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Tuesday, April 30, 2013

Petrol price cut by 3 per litre

New Delhi: State-run fuel retailers on Tuesday pared petrol price by Rs 3 a litre, marking the fourth — and the steepest — reduction since December 2008 on the back of a continuous fall in international oil prices and a strengthening rupee. 

    In Mumbai, the fuel will cost Rs 69.73 per litre from midnight on Tuesday. In Delhi, it will cost Rs 63.09 a litre Rs 70.35 in Kolkata and Rs 65.90 in Chennai. The reductions vary by a few paise due to differences in local tax and freight charges. The retailers had reduced the price by Rs 1.20 on April 16. On March 16, the rates were cut by Rs 2.40 per litre and by Re 1 in the following fortnight. 
    The steepest cut so far was affected in December 2008 when pump price was slashed by Rs 5 . IndianOil Corporation, the country's largest fuel retailer, said international prices have declined from $116.61 per barrel to $107 a barrel since the last reduction. The rupee-dollar exchange rate too improved from Rs 54.51 to Rs 54.26. 
    Diesel prices, however, have not been raised though there still remains a substantial gap between its pump price and market rate. The government had, in January, allowed the fuel retailers to raise diesel price in 
small doses of 40-50 paise each month till it reaches market rate. But the oil ministry has asked retailers to hold the price line since it would be difficult to explain the hike to consumers at a time when the petrol price was being cut. 
Non-cap LPG refills may also cost less 
New Delhi: State-run fuel retailers are likely to reduce the price of non-subsidized domestic cooking gas cylinders by Rs 50-55 each and that of commercial refills by Rs 85-87 on the back of falling international prices and a stronger rupee. The price of subsidised cylinders for the first nine refills in a year would remain unchanged. TNN


Unilever offers $5.4bn to up HUL stake Renewing Faith In India Growth Story, Co Launches Biggest Open Offer


Mumbai: Anglo Dutch consumer products giant Unilever Plc on Tuesday launched a $5.4 billion, or Rs 29,000 crore, voluntary open offer to buy shares from the public in India. The offer, which is the largest in the country's history, will see the parent raising its stake in Hindustan Unilever (HUL) to 75% 
    Unilever, which currently holds 52.48% in HUL, is offering shareholders Rs 600 per share—a 26% premium to last one month's average trading share price—to tender their shares. HUL shares soared after the Tuesday morning announcement ending 17%, or Rs 86, higher at Rs 583.60. The move signifies Unilever's conviction in the growth story of India, as HUL reported steady growth over the last two years and actively invested in categories driving future sales. But it also provided heft to a gathering trend of market leading global companies delisting from Indian bourses, or limiting the local investor participation in one of their biggest growth engines worldwide. 
    "This represents a further step in Unilever's strategy to invest in emerging markets and offers a liquidity opportunity at an attractive premium for existing shareholders. The long heritage and great brands of Hindustan Unilever, and the significant growth potential of a country with 1.3 billion people makes India a strategic long term priority for the business," 
said Unilever CEO Paul Polman in a statement. 
    Unilever currently garners 55% revenue from emerging markets, and a faster pace of growth could see them contribute almost 75% of the business by 2020. Unilever has accelerated momentum in markets like India to offset slowdown in the developed world. Unilever will acquire up to 487 million shares representing 22.52% of the total outstanding shares of HUL under the voluntary offer managed by HSBC Securities and Capital Markets (India). 
    Sebi regulations require a minimum 25% public float to remain listed in the country. A 
Unilever spokesperson said there was no delisting plan on the anvil. The organization sees benefits in projecting HUL as an "Indian company" in addition to attracting good talent, he added. "India and Brazil are the No. 2 operating companies for Unilever after the US. It is an 
attractive proposition for Unilever to increase holding in the Indian subsidiary," the spokesperson explained. The FMCG behemoth's local units in India and Indonesia faced some investor heat after recent moves to hike royalty payments to the parent. Unilever's ownership 
of the Indonesian unit stands at 85%, while it operates wholly owned subsidiaries in China and Brazil. Global rival Procter &Gamble India has a large part of its Indian business parked under a 100% company, P&G Home Products, though it operates another listed local company (Procter & Gamble Hygiene andHealth Care) as well. 
    HUL's higher dividend payout this year, and now an offer to buy shares at a premium, are seen by some as a means to assuage the investor fraternity perturbed after the increased royalty payouts. The annual results announced a day earlier exceeded analyst estimates, with volumes improving despite a slowdown in the indus
try growth. HUL is currently trading within striking distance of the voluntary offer price, with a section of the investors anticipating an upward revision factoring in the future growth. The Unilever spokesperson, however, said there would be no revisions in the offer price. 
    Industry analysts said it was worthwhile for the parent to buy shares in the Indian subsidiary as valuations would only move up, making share purchase offers more expensive in the future. Most MNCs hold 100% in their subsidiaries abroad or a substantially higher stake of 60-75% to benefit from any dividend payouts. That emerging markets like India would grow bigger in size is a bait worth biting for most MNCs who are now upping their holdings through costly buybacks. British drug giant GlaxoSmithKline recently increased stake in GlaxoSmith-Kline Consumer Healthcare, its publicly-listed consumer healthcare subsidiary in India, from 43.2% to 72.5% in a transaction valued at Rs 4,800 crore. The group attributed this to "a significant vote of confidence in the long-term growth prospects" in India. 
    In the last decade, companies such as Reckitt Benckiser (2003), Cadbury India (2003), Otis Elevator Company (2003), Kodak (2003), Philips (2004), Carrier Aircon (2005), Panasonic (2007) and Ray Ban Sun Optics (2008) have delisted their shares from the Indian bourses. 
India's growth potential spurs HUL, GSK offers Secular Uptrading To Boost FMCG IndustryNamrata Singh TNN 
Mumbai: The growth potential of the Indian market, where a secular consumer trend of uptrading is expected to bolster growth in the FMCG market, is akey factor why multinationals such as Unilever and GlaxoSmithKline (GSK) are increasing their holdings through voluntary offers. The contribution of developing and emerging markets (D&E) to Unilever's turnover is expected to grow to 75% by 2020, as Asia overtakes North America as the biggest consuming continent in terms of purchasing power parity. 
    Certainly, India has a big role to play if Unilever is able to extract growth from this market to its maximum potential. At Hindustan Unilever's (HUL) press meet on Monday to announce the company's results, Unilever COO Harish Manwani made an interesting point about why the organization is investing in sectors of the future — face wash, deodorants, hair conditioners, fabric softners and premium personal products. What stands at a turnover of Rs 1,000 crore today, could very well become Rs 10,000-15,000 crore a decade down the line. HUL is making investments in these 
emerging categories to "future proof" the business. 
    "We can see the trend unfold in South-East Asia. History is littered with examples of how certain segments have grown to become full-fledged categories. These categories may be small today, but when the tipping point comes, we want to ensure we are leaders in these categories," he said, in effect demonstrating the future roadmap. 
    Most of these categories are aspirational in nature and premium in pricing, which means as these categories grow, they will result in a higher value or sales turnover for HUL. This should augur well for Unilever as well, especially if it has a substantially high shareholding in the company. 
    With HUL already investing behind categories of the future, its turnover and profits would only grow at a higher 
rate. Unilever certainly does not want to miss out on an opportunity to get a higher share of future dividends paid out by the Indian subsidiary. 
    According to a BCG/CII report, the Indian consumer market is poised to grow 3.6 times between 2010 and 2020, faster than most other emerging markets. Estimated at $991 billion in 2010, total consumption expenditure is expected to grow to nearly $3.6 trillion in 2020, the report said. 
    Unilever is allocating resources to this market with an eye on return on investment, said industry experts. Resource allocation is not only in products but also in technology. Unilever recently said its royalty payments from India would increase in a phased manner from the current 1.4% of turnover to 3.15% of turnover over five years. Two out of the six global R&D centres of Unilever are in India and China. In an interview to TOI last year, Manwani attributed the fundamental shift in resource allocation to D&E to rising income levels and these markets emerging as growth centres. He said D&E was an irreversible shift, wherein India and China have a growth runway of 20-25 years.



