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Monday,
March 31, 2003, Chandigarh, India  
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Why do we spend so much on a house? Should one
buy during war?
Consensus must for VAT system |
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Banks achieve 90 pc targets in Himachal Inflation up FIIs net buyers in equities Samsung ACs cost less after Budget
Time to buy strong scrips Gillette Ingersoll Rand HDFC Bank Forecast for the market
Most of District Forums under-staffed
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Why do we spend so much on a house? Why do houses cost so much, particularly in planned localities in towns and cities? Many spend their life time’s savings to own a roof. Employees get carried away by the ad blitzkrieg of so-called easy house loans and soon find themselves trapped in the web of unending loan instalments. But few bother to ask: why the hell is a house or flat so expensive? And fewer still try to seek a solution. Houses are expensive because government agencies like PUDA, HUDA or DDA play the villain. They acquire farmers’ land, sometimes forcibly, often at lower-than-market prices in expanding cities and, in the name of development, jack up prices of plots astronomically to adjust for corruption and inefficiency. Colonisers everywhere are fattening, no doubt. And bankrupt state governments also survive partly on money collected through housing schemes. Worse, the civic amenities for which every house buyer pays through the nose are seldom available in satisfactory working conditions. The sewerage collapses during rain, roads crack up in six months, water refuses to move beyond the first floor and the electricity supply is disrupted whenever the winds pick up momentum. And then the government agencies concerned let loose the battalions of their employees, who extract more money from the house owners to do the repair work. The loot is now officially recognised, at least in Punjab. The house committee of the Punjab Assembly has in its report accused PUDA (Punjab Urban Planning and Development Authority) of acting like a private coloniser, undertaking substandard construction work, pushing up house/flat prices for profit and advised it do, for a change, a bit of social service. By “social service” the committee means providing cheaper houses for the poor. Moved, it seems, by the plight of jhuggi owners, the committee has recommended alternative houses before launching a jhuggi demolition drive. It expects PUDA officials to be vigilant and not to allow encroachments on government lands. The committee nitwits have seemingly chosen to ignore something obvious. The politics of encroachment is known to every kid in the street. The first thing that every labour migrant from UP and Bihar does on landing in Chandigarh or its satellite towns is to eract a jhuggi. Others follow him and soon a jhuggi colony comes up before PUDA or HUDA gets to know. Politicians then take charge and resist any demolition until alternative sites are made available. By the time a regular housing colony is got ready for them, they become familiar with the tricks of the trade. Some shift to the new colony, others sell the subsidised house at a hefty premium and return to the old business of building jhuggis. Their financial success attracts their relatives too. Instead of creating an artificial price through a subsidy, why not lower the cost of housing by reducing taxes on construction materials like steel and cement.? Why should a government agency do what can be done better by a private hand? Building expensive houses and then selling them at subsidised rates hardly amounts to social service. Rules and motivated restrictions often lead to a price rise. Cut the costs of governance. Taxes can come down only if the role of the government shrinks to the minimum possible. How can a government in a so-called welfare state do real estate business on its own terms and make huge profit at the cost of citizens? If the likes of PUDA, HUDA and DDA act as regulators to ensure that all housing plans and bylaws are followed, cooperative societies and even private colonisers provide the requiste facilities, housing prices would come down because of competition and less corruption. Currently, the cooperative movement in housing is throttled by cumbersome procedures and corruption in official circles. Power and water connections come at a price. The housing pressure on cities can be eased if smaller towns and villages are provided with basic facilities available to those in cities. Post-retirement, many would like to spend the evening of their life in their forefathers’ village — away from the mad rush and unhealthy air of cities. Who would like to part with all his savings just for a costly shelter in an unhealthy environment? There is more peace of mind in one’s own ancestral house, no matter how small and devoid of modern gadgets. The cost apart, traditional housing architecture is increasingly replaced by the one imported from the West and foisted on Chandigarh. It has spread to smaller villages also. The cost of building a house on the Chandigarh pattern is prohibitive. A traditional house made of locally available material is not only cheap, but also more comfortable in the prevailing climate. Besides, the western concept of small rooms with an emphasis on privacy is alien to the traditional Indian rural
culture which lays stress on openness, joint living and community feeling.
