Indian Economy - News & Updates - Archive

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India, Pak agree to share gas, differ on costs

ISLAMABAD: India and Pakistan moved a step closer to build the $7 billion Iran-Pakistan-India gas pipeline as they reached an understanding to share natural gas to be imported from Iran, but they failed to arrive at a consensus on transportation costs and transit fee.

Addressing a joint press conference after the end of the two-day official-level talks, Pakistan's petroleum secretary Ahmad Waqar said the two nations have agreed to receive 60 million standard cubic meters of gas per day (mmscmd) and share 30 mmscmd each in the first phase.

The remaining volumes would be shared in the next phase of the project. The understanding was reached at a bilateral meeting attended by petroleum officials of India and Pakistan while Iran attended it as an observer.

He said Pakistan has also agreed in-principle to the formulation of transportation costs involved in bringing the gas from Iran-Pakistan border to Pakistan-India border.

"We agreed with India (on the formulation). However, final tariff will be based on actual technical and financial inputs to be worked out by officials in coming weeks," he said.

"The two sides differed on transport costs and transit fee that India would have to pay Pakistan for using its territory, Indian petroleum secretary," MS Srinivasan said.

The transport tariff proposed by Pakistan was 2 to 2.5 times higher than what was applicable to similar distances and volumes.

"These were based on certain assumptions and the actual tariffs would be determined by actual inputs and reality on ground," he said.

Differences also remained on the transit fee as both the countries proposed different formulations. Pakistan proposed 57 cents per million British thermal unit, whereas India said it cannot be more than 15 cents per mBtu.

Waqar said both sides have agreed to complete necessary documentation to meet the target of finalising an agreement on the IPI gas pipeline project by June this year.

"We have agreed to complete documentation and will be able to sign the final document by June 2007," Waqar said.

Srinivasan said as per Pakistan's calculations the transit fee worked out to be $220 million (around 10% of delivery of gas), but India believed it should be around $70 million.

"India proposed that transit fee is to be determined on the basis of commodity price, not on delivered price as it amounted to double accounting," he said.

Pakistan has agreed to consider India's proposal and reply by March 15. Srinivasan said the twin issues of transportation costs and transit fee will have a considerable bearing on the overall delivery of gas.

The two sides have not finalised the route of the 1,030 km long pipeline. For security reasons, Pakistan has proposed three routes and suggested a coastal route which increased the length of the pipeline within Pakistan by 260 km.

 

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Wal-Mart may adopt new plan in India


NEW DELHI: Away from the political backlash against its entry into India, the world's largest retailer has been keeping domestic rivals guessing about the format it would adopt in this country, where grocery shopping is an industry by itself.

Wal-Mart, better known for its large stores like hypermarkets and supermarkets spread over thousands of square feet, may go in for the neighbourhood store format keeping in mind the Indian consumer's preference for this model.

"We expect Wal-Mart and Bharti to explore the neighbourhood market concept because groceries are one of the largest retail categories with the least organised retail competition in India," a former Wal-Mart adviser and US-based global retail investment firm Growth Ventures Group's Chairman and CEO Love Goel said.

Though foreign multi-brand retailers are barred from setting shop in India, Wal-Mart has tied up with Bharti Enterprises to gain a toe-hold in the country.

While the Left parties fear that entry of multinational retail players would slowly kill the estimated 13 million mom and pop stores, Congress President Sonia Gandhi too has joined the chorus of opposition against FDI in retail.

Even though fully opening up retail sector to foreign players still remains an issue, domestic petrol and petrochemical major Reliance Industries has entered the field and already boasts of over 40 neighbourhood vegetable and grocery stores across five cities.

Wal-Mart, which has a revenue of 320 billion dollars, is the largest retailer of groceries in the US. So, it could be anybody's guess what format it would choose for India. Wal-Mart has often adapted itself to the local needs, like in Brazil where there is a greater emphasis on neighbourhood stores inside cities, Goel said.

The company has already become the third largest retailer in Brazil by following the right format concept, Goel added.

However, the going might not be as easy for the company in India, where a number of retailers like Big Baazar and Vishal Megamart are expanding their presence with large-format neighbourhood stores and domestic conglomerate Reliance Group, which has also purchased land in the vicinity of residential areas in various cities for its retail stores.

