Tax boost for venture funds
Shell may give its LNG rivals a shock
DSS Mobile ties up with E-PAC
New textiles policy sets $ 50 bn exports target
BPCL to up Numaligarh stake
Uco plan to cut 4500 jobs ready
Foreign Exchange, Bullion, Stock Indices

 
 
TAX BOOST FOR VENTURE FUNDS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Nov 2: 
The government has decided to do away with the stipulation that requires venture capital funds (VCFs) to give up their tax pass-through benefits within 12 months of the companies being listed on the stock exchanges.

In this year’s budget, finance minister Yashwant Sinha had announced that the principle of pass-through would be applied in the tax treatment of venture capital funds whose income would be free of tax, except when not distributed within the period prescribed under Sebi guidelines.

Further, income in the hands of the investors in the VCF, which would otherwise be taxable, would also be kept tax free. There would only be a one-time payment of tax by the VCF at the rate of 20 per cent when the Fund distributes its income to its investors. The same rate would apply to undistributed incomes also.

This beneficial tax treatment was being given to spur investment in the knowledge-based industry which Sinha had said in his budget speech would “help facilitate the coming together of Laxmi and Saraswati to bless entrepreneurs and investors.”

Soon after the budget announcement, the Securities and Exchange Board of India (Sebi) had stipulated that the benefit would come to an end within 12 months after the companies got listed.

“I am happy to tell you that we have decided to do away with this stipulation,” Sinha said at a seminar organised by Nasscom here today.

The finance minister said Sebi will soon issue guidelines to do away with the stipulation on removing “tax pass through”.

Sinha, however, said the government would keep a strict vigil on the incentive scheme and “we will take action if there is any misuse”.

The finance minister said the infotech industry could prepare their “wish list” in time for pre-budget discussion and added that he was not in favour of making modifications between budgets.

Nasscom had asked the finance ministry to modify the new Section 10A/10B under the Income Tax Act. This section allows tax holiday till 2010 for units registered with software technology parks, export-oriented units and export processings zones.

However, the clause stipulated that if majority shareholding of a company changed hands during the year, then the company would cease to get income tax holiday. “Such a clause is the biggest hurdle to mergers and acquisitions,” said Nasscom president Dewang Mehta.

Sinha also asked the trade and industry to avoid seeking incentives for staying competitive and asked them to work out strategies to enhance productivity. Various schemes for information technology sector were being worked out as this had a potential to generate jobs.    


 
 
SHELL MAY GIVE ITS LNG RIVALS A SHOCK 
 
 
FROM R. SASANKAN
 
New Delhi, Nov 2: 
It is neither Enron nor Reliance but Shell which is going to call the shots at the liquefied natural gas (LNG) market in India.

Its proposed terminal at Hazira can undermine the rivals such as Petronet LNG Ltd if it comes up ahead of others.

Experts are of the view that there is scope for only one terminal on the west coast. Enron’s terminal at Dabhol—in an advanced stage of construction—is meant essentially for the power plants there.

Though it intends to market gas to the industrial centres in Gujarat, a terminal at Hazira will have a great advantage locationally. As a port Hazira is far better than Dahej where Petronet LNG proposes to set up its terminal.

Earlier, not many in the oil and gas industry took Shell’s LNG proposal seriously as it teamed up with Essar. The surplus gas of Oman Gas—in which Shell is an equity partner—was sold to Enron by the Oman authorities.

This created an impression that Shell which got the licence for developing Hazira port will not go ahead with the liquefied natural gas project. Shell has proved others wrong.

It is going ahead with its LNG terminal proposal as part of its ambitious plans for India. Its strategy is to link its proposed investment in liquefied natural gas terminal with the plan to enter the retail marketing of petroleum products.

Shell demonstrated its clout when the government modified its earlier Cabinet-approved policy that marketing rights for petroleum products would be given only in the event of fresh investment to the tune of Rs 2000 crore in a refinery project or an annual 3 million tonne crude production.

