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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS
B U S I N E S S

PM rules out legislation on quota in pvt sector, hopes to arrest inflation
New Delhi, September 4
Prime Minister Manmohan Singh today exuded confidence that the government would be able to rein in the inflation rate and ruled out to bring a legislation to provide job reservation in the private sector.

RBI for cluster-based approach
Mumbai, September 4
The Reserve Bank of India (RBI) today asked banks to adopt a cluster-based approach for lending to small and middle industries while exploring new instruments to promote rural industry.

Restructure power policy, asks PHDCCI
Shimla, September 4
The PHD Chamber of Commerce and Industry has opposed the proposal to impose 1 per cent levy on saleable energy from hydroelectric projects and urged the government to restructure the quantum of free power given as royalty to the state by independent power producers (IPPs).

Lucknow Shatabdi gets ISO certification
New Delhi, September 4
The 2004/2003 New Delhi-Lucknow Shatabdi Express of the Northern Railway was awarded an ISO 9001: 2000 certificate at a function held at Coach Care centre of Delhi division here today.

Aviation Notes

Open market formula may replace no-frills concept
The competition in the air has led to initiation of no- frills airline. The one is operating successfully and 2-3 other scheduled airlines are likely to jump in fray.

Investor guidance

Equity-based schemes exempt from distribution tax
Q: I have invested in equity schemes of different mutual funds. I want to know the tax implications on the gains made in the light of the new Budget proposals. I made major investment in the month of January this year.


The President of India, Dr APJ Abdul Kalam, plants a Jatropha (bio-diesel plant) sapling at Rashtrapati Bhavan on Saturday.
The President of India, Dr APJ Abdul Kalam, plants a Jatropha (bio-diesel plant) sapling at Rashtrapati Bhavan on Saturday. A part of the estate is to be developed as the bio-diesel garden. — PTI

EARLIER STORIES

 
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Sri Lankan government looks forward to cheaper foreign imports to help curb inflation.
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PM rules out legislation on quota in private sector,
hopes to arrest inflation
Gaurav Choudhury
Tribune News Service

New Delhi, September 4
Prime Minister Manmohan Singh today exuded confidence that the government would be able to rein in the inflation rate and ruled out to bring a legislation to provide job reservation in the private sector.

Answering a number of questions on important economic matters during his maiden press conference after assuming office as Prime Minister, Dr Singh said the government was trying to find ways for providing opportunities to the Scheduled Castes, Scheduled Tribes and Other Backward Classes in the private sector in consultation with the industry.

The recently constituted Group of Ministers (GoM) will see if this could be worked out “without a legislation” and through “constant dialogue with the industry.”

However, the Prime Minister called upon the private sector to show more “sensitivity” to provide larger employment opportunities to the marginalised sections.

The Prime Minister also said there was “no change in the attitude on FDI” and the UPA government was not ideologically averse to disinvestment.

“I hope we can persuade the Left,” he said, adding the government was engaged in a “constructive dialogue” and will lead to a “conclusion, which is a forward looking one”.

“Inflation has caused some concern. But, I assure you that despite increasing world oil prices, a delayed arrival of the monsoon and avoidable disruptions caused by such actions as the truckers’ strike we shall be to control inflationary pressures. We shall take firm measures to check inflation without hurting the growth process,” Dr Singh said.

Even as he did not elaborate on the specific measures of the government’s price management policy, the Prime Minister said the rise in inflation in recent weeks can be partly attributed to the unfavourable climatic conditions such as droughts and floods in some parts of the country.

In addition, the rise in international prices of crude oil and the increase of liquidity in the economy could turn out to be the other major factors in the rise in inflation rate, he said.

The objective of the government would be to moderate the inflationary pressures without adversely affecting the overall growth process, Dr Singh said.

A somewhat similar situation had emerged during the later years during Dr Singh’s stint as Finance Minister in 1995-96. A tightening of the monetary policy was adopted to address the issue during that time.

Dr Singh today however, refused to draw any parallel between the two and said that no two situations were similar.

“The monetary policy is the prerogative of the Reserve Bank of India and I am sure that RBI and the Finance Ministry were alert on what needs to be done”, he said.

On the politically contentious issue of disinvestment, Dr Singh said that the there was enough scope for disinvestment without changing the basic character of public sector undertakings.

The UPA government, he said, did not have any “ideological aversion to disinvestment. If there are profit-making enterprises that make reasonable profits in competitive conditions there is no earthshaking reason for disinvestment.... As regard disinvestment, ‘yes’, but not to the point of changing their character into private companies”, he said.