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Should
one buy during war? “Buy when there is blood on the streets”, “Buy when your pan-wala says to sell the stocks”, “Buy when donkeys fear to tread”, “Fear and greed are the troughs and crests of the stock market”. — All these axioms of equity investment are testing the waters at a very opportune time when the military and economic super power of the world, the USA along with its ally, the UK has attacked the most powerful oil nation — Iraq. History shows that the equity markets usually plummet on war “rumours” and actually move up once the “news” of war breaks in. This amply reflected during World War II when the USA entered the war after the Pearl Harbour was attacked on December 7, 1941. The Standard & Poor’s 500 index jumped by whopping 58 per cent by the end of the war in August 1945. Similarly when the two Koreas were waging a war for three years from June 25, 1950 to July 25, 1953 the Standard & Poor’s 500 index again rose by nearly 27 per cent. Even during the previous conflict between USA and Iraq when Iraq attacked Kuwait on august 2, 1990 and the war ended with a ceasefire on April 6, 1991, the Standard and Poor’s 500 index rose nearly 7 per cent even though it had fallen sharply before the US forces started their campaign. The Bombay Stock Exchange Index rose 14.8 per cent during this period of conflict and that too when the Indian economic situation was grim. Foreign exchange reserves were hardly sufficient to cover a few weeks of imports. Inflation was touching all time high of 17 per cent. In spite of all this, the stock market witnessed a strong run up. This clearly sums up that as the signals of war appear on the screen, the stock prices start drifting downwards and the negative news of uncertainty and business gloom starts building up in the stock prices till they reach such a level that war becomes certain and the pessimism gives way to optimism of postwar reconstructions. There is no more negative news that can draw the prices down much and the stock prices start looking up. Recently the BSE index touched a high of 3416 level on January 10, 2003 when United States started cooking up the war stories. The BSE index responded and started falling and touched a low of 3049-just two days before the actual war started. It lost 10.74 per cent in value and we saw considerable volatility in the short run. From long term perspective valuations are compelling and fairly attractive for a genuine patient equity investor as the downside risk is lower in comparison to the returns of the upside. Investor should have faith in equity market and should enter the arena in such a situation. Experts say that fundamentally Indian economy is on a much stronger footing than it was earlier. It is not much dependent on foreign trade like to called other Asian tigers-Singapore. Korea, Malaysia who will be considerably affected on account of Gulf War. India has foreign reserves of 73.91 million. Inflation is within manageable limits. Industrial production is on an upswing. Auto, Steel, Cement, Banking, Power, Engineering are the sectors, which are outperforming. Investor should look forward to those sectors, which would help in rebuilding the war torn Iraq. In the mist of the Gulf war PSU stocks tend to remain safer bets for diversification of investment ;portfolios since they will definitely be on divestment drive of Arun Shourie the PSU Disinvestment Central Minister to reduce surmounting fiscal deficit. Investor should be cautious on the Information and Technology sector. Though stock prices in the IT sector have dropped considerably they should stick to leaders, which can pull on their socks after the war on account of their management capability and strong brand names. All in all investors should take courage and start building up their portfolios of stocks depending upon their risk-return profile lest they should be too late. It is rightly said, “Future Belongs To Those Who Dare”.
