Cash-and-sop props for SSIs
Govt divided on petro price hike
Recovery signal for Air-India
Mavens demystify marketing
Lever, DCW in detergent deal
Magor to clean slate by year end
Govt wields the axe on taxmen
Foreign Exchange, Bullion, Stock Indices

New Delhi, Aug 30: 
Prime Minister Atal Behari Vajpayee today announced a special package for small-scale industries that included an increase in the excise duty exemption limit from Rs 50 lakh to Rs 1 crore and a Rs 447 crore package for the handloom sector.

The government also raised the limit for composite loans from Rs 10 lakh to Rs. 25 lakh. Vajpayee also announced a capital subsidy of 12 per cent for investment in technology in select sectors.

Inaugurating the first national conference on small-scale industries, Vajpayee said, �You must accept the challenge of globalisation and improve your product quality to effectively deal with forces of competition.�

The Prime Minister said announcements regarding customs duties will also be made soon by finance minister Yashwant Sinha. ��The small and medium industries ministry will also be separately announcing some other measures to strengthen the sector,� he said.

Entrepreneurs will now be able to secure term loans and working capital from the same agency and the industry-related service and business enterprises with a maximum investment of Rs 10 lakh would qualify for priority lending.

Vajpayee announced the formation of an inter-ministerial committee of experts to define the scope of technology upgradation and sectoral priorities. To encourage total quality management, the government would continue to grant Rs 75,000 to each unit that obtains ISO 9000 certification for the next six years.

He made a one time capital grant of 50 per cent to small scale associations who wish to develop and operate testing laboratories.

The Prime Minister also announced the launching of a new scheme named Deendayal hathkargha protsahan yojana aimed at supporting the handloom sector through finance, design and marketing outputs.

Mixed reactions

Industry welcomed the package of incentives announced by the government for the small-scale sector saying that it would revive its sagging fortunes.

Assocham president Shekhar Bajaj said the financial package addresses the vital ingredients of SSI growth. It also recognises the importance of information technology, actual procurement of technology and finance for technology upgradation and induction.

However, Bajaj said, the fiscal benefits available to the SSIs for marketing should be extended to the branded marketing products.

Ficci also welcomed the decision to raise the limit of excise exemption. �This has been a long-standing demand of the SSIs and Ficci has been pursuing with the government for this concession. This has become imperative in view of the increasing costs of production,�� it said.

However, the swadeshi hardliners within the BJP, who have widely criticised the government for ignoring the interests of small businessmen and traders, were not too pleased with the announcement.

The argued that the government ought to have rewarded the small businessmen, who form a core support base for the party, in more concrete terms.

The Sangh constituent� the Swadeshi Jagran Manch (SJM)�has publicly opposed the pro-reforms policy of the government. BJP sources hoped the package announced by the PM today would put the lid on their criticism for for some time.

SJM sources, however, did not sound happy with the announcement.

�The package is based on the interim report of the Gupta committee on the small scale sector. Why couldn�t the government wait for the final recommendations?� asked an SJM activist.    

New Delhi, Aug 30: 
The finance ministry and the Planning Commission are concerned over the delay in hiking the administered prices of petroleum products.

Senior officials say the government should immediately increase the prices of all major products, at least by 20 per cent, to ensure that the deficit in the oil pool account does not widen.

Ram Naik, the minister for petroleum and natural gas, remains unconvinced. His reasons are essentially political. Any increase in the prices of petroleum products can destabilise the government as it will not be acceptable to partners in the ruling coalition.

Last time, he was under tremendous pressure to roll back the increase in the prices of diesel and LPG, but he managed to stave off a crisis after Prime Minister Atal Behari Vajpayee intervened, and persuaded the leaders of various political parties to accept the revision.

Apart from being extremely unpopular, a significant rise in the prices of these petroleum products can push up inflation. Official circles maintain that such a situation is unavoidable.

In their view, artificially depressed inflation is dangerous. The government, they say, is subsidising consumers of petroleum products by not raising prices. Official sources say even the Prime minister is not in favour of a price hike now.

He has already been briefed about the gravity of the situation. With the oil pool deficit hovering around Rs 10,000 crore, the situation may careen out of government control unless international prices come down. There are no indications, however, of a dip in oil prices in the short term.

Naik might ultimately relent and agree to a moderate the increase after some time. Sources say he may not agree to a steep hike. The current level of deficit in the oil pool can be tackled by issuing bonds to oil companies.

Naik is still hoping that a reduction in customs duty on crude can go a long way in defusing the situation. Finance minister Yashwant Sinha, however, is in no mood to oblige. He will fall in line only if the Prime Minister tells him.

