Income tax slabs to be raised
Verdict on internet telephony in a week
RBI widens core sector loan ambit
Cash comfort for Daewoo
Infrastructure growth in January robust
Biotech to drive Wockhardt growth
IISCO seeks more time as revival plan remains elus
Duty cuts top hardware sector�s budget wishlist
CIL seeks private funds in washeries
Foreign Exchange, Bullion, Stock Indices

New Delhi, Feb. 21: 
Finance minister Yashwant Sinha is mulling over a proposal to raise the personal income tax slabs even as he plans to scrap the 2 per cent surcharge on income tax and jettison a baggage of tax exemptions.

Finance ministry mandarins have put the final touches to the note which seeks to increase the upper limit of the slab paying the lowest income tax level of 10 per cent from the existing level of Rs 60,000 to Rs 75,000-80,000. Incomes of up to Rs 50,000 will remain tax free as before.

Similarly, the income bracket for the 20 per cent tax rate is proposed to be changed from the present Rs 60,001-1.5 lakh to Rs 75,001-80,001 to Rs 1.8-2 lakh.

The highest slab of 30 per cent will now be imposed on those earning incomes of more than Rs 1,80,000-2 lakh instead of those earning more than Rs 1.5 lakh.

The Prime Minister�s Office has also initiated a move to bring in a fourth slab of 33 per cent for those earning more than Rs 5 lakh. This is being proposed to make the revenue collection mechanism more egalitarian.

However, insiders in the ministry say the proposal has not yet been accepted.

The government also wants to do away with tax incentives for investment in certain schemes like National Savings Certificates, public provident funds, notified government securities, interest earned from bank deposits and LIC�s annuity schemes.

An earlier proposal by the Shome Committee on taxation had suggested an even more generous rationalisation of tax slabs, but the Central Board of Direct Taxes (CBDT) has shot it down as it would have meant a tax give-away of Rs 6,000 crore. Even the proposed changes, officials feel, might lead to a revenue loss of about Rs 3,500 crore.

Various pressure groups, including the BJP itself, has demanded that the tax-free income ceiling should be raised to Rs 60,000. However, ministry officials do not agree, arguing that there is a need to widen the tax base rather than pare it.

Officials said the whole idea is to �broaden and deepen the tax net� while �generating popular opinion in favour of the budget�. The logic of course is that lower taxes for higher incomes will encourage more people to declare their higher incomes.

However, many within the ministry doubt whether the official logic will actually work. �There is no positive proof that the Laffer curve (a public finance theory which says that lower taxes translates into higher compliance) effect works in India,� a top revenue department official said.

Revenue department officials also want to cut down on tax deductions allowed for spendings on mediclaim and higher education to 10 per cent. The ministry logic is that the Income Tax Act is riddled with concessions with all kinds of deductions, which in turn make tax administration and computation extremely cumbersome while creating ample avenues for various kinds of malpractices and litigations.

Consequently, the ministry wants to end tax incentives under section 80 CC, 88, 80L and 10(15) which allow tax savings if investments are made in long-term deferred annuity schemes, superannuation funds, 15-year time deposits in post office, national savings schemes, specified government security and on earnings from bank deposit subject to a ceiling of Rs 12,000.

Similarly, it wants to cut down the tax saving element in medical and education insurance�which allows up to 20 per cent tax rebate on medical insurance and higher education under sections 80 D, 80DD, 80DDB and 80 E�to a ceiling equal to 10 per cent of the maximum investment permissible under the respective provisions.


New Delhi, Feb. 21: 
The government is likely to give its verdict on internet telephony within a week. The telecom regulator had submitted its recommendations on Wednesday in which it proposed unfettered entry for internet service providers (ISPs) along with other telecom players and said the market should be allowed to determine the user charges.

Communications minister Pramod Mahajan today said, �The department of telecommunications (DoT) is examining the recommendations of Trai on internet telephony. A view is expected to emerge within a week.� He urged the public to submit their comments and suggestions on the telecom regulator�s recommendations that have been posted on both the Trai and DoT websites.