FUTURE -PROOFING


Lottery for Mhada flats M hada has announced its lottery for 1,259 flats.

 The carpet area of the flats ranges from 180 sq ft to 740 sq ft and the flats are priced between Rs 6 lakh to Rs 75 lakh. Applications can be downloaded from the Mhada website from 2pm on May 1 to 6pm on May 21. The draw is likely to take place on May 31. There are 584 flats for the high income group (monthly earning over Rs 40,000) in Dahisar, Kandivli, Powai and Gorai. With an area of 476 sq ft to 749 sq ft, the flats are priced between Rs 39 lakh and Rs 75 lakh. There are 220 flats for the economically weaker section, 95 for the low income group and 357 for the middle income group. EPFO's spl online drive or proper valuation of Employees Pension Fund, theEmployees Provident Fund Office (EPFO) has launched a special drive to collect members' data through the EPFO employer portal www.epfindia.com.

Monday, April 29, 2013

MNCs here only to evade tax: Pranab


Nagpur: President Pranab Mukherjee on Monday slammed multinational companies saying they only looked for overseas locations with an intention to dodge taxes, raising eyebrows at a time when the country is desperately wooing foreign capital to plug a widening current account deficit. 
    Addressing a function at the National Academy of Direct Taxes, Mukherjee said more than three-fourths of business transactions nowadays took place through the units of MNCs. "Their basic objective is to locate a unit in countries where the rates of tax are the lowest," he said. TNN 
Pranab as FM had scared MNCs 
    Many are not physically located in a country but operate with an objective to evade and avoid tax in the tax havens," Mukherjee said. 
    During his stint as finance minister, Mukherjee had scared MNCs to the sidelines after making retrospective changes in tax laws and unveiling the General Anti-Avoidance Rules (GAAR) to fight tax evasion. Mukherjee, as finance minister, had linked the Vodafone tax issue to the government's fight against black money. 
    The Vodafone tax case had led to sharp division 
within the government. P Chidambaram, who took charge of the finance ministry last September, reversed a number of decisions taken by his predecessor, boosting investor confidence. The government put off implementation of GAAR and is weighing options on resolving the Rs 13,000 crore Vodafone tax issue. 
    Mukherjee, in his speech said there was a time when getting information through the banking channels of foreign countries was very difficult. However, as an indirect impact of the international financial catastrophe of 2008, many such countries were compelled to divulge information, which had made the taxman's job much easier. "However, it continues to be a complex situation, especially on issues like transferpricing. It is a constant battle of wits and legal procedures," the president said. 

    The I-T department has slapped several tax demands over transfer-pricing issues on several MNCs such as Shell India and Vodafone. Shell India has challenged the tax demand in Bombay High Court. 
    The fresh tax demands against MNCs have come at a time when the government has launched a determined bid to attract foreign investment. Chidambaram has led the efforts holding roadshows in several financial centres in Asia, Europe and the United States. He has tried to convince foreign investors about the India growth story and is scheduled to meet investors in Australia and Qatar.

Thursday, April 25, 2013

‘Getting Bank Licence Will Not be a Cakewalk’

Norms on priority sector lending & substantial presence in rural areas will make opening new banks difficult: RBI deputy guv


Bagging a banking licence is going to become tough for corporates and finance firms with the Reserve Bank of India bent on pushing the financial inclusion goal. 
"It (getting a banking licence) will not be a cakewalk as it was in 1993-94," said RBI deputy governor KC Chakrabarty. "This time, the opening of (new) banks is not so easy because we have got 
PSL (priority sector lending) norms, which are mandatory, and 25% of the branches have to be opened in unbanked sectors," he said at a conference this week. 
A large number of non-banking finance companies have less then 10% presence in rural areas, while banking licence aspirants like L&T Finance, Mahindra & Mahindra Financial Services, Shriram Transport Finance and LIC Housing Finance have few branches in far-flung areas even though they service rural customers. 
According to the entry rules laid down by the RBI, applicants must have at least Rs 500-crore capital and must open at least 25% of branches in rural centres. "The central bank should not insist on applicants opening branches in rural areas, as we need to use technology to service these centres to keep costs under check," said the CEO of a nonbanking finance company. "To ensure the business model is cost-efficient and scalable, you need 
to use technology. Insisting on branch presence in rural areas makes the model unviable." 
Some companies say achieving 25% presence in these unbanked areas could be tough; even existing private sector banks are struggling to expand their footprint in such areas, they say. 
Shriram Transport Finance, the country's largest truck financier, has 530 branches and 350 rural touch-points. These touch-points are with one or two people working from home or oneroom office. "We do not have branches in rural areas, but we operate through rural centres that are connected to our branches," CEO & MD Umesh Revankar had earlier told ET. 
LIC Housing Finance, too, does not have branches in rural areas. It services its rural customers through 7,000 home loan agents and customer-relationship associates. Most of the company's 190 branches are in semi-urban or urban area

Market Surges as Traders Roll Over Bets Ahead of RBI Policy

Punters purchase banking stocks on expectations of dividend payouts and hopes of rate cut on May 3