Wal-Mart and Bharti are likely to use one of Wal-Mart's proven store models that range in size from 40,000 square feet for neighbourhood stores to 20,000 square feet for its super-center stores, Goel said.

The US giant might also try out membership schemes to gain the customers' loyalty in wake of intensifying competition in the retail market sector, the experts believe. "With more than nine groups from Birla and Tata and Ambani investing over one billion dollars in next few years in retail, it will be important for retailers to create loyalty with customers rather than drive profit margins down by competing on price," Goel said.

Membership clubs like Sam's Club (being operated by Wal-Mart in US) are a great way for retailers to offer lower prices while creating loyalty among its customers as well, he added.

According to experts, the relationship with Bharti could prove to be an asset if Wal-Mart decided to combine their retail concept with a direct-to-consumer approach by selling through catalogs, internet, mobile phones and television. "In that case, not only most orders are placed on phone, but the after-sales customer service is also handled through phone," Goel said, adding it could pave the way for the most optimal, capital-efficient and fastest method for organised retail to grow in India.

According to the experts, while neighbourhood stores appear to be the best format for Wal-Mart in India, it could also try out away-from-city locations. Wal-Mart's approach of buying cheap land in rural or urban locations could be successful in India as proven by a number of big malls, which have sprouted up on the outskirts of big cities like Delhi and Mumbai.

"With the explosion in the number of automobiles and vehicles, transportation is not necessarily a limiting factor," Goel said.

 

[Contrarian]

IA takes on low-cost carriers in fare war

KOLKATA: Indian Airlines is revving up for a dogfight in the skies. With all-time low fares in its arsenal, the national carrier is ready to fire salvos at not just legacy carriers, like Jet Airways and Air Sahara, but low-cost airlines like Air Deccan and SpiceJet as well.

"We have slashed fares on several routes out of Kolkata. The new fares, applicable till September-end, are aimed at winning back passengers lost to competition," IA chief manager (marketing & sales) Nirbhik Rai Narang said.

The airline's new basic fares range from Rs 175 to Rs 625 on all flights to the north-east, except Dibrugarh.

The basic fare to Dibrugarh is Rs 1,525. An additional tax and fuel surcharge component of Rs 975 is applicable on all tickets.

The number of discounted fare seats may range from 15 to 50, depending on the flight's load factor. The full fare on these sectors range from Rs 4,330 to Rs 7,540.

Fares have also been slashed on metro sectors. The lowest fare (tax & surcharge included) to Delhi is Rs 2,990. It will cost a passenger Rs 3,990 to travel to Mumbai, Rs 3,330 to Chennai and Rs 4,000 to Bangalore.

The new fares are part of the airline's dynamic pricing mechanism aimed at optimising passenger load.

With a major capacity augmentation lined up (43-50 new aircraft are to be inducted in the fleet over the next three years), the Indian Airlines top brass have adopted a two-pronged strategy to fill up the seats — expand services in domestic and international sectors and take on competition aggressively to grab market share in existing sectors.

"The move is aimed at increasing load factor from 70% to 90%," Narang said. That will automatically lead to a market share hike.

At present, IA's market share in the east is 24% — next only to Jet Airways at 27%. It offers nearly 1,900 seats out of Kolkata every week.

The basic return fare to Bangkok too, has been slashed. The lowest return fare ranges between Rs 4,500 to Rs 6,000. The tax and fuel surcharge applicable on this sector is Rs 4,000.

The airline has also introduced new super-saver packs for both corporates and individual travellers. The flexible corporate package can now be used by multiple employees of the company.

Meanwhile, LCC IndiGo has announced a promotional offer on 1 lakh tickets at Rs 100, Rs 500 and Rs 1,000 for sale from February 26 to February 28. Taxes and surcharge are extra.

 

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Rail projects worth Rs 15,000 cr in Bihar: Lalu

PATNA: Railway Minister Lalu Prasad on Wednesday said his ministry has gifted projects worth Rs 15,000 crore for Bihar for setting up wheel, coach and locomotive factories in Chapra, construction of rail overbridges over river Ganga connecting Digha with Sonepur and river Kosi in Saharsa and broad gauge conversion of rail lines.