Shell did not fulfil either of these. The government modified its decision to the effect that investment could be in any area of the hydrocarbon sector. By investing in LNG terminal, Shell gets an entry into the domestic retail market.

Among oil majors, Shell has the maximum investment in LNG projects. It can bring LNG from neighbouring countries such as Indonesia. It does not have to bother about financial closure of the project as it is investing its own money.

It has already signed a cooperation agreement with Gas Authority of India Ltd which owns and operates the largest gas pipeline network. LNG has been identified as an area of cooperation.

At one stage, the ministry of petroleum and natural gas considered a proposal to persuade Shell to withdraw from Hazira. The previous secretary in the ministry who was also chairman of Petronet LNG was keen to get Hazira for his company.

Locational disadvantage coupled with too many parties involved in the running of the business with each one asking for its pound of flesh, may make Petronet LNG’s gas costlier than that of Shell which has its own sources of supply.    


 
 
DSS MOBILE TIES UP WITH E-PAC 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Nov 2: 
DSS Mobile Communications Ltd, the owner of Mobilink paging network, announced a global joint venture with E-PAC International, a five-month-old company floated by Anil Kaul, former chairman and managing director, Oracle India.

The venture, DSS Infotech Solutions Ltd, will begin operations from Delhi.

The company will primarily focus on the implementation of services for leading international software packaging as Kaul feels, “highest end of the chain in IT business is the implementation stage”.

The implementations are planned in the areas of customer relationship management, supply chain management, business to business exchanges and mobile communication application.

Offshore development and problem solving facilities is also on the agenda. However, Kaul said this area will not receive maximum emphasis.

DSS Infotech Solutions will focus on developing software products with the aim of licensing software applications in large volumes for global customers and IT enabled services.

The five-year-old Mobilink has a turnover of about Rs 70 crore.    


 
 
NEW TEXTILES POLICY SETS $ 50 BN EXPORTS TARGET 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Nov 2: 
The Cabinet today cleared a new textile policy liberalising the garment industry, lifting the foreign direct investment (FDI) cap of 24 per cent and throwing open the sector to units other than small scale ones.

Textile minister Kanshiram Rana said with the approval of the new textile policy, the entire duty structure will be reviewed to promote the industry and next year’s budget will see major rationalisation of textile duties. The measures are expected to help push India’s exports to $ 50 billion by 2010.

“The new textile policy aims to achieve an export target of $ 50 billion, as against the present $ 11 billion. It also intends to increase the country’s share of garment exports to $ 25 billion and to raise cotton production by 50 per cent besides improving its quality through the use of technology,” Rana said.

So far the garments sector was reserved for SSI units and there was a ceiling on investment of Rs 3 crore with a cap of 24 per cent on foreign equity. With dereservation, the garment industry will be able to face competition from neighbouring countries like Bangladesh, Sri Lanka and Pakistan, Rana felt.

The policy will also encourage the private sector to set up integrated textile complexes and textile processing units in different parts of the country.

The government also clarified it will now permit foreign investment in the garment sector on an automatic route up to 100 per cent. Export obligations would, however, continue to be mandatory for 100 per cent export oriented units (EOUs).

Bharat Gold Mines VRS

The government plans to offer a new Voluntary Separation Scheme (VSS) to the employees of Bharat Gold Mines Ltd (BGML).

The scheme suggest better incentives than the previous one, which saw only 356 of the over 4,000 employees opting for it, parliamentary affairs minister Pramod Mahajan told reporters after the Cabinet meeting.    


 
 
BPCL TO UP NUMALIGARH STAKE 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Nov 2: 
Bharat Petroleum Corporation Ltd (BPCL) will buy out the entire stake of IBP in Numaligarh Refineries. This will raise BPCL’s stake in the refinery to 51 per cent from 32 per cent .

Sources said the petroleum major, which enjoys a 21 per cent share in the domestic petroleum market, may seek shareholders’ approval through an extra-ordinary general meeting shortly.