    Punters rolled over a higher proportion of derivative bets to May and purchased select bank stocks to rake in dividends, sharply pushing up the market in the last half hour of trade. Most expect an interest rate cut at the RBI's monetary policy meet on May 3. Benchmark indices Nifty and Sensex rose to their monthly closing highs. The Nifty ended up 1.36% to close at 5916.3, its highest since March 11; the Sensex rose 1.19% to 19406.85, the most since March 15. 
The underlying bullish sentiment was reflected in the increased positions moved to the next month. Marketwide rollovers — stock and index futures — stood at around 73%, a tad higher than the 70% seen in the past few expiries. Nifty futures rolls stood at around 67% against 57% of the previous few expiries. Marketwide open interest (OI) — the value of outstanding bets — at the beginning of the May series is . 35,300 crore, up from . 30,400 crore at the start of the April expiry, according to Edelweiss. Nifty futures will start the May series with an OI of . 9,400 crore. Banking and IT were among sectors that witnessed higher rollovers. HDFC Bank saw 61% rolls against 51% at the end of the previous series; LIC Housing Finance saw 92% rolls (90%), Infy 68% 
(58%) and TCS 76% (70%). 
Nonetheless, there was a degree of caution among traders, many of whom have burnt their fingers in choppy trades during the last few months. Despite having carried forward their positions, they were reluctant to pay a high cost for the rollovers. "The cost to roll over long bets at 65-68 basis points was not high," said Yogesh Radke, head of quantitative research, Edelweiss. "This shows that sentiment, though 
positive, was cautious as high rolls typically stand in the 80-85 bps range," he said. 
Apart from the positive rolls, the sharp rally in the last half hour of trade was partly attributable to punt
ers having squared off futures positions in select banking counters such as ICICI Bank, Axis Bank and HDFC Bank to buy shares of the companies in the cash segment on dividend expectations. This is borne out by the rise in traded volumes. In ICICI Bank, the number of shares traded stood at 62 lakh against the two-week average of 41 lakh; in HDFC Bank the volume was 64 lakh (41 lakh) and in Axis Bank, it was 38 lakh (19 lakh). This, coupled with short covering in counters such as Hero, M&M and Bajaj Auto, drove the Nifty and Sensex to monthly closing highs, said Aadil Sethna, head of derivatives, Dolat Capital. The recent market rally picked up steam from April 16, following softening of prices in gold and crude oil, two of India's major imports. Gold fell sharply on talks that Cyprus will sell its gold reserves to secure a bailout package from EU to recapitalise its banks, while a slowdown in China pulled down Brent crude below $100 a barrel last week. Higher crude and gold prices expanded India's current account deficit to 5.4% of GDP in the fiscal year through December 2012, way above the 4.2% in FY12. In the wake of the fall in gold and crude prices, the Sensex has risen 662 points since April 16 as this will translate into lower inflation and ease current account deficit, prompting RBI to cut interest rates. However, brokers like Nirmal Jain believe markets will consolidate in the short term given the magnitude of the recent rally. 
"The fall in crude and oil has driven the current market rally," said Nirmal Jain, chairman, India Infoline. "But we will consolidate in the short term until the RBI policy meet on May 3." Markets have factored in a 25 bps cut in the repo rate, and if that happens, some profit booking could be expected. However, if RBI cuts rates by 50 bps, the current momentum will continue, Jain said. 
Meanwhile, FIIs purchased shares worth . 1,449.7 crore on Thursday, provisional data from BSE showed. 
ram.sehgal@timesgroup.com 



After Jet Equity, Etihad Now Wants Its Pound of Flesh

MidEast carrier may want bigger role in Jet management, but Sebi would be watching


Sebi and Jet-Etihad will have to sort out issues regarding control and special powers that may have been granted to the Middle-East airline as it emerges that Etihad will influence key management changes following Wednesday's over- . 2,000-crore deal. 
As per the agreement, Jet will sell 2.72 crore shares through a preferential offer at . 754.74 apiece, giving the Abu Dhabi carrier a 24% stake in the company. Even though FDI rules allow a foreign airline to invest up to 49% in a domestic carrier, Etihad has capped its holding at 24%. The reason, according to people 
from financial circles, is to comply with both aviation sector norms as well as Sebi guidelines. 
Aviation sector rules require 'control' to be in the hands of Indian companies, and as per Sebi norms control gets triggered when a firm buys 25% stake in a listed entity. In other words, with a 25% stake, an acquirer is capable of exercising de facto control. 

The reason this becomes important is because of mounting speculation about imminent board-level changes at Jet follow
ing the deal with Etihad. 
Naresh Goyal's Jet is likely to allow some key functions to be led by Etihad nominees, a person close to the deal said. The foreign airline will also play a key role in jointly managing the entity to get greater value for its investment. Etihad is expected to decide the selection of top management officials once the transaction is complete, the person said. 
Convincing Sebi will be Key 
"The deal is not complete yet. It will take at least three months for the transaction to obtain regulatory approvals. Post regulatory approvals, Etihad can play a decisive role in appointing officials in key functions," a Jet executive said. "We would not like to comment as these are speculative stories," a Jet spokesperson said. The key strategic functions of an airline include marketing, commercial strategy, finance, revenue department and planning. Jet and Etihad's preferred position will be that the control of the company is in Indian hands and that it is an Indian management that is running the airline. They will also try and point out to Sebi that Etihad does not have any special rights or veto powers that could give it semblance of control. This is important as Etihad's classification as a promoter or non-promoter will depend upon whether it has 
any special rights. "The deal has been structured very carefully keeping in mind all the laws," said a person involved in the transaction. 
So with a 24% stake, Etihad is not in control of Jet Airways and will not be classified as a promoter shareholder if there are no special rights. So then is Etihad like a private equity investor, whose interests are aligned to that of minority shareholders? 
Not really. Unlike private equity firms whose interests are financial in nature, Etihad has a long term strategic interest in Jet Airways. Both the carri
ers will be collaborating on a host of areas from routes to fuel purchases to training of pilots and cabin crew to loyalty programs and maintenance of aircraft. 
A 25% stake alone doesn't define control, other factors like board seats and veto rights also matter. Sebi's definition of control also covers the right to stop special resolutions. Bankers familiar with the transaction said that Etihad will have two representations on the board of Jet Airways. If Etihad has any powers to change personnel or nominate key officials that would be examined by Sebi though it is not clear whether such powers come under the regulator's definition of control. "When people put in money it is normal for them to protect their investment. 
Even with negative veto powers they can have influence in the management of the company," said a senior lawyer with a leading law firm. 
"This (Jet-Etihad) deal doesn't appear to be a run-ofthe-mill private equity investment it is a strategic transaction therefore the issue of control needs to be examined carefully," he added. "Etihad's classification is neither white nor black. It falls in grey area," quipped another securities lawyer. At present, negative control is not defined. 
ET Now, the sister channel of this paper, reported earlier on Thursday that Jet's CEO, Nikos Kardassis, a Greek national who was also Jet's CEO from 1994-1999 and its chief commercial officer Sudheer Raghavan, who hold key functions in the airline such as market
ing, distribution strategy and commercial strategy may be affected by the new arrangement with Etihad. Jet said these reports are mere speculations. In his place Jet's chief operating officer Hameed Ali, a Bahraini national who oversees flight operations and engineering departments, might be asked to lead the airline. 
Hameed Ali joined Jet in 2007 and is qualified pilot with immense experience and is considered to be very close to Chairman Naresh Goyal. He is also seen as the driving force behind the deal with Etihad. Jet's key management now has about 20 top level officials that also includes Anita Goyal, wife of the promoter as EVP network planning and revenue management. Sebi is currently contesting a SAT ruling in the Supreme court with regard to the Shubkam Ventures case, where SAT had interpreted that veto rights doesn't tan
tamount to control. 
Etihad's title has also come up at a time when Sebi is expected to come out with its decision on the Gillette-Saroj Poddar case. Procter & Gamble, the owner of Gillette, has proposed the re-classification of Poddar as a public shareholder. The Kolkata based business man had brought Gillette into the country through a joint venture and then subsequently Procter & Gamble acquired Gillette globally. "By re-classifying promoters does it mean giving up of veto rights? You can't have special rights and re-classify yourself as non-promoter," a person familiar with the regulator's thinking had told ET earlier.