There is a consensus among officials that the government can do away with subsidies on LPG, which works out to Rs 125 on a 14-kg cylinder. �There is no justification for subsidising the rich sections and the middle class,� said an official.    

New Delhi, Aug 30: 
The beleaguered Maharaja is ready to stage a comeback of sorts, with the civil aviation ministry keen to ensure that his flight back into the black is a smooth one.

While Air-India has recorded an operating profit for the first time in five years and a substantially lower net loss, the ministry has decided to urge the Cabinet to take measures exempting Indian carriers plying on international routes from payment of sales taxes on aviation turbine fuel, to give them a level playing field with global carriers. The additional sales tax burden is projected to be about Rs 80 crore in 2000-01.

Union civil aviation minister Sharad Yadav said here today his ministry will take up the issue with the finance ministry and other ministries and state governments, while announcing Air-India�s financial results at a press conference here today.

Stating that the national carrier had made a Rs 260 crore turnaround in three years, from a net loss of Rs 297 crore in 1996-97, Yadav said, �This is a reasonable achievement for an airline which only three years ago in 1996-97 lost Rs 413 crore on its operations and now shows a turnaround to the tune of Rs 489 crore.�

The airline claimed that if fuel prices had not shot up, bloating its bill by some Rs 220 crore, it would have actually made a net profit of Rs 180 crore. In 1999-2000, A-I had to make an additional outlay of Rs 225 crore owing to the massive escalation in fuel prices. It was paying higher local prices for fuel as well as high sales taxes for all turbine fuel bought in India, which accounted for 40 per cent of its fuel purchases.

The airline posted an operating profit of Rs 76 crore for 1999-2000 compared with an operating loss of Rs 5 crore in the previous year. Its net loss figure also came down from Rs 113 crore in 1998-99 to Rs 37 crore in 1999-2000, while turnover went up to Rs 4,662 crore from Rs 4,2036 crore.

For the first four months of the current financial year, Air-India has projected a provisional net loss of Rs 7.35 crore as against Rs 6.39 crore in 1999-2000.

Factors responsible for the improved health were route rationalisation and aggressive marketing. Passenger load factor had gone up from 66 to 70 per cent and non-operating losses were down from Rs 160 crore to Rs 22 crore.

IA concessions

Indian Airlines� passengers travelling in stretchers from or to Port Blair, Leh and Agatti will now have to pay the normal fare instead of four times the full adult fare. However, on other sectors apart from the above mentioned ones, the stretcher fare continues to be four times of the full adult sector fare.

The domestic carrier has also brought down the age for female passengers to avail the senior citizen�s discount from 65 to 63 years. Both the concessions are applicable with immediate effect.    

New Delhi, Aug 30: 
Folks who thought marketing is a byword confined to the boardrooms were jolted out of their stupor today when speakers at the two-day CII summit on marketing said the term now meant more than just selling wares � it is about convincing people, of sending a message across.

Speaking at the inaugural session of the conference, Marketing Beyond 2000, Suresh Prabhu, the Union minister for chemicals and fertilisers, said even the government needed to adopt marketing strategies to sell its policies to the people. Prabhu said a WTO-driven world will change the way business is done. �An integrated world is not just going to be about securing one�s market share but about being ready to compete with companies from across the world,� the minister said.

�The increasing use of infotech and e-commerce has taken marketing to the PCs and laptops. This is the challenge that the corporate sector now has to rise up to,� he said.

�Issues like population control and environmental degradation could be tackled effectively if the mass media reaches out to the public to convey the message to them,� he said. CII president Arun Bharat Ram nodded in agreement.

Marketing maven Shunu Sen, who is the chairman of the Marketing Summit and the CEO of a consultancy firm, said marketing is not a just a function of business, but the purpose of it.    

Mumbai, Aug 30: 
Hindustan Lever has entered into a strategic alliance to outsource detergents and intermediates from DCW�s soda ash plant at Dhrangadhra in Gujarat.

Lever is one of DCW�s main customers for soda ash, a key ingredient in the manufacture of detergents. DCW officials say Lever requires around 1200 tonnes of soda ash every month.

DCW plant, located at Dhrangadhra in Surendranagar district of Gujarat, can produce around 96,000 tonnes of soda ash annually.

Though Lever officials declined to comment on the strategic alliance, industry circles say it is a win-win deal for both companies. The deal will help DCW protect its market share at a time when its business is under pressure on two counts. One is the dumping of soda ash by foreign companies, especially those from China. Second, is the setting up of a soda-ash plant by detergent and soaps major Nirma as part of its vertical integration plan. The unit will generate enough soda ash to meet its entire production requirements.