The players who are likely to offer net telephony include all basic fixed line service providers, national long distance operators (STD operators), international long distance operators (ILD operators) and even internet service providers (ISPs). At present, there are about 3.7 million internet connections in India and about 18 million users. The number of users has increased tremendously due to the 15,000 internet cafes in India.

According to a report last year, worldwide internet telephony traffic is currently estimated at 1.8 billion minutes per month and its projected to grow exponentially. Trai officials said, �The guiding principle in making these recommendations is to promote competition with a view to giving consumers of telecom services greater choice and to provide technology neutral network platforms to operators, with adequate safeguards relating to quality of service.�

To provide greater flexibility to operators and more options to customers, Trai has also recommended that in addition to toll-quality telephony service, operators can also offer a lower-than-toll quality telephony service to customers who are ready to accept some degradation in voice quality.

Delivering the valedictory address at the Indian Export Awards of Electronics and Computer Software Export Promotion Council here today, Mahajan also announced the formation of a special Rs 10 crore corpus to facilitate the growth of small and medium IT companies.

From the interest that would accrue from the fund, SMEs would be encouraged to participate in various export promotion activities in unexplored countries and markets.


Mumbai, Feb. 21: 
In an effort to shovel more money into infrastructure, the Reserve Bank of India (RBI) has expanded the list of core sector projects where banks/financial institutions (FIs) can lend an additional 10 per cent to an industrial group. The list was earlier limited to port, power, roads and telecom projects.

The relaxation has been announced as part of a manual aimed at improving the evaluation and monitoring of projects. Banks have been advised to exercise caution and conduct appropriate due diligence while extending funds to projects of public sector units (PSUs). They have also been told that state government guarantees should not prod lax credit appraisals.

At present, banks/FIs can sink funds up to 50 per cent of their capital in an industrial group. The limit goes up by 10 per cent if the money is lent to core sector projects, which now include airports, bridges, housing, rail system, water supply, irrigation, sanitation & sewerage system and industrial parks.

Institutional lenders have been asked to carry out adequate diligence even if the projects are sponsored by government-owned entities. The funds should be committed after they are convinced the ventures will be able to generate enough income to service and repay the loan.

Infrastructure projects financed through term loans or investment in bonds issued by government-owned entities should also be appraised rigorously to ensure efficient utilisation of resources, and to gauge their credit-worthiness. Individual components of financing and returns on the project should be well defined and assessed.

�Lending/investment decisions in such cases should be based solely on commercial judgement of banks/FIs. There should be no compromise on proper credit appraisal and close monitoring of projects financed. Banks should ensure that only projects that are intrinsically viable are financed,� the central bank said. The set of yardsticks, it said, should be applied even in cases of state-government guarantees. �State government guarantees may not be taken as a substitute for satisfactory credit appraisal,� the RBI said.

In projects undertaken by public sector units, term loans may be sanctioned only for those state-run companies that are registered under the Companies Act, or a corporation established under the relevant statute, it said. Public sector units include special purpose vehicles (SPVs) � often the vehicle for financing infrastructure projects � registered under the Companies Act.

Banks and FIs should ensure that the loans/investments are used in the project alone, and not for financing the budget of the state governments.

According to the Reserve Bank, while extending loans or investing in bonds, banks and FIs should carry out all necessary tests to determine whether the projects are viable and �bankable�. Primarily, it should be seen whether future revenue streams can take care of the debt-servicing obligations and repayment � so that states do not use budgetary resources to keep paying the interest and finally the principal.

Further, in case of SPVs, banks and FIs should ensure that the funding proposals are made for projects that can be monitored tightly.

In another significant decision, the central bank permitted banks to issue guarantees favouring other lending institutions in a project, provided the one issuing the surety finances at least 5 per cent of the project cost. This should follow normal credit appraisal, monitoring and follow-up actions of the project.

Present RBI rules forbid banks from issuing guarantees favouring other banks/lending institutions as the primary lender is not expected to pass on the risk to others. The RBI said this is keeping in view the special features of lending to infrastructure projects that include high degree of appraisal skills for lenders and availability of resources of a maturity matching with the project period.


