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Kamath seeks bailout plan for MFs, NBFCs
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PM to meet industry captains today
Airlines not to pay commission to agents
ICICI Prudential to tap rural market
Mittal loses $50b in 5 months
Market Update
Tax Advice
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JSW Steel to pump in Rs 35,000 cr in WB
Salboni (WB), November 2 In an apparent reference to the small car project that moved out of West Bengal following Trinamool's protests , the Chief Minister said, "If one factory goes, it is the loss of the entire state instead of any individual's loss. Therefore, I say again: Come, let us move ahead together." "If there is any difference, it should be settled through discussion only," he said while laying the foundation stone for the 10 million tonne steel plant of the JSW Bengal Steel at Salboni — the biggest investment project in the state after the aborted Nano small car project at Singur last month. Union steel minister Ram Vilas Paswan, state industry minister Nirupam Sen and JSW Steel vice-chairman Sajjan Jindal were also present. Stating that his government had been able to solve the issue of land for the project, the Chief Minister said while the major part of the requirement was made available by land held by the government the remaining part was given by locals voluntarily. "The local people have been very supportive of the project. They want it to be expedited," he said. JSW group vice-chairman and managing director Sajjan Jindal said the 10 million tonne plant would be set up in three phases at a cost of Rs 35,000 crore. Jindal said that the first phase, a capacity of three million tonne, would come up in 2012, while the second phase, with a six million tonne capacity, would be commissioned in 2016. The plant will have its full 10 MT capacity in the third phase in 2020. Stating that he wanted the plant to come up with support of the local people, he said one member from every land donor's family would be given employment at the plant and would be given training for the purpose. Recalling his agrarian family background, Jindal said, ''my father was a farmer. He advised us to ensure that farmers were not adversely affected while bringing up projects. We want industry and agriculture to flourish together.'' Initially the project would focus on preparation of raw material and the pelletisation plant for which low grade iron ore fines and low grade coal would be required, Jindal said. Denying that the project had been scaled down owing to the slowdown, he said the project had originally been planned in three phases. The first phase, he reiterated, would come up in 2012 with an investment of Rs 10 to 12,000
crore. — PTI |
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Kamath seeks bailout plan for MFs, NBFCs
‘Corporate defaults can’t be ruled
out’ Concerned over the interest rates in 'high teens' that could make India a high-cost economy, CII president
K.V. Kamath on Sunday said corporate defaults beginning with small and medium enterprises could not be ruled
out. "As of now, we are not seeing big corporates defaulting. But I cannot rule that out, particularly starting with SME sector. (If) we continue to have high interest rates,” he said.
New Delhi, November 2 "I think there is an immediate and urgent need to look at how these institutions are funded and address this critical point. We also need to see how we provide them soft lending. I am saying, let us recognise there is a problem here," Kamath, who is also CEO and managing director of ICICI Bank, told PTI in an interview. Asked if the mutual funds and NBFCs needed a bailout rather than the banks, he said 'exactly' while terming them as 'vulnerable' going by the size of the debt that the two sectors collectively have. "There is no need for a bailout package for the Indian banking system but the bailout package could be required for mutual funds and NBFCs. "We have a situation where the two have a corpus of debt or money lent out at around Rs 6,30,000 crore. The number I have roughly on mutual funds' debt side is around Rs 2,50,000 crore and NBFCs non-deposit taking is Rs 3,80,000 crore," he said. Kamath said he would raise this, along with the issues of liquidity and corporate India's concern over the weakening of rupee, during Prime Minister Manmohan Singh's meeting with industrialists on Monday. "Some of these issues CII has already flagged. But I think I have articulated to you my broad thinking which is what I will table. One more thought I would like to share is that of rupee weakening. This is a concern in the minds of corporate India," he said. Asked about the nature of the bailout package that the government should consider for NBFCs and mutual funds, Kamath said, "You could have soft lending. If liquidity is not provided to these institutions there could be a loss of confidence. There could be a major problem because we are talking of a large amount here." On whether disturbance in this sector could impact the entire economy or the whole banking system, he said, "The size of disruption could impact every body. That is the worst case scenario. What is required is how will it be shored up and we need to find an answer to it." Asserting that there was an immediate need to make sure that there was availability of liquidity and rollovers (churning of finances) where the credit is good. Reserve Bank of India, as part of injecting liquidity in the system, yesterday opened a soft loan window through a special refinance facility for MFs and NBFCs — a move that could help the segment access additional liquidity of about Rs 40,000
crore. — PTI |
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PM to meet industry captains today
New Delhi, November 2 Preparing for the meeting, apex industry associations CII and Ficci held the meetings of their core group, including past presidents, to flag the issues that they should take up with the Prime Minister. Ratan Tata, Anand Mahindra, Mukesh Ambani, Anil Ambani, K .P. Singh, Sunil Bharti Mittal and Deepak Parikh are among those expected to attend the meeting —two days after RBI decided to inject another Rs 85,000 crore into the financial system by revising downward short-term lending rate and key deposit requirements for banks. High on the agenda of the chambers is the spurting interest rates and drying up of liquidity for the industry, which recorded a dismal growth of 1.3 per cent in August this year.