Arora highest paid in Google with $46.7m package last yr


 Google's chief business officer Nikesh Arora received $46.7 million in total compensation in 2012, more than double from a year earlier, becoming the company's highest-paid executive, a regulatory filing shows. 
    Chief financial officer Patrick Pichette was next highest, receiving $38.7 million in 2012, also more than doubling from a year earlier, according to the filing. The company awarded David Drummond, chief legal officer, $31.3 million during the year, a 71% boost from 2011. 
    Google's net income gained 10% to $10.7 billion as sales increased 32% to $50.2 billion last year. The compen
sation increase was especially high in 2012 after the company last year started to hand out equity awards only in even-numbered years, according to the filing. 
    "Granting less frequently allows us to incorporate performance over a longer time period into our equity deci
sions," California-based Google said in the filing. "We expect that future equity awards will also have higher at-grant target values than awards made under our pre-2012 annual granting practices." 
    Chairman Eric Schmidt received total compensation of $7.6 million last year, down from $101 million in 2011, when his pay was boosted by stock and options valued at $93.8 million. Chief executive Larry Page and co-founder Sergey Brin each received a $1 salary last year, unchanged from 2011. Page and Brin rank 25th and 26th, respectively, on the Bloomberg Billionaires Index. BLOOMBERG

Nikesh Arora


Majority of JPC against giving clean chit to PM

New Delhi: The Congress bid to get a clean chit for Prime Minister Manmohan Singh and finance minister P Chidambaram in the 2G scam seemed to be in jeopardy as 15 opposition members of the joint parliamentary committee (JPC) on telecom expressed lack of confidence in the panel's chair, P C Chacko. 

    The decision of the opposition MPs to seek Chacko's 
removal split the 30-member committee evenly, but worryingly for the Congress, the Samajwadi Party refused to clearly state its position. 
    The SP is not accusing the PM of dereliction of duty but seems to be of the opinion that it would be incorrect to give Singh a clean chit without giving key accused and then tele
com minister, A Raja of the DMK, a hearing. In fact, SP MP Shailendra Kumar said the party was not in favour of the draft report which did not factor in Raja's version. 
    BJP, Left and BJD leaders have been coaxing SP boss Mulayam Singh Yadav that not supporting the draft is not as serious a matter as a 
vote on the floor of Parliament and that the SP should consider abstaining. 
    The SP is the key factor as even an abstention will favour the opposition line-up triggered by the draft report that endorses the UPA's zero-loss theory on the 2G scam but pins a Rs 40,080-crore loss on the Vajpayee government. 

BROAD-SPECTRUM WAR 
The conduct of the chairman of the JPC from the very beginning has been highly partisan, unfair, prejudicious (sic) and unbecoming of the post to which he was appointed — JPC MEMBERS IN THEIR PETITION TO SPEAKER 

We are unanimous that these members (BJP's Yashwant Sinha, Jaswant Singh and Ravi Shankar Prasad) need to be removed from (JPC) membership in the interest of justice and fairness — CONG PETITION TO SPEAKER 

The draft report may not be convenient for them, that is why they are demanding my removal after two years 
— PC CHACKO 
Oppn unity on JPC takes Cong by surprise 
    Hitting back, Congress members on the JPC wrote to Speaker Meira Kumar, demanding the removal of BJP members Jaswant Singh, Yashwant Sinha and Ravi Shankar Prasad citing conflict of interest on the ground that they were ministers in the NDA government who also headed GoMs on telecom during the period under the panel's review. 
    The tactic was clearly intended to counter the no-trust plea as the three BJP members have been appointed with the consent of Parliament and have been on the panel since March 2011. The Congress does not seem to have anticipated that the draft would unite the Opposition in the manner it has with BJP, Janata Dal (U), DMK, AIADMK, Left, Trinamool and BJD MPs joining hands to petition Kumar on Thursday. 
    Fortified by lunch at the BJD 
office in Parliament, 14 Opposition MPs met the Speaker to submit identical letters criticizing Chacko for handling the JPC in a "highly partisan, prejudicial and unbecoming manner", alleging that the Congress MP failed to summon key witnesses. 
    In a formulation framed to keep in mind sensitivities of rivals DMK and AIADMK as well as some other parties, the letter did not mention Raja, the PM or Chidambaram but said Chacko failed to call "crucial witnesses" to the panel and did not 
call a meeting since February 12. 
    Ending speculation about the JD(U)'s alleged ambivalence, the party leader signed a letter along with the BJP as part of the NDA. The second JD(U) member on the panel, R C P Singh, was due to hand in his letter as he was not here in the morning. The Congress viewed the developments with some concern as Chacko met the PM and party chief Sonia Gandhi on Thursday morning. The implications of the JPC draft report not being adopted and the consequent embarrassment for the government are learnt to have figured in the deliberations. 
    With half the JPC up in arms, Chacko has a tough job on his hands when the committee meets to consider the draft — the discussion scheduled for Thursday was cancelled as sitting Trinamool Lok Sabha member Ambica Banerjee had passed away. 
    What will worry the Congress is the upbeat mood in the Opposition camp exemplified by CPM's Sita
ram Yechury telling other MPs at the luncheon meeting at the BJD office that they were part of a historic occasion, alluding to the spectrum of political opinion represented. 
    The Congress is hoping that the SP does eventually bail it out as in a 15-15 situation, Chacko can use his second or casting vote to break the tie. Otherwise, there is a risk of the official draft being reduced to a minority report, robbing it of the sanctity the ruling coalition had expected. 
    In their petition to the Speaker, Congress MPs said the three BJP members were "very closely associated with the decision-making process in the government from 1998 to 2004, which have come under scrutiny of the JPC". The letter added: "In their capacity as chairmen/members of the GoM/ GoT/GoT-IT and as Union ministers, these members were instrumental in taking major decisions relating to the telecom sector, that are being investigated by the JPC."


Only 16% of city’s salt pans can be developed: MMRDA

Mumbai: No more than 16% of Mumbai's 5,430 acres of salt pans—or about 880 acres—can be made available for future development, according to a report prepared by the Mumbai Metropolitan Region Development Authority (MMRDA) in 2010. 

    The findings of the report, which had not come into the public domain thus far, is bound to be a disappointment to builders and politicians eyeing the sprawling eco-sensitive tracts as potential real estate bonanza. The most comprehensive official assessment of the status of salt pans, the document was prepared by an eight-member team headed by the then MMRDA commissioner Ratnakar Gaikwad. 
    The report said around 3,766 acres (69%) of salt pans of the city's total 5,430 acres are "out of bounds". 