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Consensus must for VAT system VAT in simple terms is a system of collection of tax on the ‘value added at each stage’ of sale, store, stock, transportation and manufacturing of goods. Thus, there will be multiple layers of tax payers from manufacturers, stockists to retailers. The VAT Acts of all states, enacted so far, are patterned on the model VAT Bill, 2003, of the Centre which provide multi-tax rate categories — general rate; between 4 per cent to 12.5 per cent, special rate for bullion and jewellery of 1 per cent; petrol and liquor 20 per cent, diesel 12 per cent and provision of tax exempted commodities. The new system envisages for taking potential advantages of hi-tech IT by allocating TIN (Taxation Identity Number) under Harmonised System of Nomenclature
(HSN), change in procedures of filling returns, assessment and refund. So, it appears a right step towards establishment of smart (simple, morale, accountable, responsible and transparent) governance but crooked tax-payers, for instance, under the Haryana VAT Act, 2003, will have no fear of tax evasion and elusion in the absence of prosecution and criminal proceedings. No mechanism has been evolved to make dent in nexus between cunning bureaucrats and manipulator traders. There are enough scope for misusing of discretionary powers by taxation officials while inspecting business premises, awarding tax rebate, intelligence examination of account books and documents, deciding cases for reassessment, review, revision and checking practice of underpricing of goods in certain trades. The New system proposed under VAT, if its long-term implications are calculated, will have to tight the strings of states’ coffers by ways of avoiding cascading effects of taxes and levies such as entry tax, luxury tax, octroi, mandi tax and hike in consumer prices, probably by 50 per cent because tax will be calculated on a higher value and at a higher rate than current CST. The effects of two decades reform initiatives in India and lessons drawn from these reveal that neither politicians nor public officials, from petty clerks to higher civil servants, have shown commitment and conviction to prod growth-oriented measures into action. They, however, seem to be obsessively concerned with amassing wealth at the cost of innocent citizens’ bleak foresightedness denied them information. They interpret provisions and exploit circumstances in accordance with their whims and caprices. Had traders and consumers been educated, informed and awakened about consequences of VAT, a situation would not have been reached, where persistent apprehensions and alarming fears have compelled traders’ associations to announce strikes and
bandhs. Before switching over to VAT, the taxation department should organise training and orientation programmes to equip its employees, who are otherwise mediocre and least technology prone, with strategies to cope with daunting challenges unleashed by new trade regime. The success of VAT also requires constituting of expert councils drawn from the government, businessman and consumers to monitor implementation process. There should also be a consensus over unified and uniform taxing power of the states under federal polity before switching over to zero rating CST by 2005.
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Banks achieve 90 pc targets in Himachal Shimla, March 30 Inaugurating the 92nd state-level bankers committee meeting, here today she said that some medium to large projects should be formulated by the departments wherein a partnership with the banks could be considered at least on experimental basis. All the departments were required to play a pro-active role in such projects. She said that the banks in the hill state had been playing a vital role in the economic transformation through their social banking commitments. She said that lending in the priority sector in the state was more than 63 per cent against the national parameter of 40 per cent. In view of the difficult topographical and geographical terrains, the capital formation and asset creation were costly, she added. Expressing satisfaction over the annual credit plan commitments, the Chief Secretary said that the banks in the state had achieved more than 90 per cent of the targets during the first 3 quarters of 2002-03. She said that it was heartening to note that bankers had sponsored poverty alleviation programmes. Such schemes included Pradhan Mantri Rozgar
Yojna, Shashri Gramin Swarozgar Yojna, Swaran Jayanti Swarozgar Yojna and Margin Money schemes.
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Inflation up
New Delhi, March 30 The price change, as measured by Wholesale Price Index (WPI), rose by 0.43 per cent from the week-ago’s level to tick the highest figure in the last one-and-a-half years. The index was 1.63 per cent in the corresponding period a year ago. WPI rose by 0.4 per cent to 170.8 as there was rise in the price of primary articles, mainly in mass consumption items of vegetables and fruits. The index was 161.8 a year-ago period.
