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Govt to promote gas as preferred fuel
New Delhi, August 6
To encourage the laying of natural gas pipelines and promote gas as a preferred fuel, the government has proposed to encourage private investment in this sector by introducing permit system. The subsequent competition in the natural gas market is also aimed at bringing down gas transmission prices.

Punjab village in cotton-belt ‘on sale’
Malsinghwala, August 6
We have heard of selling vegetables, commodities, houses, crops, cars etc. but putting up the whole village for sale sounds really strange. A drought-like situation and consecutive crop failures leading to financial ruin have forced villagers of Malsinghwala to put the tag of 'on sale' on their village. 

Restructure debt of farmers, banks told
New Delhi, August 6
The Centrally-sponsored special package for cotton production in the country to improve quality and productivity of the fibre is being implemented in 13 states, including Punjab and Haryana.

Aviation Notes

A-I subsidiary’s losses mount
While Airbus Industries and Boeing are waging their own subtle battle of attrition on deals of aircraft to India, two flag-carriers Air-India and Indian Airlines, continue to merely long for expansion of fleet. Everyday, new problems from price war to technical area are tumbling out of the files of the manufacturers.

INVESTOR GUIDANCE

SIP, a strategy to save tax
Q: Can I invest in SIP’s (Systematic Investment Plans) for attaining tax benefit? And how it is being calculated?
— Geetanjali
A: SIP is nothing but investing periodically, say monthly, bi-monthly or six monthly in an MF scheme. In other words, it is akin to what recurring deposit is with respect to investing in fixed deposits. Therefore, SIP per se, does not offer any tax benefit as it is not a product but a strategy for investing.



Bollywood actress and CRY Ambassador Preity Zinta at a function
Bollywood actress and CRY Ambassador Preity Zinta at a function where she received a cheque of Rs 1.26 crore for "Shiksha", a part of P&G and CRY programme, to help and educate the underprivileged children across India, in Mumbai on Friday evening. — PTI

EARLIER STORIES

 
Robin Li, president of Baidu.com, answers a question during a news conference in Shanghai in this file photo Robin Li, president of Baidu.com, answers a question during a news conference in Shanghai in this file photo. Shares of China’s largest Web search company, Baidu.com, flew to the highest altitude of companies making their launch on US stock markets on Friday. Baidu.com shares surged roughly 330 per cent to about $ 116 on Nasdaq in the most spectacular entry ever by a foreign company, overshadowing world search leader Google Inc’s float last year. Baidu had priced its IPO at $ 27 per American Depositary Share. — Reuters

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Govt to promote gas as preferred fuel
Manoj Kumar
Tribune News Service

New Delhi, August 6
To encourage the laying of natural gas pipelines and promote gas as a preferred fuel, the government has proposed to encourage private investment in this sector by introducing permit system. The subsequent competition in the natural gas market is also aimed at bringing down gas transmission prices.

To begin with, the Ministry of Petroleum and Natural Gas has set up a gas cell, which has proposed regulatory framework to introduce transmission, distribution and supply of natural gas by pipelines on an open access and non-discriminatory basis, including third party access and competitive tariffs.

According to information available, the proposed Petroleum and Natural Gas Regulatory Board will later issue permits to the transmission and distribution companies for different regions. It will make it obligatory for the permit holders to supply gas by charging at non-discriminatory transmission fee.

The ministry has proposed these regulations on the recommendation of the Advisory Committee on Synergy in Energy headed by Dr V. Krishnamurthy. The committee, which submitted its report recently, has recommended the restructuring of state-owned gas supplier GAIL by unbundling its transmission activities into a separate entity.

“It is necessary to unbundle the supply and transport services of GAIL. Unbundling of a gas monopoly in specific terms is required to facilitate competition and to reduce conflict among entities. Separate entities should be formed for inter-state transmission of natural gas as an activity, and other activities like supply to fertilisers and power,” recommended the report of the committee.

The government is currently studying the recommendations of the committee including establish a separate downstream regulator—Petroleum and Natural Gas Regulatory Board to monitor the oil market including third party access to common carrier facilities. The Director General of Hydrocarbons (DGH) is expected to monitor and regulate the upstream activities.