SALTED AWAY The city has about 5,430 acres of salt pan land 
2,302 acres fall under CRZ-I, which prohibits any form of construction 
Around 1,464 acres encroached upon or utilized 
30% or 1,633 acres can be made available for development. But of this, about 753 acres fall under CRZ-II, CRZ-III 
and no-development zone 
'Net land available for development' is 880 acres 
All salt pans under CRZ-I, can't be developed: Activist 
    An MMRDA report said around 3,766 acres (69%) of salt pans of the city's total 5,430 acres are "out of bounds". This is because 2,302 acres fall under coastal regulation zone (CRZ) I, which prohibits any form of construction. The remaining 1,464 acres of the 3,766 acres are off limits since they are already encroached upon or utilized. 
    The document provided a breakup of the area squandered in construction. 
    Nearly 390 acres of salt pans, it said, have been lost to large-scale encroachment by some of suburban Mumbai's landmark residential colonies such as "Garodia Nagar in Ghatkopar, Chheda Nagar in Chembur, Bangur Nagar in Goregaon and Star Builder Bhandup". A further 44 acres are encroached upon by slums, while 359 acres are either lost in litigation or have ownership disputes. Another 483 acres were acquired by the state government to build the 
Eastern Express Highway, a sewage plant and a cemetery. Finally, 187 acres were given to the central government to build various staff quarters. 
    Among the remnants of Mumbai's open spaces, the salt pans are viewed by some as possible development space. The state government wants the salt pans to rehabilitate slumdwellers, project-affected people or build affordable homes. Allegations abound, however, that hidden in the proposal to create public amenities is a plan to commercially exploit salt pans to build towers and malls. Environmentalists remind that the lands constitute Mumbai's last oxygen reservoir and should be left untouched. 
    The MMRDA report said that only 30% (1,633 acres) of 5,430 acres of salt pans can be made available for development. But of this, about 753 acres fall under CRZ-II, CRZIII and no-development zone. Hence, the "net land available for development" is 880 acres; the report suggested that this land be shared equally be
tween the state government and the Centre. 
    It also recommended that the big chunk falling under CRZ-I (2,302 acres) be given to the state government to plant trees and "other environmental upgradation measures." However, if CRZ-I rules are relaxed in the future, it added, the Centre should get the first right to choose and take back 50% of such developable land. 
    Debi Goenka of the NGO Conservation Action Trust stressed that all of Mumbai's salt pans fall under CRZ-I "since they are all located within the Low Tide Line and High Tide Line and are affected by tidal flows. There is no question of salt pans being graded as CRZ-II or CRZ-III." 
    The city's salt pans are spread over Ghatkopar, Chembur, Trombay, Mandale, Turbhe, Anik, Wadala, Kanjurmarg, Bhandup, Nahur and Mulund in the eastern suburbs, and Malvani, Dahisar, Mira-Bhayander and Virar in the western belt. Of the 31 salt works, seven are on lease and 24 have been given 
on licence for salt production. 
    The 2010 report said that salt pans in Malwani, Pahadi, Ghatkopar, Chembur and Dahisar have no development potential. Of the 863 acres in these five locations, 389 acres are encroached upon. 
    Over the past decade, builders linked with powerful state politicians are believed to have approached salt pan owners and urged them to cut deals. Political clout is something salt pan owners would welcome. Several are in litigation with the salt department over ownership titles. 
    In 2006, the Vilasrao Deshmukh government chalked up a plan to carve up salt pan lands between three parties—the Centre, the state government and developer. The lessee of the land was to be eased out through cash compensation. The developer would have been required to provide on-site and off-site infrastructure. In return, the developer would have received incentive FSI for commercial use. The plan was however put incold storage.




Wednesday, April 24, 2013

FULL THROTTLE Automakers look to invest 11,000 crore to expand capacity What Slowdown? Car Cos Plan Big Ramp-up

Carmakers in India are passing though their toughest ride in a decade — sales dropped 7% last fiscal, capacity utilisation has slipped to 60-65%, profit margins are down as companies bank on steep discounts and freebies to push sales. Yet, five carmakers plan to invest a total of `11,000 crore to build additional capacity for one million cars, or onethird of the current market size. 

Maruti Suzuki, Ford, Honda, Toyota and Renault-Nissan have all lined up big expansion plans with their eyes on the long-term potential as well as competitive nature of the market although there is real fear of a glut if the market does not rebound in the near future. "Our expansion is based on long-term projections," says RC Bhargava, chairman of market leader Maruti Suzuki, which is investing 1,700 crore to increase capacity by 250,000 units. He, however, points out that the three-million-unit Indian car market needs to grow at least 10% a year to absorb an additional one-million units capacity. "The utilisation of new plants completely depends on which direction the market will move. If the market does not go up and demand does not improve, it can hamper companies with high cost of manufacturing," Bhargava says. 
If Maruti Suzuki is building capacity to protect its market share, its Japanese rival Honda looks to increase it by entering new segments to address 50% of the overall Indian car market up from its presence of just 10% now. Ford and Renault Nissan are building new capacity for exports while Toyota has both domestic and export markets in mind. 
FEAR OF GLUT 
Industry experts, however, warn about huge idle capacity once the planned expansions go on stream if the market remains gloomy following a meagre 2% growth in FY12 and a drop last year. 
With installed capacity of close to 5 million units, the Indian passenger vehicle market currently operates at 60-65% of capacity, one of the lowest levels in the last five years. 

"The auto industry is sitting on significant idle capacity at the moment," Deepesh Rathore, MD India at consulting firm IHS Automotive, says. 
The fear is that if the market does not take off in the immediate future, the 10-15 new launches from firms such as Ford, Honda and Renault Nissan may not really expand the market and instead eat into the existing models, he said. 
V G Ramakrishnan, MD at Frost & Sullivan, South Asia, points out that slow offtake has already resulted into high discounts at the cost of margins. "Higher depreciation and higher cost of financing this investment will further put pressure on their profitability and overall margins," he says. 

The compounded annual growth rate for the next 5-7 years is expected to slip 11-12% on a larger base and the margins to have fallen by several hundred basis points. 
EYES ON THE FUTURE 
Deepesh Rathore of IHS Automotive, however, adds that such short-term worries do not affect long-term strategies. "Every automaker has its own long-term strategy — on expansions and new products and the short-term slowdown cant deter long-term aspirations," he says. 
Jnaneswar Sen, senior vice-president (sales & marketing) at Honda Cars, says, "Tough times don't last forever. There is enormous growth potential in India." 
The Japanese carmaker, which recently launched its first diesel car, the Amaze, plans to double its capacity in India to 240,000 cars by investing 2,500 crore. 
Honda currently utilises just about two-thirds of its installed capacity in the country. But it is confident of using the entire capacity as it plants to be present in segments that account for half the total car sales in India with new launches. 
Ford and Renault Nissan are expanding capacities despite using less than 50% now. They are betting on export markets to utilise their full capacity. Renault Nissan, which produced over 1.93 lakh units in fiscal 2013, exported over 50% cars made out of India. "We will reach our full capacity in 2014, we do have an opportunity to expand within the same plant," a Nissan Motor India's spokesperson says. 
Industry experts say capacity utilisation of 85-90% in developed markets should not be treated as a benchmark for emerging markets like India because fluctuation in demand is an integral part of growing markets. They say carmakers don't want to commit the same mistake they did two years back when sales had plummeted. In 2009-10 when the demand soared, they were caught off guard due to production constraints. "All of us were playing catch up then. Many of us were operating above 100% capacity to meet the demand," an industry official says. "In a highly competitive market, no company wants to lose customers to competition because of capacity constraint. So right now, there is a trade-off between controlling cost in the short term or being ready with capacity. And most companies prefer the later option," the person adds. Sandeep Singh, deputy managing director and chief operating officer, marketing and commercial, at Toyota Kirloskar Motor, says short-term issues such as current market condition, demand and interest rates are important in decision-making, but they cannot be the deciding factors for long-term planning. "Sluggish market is certainly affecting sales and profitability. It will continue to be so in the coming months. However, this is just a temporary phase," he says. 
ketan.thakkar@timesgroup.com 