The economic reforms, which Dr Singh initiated in his earlier avaatar as the Finance Minister in the early 1990s, is certainly not being reversed, he said.

“Deliberately, we have to do a mid-course correction but that does not mean we have given up reforms... we will stay on the course,” he said.

The reforms programme, he said, would be executed after consulting the views of the coalition partners and the Prime Minister was confident that the government would be able to “overcome the obstacles.”

There was no evidence to believe that there is deceleration in growth. “Industrial growth has been higher than previous year, investment is buoyant, non-food credit growth is higher and export growth is better than last year”, the Prime Minister said.

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Board for reconstruction of PSUs to be set up

The government will set up a board for the reconstruction of public sector enterprises (PSEs) to “guide government policy” The PSEs and nationalised banks will be encouraged to enter the capital market to raise additional resources, Prime Minister Manmohan Singh said here today.

“The board will advise the government on measures to be taken to restructure central PSEs, including cases where disinvestment or closure or sale is justified in the national interest,” Dr Singh said while addressing the conference of chief executives of the central PSEs here.

The Prime Minister said the UPA government believes the “process of disinvestment should increase competition and not decrease it.”

“We are of the view that there should be a link between disinvestment and the provisioning of the basic social goods. Towards this end we propose to use the revenues generated through disinvestment for designated high priority social sector spending. Public sector companies and nationalised banks will also be encouraged to enter the capital market to raise resources and offer new investment avenues to retail investors,” he said.

The Prime Minister said the government would take steps to make PSEs more “efficient and self-reliant.” While some measures have been suggested by the chairman of Scope (Standing Conference of Public Enterprises), the report of the committee headed by Mr T.K.A. Nair is also being studied by the government.

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RBI for cluster-based approach

Mumbai, September 4
The Reserve Bank of India (RBI) today asked banks to adopt a cluster-based approach for lending to small and middle industries while exploring new instruments to promote rural industry.

A full-service approach to cater to the diverse needs of this sector may be achieved through extending banking services to recognised clusters by adopting a 4-C approach, namely customer focus, cost control, cross sell and contain risk, RBI said in a notification here.

These are some of the recommendations of the A S Ganguly committee accepted by the central bank.

A cluster-based approach to lending is more beneficial in dealing with well-defined groups, availability of information for risk assessment and monitoring by lending institutions, it said.

Clusters should be identified based on factors such as trade record, competitiveness and growth prospects and/or other cluster specific data, it said, adding besides 60 clusters identified by government for focused development of SSIs, banks must identify new ones and adopt cluster-based approach for financing SME sector. — PTI

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Restructure power policy, asks PHDCCI
Tribune News Service

Shimla, September 4
The PHD Chamber of Commerce and Industry has opposed the proposal to impose 1 per cent levy on saleable energy from hydroelectric projects and urged the government to restructure the quantum of free power given as royalty to the state by independent power producers (IPPs).

The captains of industry suggested several changes in the draft power policy circulated by the government during an interactive session organised by the PHDCCI, here today. Putting forth the viewpoint of the industry, Mr S.C. Goyal, chairman of the energy committee of the PHDCCI, said one per cent levy to fund the activities of local area development authority as proposed in the draft policy would only make hydropower costly. He said government should dissuade from making any provision, which added to the cost of generation.

Meanwhile, the Union Ministry of Commerce is likely to clear a proposal of the state government to redefine the capital investment subsidy policy which so far included subsidy for plants and machinery of the industrial units and tourism related projects.

This was disclosed by the Additional Chief Secretary Renu Sahni Dhar, who is also Principal Secretary, Industries.

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Lucknow Shatabdi gets ISO certification
Tribune News Service

New Delhi, September 4
The 2004/2003 New Delhi-Lucknow Shatabdi Express of the Northern Railway was awarded an ISO 9001: 2000 certificate at a function held at Coach Care centre of Delhi division here today.

The Director of NQAQSR Certification Pvt. Ltd, Mr S.M. Bhola, presented the certificate to the Railway Board Chairman, Mr R.K. Singh.

The New Delhi-Lucknow Shatabdi has been awarded the certificate for complete service including catering besides mechanical, electrical and signal and telecom maintenance, an official said.

The Shatabdi Express was introduced in November’89.