New Delhi, Feb. 21: 
After a three-month hiatus, banks and financial institutions have agreed to provide fresh working capital to the ailing Daewoo Motor India (DMIL). The Industrial Development Bank of India, ICICI Bank and Exim Bank of India have agreed to provide uninterrupted flow of working capital to the auto-maker.

�We have tied up funding arrangements with the banks which will sustain our operations. We are currently producing 600 cars per month. So, with the little turnover and help, we will manage to survive till the General Motors- Daewoo Korea deal is wrapped up. Moreover, the Korean Development Bank is also ready to help us,� said D.W. Kim, deputy managing director of DMIL.

Earlier, DMIL had rescheduled its loans worth over Rs 600 crore with the help of PriceWaterhouse Coopers.

Daewoo�s plant at Surajpur in Uttar Pradesh has the capacity to make 72,000 units annually. The gridlock over the GM-Daewoo Corp deal has created uncertainty over the future of the Indian operations. Daewoo Motor holds a 91.6 per cent stake in DMIL and, unless the first set of deals come through, there will be no sign of a rescue plan for DMIL. Daewoo Motor had invested Rs 100 crore in its Indian operations.

Meanwhile, it is working on survival strategies by trimming the workforce and working on the new Matiz model that will have a more powerful engine. �The streamlining of the workforce has to be done as cutting costs is our only hope. Although we have not decided on how many workers to shed, it will definitely follow,� said Kim.

Daewoo at present has 1,500 workers in its Surajpur plant. This will be the second round of retrenchments; last October, 237 workers were shown the door. The closure of Daewoo�s engine and transmission plant led to the retrenchments last year.

Y.J. Kim, general manager (sales and marketing), said: �We need more models to survive in the Indian market. We are planning to completely revamp Matiz. It will be fitted with a more powerful, but much cheaper, engine that our research team has produced. The model will be launched early next fiscal.� DMIL has reduced its third quarter net loss by 25.3 per cent at Rs 85.74 crore compared with a net loss of Rs 114.81 crore in October-December 2000.


New Delhi, Feb. 21: 
The six infrastructure industries have grown by 5.9 per cent in January this year compared with a growth rate of 1.6 per cent registered in the same month last year. However the overall growth in the April-January period for the current fiscal is only 2.5 per cent compared with 6.3 per cent in the same period last year.

Except for crude oil production, all other sectors�petroleum product refining, coal, electricity, cement and finished steel�showed significant increase in the growth rate during the second month in succession.

In December, the six infrastructure industries had clocked a growth of 4.2 per cent. January is only the second month in this fiscal when infrastructure industries have posted a growth rate of over 5 per cent, September being the first.

Growth in January was led by cement which posted a growth of 17.4 per cent as against a negative growth rate of 13.3 per cent in the same month last year.

Petroleum refinery products saw a decent 10.1 per cent growth compared with 6.5 per cent last year even as crude oil production showed a negative growth of 1.5 per cent as against 7.9 per cent growth in January last year.

Growth rate in finished steel was higher at 8 per cent, coal at 5.2 per cent and electricity at 3.8 per cent in January as opposed to stagnant growth in finished steel, 1.7 per cent in coal and 3 per cent in electricity during the same month the previous year.


Mumbai, Feb. 21: 
Pharmaceutical major Wockhardt Ltd has identified biotech and exports as key drivers of growth in the years to come.

While its success in the biotech arena is expected to come from potential blockbuster products like Rhu-Insulin, export growth is projected to be significant following the emphasis on research and development, as well as the five Abbreviated New Drug Applications (ANDAs) that are being filed.

This was indicated by the senior management of the company at an analyst�s meet on Wednesday.

The company already has two such products in the biotech segment, which includes its Hepatitis B vaccine.

Wockhardt is now slated to launch Rhu-Insulin in the domestic market, in the first half of the next year. Officials here said the launch would make it the fourth drug firm in the world to have this technology, apart from the likes of Aventis, Eli Lily and Novo Nordisk. Company officials were also confident that the product would succeed both in the domestic and foreign markets.