Bellary Getting Reddy to Mine a New Future E-auctions, drones used to curb illegal mining; listed cos drive political change

 In Bellary, the nondescript town made famous by a vast iron-ore mining racket, at first glance it seems as if the old times have returned after the tumult of the last five years. The feared Reddy brothers — Janardhan, Karunakaran and Somasekhara — who lorded over the region and its riches have been displaced and the old mining barons are back contesting elections. But on closer examination it becomes apparent that the old ways are gone forever, and politics is late catching up. In Bellary city and surrounding areas, political parties of all hues have fielded mine-owners who were pummelled into submission by Janardhan Reddy, the imprisoned son of a constable, who supplied both the brain and the brawn for the Reddy family. So, the Congress has Anil Lad, a Rajya Sabha member who is contesting from Bellary city, and Abdul Wahab from Vijayanagar. The ruling BJP has fielded mine-owner Anand Singh to take on Wahab. And then there is B Sriramulu, a close associate of Janardhan Reddy who has started an outfit called the BSR Congress. That the political parties are late catching up became obvious a few days ago when the Supreme Court cancelled the mining leases of Wahab, Lad and Singh. This has had a dampening effect on the poll fervour. The legal crackdown has also meant that there is less of a display of money power and that top leaders from national parties are avoiding Bellary like the plague. "Definitely money power has come down in these elections, not just in Bellary, but also in the state as a whole," says Lad, one of the first of the Bellary barons to own a helicopter. Bellary was just another dusty mining town before the Reddy brothers, aligned with the BJP, took control of the area. Poll Expenses Being Closely Monitored 

Rivals alleged a campaign of threats and intimidation, and claimed that Janardhan Reddy plundered the mines and used the money to wield influence over the government in Karnataka and party leaders in New Delhi. A Lokayukta report by Santosh Hegde detailed a vast scheme of official collusion, pointing to a complete breakdown of the official machinery in Bellary and neighbouring parts. 
Now, the BSR Congress of Sriramulu is clearly struggling for support and credibility. The modest tent and half-empty seats at Sriramulu's campaign inaugural at Chellakurdi village in the area also attest to the fact that expenses are being closely monitored, and that lack of financial inducement is keeping crowds low. 
Sriramulu himself, after winning a byelection in December 2011 just a couple of months after Janardhan Reddy's arrest, is concentrating the attack on the Congress rather than his former party, the BJP. "The Congress is a master at misusing the CBI; look at what they have done to Janardhan Reddy and Jaganmohan Reddy," he said, referring to the son of the late Andhra Pradesh chief minister YS Rajasekhara Reddy who has broken away from the Congress. 
    BJP leaders say Sriramulu is wor
ried that a Congress government could be worse than the BJP for the Bellary Reddys. Last month, he met senior party leaders through Karunankara Reddy, who is still in the BJP, leading to speculation he could merge his party with the BJP. 
Whispers of secret meetings, visibly less ostentatious campaign material (the only "gift" caught by the district administration during the urban local body polls this year was an abandoned truckload of wall clocks with Sriramulu's picture on them), and generally of mining barons on the run attest to the fact that 10 years of a free run have come to an 
end. Even if all mining barons in the fray win, their influence on the government will not be the same as before. The introduction of e-auctions, electronic monitoring of trucks and aerial surveillance through drones are some of the measures being implemented to prevent illegal mining and transportation of ore. 
An immediate reconsolidation of business interests in favour of listed companies with proven track records is changing the ore-driven politics of the area. "We have now systems in place regarding mining. The Supreme Court has given an excellent order where illegalities will be addressed and inter-generational equities will be taken care of. On this assurance, domestic industry will be able to do business here over a period of time," says Amlan Biswas, deputy collector of the district. 
Perhaps the best symbol of changing times in the area is the abandoned palace of Janardhan Reddy, called Kuteeram. Reddy's family has moved to a modest four bedroom house next door, cursing Kuteeram's 'vaastu' for the way their world has turned upside down.



Rivals Bharti and Reliance Bridge a Sea of Differences RIL signs deal to share Mittal co’s submarine network for 4G

Bharti Airtel will share part of its submarine cable network with Reliance Industries' telecom arm, a rare partnership between two firms not known for their camaraderie. 

The country's largest telco will provide Reliance Jio Infocomm data capacity on its undersea cable that links India and Singapore, enabling the Mukesh Ambani-owned venture to connect its proposed 4G network to the Asia-Pacific region. 
The old rivals also held out the intriguing possibility of greater cooperation in the future. "Bharti and Reliance Jio will continue to build on this strategic framework and consider other mutual areas of cooperation and development to leverage their respective as
sets towards offering their customers a much richer experience," said a statement issued by both the companies, without specifying what these areas could be. 
Two executives aware of the development 
said Bharti and Reliance were in discussions for an optic fibre-sharing deal that could be similar to the recent agreement between Reliance Jio Infocomm and Anil Ambani's Reliance Communications. Both Bharti and RIL declined comment on this. Tuesday's pact marks a break in a narrative of rivalry between the two companies dating back to the early 2000s. Analysts Welcome Connectivity Deal, Say it is Good for Industry 
In the early 2000s, Bharti and Reliance Industries fought a lengthy battle over allowing CDMA operators to offer fullfledged mobile services. This was followed by a period of truce as the ownership of RIL's telecom business was transferred to Anil Ambani as part of the family settlement of 2005. 
But RIL's ambitious re-entry into the telecom sector has reignited the old rivalry, with analysts anticipating a dramatic confrontation both within and outside the marketplace between the country's largest private company and the largest telecom company. 
The two groups also compete against each other in retail. RIL's retail business crossed the . 10,000-crore revenue mark in 2012-13. While Bharti is a much smaller player in this business, the group is expected to grow it aggressively along with partner Walmart, now that the government has allowed foreign investments in the sector. 
Analysts were quick to welcome the data connectivity agreement between the two. "Such deals are good from the industry point of view as they result in sharing of infrastructure, which is costly to build. It is a part of industry consolidation and could be a win-win 
for all, including the ultimate consumer," said Hemant Joshi, partner, Deloitte Haskins & Sells. 
Executives close to Bharti said the company had a history of sharing infrastructure with competitors. They point out the company had taken the initiative to merge its towers with those of Vodafone and Idea to form Indus Towers. Reliance Jio Infocomm and Reliance Communications had earlier announced their intention to work closely in telecom after the optic fibre-sharing deal, and the RIL spokesman did not provide reasons as to why the company chose Bharti over FLAG Telecom, the undersea cable network owned by an Anil Ambani-promoted company. 
An executive close to Reliance Communications said RIL opted for Bharti since FLAG did not have connectivity on the Chennai-Singapore route. But this was disputed by a person close to Bharti, who said FLAG offered connectivity through other major business hubs in Asia, which in turn were liked to Singapore. 
Analysts said there could be multiple reasons for RIL not choosing FLAG. "One of the reaons could be that since RCOM has put Reliance Globalcom on the block, the future ownership of the company remains unclear at present," 
said Rishi Tejpal, principal analyst with technology research firm Gartner. Reliance Communications was in talks to sell Reliance Globalcom, the company that owns FLAG, to Bahrain Telecommunications, but talks were called off last week. The company has now said it is in discussions with a Samena Capital-led consortium of private equity funds. 
RIL shares gained 1.7% on Tuesday to close at . 803.50, while the Bharti stock fell 0.43% to . 299.50. Shares in RCOM, which had gained as much as 77% over the past couple of weeks on the possibility of more deals with RIL and the likely sale of its undersea cable arm, fell 5% after Tuesday's announcement but recovered to close 3.3% lower at . 94.50. 
According to the pact, Reliance Jio will use a dedicated fibre pair on i2i cable that connects Chennai with Tuas in Singapore. "The high-speed link will enable Reliance Jio to extend its network and service reach to customers across the Asia-Pacific region. It will connect Reliance Jio directly to the world's major business hubs and Internet service providers, thereby helping the operator meet bandwidth demand and provide ultra-fast data experience to its customers," said the statement from both companies.