— PTI |
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Airlines not to pay commission to agents
New Delhi, November 1 Full-cost carriers like Air India, Jet Airways and Kingfisher Airlines implemented 'zero commission' for travel agents from November 1. They have allowed agents to charge a transaction fee of Rs 350 and Rs 500 on economy and business class tickets in domestic sector over and above the ticket price. Passengers travelling overseas would be charged a maximum of Rs 2,500 for each economy class ticket, Rs 5,000 for business class and Rs 10,000 for the first class depending on the distance to be flown by the customer. For short-haul international travel within the SAARC nations and Afghanistan, the fee would be the same as that in the domestic sector. In case of medium-haul travel to the Gulf and Southeast Asian destinations, it would be Rs 1,200, Rs 2,000 and Rs 5,000 per ticket, as per the circulars. The airlines have also asked travel agencies to sign agreements by November 15 to implement the transaction fee and zero commission, making it clear that only those who sign the contract would be able to reimburse the fee. Agents have urged the aviation industry to take alternative steps to make up for their losses and share the burden with customers. They also want the airlines to defer the November 1 deadline for enforcing zero commission. So far, a 5 per cent commission was built into the airline fares for travel agents. |
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ICICI Prudential to tap rural market
Chandigarh, November 2 This was revealed by the senior vice-president, ICICI Prudential, Poonam Bhardwaj, during an interaction with The Tribune here. “Even in these difficult times, when the global meltdown has started taking its toll on the Indian economy, we are expecting a surge in business, especially from the rural areas. Though we launched this vertical by offering micro insurance products in February last year, we are getting 7 per cent of the revenue from rural areas,” she said. As part of ramping of its rural operations, the company has now ensured that 50 per cent of its branches (1,000 branches of a total of 2,070) are located in the rural areas. In fact, ICICI Prudential is coming out with a new rural health insurance product to tap this segment. “We have applied to the IRDA for approval, following which this product will be launched in the market,” she said, adding that like for other rural insurance products, they would be hiring NGOs to create awareness and sell their products. She said since the saving behaviour of rural consumer was the same as that of urban consumer, they were sure of a good business opportunity in the hinterland. ICICI Prudential Life's total premium income grew by 56 per cent over last year, while its renewal premium grew by 90 per cent over last year. |
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Mittal loses $50b in 5 months
London, November 2 While the US and European markets started their downslide way back in August-September last year, ArcelorMittal, the world's largest steelmaker, continued to gain value till about five months ago and its share price scaled a life-time high of $104.77 on June 5 at the US bourses. However, the valuation has now dipped to below the one-fourth of its record high level and the company's shares, which are listed at NYSE as well as on some European bourses, are currently trading near $25
level. — PTI |
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Market Update
Last week was a strong week in an otherwise brutal month, which has seen the BSE Sensex decline by 30 per cent. The performance of stocks in October was the worst ever recorded by the Indian stock market since the start of this millennium. The BSE Sensex declined by 30 per cent during the month, far outpacing the 18 per cent decline of June 2008 which was the earlier worst month for Indian stocks. The losses would have, in fact, been worse but for this week’s surge, which saw the Sensex gain almost 13 per cent. Though the key benchmark indices edged higher last week, the market sentiments remained fragile due to the global recession and heavy selling by foreign funds this year. Global Markets rallied after central banks across the globe cut interest rates to tackle the financial crisis. The market sentiment also got a boost after India’s inflation rate fell below 11 per cent for the first time since May 2008. It was a truncated week with the stock market closed on Tuesday (28 October) and Thursday (30 October) for Diwali holidays. A special one-hour Muhurat trading session was held on Tuesday to mark the beginning of the new Samvat year 2065.