"We have gifted the state with projects worth Rs 15,000 crore," he said while flagging off the new Patna-Ahmedabad Azimabad Express train at the Rajendra Nagar terminal here. Six new trains were introduced in Bihar during the past three days, Prasad said adding he had fulfilled the promise he made for the state in last budget.

Work continued on laying 600 km rail lines in different areas in the state, while survey was on to expand the railway network in another stretch of 1,350 km in the state, he said. Prasad said rail locomotive factory in Saran, besides the wheel factory in Chapra, as promised by him for his parliamentary constituency, were being set up with an estimated expenditure of around Rs 3,000 crore.

He said his ministry had given special attention for expansion of rail network in the state. RJD Minister in the UPA government Kanti Singh, party MP Vijay Krishna and Ramkripal Yadav attended the function.

 

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India emerging as online tutoring hub

CHENNAI: India is fast emerging as the global online tutoring hub by delivering top-notch teaching services at down-to-earth rates.

With a large number of dedicated post-graduates well-versed in English language, India has the greatest potential to grow in the online tutoring industry, say industry insiders.

Indian teachers provide tutoring services at a fraction of the amount charged by their counterparts in the United States, United Kingdom and other European countries.

"When it costs $ 40-100 per hour in the US, Indian teachers charge three to four times less," says V Rameshwar, Chief Quality Officer of Chennai-based Tutors World Wide (I) Pvt. Ltd.

Going a step further, Bangalore-based Tutorvista provides unlimited tutoring for a month for $ 100, says its Chairman and Founder, K Ganesh.

Within a short span of two years, ever since supplementary education through internet attained an industry status in India, the growth rate is 100-150 per cent, says Rameshwar.

The company, which was started in 2004, now has 400 teachers on its pay-roll and around 5,000 students across the globe.

According to Ganesh, 18 months back, Tutorvista started with one teacher and one student and now has 500 teachers and over 2,000 students.

India now earns around $ 15 million per year from online tutoring -- 10 per cent of the total market share. "This is expected to swell to $ 2.4 billion within three years", says Ganesh.

Tutorvista has students in 12 countries, including Australia, Turkey, Denmark, Singapore, the Middle East and Canada. But majority of the students are from the US and the UK.

Thirteen-year old Kathreen of Westchester County, New York, says, "My Indian tutor is very patient and kind. She takes time to explain things to me and I have improved in classes".

"With online tutoring, we can do sessions at our convenience. We save a lot of time, instead of having to drive up and down", Kathreen, who has been receiving tuitions from Tutorvista for English since October last year, said.


Among the other developing countries which have ventured into the "eBay of education", such as Pakistan, Sri Lanka and Malaysia, India has an edge, says Ganesh.

India has a large number of post-graduates with sufficient computer know-how compared to these countries, he says.

"When we gave a recruitment advertisement, we received applications from 6,000 post-graduates, many of them being PhD and M.Phil holders", says Ganesh.

Through online tutoring, globalisation, whose merits were hitherto enjoyed only by the technologically qualified, has reached the homes of people educated in all subjects.

It gives opportunities to science and arts degree holders to earn from home. For seven hours work a day, Tutorvista pays them Rs 12,000-14,000 monthly. Moreover, there are no commuting hassles and the timings also are flexible, he says.

According to Rameshwar, TWWI recruits freshers and trains them for the job.

But Tutorvista has retired professors, teachers and qualified housewives on their pay-roll.

These companies also have representatives in many of the client countries, especially in the US and the UK, through whom the necessities of the market are ascertained.

By online tutoring, Indian outsourcing companies have even ventured into the B2C (Business to Consumer) model, says Ganesh.

They deal directly with the parents and the students. There is no other brand or company intermediating in the B2B (Business to Business) model, he points out.

Tutoring through letters and couriers had been a mode of supplementary education in sparsely populated countries like Australia for long.

But, with the advent of voice technology on the internet, "real-time voice-based online education" has become accessible to everyone across the globe, adds Ganesh.

 

[Contrarian]

Novartis case raises fresh controversy

NEW DELHI: A court case filed by Swiss drug major Novartis challenging the government and its patent laws, has snowballed into a fresh controversy. Concerned that enough was not being done by the government to protect public health safeguards, the domestic generic industry has urged it to act in earnest to defend its laws.