GOLD CRASH CAUSES COLLATERAL DAMAGE IN ZAVERI BAZAAR

Su-Raj Heading for Darkness as Gold Loses Shine Across World

Bullion banks invoke letters of credit worth . 4kcr on Mumbai jeweller's import


One of the biggest gold bets that has backfired involves a mid-sized jeweller, Winsome, with leading international bullion banks who dealt with it gunning for the company. It's understood that Standard Bank of South Africa, Standard Chartered London and Scotiabank have invoked letters of credit (LCs) worth more than . 4,000 crore after the company, formerly Su-Raj Diamonds, failed to cough up a smaller amount. 
Zaveri Bazaar, the country's jewellery hub, bullion traders in the city, and diamond houses in Mumbai and Ahmedabad — which got a whiff of the default 
— are trying to figure out how Mumbai-based Winsome Diamonds & Jewellery deals with offshore banks and a string of local lenders. 
Around a dozen banks in India had issued LCs favouring the three bullion banks that belong to the elite club of gold suppliers from whom Winsome imported the bullion. 
Letters of credit, a simple promise to pay, are issued by the banks of the buyers to comfort sellers that they will be paid as long as the terms of trade are fulfilled. 
The overseas banks pulled the trigger on Winsome following the devolvement of LCs worth about . 500 crore. 
Bullion Banks Play it Safe with Winsome 
"Of the . 4,000-odd crore worth of LCs, many are yet to reach the due date. Some were issued for a few group firms of Winsome. But the bullion banks are unwilling to take chances with the price of gold falling sharply," said a person familiar with the development. Banks have the right to invoke LCs before maturity if they fear the buyer may default. 
The buzz in the market is that the company, having contracted imports at a higher price, is backing out with gold falling unexpectedly. Sections think there could be more than what meets the eye and the drop in gold price has only compounded the problem. Since January 1, gold has fallen by almost 14% to $1435.31 an ounce through Monday. 
Ramesh Parikh, director (finance) at Winsome, denied market rumours. "We did not speculate on gold...our customers are taking time to pay," Parikh told ET minutes before his meeting on Tuesday with the consortium of local banks that issued the LCs. He hoped the banks 
would be "supportive" and the company would be in a position to meet all its commitments. Parikh refused to discuss the matter further as Winsome has moved the Bombay High Court to stay the invocation of LCs by Standard Bank. Scotiabank's India head Rajan Venkatesh did not respond to a text message while ET's email query to Standard Chartered Bank remained unanswered till the time of going to press. The local banks Winsome dealt with include Punjab National Bank, Canara Bank, Vijaya Bank, Central Bank, Bank of Maharashtra, Syndicate Bank, Bank of India, Axis Bank, State Bank of Hyderabad, State Bank of Mauritius, Union Bank, Oriental Bank of Commerce and Standard Chartered India. The extent of hit some of these banks take would depend on the margins they have collected from Winsome to part-cover their LCs, future recoveries and relationships with the client. Crisil has downgraded Su-Raj's rating to 'A4' and the company continues to remain on the rating agency's 'Watch Negative' list. This is not the first time Winsome (or Su-Raj) has hit the headlines for the wrong reasons. In 2012, the company, in its earlier avatar Su-Raj, came under the glare of US investigative agencies following allegations of undisclosed sale of synthetic diamonds. In the same year, the listed entity rechristened itself Winsome. Months later, chairman Jatin Mehta stepped down and Madan Khurjekar, a former Central Bank of India employee and an independent director in the company, took charge as non-executive director. Mehta, who holds shares in Winsome, is no longer on the board. He was unavailable for comment. 
The promoters of Winsome hold 25.21% while foreign portfolio investors have 58.6% shareholding. Of these, Passage to India Master Fund holds 9.55%, Sparrow Asia Diversified Opportunities has 9.4%, and Davos International Fund owns 8.02%, according to quarterly filings as on March 31 with the Bombay Stock Exchange. The share price of Winsome has remained relatively steady at . 23.5 over the past month through Tuesday.


Sunday, April 21, 2013

Is this a good time to purchase gold jewellery?

The sudden crack in gold prices has created a flutter among gold aficionados. For those who firmly believed that gold only increases in value, a 20% slide has come as a rude shock. Now that this notion has been dispelled, consumers and investors alike are in two minds as to how they should approach the yellow metal. Is this the ideal time to purchase gold jewellery after the prices have softened? Or should one wait and watch? Sanket Dhanorkar asked some experts for their opinion. Here's what they had to say.



R Venkataraman MD, India Infoline 
Yes 
The recent, sharp decline in gold prices has shaken the market out of its comfort zone. It is a unique situation because the investors who are holding on to their gold positions are unhappy that the prices have gone down, whereas the women who have been wanting to buy jewellery ever since the stark rise in prices, are delighted and celebrating the fall. At the end of the day, gold is a commodity, and all commodity prices go through cycles. Apart from having limited use as jewellery, gold is 
also perceived as being a store of value from historical times. 
    From 2000 onwards, gold has had a dream run, with prices rising significantly on a yearly basis. However, people have forgotten that there was a period during the 1990s, when gold prices had declined continuously. The recent collapse of gold prices can be attributed to a combination of factors, including the speculative sell-off and recovery in the US. If the interest rates in the US go up, gold will start competing with the US treasury. After the subprime crisis of 2008, investors across the globe had bought gold as a store of value. As the world economy stabilises and people's faith in the banking sector recovers, gold is likely to lose its sheen. 
    My recommendation to investors and savers is to start investing in a disciplined manner and spread the gold purchases over a period of time. Reduce the gold allocation in your portfolio as we think the prices will witness a consolidation and stabilise at around $1,200-1,300 because this is the marginal cost of production. 
    For those interested in buying jewellery, there is no right time to do so. Whenever you can afford it, walk into the nearest jewellery shop, buy and indulge yourself.


