VAT rests on 2 basic rates
Three options on internet phone tariffs
Trade tiff with EU deepens
Mother-son Birla duo joins L&T board
Bajaj rides Pulsar to step out of Kawasaki shadow
NIIT, M&M plucked out of sensex
CESC sees 3-fold rise in losses
PwC to draw up rescue plan for Daewoo India
Cement prices drift south in east
Foreign Exchange, Bullion, Stock Indices

New Delhi, Nov. 23: 
Twelve states have unanimously agreed to introduce value-added tax (VAT) with two basic rates of 4 and 12 per cent from April 1. A flat 20 per cent value-added tax will be charged on liquor.

An empowered committee of state finance ministers headed by Asim Dasgupta has agreed on two basic VAT rates. It will be a uniform 4 per cent across all states for goods considered to be basic necessities, industrial and agricultural inputs, declared goods, and capital goods (mainly machinery). The 4 per cent VAT will also cover additional excise duty (AED) items like textiles and sugar.

The second rate will be 10 per cent general rate on all other commodities. There will be also two special rates for select items — 1 per cent for gold, silver, precious and semi-precious items, and 20 per cent on liquor.

However, unprocessed agricultural and industrial goods in the unorganised sector and goods of social importance would be exempted from VAT.

The introduction of VAT is expected to bring down the retail prices of several commodities, including liquor, since the single levy will replace a set of cascading levies under the existing sales tax system.

“There was complete unanimity among states. Most of them will be in a position to implement it from April. I have given them an assurance that if any state suffers any loss in revenue while implementing it, the Centre will compensate them for it,” finance minister Yashwant Sinha said after the meeting with the empowered committee on VAT.

Only 12, including the three newly-formed states, are in a position to implement it from April. These include West Bengal, Maharashtra, Gujarat, Punjab, Madhya Pradesh, Karnataka, Uttar Pradesh, Delhi, Haryana and Meghalaya. The remaining states will implement it from 2003.

The existing sales tax structure unduly increases the tax burden of a commodity by taxing both imports and output and thus creating a cascading burden of taxation, which creates distortions in the economy. VAT eliminates the tax burden by setting off the tax paid on inputs and supplies.

The VAT liability will be self-assessed by the dealer in terms of submission on returns upon setting off the tax on inputs/supplies. Return forms as well as other procedures will be simple, transparent and similar in all states. All dealers are expected to be audited at least once in five years. If evasion is detected on audit, the dealer will then be assessed for all the previous years.

Industrial units enjoying remission or deferment under the old industrial incentive schemes will have to pay tax on procurement of inputs and collect tax on sale of goods at usual VAT rates. VAT liability on units enjoying deferment of tax will continue to be so. Units enjoying remission will have their VAT liability for the expired period deferred over a longer period.

Registration for VAT will not be compulsory for dealers below a threshold turnover and there will be a provision of an optional and simple composite scheme of taxation of a small percentage of gross turnover. The level of threshold and details of composition scheme will be determined by the states.

The states will get more powers of taxation. They will be able to impose VAT on Additional Excise Duty (AED) items like textiles, sugar and tobacco.

The Central Sales Tax Act will also be amended to help taxation by the states. The possibility of compensation in terms of additional central funds for any loss of revenue by the states on the introduction of VAT is also being considered.

Earlier, the Confederation of Indian Industry (CII) made a presentation to the committee. It argued that with the introduction of VAT, various state taxes and other local levies such as sales tax, turnover tax, entry tax, octroi and any other taxes on sale/movement of goods should be abolished.

The chamber pointed out a disturbing feature: some state governments are contemplating other forms of taxation like entry tax, luxury tax/special additional tax on selected products which would be in addition to the proposed revenue neutral rate under VAT, which would defeat the very purpose behind the system.

CII reiterated that with the introduction of a Revenue Neutral Rate (RNR) all other taxes should be abolished. The confederation has pointed out, that the VAT rates could be two-slab structure. Besides the exceptional rates of nil, 1 per cent and 20 per cent for specified items, there should be 4 per cent rate on items of mass consumption — merit goods.

All other items should be at RNR, which could vary between 4 and 12 per cent. There is a need for a cap of 12 per cent on RNR as any rate higher than this will not be acceptable and may lead to tax evasion.


New Delhi, Nov. 23: 
The Telecom Regulatory Authority of India today set three options for fixing internet telephony tariffs — a flat rate, a volume-based rate and usage time.

“It is difficult to unbundle the various elements of an internet protocol (IP) based network such as separating the cost of a local, long-distance or international call, as can be done in a public switched telephone network (PSTN), or what is commonly known as fixed line phone.

“In this background, different principles for internet telephony like volume-based charging, flat rate charging or time-dependent charging may have to be considered,” the telecom regulator said in its consultation paper released today.

“The main objective of this paper is to solicit informed views of various stakeholders including service providers, consumers, consumer organisations and others interested in the subject,” a Trai official said

The consultation paper provides information on the existing global scenario regarding Net telephony and gives the background on various policy, licensing, regulatory and technical issues.