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Aviation Notes

by K.R. Wadhwaney

Open market formula may replace no-frills concept

The competition in the air has led to initiation of no- frills airline. The one is operating successfully and 2-3 other scheduled airlines are likely to jump in fray.

Is the concept of the ‘no-frills’ airline genuine or is it meant to woo passengers. The experts connected with the airline industry since 40 to 50 years feel that it is a gimmick.

It is true that Air Deccan sells a ticket on the Delhi Bangalore sector, for Rs 500 plus Rs 200 as tax. But only first five of the 180 seats on Airbus aircraft are available at this price. For the rest of the 175 seats in the economy class, there is a system of graded payment, as is in operation for flights operating on the pattern of ‘apex fares’.

In a growing competitive environment, the tickets bought close to the date of departure are only at Rs 3,000 each. It may be cheaper than the tickets sold by other carriers, but it is not that cheap.

The Air Deccan advertisement says: “An Air Deccan ticket will always be far cheaper than those on any other airlines. Even the last day fare will at least be 25 per cent cheaper than comparable fares on any other airlines”.

This may be true but how is it called a ‘no-frills’ airline’? According to experts, this concept of no-frills will soon die) and instead the ‘open-market’ formula, as is in existence in some countries, will take birth. In some foreign countries, the tickets are auctioned and airlines are free to sell their product at any price they want to.

If the ‘open market’ concept gets the importance it deserves, there will be less corruption in the airline industry.

In a ‘no-frills’ airline, there is lesser transparency. Open market in open skies will help reduce turbulence in the aviation industry, which is passing through a difficult phase.

Re-bid woes

The change of the government means change of policy. The change of policy means change of decisions. The change of decisions means setback to whatever little has been achieved in the much neglected aviation sector.

After years of haggling and serious rounds of politickings by the US and France governments, the decision had been taken for acquiring aircraft.

Shockingly, without any justifiable reason, the civil Aviation Ministry has asked for re-bidding by world’s two leading manufacturers, Airbus and Boeing. The Boeing Company has already held its press briefing whereas Airbus will hold a similar conference soon. There will now be intense lobbying.

A spate of charges and counter-charges will resurface. In this war of attrition between Airbus and Boeing, two national carriers, Indian Airlines and Air-India will be the losers.

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Investor guidance

by A.N. Shanbhag

Equity-based schemes exempt from distribution tax

Q: I have invested in equity schemes of different mutual funds. I want to know the tax implications on the gains made in the light of the new Budget proposals. I made major investment in the month of January this year.

— Abhishek Katare

A: The securities transaction tax (STT) is levied on all purchases and sale of equity-based units of MFs (mutual funds), from the market at the rate of 0.075 per cent on purchase and 0.075 per cent on sale, respectively. Upon purchase of the units of equity-oriented schemes from the MF itself, there is no STT. However, in this case the STT will be leviable at 0.15 per cent upon redemption. There will be no STT on debt-based MF schemes.

LT gains arising out of sale of equity-based units are exempt.

LT gains arising out of sale of debt-based units will continue to be taxed as per the old provisions, which is at 10 per cent without indexation or 20 per cent with indexation, whichever is lower.

ST gains arising from repurchase of equity-based MF units shall be charged to tax at 10 per cent flat.

ST gains arising from repurchase of debt-based MF units, shall continue to be governed by the old provisions. In other words, the amount of gain will be added to the normal income of the assesse and charged to tax at the rate applicable to his slab of income.

These three provisions are applicable from the date of announcement in official gazette.

Units of MFs are included in the definition of securities.

If you have chosen the dividend option, the dividend received by you is tax free in your hands. However, in case of debt-based schemes, the MF will pay (effectively the unit holders) distribution tax at 12.5 per cent (+2.5 per cent surcharge and 2 per cent education cess) on the distributed amount. The equity-based schemes are exempt from the distribution tax.

Senior citizens

Q: Please enlighten whether employees in the state government and private sector who retire at the age of 58 are eligible or not for the senior citizens scheme.

— Randhir Dar

A: The scheme is available for those who have accepted VRS and are over 55 years of age. The investment must be made within three months from the date of acceptance of VRS. Others should be over 60 years.

NRIs gift to kin

Q: I am a non-resident Indian doctor working in Saudi Arabia for the past 20 years.

During my recent annual vacation to India in July 2004, I bought your book titled “In the wonderland of investment-for NRIs-revised 4th edition-AY 2004-2005.” I found it to be a very useful book. Still I have some queries.