PTI
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FIIs net buyers in equities
Mumbai, March 30 Mutual funds (MFs) netted sales of Rs 44.07 crore in equity market while netting purchases of 219.6 crore in debt during period under review, according to the data available with SEBI here. FIIs on March 24 bought equity instruments worth Rs 171.6 crore while offloading to the extent of Rs 127.6 crore, thus netting their highest net inflows of the week at Rs 44 crore ($ 9.2 mn). They also recorded net purchases in equities at Rs 43.6 crore ($ 8.4 mn) and Rs 40 crore ($ 8.4 mn) on March 28 and 25 respectively, however, FIIs netted sales of Rs 24.8 crore (U 5.2 mn) on March 27. On debt side, the foreign funds were net purchasers at Rs 340 crore ($ 71.2 mn) on the first day of the week followed by Rs 148.6 crore ($ 31.1 mn) on March 27. MFs were net sellers in equities for four trading days and netted their highest outflow of the week at Rs 21.65 crore on March 27 followed by Rs 11.87 crore on previous day. In debt market, they were net purchasers at Rs 195.73 crore, Rs 71.39 crore and Rs 15.14 crore on March 27, 24 and 25 respectively. PTI
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Samsung ACs cost less after Budget
Chandigarh, March 30 |
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Time to buy strong scrips The initial optimism about a brief war in Iraq, which had propelled the market higher in the previous week, dissipated last week as the investor realised that the US-led war could take at least a few months to end rather than a few weeks. The 30-share Bombay Stock Exchange index (Sensex) lost 103.20 points during the week to settle at 3,115.44 and S&P CNX Nifty shed 36.55 points to close at 1,000.60. Short-term investors are likely to remain on the sidelines till there is some clarity on the US-Iraq war front, but for long-term investors such a scenario should be used to accumulate stocks with good fundamentals. Some of these scrips are
Gillette On the footsteps of Hindustan Lever and other FMCG stocks, Gillette has lost close to 15 per cent in the last one month despite showing better than expected numbers. After the disposal of the Geep Battery business, the re-structuring of the company is now complete. The focus of the company now is to reverse the volume decline in the premium double-edged safety-blade segment, and to accelerate growth in the disposable sector with the launch of cheaper products. The company has now closed down its alkaline battery division, and sold off the carbon-zinc business. The worst is thus over and the investor can buy the fundamentally strong company’s shares strictly for long term investment. The share is quoting around Rs 280, liquidity concerns not withstanding.
Ingersoll Rand Investment in the National Highway Development Programme (NHDP) by the government has brought about a sea change in the fortunes of Ingersoll Rand. The ambitious Rs 54,000-crore NHDP of the National Highways Authority of India (HNAI) is expected to create demand for a lot of construction equipment in the next two to three years. That will translate into good business for the makers of construction machinery, specially Ingersoll-Rand which is the leader in the business. The company expects to clock a turnover of Rs 700 crore in the year 2005-06. Ingersoll is definitely worth adding to one’s portfolio with two to three years perspective.
HDFC Bank HDFC Bank has two key ingredients for success in the retail finance business: a professional, experienced management and the low cost of funds. The bank has significantly stepped up its growth rates in retail loans, and seen spectacular growth in its retail fee initiative. The bank is on a track for a compounded growth of 30 per cent for the next two years. Rumours of HDFC Bank buying out IDBI’s stake in IDBI Bank has also been doing the rounds, and if that does happen the HDFC Bank scrip will surely enter a different bull orbit like the one it entered when it took over Times Bank Ltd.
Forecast for the market On Fundamentals: The surge in global crude prices has made the investors edgy. Oil prices that had witnessed a setback at the onset of the war, are again moving north. Rising oil prices may further hit the already fragile economies of the world. The focus of investors is likely to shift to the fourth quarter results of various companies which will begin pouring in early next month. On technicals: The Sensex has once again found support at the 3100 level there is a doji star formation on the index, signifying the loss of momentum of the downmove. The sensex is expected to find support at the 3050 level on the downside and on the 3160-80 range is likely to act as a barrier on the upside.