While the domestic market is estimated at over Rs 300 crore, the company believes the product would have better pricing power overseas. Officials here opined that its capacities could meet around 15 per cent of the global injectibles market.

However, in the immediate term, Biovac-B (Hepatitis B vaccine) is expected to be a significant contributor to its revenues.

As regards its success on the R&D front, company officials said that it has five ANDAs in the pipeline and that these would be major drivers of its revenues in the next 12-18 months.

The company has also firmed up around nine partnerships in the generic arena, of which around seven are in Para IV applications (which lead to product exclusivity). While it is planning to launch around three molecules in the next year, formulation exports on the other hand, is expected to post a growth of close to 60 per cent in the current fiscal.

For the quarter ended December 31, 2001, Wockhardt�s exports were placed at around 27 per cent of its sales, that stood at over Rs 177 crore, against 21 per cent in the preceding quarter.

However, analysts point out that even as Wockhardt has been successful in posting good export growth rates, its domestic dosages business is a partial drag. �Its domestic formulation business has posted sub-industry growth rates. This is more evident in the recent quarter where growth rates have fallen,� C Srihari, analyst at Khandwala Securities said.


Calcutta, Feb. 21: 
The ailing Indian Iron & Steel Company (IISCO) has sought a six-month extension from the Board for Industrial & Financial Reconstruction (BIFR) to submit a revival package. BIFR had asked IISCO and its parent, Steel Authority of India Ltd (SAIL), to submit a proposal by this month.

This is the third time in the last six months that IISCO has sought an extension, ever since BIFR hinted it was time to wind up because of the promoters� failure to submit a turnaround scheme.

IISCO sources said the company, along with the prospective Russian buyer TyazPromExport (TPE), has set up a working group to examine the viability of the sick public sector unit which has a staff strength of 17,000.

TPE is expected to submit a proposal to the government shortly on the basis of the study being carried out by this group.

A senior IISCO official said the fresh proposal is likely to be more �meaningful� following the Indo-Russian Intergovernmental Commission�s meeting on February 7 in the presence of Russian deputy prime minister Ilya Klebanov.

�It is premature to comment on what could be the probable size of the package. But if the rupee-rouble constraint is overcome, we are optimistic of a good investment from TPE,� he added.

BIFR, to which IISCO had been referred way back in 1994-95, had earlier extended the deadline to February, by which time the government or SAIL were asked to submit a revival package. Steel ministry sources said SAIL has washed hands of its subsidiary in West Bengal citing an acute financial crunch.

SAIL has �forwarded� the Rs 600-crore revival package prepared by Mecon to the government in order to arrive at a tangible solution to the IISCO crisis.

�The SAIL package holds very little meaning now since the fate of IISCO largely depends on the decision taken by TPE,� sources said.

Earlier, SAIL proposed to sell off a majority stake in IISCO for which it floated a tender. The BHP-Mitsui combine and TPE had carried out due diligence, but later both backed out. TPE has been keen on taking over a majority stake in IISCO since 1998 when it had submitted a Rs 2,107-crore investment proposal for the ailing company.

Later, the Russian steel major submitted another proposal, promising to invest around Rs 800 crore. �The matter has dragged for such a long time that nobody is sure what exactly would TPE submit when the working group completes its viability study,� sources said.

But the delay in coming up with a turnaround scheme will only bring IISCO closer to closure, resulting in a massive political crisis.

A senior SAIL official said shutting down IISCO will be costlier for SAIL than its revival since it will have to cough up over Rs 1,100 crore for a voluntary retirement scheme.


Calcutta, Feb. 21: 
The Indian IT industry needs to develop a strong base at home to carve a niche for itself in the global market, something the hardware sector will enable it to do, through increased penetration and usage.

Industry sources feel the government has a major role to play in helping the sector grow. Some recommendations made by the Manufacturers Association of Information Technology (Mait) for the 2002-03 budget are reduction in excise and customs duties, nil sales tax and a simplification of exim procedures.