Tough times have forced companies such as DCW and Tata Chemicals to improvise and provide value-addition in order to stay afloat.

�The DCW-Lever deal will become a trend in the industry as raw material manufacturers will be forced to provide such services to customers,� an analyst said. Citing an example, he said automobile makers now ask wheel-makers to fit in tyres before supplying the vital input to plants.

Meanwhile, DCW has initiated steps to amend its object clause of the memorandum of association in a manner that will allow the company to make detergents and its intermediates.

DCW officials said the new business will fit easily into its ones. The strategic alliance would help the company face competition from local firms as well as overseas competitors.

The Centre had recommended the imposition of anti-dumping duty on soda ash imports from China in early July following demands made by local companies such as Tata Chemicals, Birla VXL, DCW and Gujarat Heavy Chemicals.

The extent of the Chinese damage to the Indian soda ash industry can be gauged by the fact that products from that country accounted 56 per cent of imports to India in 1997-98; this increased to 71 per cent during the period when investigations were being carried out by the government.    

Calcutta, Aug 30: 
Stung by the adverse observation of its auditors Lovelock and Lewes, Williamson Magor has decided to clean up its balance sheet in the current financial year itself.

Addressing the shareholders at the company�s annual general meeting here today, chairman B.M. Khaitan said, �We will write-off our bad loans and clear our balance sheet. All our litigations are over and we can take necessary steps now.�

Lovelock and Lewes, in its 1999-2000 audit report for the company, had expressed doubts about the recoverability of certain loans and advances made by the company.

Williamson Magor�s profit increased threefold last year though its income fell. �This has happened mainly because of substantial reduction in employee cost during the year. We had given voluntary retirement package to about 150 people last year,� Khaitan said.

He said the income of the company suffered mainly because of the destruction of its premises at 2, Fairlie Place due to a devastating fire last year, resulting in loss of rental income from its tenants.

Williamson Magor�s subsidiary, Woodside Parks Ltd is developing a commercial complex at 22, Camac Street. The total area is 325,000 square feet and the company expects to earn Rs 125 crore by selling this area. WM has about 15 bighas of land at Majerhat. The company is also trying to develop this property.

Earlier in the day, the annual general meeting of Bishnauth Tea was held where the shareholders approved all the resolutions, including the appointment of B.M. Khaitan as managing director.    

New Delhi, Aug 30: 
The government plans to restructure the income tax department by separating tax assessment, collection and recording functions, increasing the number of commissionerates as well as the use of cyber tools and slashing staff at the lower level.

The restructuring plan proposed by the finance ministry is likely to be considered by the Union cabinet tomorrow. The ministry wants to �redesign its business process� by separating the three main functions of the tax department at all levels: assessment, collection and record keeping.

It also wants to increase the number of commissionerates and officers to keep up with rise in the number of taxpayers from some 80 lakh in 1990 to 2.5 crore today. And to pay for all this, it will slash nearly 5,000 low level jobs.

It cites the mounting arrears of work as the main cause for this sudden decision to reorganise its main executive arm. The number of IT assessments that are now pending have shot up from some 14 lakh in 1987 to nearly a crore. Uncollected tax arrears have gone up from Rs 3,475 crore in 1987 to Rs 44,140 crore in 1999. The number of taxpayers per commissionerate has gone up from 84,000 in 1997 to 1.65 lakh this year.

To deal with this situation more chief commissionerates, commissionerates, ranges and wards will be created so that there is one commissionerate for every one lakh taxpayers and one range for every 33,000 taxpayers. More judicial commissioners will be appointed to bring down the time span for addressing appeals.

Some 60 new chief commissionarates will be created within the next two years as a result.

It will also break up the basic unit of tax administration � income tax ranges into three separate units � one which will only assess incomes, another whose sole responsibility will be to collect taxes, arrears etc and a third to keep records, with separate officers heading each.

The Central Board of Direct Taxes itself will be re-organised into a number of new directorates modelled on corporate boards. It will now have separate human resources, infrastructure, international taxation and public grievances directorates.

To offset the higher wage cost of more officers and to take care of future increases in number of tax payers, it will rapidly introduce infotech tools to assess, collect and record tax cases.

The ministry feels a total overhaul of the department is needed to do this which will involve retraining and redeployment of staff rendered surplus by the large-scale introduction of cyber-savvy taxation methods.

The finance ministry�s note for the cabinet claims that the decision will impact government�s tax collection by nearly 8,000 crore in arrears which would be collected and unpaid taxes which would be tapped.    


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