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Most of District Forums under-staffed There were two meetings of considerable significance to consumers last fortnight. While one was the conference of Presidents of State Consumer Disputes Redressal Commissions and Secretaries in charge of consumer affairs in all states and UTs, the other was the meeting of the Central Consumer Protection Council (CCPC), a policy-making body constituted under the Consumer Protection (CP) Act. Both were held in New Delhi and the central issue at both the meetings was the enforcement of the amended CP Act. Even though the CP Act of 1986 envisaged a consumer justice system that made resolution of consumer disputes simple and quick, studies and surveys conducted over the years on the functioning of these courts highlighted several inadequacies in the law itself, besides its enforcement. They called for immediate remedial measures in three main areas: (a) amendments to the law to overcome several lacunae noticed during its enforcement b) provision of adequate infrastructure by the state governments to ensure smooth functioning of the courts and c) attitudinal change in those who resolved the disputes, so as to ensure that the proceedings remained simple and quick. All three required inputs from several quarters. First of all, the Central Government had to amend the law, which it finally did after a long wait of almost ten years. Now the state governments have to ensure stringent enforcement of the law by constituting additional District Forums and Benches of the state commissions where necessary, appointing judicial and non-judicial members without delay and providing the required staff and other office equipment for the smooth functioning of the courts. The members, particularly the judicial members, in turn have to ensure that the proceedings are simple and quick as envisaged in the law. So both meetings, called by the Ministry of Consumer Affairs, discussed ways and means of enforcing the new law to ensure better functioning of the consumer courts. In the last 16 years, the National Consumer Disputes Redressal Commission and the 35 State Consumer Disputes Redressal Commissions have together received 2.9 lakh complaints, out of which, 1.9 lakh have been resolved and the rest are pending disposal. In addition, nearly 17 lakh cases have been filed before the 570 District Consumer Disputes Redressal Forums (or the consumer courts at the district level) in the country. Out of this, 14.6 lakh cases have been disposed of and 2.4 lakh are pending before the various forums. Two factors are expected to push up the cases filed before the District Forums — while one is the enhancement in the pecuniary jurisdiction of these forums from Rs 5 lakh to Rs 20 lakh, the other is the increasing consumer awareness. This will require the state governments to pay more attention to the proper working of these forums. Will the State Governments pay heed? The conference of the Presidents of the State Commissions and the secretaries handling consumer affairs, which reviewed the functioning of these courts, found that several states were yet to appoint members and Presidents to fill vacancies left by those who retired. Each District Forum and the State Commission consists a President who is a judicial member and two non-judicial members. The situation was worse in some states where as a result of such vacancies, the work of the court had come to a standstill. In Uttar Pradesh, for example, (as on December 31, 2002), 14 out of 64 district forums had stopped functioning because the state government had not filled the vacancies in the posts of Presidents and members (45 vacancies). In Bihar, out of 37 forums, 9 were not working . In Maharashtra, as on January 31, 2003, out of 34 District Forums, 5 were non-functional. In addition, many District Forums lacked even the basic minimum requirements to keep the courts running, such as the required staff, photocopying machines, computers, etc. In fact, most of them were woefully under-staffed. Since the state governments had complained of lack of funds, the Central Government had, during 1995-99, disbursed about Rs 62 crore to the states as a one-time grant for providing basic amenities in these courts. However, even today, the overall utilisation of this amount by the state governments is only about 65 per cent. The Ministry of Consumer Affairs is urging the states to ensure that the balance available from the grant should be utilised expeditiously and utilised only for the purpose for which they are sanctioned. This was underscored at the two meetings as well. The conference of the Presidents of the State Commissions also focused on the need for simplifying and quickening the process of justice before these courts. It also decided to constitute a committee to look into the additional infrastructure needs of the District Forums, keeping in mind the additional inflow of cases. In short, the emphasis at both meeting was on making these quasi-judicial bodies, consumer-friendly. Let's hope that it becomes a reality soon. |
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