To bring down the administrative costs, the committee has recommended allow the public sector oil companies to devise attractive voluntary retirement scheme (VRS) packages, different from the standard VRS packages.

Referring to develop the gas transmission market, the Petroleum Ministry has proposed that the board would determine the initial tariff for all pipelines on cost of service basis. The tariff for transportation would include a fixed charge (in Rs per km) for carriage of minimum committed volume of natural gas over a distance, and variable charge payable in relation actual transportation. The transmission companies and end-users will mutually fix the service charge for usage of essential transmission and/or distribution related facilities.

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Punjab village in cotton-belt ‘on sale’

Malsinghwala, August 6
We have heard of selling vegetables, commodities, houses, crops, cars etc. but putting up the whole village for sale sounds really strange.

A drought-like situation and consecutive crop failures leading to financial ruin have forced villagers of Malsinghwala to put the tag of 'on sale' on their village. The residents are under heavy debt and are unable to repay loans for the past few years. The villagers are forced to sell their land and migrate to cities to earn a livelihood.

The village, which owes whopping Rs 160 million ($ 3.7 million), is one of the largest cotton producing villages in the seven districts of Punjab, a major cotton producer in the country.

The village with a population of about 4,000 has 1,800 acres of cultivable land, out of which 750 acres remain barren due to the insufficient water for irrigation.

"750 acres of land is lying barren. The tube well water is salty which is not fit for irrigation. There is a stream six-and-a-half km away. If the government diverts it to our village half of our problems will be solved," said Jasbir Singh, village head.

The extent of indebtedness in the village can be gauged from the fact that there is not a single household that does not have to repay debts to the cooperative banks and moneylenders.

The villagers said if the administration did not take steps, the village would soon be empty as all would sell off their land and move out.

“Earlier, when we had water, we had enough to eat. Now we are totally finished and are ready to leave the village,” said Baljit Singh, a villager.

However, authorities say they are doing every bit to solve the problem.

"There is going to be an augmentation of water supply system for Malsinghwala itself. We are creating an overhead reservoir, which will cater to particularly Malsinghwala. So, by 31st of March, 2006, which is the target date, this will be finished." — ANI

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Restructure debt of farmers, banks told
Tribune News Service

New Delhi, August 6
The Centrally-sponsored special package for cotton production in the country to improve quality and productivity of the fibre is being implemented in 13 states, including Punjab and Haryana.

Minister of State for Agriculture Kanti Lal Bhuria said the Mini Mission-II of Technology Mission on Cotton would help improve production, productivity and the quality of cotton in the country.

The scheme is under implementation in Andhra Pradesh, Gujarat, Haryana, Karnataka, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Tamil Nadu, Tripura, Uttar Pradesh and West Bengal.

Under the schemes, assistance is provided for the production and supply of certified seeds of varieties/hybrids not older than 15 years, transfer of technology through frontline demonstrations, training of farmers through Farmers Field School (FFS) and extension workers, insecticide resistance management, maintenance of nucleus resistance management, maintenance of nucleus and breeder seeds, plant protection measures including IPM demonstration, supply of sprayers, pheromone traps, bio-agents as well as water-saving devices like sprinklers and drip irrigation system, he said.

These developmental and extension activities have benefited farmers through increased production, productivity and reduced cost of cultivation through control of insects and pests.

The minister said the government has taken several steps to provide relief to the farmers.

The banks have been advised to reschedule/restructure the debt of farmers in distress and in arrears, grant one-time settlement facility for settling overdue loans of small and marginal farmers and advance loans to the farmers for repaying the loans taken from non-institutional sources.

The farmers are also protected against natural calamities through National Agricultural Insurance Scheme.

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Aviation Notes

by K.R. Wadhwaney

A-I subsidiary’s losses mount

While Airbus Industries and Boeing are waging their own subtle battle of attrition on deals of aircraft to India, two flag-carriers Air-India and Indian Airlines, continue to merely long for expansion of fleet. Everyday, new problems from price war to technical area are tumbling out of the files of the manufacturers. As the situation is getting markier, it seems unlikely that the AI or IA would be able to acquire new aircraft for quite some time.