Besides, it clarifies the differences between internet telephony and voice over internet protocol (VoIP), the two different variants of IP Telephony.

In its consultation paper, Trai has also sought to highlight important issues like who should be allowed to provide this service and the level of quality that should be maintained.

Internet telephony is generally considered a cheaper option for making long distance calls and is hence perceived to usher in a reduction in tariffs to the benefit of consumers, though it comes with much lower service quality than conventional phones.

As far as providing internet telephony is concerned, the regulator has suggested allowing either only internet service providers (ISP) or only basic fixed line or national long distance operators to offer this service.

The issue of contribution to a Universal Service Fund (USO) by the internet telephony service provider (ITSP) has also been put to debate.


New Delhi, Nov. 23: 
The battle over trade between India and the European Union seemed to deepen today, despite the platitudes showered on each other by both sides and offers of a textiles pact by visiting EU president Guy Verhofstadt on Thursday, with both Prime Minister Atal Bihari Vajpayee and commerce minister Murasoli Maran coming out against the EU’s discriminatory policies.

While Vajpayee demanded greater market access in the face of pressures to open up markets to foreign goods and services, Maran publicly complained about India being at the receiving end of an EU system of differential tariffs and tariff quotas.

“Our market access problems revolve around differential rates of tariff or tariff quotas being applicable on different partners and India being given a raw deal,” Maran said at the plenary session of the second Indo-EU business summit. India has been facing problems with textile export quotas and duties that favour rival Pakistan and with the quotas being imposed on farm products like basmati rice. Among other things, it is extremely unhappy with an EU decision to curtail rice imports, simply because farmers in Italy and Spain have been over-producing.


Mumbai, Nov. 23: 
The AV Birla Group sun rose on the L&T horizon today with the Ambanis passing on the baton to the mother-and-son duo of Rajashree and Kumar Mangalam Birla.

The two were inducted on the board in place of the Ambani brothers—Anil and Mukesh—as a consequence of the sale of Reliance’s 10 per cent stake in L&T to the Birla group flagship Grasim.

Further, former Unit Trust of India executive director B G Daga made way for S. Rajagopal, former Cabinet secretary, who took his place as the new UTI nominee.

Ushering in the new board members at the engineering and cement major was its 94-year old founder and chairman emeritus H. Holck Larsen.

“I have high regard for both the industrial houses and value the long-standing business relationship we have shared with them. I am sure that the professional structure of the company will continue to serve the interests of all the shareholders,” he said, adding “L&T has always been a professionally-managed company.”

The statement clearly reflected what was uppermost on everyone’s mind at L&T—that they expect status quo to be maintained by the Birlas.

Taking a trip down memory lane, the man who founded the company with the Late Soren Toubro, said: “Sixty-three years ago Soren Toubro and I started the company with the dream of creating a company that would excel in every aspect of business, while following high ethical standards. This company has been build by its employees around the core values of customer care, integrity and trust. These values are part of our unique heritage and have shaped the character and complexion of the organisation.”


Mumbai, Nov. 23: 
Two-wheeler major Bajaj Auto today rolled out Pulsar, its latest offering in the premium bike segment. And in what was a significant break from the past, the bike, touted as the most powerful sub-250cc model on Indian roads, sports the Bajaj name, unlike past offerings that had the Kawasaki tag. This makes it the country’s first bike to be marketed under the Bajaj brand.

Launching the Pulsar at a press conference, Rajiv Bajaj, president, Bajaj Auto Ltd said, “Pulsar is the culmination of our efforts to offer world class technology adapted for the Indian conditions that offers maximum value to our discerning customers. With the Pulsar in our portfolio, we today offer the widest range of motorcycles at various price and performance points.” The bike, he said, has the potential to sell 200,000 units in the next 24 months.

The Pulsar, developed by Bajaj’s product engineering division in association with Tokyo R&D, is being manufactured at the two-wheeler major’s state-of-the-art facilities at Chakan near Pune, the same plant where it makes its range of stylish scooters such as Bajaj Spirit and Bajaj Saffire.

Analysts say the strategy behind Bajaj roping in renowned Japanese design house Tokyo R &D, an independent engineering outfit based in Japan promoted by former Honda engineers was basically to protect itself from over-dependence on Kawasaki. This is despite the fact that both the partners enjoy the best of relationships.

There is also a fear that Pulsar may eat into the market dominated by Calibre and Aspire, bikes made with Kawasaki technology. However, Bajaj appeared unfazed by the possibility.

Nevertheless, the bike is certain to give both TVS Suzuki’s Fiero and Hero Honda’s CBZ a run for their money, by virtue of its incredibly competitive pricing strategy.

The company invested an estimated Rs 100 crore in developing the bike and the project took 36 months from the concept stage to actual commercial production.


Mumbai, Nov. 23: 
The Bombay Stock Exchange (BSE) has reshuffled three of its indices so that they represent the industries that make it up more accurately.

The prestigious 30-share sensitive index (sensex) will see NIIT replaced with HCL Technologies and multi-utility vehicle major Mahindra & Mahindra dumped in favour of Hero Honda, the largest two-wheeler manufacturer in the country. The changes will take effect from January 7, a release said here today.