Taking a cue from the international counterparts, the RBI last Saturday cut CRR and repo rates. SLR has also been cut by 1 per cent to 24 per cent. These measures indicate that the RBI continues to closely monitor the developments in the global and domestic financial markets and take timely and appropriate steps to maintain stability. Also, domestic banks will certainly draw some comfort from these measures in the short to medium term, which will enable them to lend to productive sectors as well as protect their margins. Foreign institutional investors (FIIs) have been pulling out their investments from India and other emerging markets to shore up resources to beat the global liquidity crunch. In India, FIIs were net sellers of Rs 14,000 crore plus in October 2008 so far. FIIs have sold Indian shares of more than Rs 50,000 crore in calendar year 2008. Going forward, in the short term, the markets will continue to gyrate to the global happening and how the central banks respond to stabilise the financial markets. Investors may stay away from the loads of emotions that are floating around these days as we are quite certain that the stocks across the spectrum — large, mid and small — are on sale and if you have cash to spare invest in strong businesses that are likely to weather this downturn and emerge much stronger over the next few years. |
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Tax Advice
Q. I am in receipt of a family pension after the death of my husband. Is any form of deduction allowable for such a pension?
— Maya Devi A.
As per the provisions of Section 57 of the The Act, a sum of Rs 15,000 or 331/3 % of such an income whichever of the two is less, is allowable as a deduction from the amount of the family pension. It may be added that family pension for this purpose means a regular monthly payment payable by employer to a person belonging to the family of an employee in the event of his death. I hope the pension received by you is covered within the above definition. Correction in PAN
Q. Payment of income tax has been made by challan form 280, though the name is correct but there is some mistake in Permanent Account Number. That is in permanent Account number letter "D" has been mentioned for letter "P" though the name mentioned is correct. Under such circumstances what is the remedy? Please provide some guidance. — S.S.Kanwar, Advocate A. It would be advisable to write a letter to the concerned assessing officer pointing out the mistake in writing the correct permanent account number in the challan form 280, by virtue of which the relevant instalment of advance tax has been deposited. Further, a request should be made to the assessing officer to appropriate amount so deposited vide challan no 280 to your account for the relevant assessment year. TDS
on VRS benefits
Q. I retired under the exit option scheme & got 36 months salary in advance on which the bank deducted tax at source of 30 per cent as per terms of exit option scheme. My question is whether the above exit option scheme of the bank will be treated as VRS under Section 10(10C) of income tax rule which allows an exemption in respect of VRS compensation providing that the maximum amount that can be claimed as exemption up to Rs 5 lakh. Kindly advise. — Naveen Dhawan A. You have rightly pointed out that any amount received by an employee from an authority established under the Central State or Provincial Act on account of the voluntary retirement or termination of the service in accordance with any scheme or schemes of voluntary retirement is exempt from tax to the extent such an amount does not exceed Rs 5 lakh under Section 10(10C) of the Income-tax Act, 1961 (The Act). The section further provides that the scheme of the authority governing the payment of such amount should be framed in accordance with the guidelines (including inter alia criteria of economic viability) as may be prescribed. The exemption granted to an employee under this clause is once for all and no exemption is granted thereafter to such an individual with regard to the receipt of the amount on the voluntary retirement. The deduction of tax at source @ 30% from the amount paid under the Exit Option Scheme of the SEBI seems to have been made on account of the fact that the above conditions required by Section 10 (10C) of the Act have not been complied with. You should, however, make an enquiry from the SEBI in this regard to confirm the above stated position. Rebate on donation
Q. I intend paying a donation to a political party. Can I claim the deduction thereof in my taxable income? — Gurbhajan Singh A. Section 80GGC of the Act provides that in computing the total income of an assessee, being a person except local authority and every artificial juridical person, wholly or partly funded by the government, there shall be allowed a deduction of an amount contributed by him, in the previous year, to a political party. The political party referred to in the aforesaid section should be such which is registered under Section 29A of the Representation of the People Act 1951. Thus in case you contribute a sum as a donation to such a political party, you would be entitled to a deduction of the amount paid as donation from your total income. No tax on dividend
Q. I have received an amount of Rs 10,000 as an interim dividend from a company which was declared in the last week for the year 2007-08. However, the same has been credited to my account through the medium of ECS in first week of April, 2008. I did not include the said income in my return for assessment year 2008-09 as the amount was received in April 2008. Please let me know whether my decision was correct as I am told that the dividend became income as and when the right to receive the same is established ? — A. L. Arora A. The legal position explained to you as to the accrual of income from dividend is absolutely correct. However, the declaration of income in the tax return would depend upon the method of accounting followed by you for accounting 'Income from other sources'. If you have been following the cash method consistently over the years the declaration made by you in the return is correct. However, if you are following the accrual method, the method followed by you was not correct. It may be added that the issue of dividend income being accounted in the assessment year 2008-09 of 2009-10 will have no significance as the dividend received from an Indian company is exempt from levy of income-tax in the hands of the recipient. |
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