Novartis had challenged the validity of Section 3(d) of Patent Act, 1970 in Chennai High Court, which is intended to prevent evergreening of existing drugs, after its patent plea for a new use for its cancer drug, Gleevec was rejected by the Indian patents office in January last year.

The section states that patents would not be given for new forms, uses or minor modifications of existing drugs unless they differ significantly with regard to efficacy.

Initially the company filed a petition challenging the domestic law on the ground that it is not TRIPS (trade-related aspects of intellectual property rights) compliant. Subsequently, it also said that Section 3(d) violates Article 14 of the Constitution, which promotes equality before the law and prohibits arbitrary statute.

Simply put, Novartis is seeking a declaration from the court that Section 3(d) is not TRIPs compliant and also that certain terms in the section are vague and can lead to arbitrary decisions from the patent office, and, therefore violates Article 14 of the Constitution.


Department of Industrial Policy and Promotion (DIPP) being the nodal ministry is the main defendant, while the generic industry is represented by Indian Pharmaceutical Alliance (IPA) is contesting the case against the foreign major.

DIPP had recommended that the solicitor general represent the government's case at the hearings in Chennai, since it was an issue of constitutionality of the Indian patent law. But he was not present in the hearings as he had not got the appropriate clearance from the law ministry.

While public health groups including Indian Network for People Living with HIV/AIDS have written to PM to intervene as it may adversely impact their access to treatment in India, some organisations have approached DIPP and law ministry. Those like CPM too have asked the government to defend the Patents Act in the court against Novartis.

Also, the 'laxity' on the part of government in not giving appropriate clearances and filing counter affidavits, have raised concerns within the domestic industry. IPA, in a communication to DIPP, listed its concerns which stem from the fact that the department did not attend the hearings on January 29-30, and February 15-16.

It has also said the government should have challenged the maintainability of the writ petition by a foreign private company, since the WTO agreement has established a system to deal with matters relating to non-compliance by member states. The matter could be contested in a WTO dispute panel, but not in a local court of law.

 

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AI, GE sign pact for green engines

NEW DELHI: After hearing of green drives for long, you can now talk of green flight as well with Air India planning to induct eco-friendly engines in its newly ordered aircraft. The airline has signed an MoU in this regard with General Electric (GE) on Tuesday.

As per the MoU, GE will deliver aircraft engines from its ecomagination portfolio including GE90-115B engines for the Boeing 777-300ERs and the GEnx engines for the Boeing 787-800 aircraft ordered by Air India some time ago. The deal will cost Air India $2.2 billion.

Expecting the engines to be 15% more fuel efficient than the ones currently used in AI fleet, V Thulasidas, CMD, AI said: "Considering the life span of 15 years, a GEnx engine will save up to 500 million tonnes of fuel fetching over $150 million for an airline."

Air India's green flight will not be restricted to engines as the airline plans to rope in GE in areas including the in flight content creation, co-branding and above all turning its Mumbai Air India building green.

According to sources, the airline plans to induct an ecomagination logo on its to be inducted aircrafts along with showcasing of environment-friendly videos and magazines to passengers on board.

With the first newly-ordered Boeing expected to be delivered by May after a delay of two months, the airline plans to launch a direct non-stop flight from Mumbai to New York to be shortly followed by a similar arrangement between New Delhi and New York.

For Thulasidas, Air India's latest move is part of the airline's corporate social responsibility initiative but in a sense it will help the airline save on the fuel cost in the long run.

The flag carrier had ordered 23 Boeing 777, including eight Boeing 777-200 long range and 15 Boeing 777-300 extended range aircraft, apart from 27 Boeing 787 aircraft.

Thulasidas said: "This year has been exceptionally difficult due to the high aviation turbine fuel costs. Last year, AI had posted a profit of Rs 15-16 crore." On reports of withdrawal of tax exemption on aircraft lease rentals, he said: "Retaining tax sops for lease rentals of aircraft is important for us and others."

 

[Contrarian]

Essar buys BPO firm in Bermuda

MUMBAI: Essar Global, the flagship company of the Essar group, on Tuesday announced 100% acquisition of Bermuda-based business process outsourcing firm, Global Vantedge for $23 million or roughly Rs 100 crore.

