Tacit go-slow on A-I selloff
Duty breather boosts ship acquisition plans
City firm sets up game park in Bangalore
Tough conditions stall incentive funds to states
CII wants IT Act amended

New Delhi, May 27: 
Who wants to disinvest in the beleaguered flagship carriers — Air-India and Indian Airlines — right now? Not Sharad Yadav, certainly. He never did.

Nor disinvestment minister Arun Shourie for that matter. Not till the controversy of whether to allow Videocon and Hindujas to bid for Indian Airlines is formally cleared. Nor does the rest of the government want to be embroiled in a new controversy by letting either the widely-tipped Tata-Singapore combine or any of the other bidders for Air-India snap up the airline at a price that could spark an uproar on a scale much higher than the one when Balco was sold.

In fact, Shourie is believed to have given Yadav a message that there should be a slow down in the efforts to sell off the two airlines, till these issues are either resolved or die down on their own.

The problem for the government is that Air-India’s own planners had calculated the net worth of the airline at an astronomical Rs 20,000 crore a year or so back — a sum of Rs 12,000 crore in assets and Rs 8000 crore in the value of the landing rights under the bilateral agreements.

But no buyer ever was or will now be willing to cough up Rs 8,000 crore for the honour of owning 40 per cent stock in the Maharaja with its already aged fleet of 26 aircraft, despite its huge stock of accumulated unused bilaterals.

Although the civil aviation ministry is being accused of diluting Air-India’s net worth by granting flying rights to foreign carriers, the fact is its stock of unused bilaterals is actually increased every time a fresh bilateral pact is signed.

For every new flight a foreign carrier gets, Air-India gets the right to an added flight of its own. Air India’s tragedy of course is that it does not have the planes to use up those rights.

In fact so zealously have these rights been guarded, that when a Gulf-based airline was given the rights to fly to Hyderabad seven days a week and Indian Airlines put in a demand to use up the reciprocal right, it was disallowed because Air-India felt it might be able to fly the route after it had managed to rent new planes.

Civil aviation ministry officials, however, value Air-India at a more conservative Rs 4,000 crore. At this price a 40 per cent stake should be priced at around Rs 1,600 crore; add a 25 per cent premium for the right of managing the airline, and the price tag could be about Rs 2,000 crore.

However, a selloff at about this price would certainly raise howls of protest from all quarters including, most embarrassingly for the ruling BJP, from its own MPs, many of whom feel the very concept of selling off the country’s flagship carriers to be an alien one. Who then is interested in hurrying up the sale? Maybe only the buyers, provided they get it at the right price.


Mumbai, May 27: 
The lifting of the budget-imposed 5 per cent customs duty on ship imports is expected to boost vessel acquisitions after a boom year that took freight rates to record highs.

The imposition of this duty derailed the purchase plans of local companies. It also prompted some private firms to buy tankers through their overseas subsidiaries.

Sources say these companies have now decided to transfer these acquisitions back to their books after finance minister Yashwant Sinha said recently he would withdraw the duty.

Among private sector firms, Great Eastern Shipping and Essar Shipping are believed to be planning imports of carriers. Officials of GE Shipping said their company will acquire second-hand product tankers at a price of $ 24 million each.

In the current fiscal, 3 crude carriers at a price of $ 37 million each will be bought, in addition to two product tankers as part of a Rs 700-crore capital expenditure programme for the next two years

. The company’s shipping division has 31 vessels — dry bulk, crude, product and LPG carriers. Similarly, its London-based subsidiary has a fleet of 4 dry bulk vessels.

Apart from G E Shipping, Shipping Corporation of India (SCI) is also planning to add 12 ships next year, most of which will be tankers and container vessels. The public sector company is now devoting its resources to a fleet restructuring as part of which it sold off some of its liners and non-profitable ships.

The acquisition plans of domestic shipping companies come at a time when freight rates have started showing signs of easing after hitting new peaks in the previous financial year.

Last year, with the shipping cycle at its peak, companies could fetch a freight rate as high as $ 35,000 daily against yield of $ 15,000 daily earlier. Among various categories, the sharpest increase was observed in the crude carrier segment, which reaped the gains of sizzling global oil prices.

However, the situation has changed dramatically in some of the categories, and industry circles say the dry bulk and container segments have had to take it on their chin.