In July 2004, during my above mentioned vacation trip to India, I transferred a sum of Rs.13 lakh from my NRE a/c to savings a/c of my daughter (who is an unmarried 19- years-old resident Indian studying in India). With a view to her future education and marriage from this amount, I have bought in her name the following securities — 6.5 per cent tax free RBI bonds for an amount of Rs 6 lakh and 8 per cent taxable RBI bonds for Rs 7 lakh (both with cumulative option for interest). Kindly let me know:

1) Is the above transaction legally correct? (I have already given her a handwritten letter indicating that I have given her an NRE cheque of Rs.13 lakh as a gift). Since I am a NRI, I am not allowed to buy these bonds. So I have bought the bonds in my daughter’s name, as she is a resident Indian.

2) For filing the income tax returns should I apply for a Pan number in my daughter’s name or should I apply in my name. Since the bonds are of a cumulative nature, is it obligatory to file returns now or is it permissible to file returns on accrual of interest after five to six years?

3) I also maintain a PPF a/c in my daughter’s name to which I make regular contributions from my NRE account.

4) Besides above, I have no other investments in India in my or my daughter’s name. All deposits are in the nature of NRE term deposits. Kindly guide me

— Ankush Jain

A: The transactions are legally correct. Since you have given a gift of Rs 13 lakh to your daughter, she should write a “Thank you” note accepting the gift.

The way you have arranged the affairs, your daughter, who is a major, will have to file tax returns since her taxable income, presuming she does not have any other income, is Rs 56,000, which is a little more than the tax threshold of Rs 50,000. She, however, will not have to pay any tax, since a non-senior female enjoys income tax rebate up to Rs 5,000.

Whether you have to file the returns or not will depend upon whether your own income (ignoring the income of your daughter) is above the tax threshold and if not, whether you have suffered any TDS.

An excellent strategy is to contribute to your daughter’s PPF account but you should indicate the amount. I hope it is Rs 70,000. You and your daughter should complete the gift procedure by writing a gift giving and gift-received notes respectively every year.

You state, “All our deposits are in the nature of NRE term deposits”. Your daughter is a resident and I hope this ‘our deposits’ does not include her.

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BRIEFLY

Oracle
Amritsar, September 4
Khanna Paper Mills Private Limited , one of the leading manufacturers of paper and paper board in India today signed an MoU with Oracle of USA and Satyam Computer Services Limited to implement Entrepreneur Resource Planning ( ERP) for total software solutions for the business suite. The company has chosen Oracle, one of the leading software companies in the world, as the product vendor and Satyam Computer Services Limited as the implementation partner for the same. — OC

PNB
Rohtak, September 4
Punjab National Bank will interlink its 1200 branches throughout the country under its Centralised Banking Solutions (CBS) scheme by March next. Disclosing this, the General Manager (North zone) of the bank, Mr B.P. Chopra, said its branches in 141 cities covering 680 branches in India had this facility at present. He was speaking at an agricultural loan distribution function organised here today. More than 2,000 farmers from Rohtak, Jhajjar, Rewari, Mohindergarh, Faridabad and Gurgaon districts were given loans at the function. — TNS

RBI
Mumbai, September 4
Relaxing loan impairment norms for urban cooperative banks, Reserve Bank of India today said 90-day norm relating to asset classification and provisioning would be applicable for gold loans and small loans up to Rs 1 one lakh from fiscal ending March 31, 2007. The decision to relax the loan impairment norm was based on the representations received from UCBs, an RBI release said here today. Meanwhile, the RBI would conduct an auction of 91-day treasury bills aggregating Rs 2,000 crore, including Rs 1,500 crore under the Market Stabilisation Scheme (MSS), on September 8. — PTI

DTH telecast
Bangalore, September 4
The Bangalore kendra of the Doordarshan has commenced trial run of free- to-air, Direct to Home (DTH) telecast, offering a bouquet of 17 television channels and 10 All India Radio channels. The bouquet would precisely consist of 30 television channels, including 13 private channels, with which negotiations were on. More channels would be added later. The formal inauguration of DTH services would be made shortly. — UNI

Eicher
New Delhi, September 4
Boosted by rising sales of its new heavy truck, Eicher Motors Ltd has recorded 88 per cent sales growth in August to 1,722 vehicles against 915 units sold in August last year. The city-based automaker said its sales in April-August were up 37 per cent from the last year and exports were up 25 per cent. — UNI
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