In BSE 100, BPL will make way for Gas Authority of India, the state-owned pipeline company, while the Aditya Birla group aluminium maker Indal vacates its slot for Corporation Bank, a public sector bank in which LIC has a large stake.


Calcutta, Nov. 23: 
CESC is projecting a loss of over Rs 300 crore in the current financial year compared with a figure of Rs 98 crore for the year ended March 31 this year.

Sources close to the management said the total interest burden of the company will stand at Rs 369 crore, while depreciation is estimated at around Rs 200 crore.

A sharp pay cut for executives will take effect from December 1 as part of a sweeping cost-control and belt-tightening drive. According to an internal memo, the allowances (including HRA) of executive directors and the managing director will go down by around 10 per cent.

That’s not where the squeeze ends: there will be no increments for officials from April. The austerity axe will also fall on other items of expenditure, such as business travel; no foreign visits will be allowed, unless it is specifically approved by the managing director. The company has already stopped overtime for employees, except in cases where it is absolutely necessary.

A CESC spokesman could not quantify the financial impact of the cost cuts. Sources said the austerity drive will not be confined to the management cadre, and will soon extend to employees across the company, which forks out Rs 196 crore in wages every year.


New Delhi, Nov. 23: 
Beleaguered car-maker Daewoo Motors India Ltd has warded off the prospect of being wheeled into the sick bay.

The company has appointed PricewaterhouseCoopers to chalk out a financial restructuring package designed to reschedule the payment of loans amounting to Rs 1,000 crore (around $ 200 million) to Indian bankers and financial institutions and stave off a referral to the Board for Industrial and Financial Reconstruction.

Daewoo India board officials met here today to consider the half-yearly results but refused to divulge the details. The company said it would be reporting to the stock exchanges on Monday.

“There has been a 20 per cent fall in sales turnover compared with last year during the same period. But the loss will not be of that magnitude as there had been rigorous cost-cutting in these few months. We also want to cut down on interest liabilities of the company. That is why the specialised management firm has been brought in,” Atul Tandon, head of finance of the company said.

Tandon admitted that the company had been close to reporting sick. “But that has been taken care of. There is no immediate fear of that,” he added.

Company sources said in the recent past DMIL’s managing director Y.T. Cho had gone to Korea Development Bank to arrange for the credit needed to pay back the Indian lenders—ICICI, Industrial Development, Bank of India and Exim Bank of India.


Calcutta, Nov. 23: 
Cement prices in Calcutta have crashed to a two-year low of Rs 125 per 50kg bag, even as prices in other parts of the country are firm and, in fact, moving north.

Despite the ongoing polarisation in the industry — aimed at better price realisation — prices of all leading cement brands in Calcutta have crashed by at least Rs 15 per bag in the last one month.

Leading manufacturers attributed the fall to oversupply of the commodity in the eastern region and aggressive selling by the leading manufacturers.

The price cut, however, has not been able to trigger any significant growth in offtake, the demand of the commodity being relatively price inelastic. “But the present prices are unsustainable for manufacturers and are bound to move north,” a Gujarat Ambuja director said. There are indications that prices would improve on better demand in the peak season that is setting in.

Traditionally, cement prices start firming up in December and hold out till the monsoons. Prices in Calcutta in March this year were at Rs 170-175, but have been falling steadily since then.

Current prices in Calcutta are at least Rs 25 lower than in Mumbai and marginally lower than those in Delhi.

Leading manufacturers said prices in Calcutta should firm up beginning December, and return to the October-end level of Rs 135-140. The seasonal upswing last year had pulled up prices in Calcutta to Rs 170-175.

The recent acquisition of a 10 per cent stake in Larsen & Toubro by Grasim Industries has sparked off another wave of consolidation in the cement industry, that began when Gujarat Ambuja acquired 14.45 per cent in ACC.

The combined capacity of the two blocs is about half of the country’s cement manufacturing capacity. Grasim’s acquisition of 10 per cent in L&T is also understood to have thwarted the expansion plans of foreign majors.

The polarisation in the industry is expected to give the manufacturers greater control over cement prices, and thereby make better realisations possible.

In Mumbai, leading manufacturers like ACC, L&T, Grasim and Gujarat Ambuja pushed up prices by Rs 10 per 50kg bag to Rs 150 on Thursday.



Foreign Exchange

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UK £1	Rs. 67.69	SW Fr 1	Rs. 28.55*
Euro	Rs. 43.22	Sing $1	Rs. 25.75*
Yen 100	Rs. 38.73	Aus $1	Rs. 24.55*
*SBI TC buying rates; others are forex market closing rates


Calcutta			Bombay

Gold Std (10gm)	Rs. 4620	Gold Std(10 gm)	Rs. 4540
Gold 22 carat	Rs. 4360	Gold 22 carat	NA
Silver bar (Kg)	Rs. 6975	Silver (Kg)	Rs. 7040
Silver portion	Rs. 7075	Silver portion	NA

Stock Indices

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