Mait has sought rationalisation of customs duty and correction of the inverted tariff structure and asked the government to keep its commitment to reduce customs duty on capital goods for manufacturing electronic items to zero and phase out duty on all raw materials. The recommended duty structure for peripherals should be set at a maximum of 15 per cent, it added.

Moreover, the grey market, which comprises around 53 per cent of the total PC market, has always been a source of great concern for industry. Mait suggests that a uniform excise duty of 8 per will help combat the problem, since excise and sales tax evasion account for 35 per cent of the grey market. The present excise duty stands at 16 per cent with sales tax at 4 per cent.

The industry has also demanded the removal of the 4 per cent special additional duty (SAD) and increase in the rate of depreciation on IT products to 100 per cent from the existing 60 per cent. This will enable small and medium enterprises (SMEs) to use IT and retain their competitiveness.

Businesses can also donate used IT products to educational institutions, as book value after a year will be nil.

These measures could result in PC prices dropping by almost 15 per cent as against a mere 5 per cent if the present tax structure stays. The government will also generate a 21 per cent increase in revenues by 2005 due to increase in volumes.

Mait has recommended creating manufacturing zones or islands of infrastructure excellence. These zones would permit duty free import of raw materials, capital goods and have a zero corporate tax for 10 years to encourage IT manufacturing.

According to estimates, with the restructuring of the taxation schemes, PC volumes in the country will reach 10 million from present 1.8 million and PC penetration is expected to increase to 26 per 1000 from 6 per 1000 at present.


Calcutta, Feb. 21: 
Coal India Ltd (CIL) chairman N.K. Sharma has strongly advocated the need for private sector investment in the coal sector to bridge the huge gap between demand and supply.

Addressing a seminar today, organised by Coal Consumers� Association of India, Sharma said by 2006-07, the demand-supply gap could reach about 50-60 million tonnes, up from the current level of 25-30 million tonnes. �This cannot be met by CIL and therefore the private sector has to come in. Private initiative is also necessary in setting up washeries,� he said.

�Neither the CIL, nor the state electricity boards (SEBs) have the capital to put up washeries, but if the private sector comes in, we are ready to provide land, power, water and coal to them,� he said. The response from the private sector however, has been poor, as out of the 26 mining blocks leased out to private sector, only two to three were working, he said.

Sharma also sought rationalisation of freight charges by the railways and an end to cross-subsidisation by state electricity boards to enable the coal sector become competitive and effect a reduction in coal prices. �Railways and SEBs are subsidising other sectors at the cost of coal. Unless this cross-subsidisation is stopped, coal costs will not come down,� he said here.

The coal monolith, which had an accumulated loss of about Rs 2,000 crore, incurs total freight bills of about Rs 4,500 crore per annum, Sharma said. Stressing the need for rationalisation of freight charges for distances below 100 km, he said �The Eastern Coalfields alone can load 450 wagons every day if the charges are rationalised�.

Besides railways, he said the SEBs were also engaged in cross subsidising other sectors at the cost of coal. �NTPC gives power to SEBs at a rate of Rs 1.80 per unit, whereas SEBs supply the power to Coal India at a rate of Rs 4.50 per unit,� he said.



Foreign Exchange

US $1	Rs. 48.67	HK $1	Rs.  6.15*
UK �1	Rs. 69.40	SW Fr 1	Rs. 28.20*
Euro	Rs. 42.41	Sing $1	Rs. 26.25*
Yen 100	Rs. 36.44	Aus $1	Rs. 24.70*
*SBI TC buying rates; others are forex market closing rates


Calcutta			Bombay

Gold Std (10gm)	Rs. 4960	Gold Std(10 gm)	Rs. 4870
Gold 22 carat	Rs. 4685	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7525	Silver (Kg)	7625
Silver portion	Rs. 7625	Silver portion	NA

Stock Indices

Sensex		3570.46		+ 12.25
BSE-100		1727.25		+  5.78
S&P CNX Nifty	1149.85		+  3.90
Calcutta	 122.10		+  0.29
Skindia GDR	 550.31		-  1.06

Maintained by Web Development Company