Add to it, pilots’ poaching— this problem is nothing but a creation of politicians — Air-India’s subsidiary, Express, is breathing for fresh air in turbulent Indian skies. Operation of flights has been considerably reduced but overhead expenses remain unaltered. Without being adequately airborne, Express’s losses are mounting and they will have to be borne by Air-India, whatever, soothing words may be spoken by the Chairman and Managing Director V. Thulasidas in this media interviews.

In sharp contrast, Indian Airline’s handling of this fleet acquisition problem is realistic. We have to survive and prosper with car meagre 67 aircraft and maintain our profitability by cutting our belly,” said two senior airline officials, adding: “We are working on a strategy to further reduce the aircraft-employee ratio from 1,289 to inside of 1,200 before the end of March 31, 2006”. If this effort becomes a reality, IA’s profitability will soar from Rs 28 crores in the first quarter (April-June 2005) to about Rs 36 crore.

In addition to cost cutting exercise in other areas, like, overtime payment and reduction of expenses on needless shuffling of staff on posting abroad, the airline is also taking measures to channelise route structure in such a way that optimum results are achieved with the minimum utilisation of fuel. The airline’s objectivity is to soar higher on Indian skies without failing to discharge social responsibility of flying on nonprofitable routes.

Worldwide, pilots are a pampered community. The more they earn, the more they demand. But even this difficult unit is convinced that it is a good day for IA to have an insider to be an officiating CMD. Three retired commanders of the status of director of operations are of the firm view that an experiment of providing reigns to the insider will bear better fruits than handing over the charge to a ministry bureaucrat.

The Minister of State for Civil Aviation Praful Patel is nurturing an idea of creating a National Facilitation Committee. Aviation analysts feel that instead of establishing yet another body, best remedy would be to translate the Airports Authority of India’s name into Airports Facilitation of India. The word ‘authority’ provides needless sense of vanity to officials who instead of catering to the needs of passengers and users indulge in acts of ‘dadagiri’.

The AAI has tons of money which should be utilised for bettering airports and setting up facilities for passengers. The surplus fund in the AAI should be made effective use of instead of creating Essential Air Services Fund (EASF). The analysts say that more money means more corruption.

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INVESTOR GUIDANCE

by A.N. Shanbhag

SIP, a strategy to save tax

Q: Can I invest in SIP’s (Systematic Investment Plans) for attaining tax benefit? And how it is being calculated?

— Geetanjali

A: SIP is nothing but investing periodically, say monthly, bi-monthly or six monthly in an MF scheme. In other words, it is akin to what recurring deposit is with respect to investing in fixed deposits. Therefore, SIP per se, does not offer any tax benefit as it is not a product but a strategy for investing. The tax benefit u/s 80C is offered by ELSS schemes of MFs. However, you can invest in ELSS using the strategy of SIPs.

Interest on debentures

Q: I would appreciate knowing from you the tax aspect of the following:

Hindustan Lever gave secured fully paid 9pc non-convertible bonus debentures of Rs 6 each allotted on 2-7-03, record date 1-12-04 These were redeemed on 1-1-05.

Is the redemption amount to be treated as capital gains and capital tax is to be paid at 10pc only as indexation is not possible. Is this correct or is there any other scenario? — J.R. Patell

A: The interest received on these debentures is taxable. The debenture amount is completely tax-free. These debentures were issued in lieu of dividend payable (deemed dividend) on which dividend distribution tax was paid by Hindustan Lever Ltd. in the year of issue. There is no capital gains involved. The annual report of HLL mentions this.

Tax and capital gain

Q: I have a query about tax rate for short term capital gains and tax rate for total income. If in the financial year 2004-2005, I have a long-term capital gains (after Oct 2004) of Rs 60,000 and short-term capital gains (after Oct 2004) of Rs 3,00,000.

I am retired, so I don’t have income from other heads.