The acquisition, fourth in the last 12 months made by Aegis BPO the wholly owned subsidiary of Essar Global will bring $25 million accretion to the turnover and $5 million to net profit of Aegis whose current revenues exceed $180 million.

Aegis which is also the fifth largest BPO company in India is likely to climb up the ladder by the current acquisition. In the last one year Aegis has acquired Customer First and Orion in India and Technion in the US.

Aparup Sengupta, CEO of the BPO business of Essar Global in India told TOI that the group is still looking out for more acquisitions. "We are in active dialogue with few companies (for acquisition)," he said.

Basically, Essar is looking for BPO companies with $20-30 million revenue with employee strength of 1,000-2,000 people. "However, there are companies on our radar which are 3-4 times bigger than our target size," Sengupta said.

Commenting on the acquisition, he said Global Vantedge's buy will complete the entire suite of 'customer life cycle management' services (which include customer acquisition, retaining them and also following up with an ex-customer) provided by the BPOs.

Global Vantedge, which will be renamed as Aegis Collect, is the leader in the collections and accounts receivable management services segment.

Several customer of Essar's BPO business like the American Expresss platinum and gold card unit will benefit from the acquisition as it will now also be extended the collection and accounts services of Global Vantedge.

Global was owned by Chrys Capital and the company's management team which will continue to manage the BPO. It has over 1,400 employees with facilities in Gurgaon in India and San Jose, Costa Rica. It operates in the banking, telecom and automobile verticals.

 

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Sebi imposes Rs 1 cr fine on DLF arm

MUMBAI: Market regulator Securities and Exchange Board of India (Sebi) on Tuesday imposed a fine of Rs 1 crore on DLF Commercial Developers (DLFCD), a subsidiary of real-estate major DLF Universal. The company has been penalised for dealing in Bhoruka Financial Services scrip at the de-recognised Magadh Stock Exchange in Patna.

In its order against the DLF entity, Sebi said Magadh SE's application for renewal of recognition as a stock exchange was at a proposal stage when (between August 1 and August 12, 2005) the DLF group company carried out the said transaction.

The bourse was granted recognition on December 11, 2005, the order mentioned. The Sebi order said that the promoters of Bhoruka Financial held nearly 2 lakh shares in the company, constituting 98.73% of its equity. They sold the entire stake to DLFCD for about Rs 90 crore, at Rs 4,490 per share.

On the Magadh SE, the transactions had taken place under the 'permitted to trade' category based on an application by its member-broker Rajat Share & Stock Brokers, while Bhoruka Financial was listed on the Bangalore Stock Exchange.

Apart from DLF Commercial Developers, Sebi also imposed a combined fine of Rs 1 crore on 11 others on a similar charge. These entities included promoters, directors of Bhoruka Financial, and their related entities.

Interestingly DLF Universal, which is in the process of listing its shares on BSE and NSE through an IPO, has mentioned in its draft prospectus that it could face a fine up to Rs 1 crore for its dealings related to Bhoruka's shares.

"There is pending litigation under securities laws against Bhoruka Financial Services, one of our subsidiaries... be liable to a penalty which may extend up to Rs 10 million," the company said in its IPO draft prospectus.

 

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Banks continue to flout norms

MUMBAI: Commercial banks continue to violate the Reserve Bank of India (RBI) norm on acknowledgement of cheques. Several instances of some banks charging customers Rs 10 for acknowledging cheques presented over the counter have been reported from Tier II and Tier III centres.

Following repeated complaints from the public, the RBI, in December 2006, had directed banks not to compel customers to drop cheques in drop boxes.

"While the cheque drop box facility may also be made available to customers, the facility for acknowledgement of cheques at the regular collection counters should not be denied to them.

No branch should refuse to give an acknowledgement on cheques being tendered by customers at their counters," the RBI's guideline on cheque drop boxes and the facility for acknowledgement of cheques states.

The banking regulator had also asked banks to display on the cheque drop box itself that customers can also tender the cheques at the counter and obtain acknowledgement on the pay-in slips. However, this has not yet been implemented by all bank branches.
"Complaints on wrong debit of account, loss of cheque, not honouring of cheques despite sufficient balance are some of the common complaints that continue to come to the Indian Banks Association (IBA) and also the Banking Ombudsman," said a senior RBI official.