Raghvendra Nath 
MD, Ladderup Wealth Management 
Yes 
In India, where almost every family has some investment in gold, the reaction to the fall in prices has been shocking. Suddenly, people have realised that gold prices don't follow a one-way-street. The metal has been the favorite investing destination for Indians, so it's not going to lose its sheen so easily. The long-term history of gold clearly shows that it has been able to beat inflation consistently. If this is the case, a short-term price correction should not rattle investors. 
    The people who buy gold jewellery with the dual 
objective of usage and investment should not be worried at all. The logic is simple. If gold prices were to go up to 50,000, would they sell their family jewels? Probably not. Then why should they be worried when the prices have fallen a bit after a heady rally of several years? 
    So, if you had postponed purchasing gold jewellery because of high prices, technically, it is now available at a discount. Considering the fact that the discount could become sharper in the days to come, you could consider spreading your purchases, if possible. 
    If, however, you are a financial investor looking to profit from gold in the short term, say, 3-4 
years, it is a completely different story. Any investment for the short term has to be weighed against other investments with comparable risk and return. So, one should consider the potential appreciation in gold versus other asset classes like fixed income. 
    Considering that in four years a fixed deposit would grow by almost 40%, we have to evaluate whether gold will be able to beat it sufficiently or not. The probability of this is quite low as gold has already rallied for more than a decade, with the past three years being the most aggressive. Therefore, the expectation of the rally continuing at the same pace would be quite optimistic. Most of us would agree that gold had become an overpriced asset and the recent correction has made the price a little more reasonable.


Kishore Narne 
Head, Commodity & Currency, Motilal Oswal Commodities 

Maybe.. 
The answer to this question will vary depending on who asks it. It could be a 'yes' or 'no' according to the person's need and purpose. If one has been postponing the purchase of jewellery, but needs to buy it over the next three months or so, this could be a welcome dip. Even so, one should wait for a few more days so that the high premiums quoted by jewellers cool off and they get the right price for their purchase. If, however, the purpose of buying a gold coin or bar is for investment, then the answer is 'no'. Though we have been anticipating a correction in gold price, the intensity was a surprise. 
The sheer quantum of the fall warrants a pullback in days to come, but won't justify buying gold as an investment. 
    The factors that had prompted the rally in the past five years have started to fade. The global economy is turning the corner and the US is showing signs of recovery. Though Europe is yet to come out of the woods, most of the issues will be addressed by politicians who can't afford to let the Euro area collapse. In the process, gold may come to their rescue. As the economies improve, the monetary policies in the western world could tighten, and the biggest threat to gold is rising interest rates in the US, which can happen much earlier than the Fed has predicted. 
    For Indians, the rupee will play a crucial role in the coming months. With the recent price correction in crude oil and gold, the rupee should benefit as the current account deficit will improve over the next few months. We expect the rupee to appreciate by more than 10% by the end of this fiscal year, which could increase the pressure on domestic gold prices. 
    In this background, we expect gold prices to correct, and though they may get supports close to the 22,000-24,000 levels, we don't see any significant rally in gold till next year, which makes it unattractive compared with other investment avenues. One can start accumulating gold close to the above-mentioned levels, but keep in mind that the golden era has ended for at least a couple of years.

How to avoid TDS Submit your declaration well in time to avoid paying tax on the interest income.

 Delayed tax refunds can be frustrating. After all, what can be worse than waiting for your own money to come back to you? This is why financial advisers suggest planning one's taxes well in advance and avoid overpayment. The start of the financial year is, perhaps, the best time to do so. Submit the Forms 15G or 15H right away to avoid the tax deducted at source (TDS) on your investments, if your income is below the exemption limit. 

    From this year onwards, the Income Tax Department has introduced some changes in the two forms. You now have to give additional information on income from all sources and tax deduction availed of during the financial year. 
    According to the TDS rules, if interest income exceeds 10,000 in a year, 10% tax will be deducted at source. If the investor has not furnished his PAN details, the TDS rate will be higher at 20%. However, if the investor's total taxable income is below the basic exemption limit, he can submit a declaration to avoid TDS. Form 15G is to be used by 
individuals below 60 years, HUFs and trusts, etc. Senior citizens and those above 80 years must use Form 15H. 
    Till now, one only had to declare in the form that one's income was below the taxable limit and, therefore, the TDS should not be deducted. Now, however, one must also mention the 
expected taxable income in the financial year. This includes income from all sources, such as salary, interest, rent and capital gains. One can avoid the tax-free income like interest from the PF, the PPF and tax-free bonds. 
Are you eligible? 
Before you rush to submit the Form 15G or 15H, make sure that you are eligible. An individual or HUF must satisfy two conditions. First, the estimated taxable income for the financial year should be less than the basic exemption limit. This is 2 lakh for individuals below 60 years and HUFs, 2.5 lakh for senior citizens, and 5 lakh for very senior citizens above 80 years. 

    The second condition, which is applicable only to Form 15G, is that the total interest income from all sources should not exceed the basic exemption limit. Senior citizens have been exempted from this condition because most retirees get the biggest chunk of their income from interest. 
These conditions are not new. The only difference is that now the individual has to specifically mention his expected income in the form. In the table below, we look at the various situations in which an individual is eligible 
    to file the declaration. 
    Interestingly, these forms also require the individual to mention details of other incomes, including dividends from shares and mutual funds. Dividend income is tax-free but the Income Tax Department still wants to know how much you earned from them. "The new forms seem to have been made with all the possible situations in mind. As of now, the dividend is tax-free, but may be taxable in the future,'' explains 
Sandeep Shanbhag, director, Wonderland Consultants. 
Err on the side of caution 
The TDS rules can be cumbersome, but you just have to take them in your stride. The Forms 15G and 15H have to be submitted at every branch of the bank where you have a deposit. Though the threshold limit of 10,000 a year is per branch, some banks insist on a form to be submitted even when the interest is less than 10,000 in that branch. A bank can track you using the unique customer ID. If the combined interest in all branches is above the 10,000 limit, TDS will be deducted if you have not filled the Form 15G or 15H. It is best to provide the form than risk TDS. Once the tax has been deducted, it can only be reclaimed by filing your income tax return. 
    The worst affected are investors who are not eligible to file Form 15G because their interest income is above the threshold limit even though their total taxable income is not liable to tax. One option for such people is to allow the banks to deduct the TDS. They can then reclaim the amount by filing their tax returns. This is a cumbersome process and, therefore, not worth undertaking. 
    The second option is to split the fixed deposits across several banks and branches so that the TDS exemption limit is not breached. This is no less tedious because you will have to go to multiple locations. Besides, it increases your paperwork manifold. There may also be cases of a small tax liability which makes an investor ineligible for filing these forms. You can handle this by letting one bank deduct the TDS so that the amount takes care of your total tax liability. 
    However, note that the above strategies are only meant to avoid TDS, not avoid tax or file your tax return. You may be required to file your tax return if your total income before the deductions is above the basic tax exemption limit. 
    Besides, there is a stiff penalty for furnishing incorrect information in the form just to avoid the TDS.




 

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