For dry bulk carriers, where rates are believed to be a fifth of those quoted for tankers, there are little indications that things will look up in the immediate future. What is worse is that the increase in the supply of ships arising out of vessel purchases could dampen rates in the medium term.

With freight rates on a tumble, industry watchers reckon that tanker rates, which shot up through the roof last year, will settle at more realistic levels compared with those in the previous year. Even so, they expect earnings from tankers to more than offset the slump in dry bulk cargo.


Bangalore, May 27: 
The Newar group of Calcutta has unveiled its first entertainment centre in this city called Kool Kidz.

The company plans to set up similar centres in Calcutta, Mangalore, Jaipur, Cochin and Mumbai. Kool Kidz also plans to have franchisees in other cities.

This centre has cost the company Rs 15 lakh and has been set up at Megabowl, an entertainment spot for youth and elders.

“We are excited about launching this unique concept for children between the age group of one and seven years. Children in this age bracket are the most neglected lot,” said Manish Newar, managing director of the group. The charges have been fixed at Rs 50 per hour.

Most entertainment centres ignore children friendly games. “Parents can now be relieved as Kool Kidz is the latest option to entertain kids,” he said. Kids can have fun through innovative products.


New Delhi, May 27: 
The Incentive Fund created by the Eleventh Finance Commission is unlikely to benefit all states. The release from the fund is linked to the states’ fiscal performance. Each state is expected to achieve a minimum improvement of 5 per cent in the revenue deficit (surplus) as a proportion to their revenue deficit each year till 2004-05. The base year is fiscal 1999-2000. Last year, the finance ministry withheld the release of Rs 2,100 crore from the fund as the states’ fiscal performance could not be assessed.

The ministry has now undertaken a review on the basis of which it would identify the states eligible for the funds. In its main report, the commission recommended revenue deficit grants of Rs 35,359 crore for 15 states during 2000-05. The remaining 10 states were revenue surplus in the it’s assessment. Since only 15 were assessed to be running a revenue deficit, the fiscal reforms programme should have been limited to them.

Instead, the supplementary report recommended monitorable fiscal reforms programmes for all states and favoured that 15 per cent of the revenue deficit grants meant for 15 states during 2000-05 and matching contribution by central government be credited into an Incentive Fund from which fiscal performance based grants be made available to states.

States were to undertake a medium term fiscal restructuring policy. The major components of this would be widening of the tax base, increasing tax rates on a year-on-year basis, abolition of vacant posts in the government and power sector reforms to achieve an average tariff equal to the cost of power within two years. Not many states would pass the monitorable fiscal performance test. This would help the Centre withhold at least 50 per cent of the funds. The amount would be carried forward till 2005.

Last year, the ministry deliberately delayed the fiscal performance review so that the fiscal deficit could be limited to the budgeted figure. The review would cover the current year too. States’ fiscal failure would be a blessing for the ministry as the unreleased funds would remain with it.


New Delhi, May 27: 
The Confederation of Indian Industry (CII) has sought a few amendments to the Income Tax Act to spur growth of the information technology sector.

Further, in view of the slowdown in the US economy, the biggest market for Indian software exports, the chamber has also demanded removal of all constraints on the sector.

The CII has sought removal of sub-section (9) in Sections 10A and 10B of the Income Tax Act, inserted by the Union budget 2000-01, which stipulates that on any change in the beneficial ownership of a company by more than 51 per cent, the company would be deprived of the benefits it is entitled to under the sections.

Sections 10A and 10B provide for a 10-year tax holiday to any industrial undertaking in Free Trade Zones (FTZs) for the “manufacture of any article, thing or computer software for export purposes.”

While the 2001-02 Budget has withdrawn the earlier restriction imposed by subsection (9), now allowing a more than 51 per cent change in beneficial ownership in those units, this benefit has been restricted to widely held companies only.

CII argued that the introduction of a 10-year tax holiday for units set up as 100 per cent export-oriented ones and for units set up in free trade zones was to encourage exports and changes in management/promoters should not be construed negatively and lead to a withdrawal of such benefits.

Anticipating corporate restructuring activity in the IT sector to remain competitive, the CII said that consolidation should be viewed as driver for growth and more importantly, for competitiveness. In this age of mergers and acquisitions, this provision will lead to undue hardship for the exporting community especially in the case of the software industry, where mergers and acquisitions are common.


Maintained by Web Development Company