IBP has attached a Rs 268 crore price tag to its 19 per cent stake in Numaligarh Refineries. Sources said the two companies have not arrived at an agreement on price as yet.

“We have sought a premium of Rs 96 crore over our investment of Rs 172 crore in Numaligarh Refineries,” a top IBP official said.

IBP, the Calcutta-based oil marketing company, has already received the government’s approval to divest its complete stake in Numaligarh Refineries in favour of Bharat Petroleum. With the sale of this stake, IBP will become a stand-alone oil marketing company. The sale is important for the company which has undertaken a financial restructuring to face the deregulated regime in oil sector after April 2002.

IBP’s proposal of making a private placement of 1.75 crore shares to the Oil Industry Development Board to garner Rs 200 crore is awaiting government approval. The private placement of equity will shore up the company’s capital base from the existing Rs 22 crore to Rs 40 crore.

BPCL has, on the other hand, decided to invest Rs 850 crore in the current financial year. Part of this fund will be used to take-over Numaligarh Refineries.

The company, which currently has 4,400 petrol stations countrywide, is shaping up the marketing network with substantial investment more than Rs 45 crore.    


 
 
UCO PLAN TO CUT 4500 JOBS READY 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Nov 2: 
The board of directors of the city-based Uco Bank has approved a voluntary retirement scheme which aims to cut the workforce by 4,500. The bank will have to shell out Rs 425 crore to fund the exit package.

V.P. Shetty, the newly appointed chairman and managing director of the bank, will meet Union finance ministry officials next week to discuss ways to fund the VRS.

In the current financial year, the bank aims to shed 2,500 employees for which it will need Rs 250 crore.

At present, the total staff strength of the bank is 32,000. According to sources, the bank management has already carried out a productivity survey which revealed that about 5,000 employees are surplus.

“We will be able to increase the business per employee from the current level of Rs 89 lakh to above Rs 1 crore once we shed our excess employees,” sources said.

The bank has already received the proposals from the Institute of Chartered Accountants of India on its borrowing programme. “They have suggested four ways how to go about with it,” sources said.

According to sources, it is not possible for Uco to fund the entire VRS from its own pocket and it needs government support.

The scheme will be similar to the one given by Punjab National Bank. The employees will get an ex-gratia amount equivalent to 60 days salary (pay plus stagnation increments plus special pay plus dearness relief) for each completed year of service or salary for the number of months service left, whichever is less. Fifty per cent of the ex-gratia amount will be paid instantly in cash and the remaining 50 per cent will be paid in the form of bonds issued by the bank for a period of five years.

Apart from discussing VRS with the finance ministry, Shetty will broach the issue of recapitalisation funds.

Uco needs about Rs 250 crore recap fund for tier-I capital to maintain the bank’s capital adequacy ratio (CAR) at 10 per cent. At present, the bank has a CAR of 9.16 per cent. “Discussion will also be held on raising Rs 250 crore tier-II capital through bonds,” sources added.

Finance ministry officials will also review the mid-term restructuring plan submitted by the bank in June. The restructuring plan focuses five areas of initiatives—three-tier decision making set up, increasing use of technology, emphasis on branch level profitability and performance oriented culture.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs.46.74	HK $1	Rs. 5.90*
UK £1	Rs. 67.80	SW Fr 1	Rs. 26.00*
Euro	Rs. 40.15	Sing $1	Rs. 26.50*
Yen 100	Rs. 43.18	Aus $1	Rs. 24.05*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4540	Gold Std(10 gm)	45001
Gold 22 carat	Rs. 4285	Gold 22 carat	41601
Silver bar (Kg)	Rs. 7975	Silver (Kg)	80001
Silver portion	Rs. 8075	Silver portion	 8005

Stock Indices

Sensex		3875.79		+87.26
BSE-100		1979.16		+29.89
S&P CNX Nifty	1224.85		+24.05
Calcutta	107.87		+1.86
Skindia GDR	NA		-
   
 

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