For this amount, the capital gains tax rates are zero for long-term capital gains and 10 pc for short-term capital gains as both gains i.e shares were sold after introduction of STT in October 2004.

Now what should be income tax I should pay? Should it be 10 pc of Rs. 3,00,000 i.e Rs.30,000? Or I should go by normal basic slabs of 10 pc for first 50,000 and 20 pc for remaining 1,50,000 etc...

Please clarify how income tax should be calculated for this case.

— K. Prabu

A: Your understanding is perfect.

The LTCG of Rs 60,000 is tax-free. As regards short-term gains,

For a resident individual or an HUF, where the total income as reduced by short-term or long-term capital gains on which tax is eligible falls below the tax threshold of Rs 50,000 the gains would be reduced by the amount by which the total income so reduced falls short of Rs 50,000 and the balance of the gains would be taxed at the rates applicable. In short, where the tax liability arises only because of inclusion of such capital gains in the total income, tax is levied on the excess over the minimum taxable limit. In your case, since you have no other income, you will be liable to pay tax @ 10 pc on Rs 2,50,000 (=Rs 3,00,000-Rs 50,000). If you are a senior citizen you will be entitled to claim rebate of Rs. 20,000 against tax payable.

GoI Bonds

Q: I wanted to know about 8 pc GoI Bonds. Is it really hassle-free? My concern is whether I’ll get the half-yearly interest credited directly in my bank account. Or, will I have to go personally and collect it? You have often mentioned about the unprofessionalism that we sometimes have to put with, while using post office schemes. Hope that is not the case with GoI Bonds. Would you recommend 8 pc GoI Bonds from the point of view of user-friendliness?

— Jaysing

A: Yes, this avenue is hassle-free and the ‘unprofessionalism’ is minimum.

At present, the ECS facility (credit direct to your bank account) is available only for members having a bank account in Ahmedabad, Bangalore, Bhubaneswar, Kolkata, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Kanpur, Mumbai, Nagpur, New Delhi, Patna, Pune and Thiruvananthapuram cheque clearing zones. Additional centres are likely to be added.

Where there is no ECS, it is desirable for the investor to open a bank account at the same bank branch to facilitate the payment of interest.

The author may be contacted at wonderlandconsultants@yahoo.com

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BRIEFLY


A line of 2006 Pontiac Solstice vehicles line the street outside the Wintergarden at the GM Renaissance Centre before a ceremony to present the first Solstice in Detroit
A line of 2006 Pontiac Solstice vehicles line the street outside the Wintergarden at the GM Renaissance Centre before a ceremony to present the first Solstice in Detroit on Saturday. Hundreds of GM employees and more than 100 owners of the first 1,000 Pontiac Solstice owners group, representing 30 states, attended the event. — Reuters

Forex reserves
Mumbai, August 6
Buoyed by rising inflows and revaluation of international currencies India’s foreign exchange reserves spurted by a whopping $ 3.06 billion, the highest in recent times, for the week ended July 29, 2005. The forex reserves stood at $ 1,40,600 million, a rise of $ 3,062 million, during the week under review, according to RBI’s weekly statistical supplement released here today. — PTI

PNB pact
New Delhi, August 6
Punjab National Bank (PNB), the second-largest bank in the public sector, has signed an MoU with UCO Bank to increase its ATM reach. UCO Bank is the seventh participating bank in the arrangement led by PNB. UTI Bank, OBC, Indian Bank, Karur Vyasa Bank and IndusInd Bank are other members of this arrangement. The MoU was signed by Mr K S Bajwa, General Manager, PNB, and Chairman of MITR Steering Committee and Mr C R Ghosh, General Manager, UCO Bank. — UNI

Torrent Pharma
Ahmedabad, August 6
Pharmaceutical company Torrent Pharma today signed an agreement with the Indian arm of Denmark-based Novo Nordisk A/S to establish a new, dedicated formulation and packaging facility for insulin, exclusively for Novo Nordisk. This new, state-of-the-art facility will have the requisite flexibility to expand and will be set up at Torrent Pharma’s existing manufacturing facility at Indrad, Gujarat. — PTI
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