The RBI, in February 2006, had formed the Banking Codes and Standards Board of India (BCSBI) with an aim to evaluate, oversee and enforce observance of the code by banks.

Accordingly, a code of banks' commitment to customers was drafted, which promised minimum customer service standards in the case of loss of cheques, wrong debits and a compensation policy as well.

 

[Contrarian]

EET regime will encourage savings

MUMBAI: Sources added that the broad contours of exempt-exempt-tax (EET) were put into place a few months ago by former chairperson of the Central Board of Direct Taxes (CBDT) M H Kherawala. She had also headed the expert committee on EET last year.

"It's easy to administer EET on voluntary investment schemes like PPF," said Dinesh Kanabar, partner, RSM & Co, and a member of the expert committee on EET.

He said that if this regime comes in, it will encourage long-term savings because people will defer their tax-liability to the time they retire. At retirement, the tax payable will be lower because the income of an individual is expected to be lower.

Tax experts like Nikhil Bhatia of KPMG also feel that bringing instruments like provident funds and pension schemes (which cover more individuals) under the EET regime will take away the pressure from the government to give assured returns and, in turn, force people to save for the future.

EET which is followed globally by several countries like US, UK and Singapore has also been a part of our tax system. Not very long ago, the National Savings Schemes were subject to a similar system of tax deduction.

 

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'Software investment gives 100% return

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NEW DELHI: Services like catering, transport, housekeeping, security and technology have received a huge boost from the IT-ITeS sector, thereby providing strong indirect income and employment opportunities for less educated and skilled workers.

The software and related services sectors also demonstrate a strong multiplier effect on the Indian economy with every rupee input resulting in a 100% return, says a joint study by by rating agency Crisil and Nasscom.

The study has analysed the expenditure on operating expenses, capital expenditure and consumption spending by professionals. For every job created in the sector, four are created in the rest of the economy, it said, especially in the areas of housing, transport, hospitality and entertainment.

 

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Excess capacity to hit commercial realty

BANGALORE: Many of those gleaming glass and concrete structures coming up all around you may remain just that glass and concrete structures. Without occupants. At least for a long time.

A survey being done by global property consultancy DTZ Debenham Tie Leung a preview of which was provided to TOI finds that across major cities in India, massive overcapacity is building up in commercial real estate.

And the conclusion drawn is this: the capital and rental values of commercial property will start going down in 6 to 12 months.

In Bangalore, over 16 million sq ft of grade A commercial space is expected to be available for leasing in 2007, but the total demand is not expected to be much more than the 11.5 million sq ft the city saw in 2006.

In Chennai, the difference between the estimated demand and supply is literally a chasm the supply is expected to be about 18 mn sq ft, and the demand probably not even half of that, considering it was just a little over five million sq ft in 2006.

In the National Capital Region, supply this year is estimated at over 15 mn sq ft, against the 8.5 mn sq ft of absorption it saw last year. The demand in 2006 constituted a sharp jump over the 2.36 mn sq ft in 2005, but this year, demand is not expected to rise more than 30%, leaving a yawning gap between demand and supply.

"We think demand will see a maximum increase of 30% in most locations, and could be much less in markets like Bangalore," says DTZ Indiamanaging director Ankur Srivastava. He says locations like Pune, Hyderabad and Kolkata too are set to see significant oversupply, and hence price corrections.

"The central business districts in most locations are still undersupplied, but we believe Indian markets generally are reaching the peak of the real estate cycle.

Factors like rising interest rates and the government constraining channels of property funding like through NRE (non-resident external) accounts will only hasten the trend," Srivastava adds.

Experts like Prakash Gurbaxani, who recently quit as CEO of TSI Ventures and set up a venture funded real-estate company called QVC Realty, agree there's overcapacity emerging. But he saysthe excess capacity is primarily in spaces designed for IT/BPO.

"There are other areas like retail, hospitality, and spaces that cater to the domestic market like telecom and legal services, where there is still a supply constraint. You can also find niches where demand can be created," he says.

"Generally, whoever gives the best value and best experience will gain. The days of being able to sell whatever you build appears over."

 

[Contrarian]

Apollo eyes UK hospital chain Capio

CHENNAI: Hospital major Apollo Hospitals Enterprise Ltd is readying itself for a major UK acquisition. According to international media reports, Apollo has already evinced an interest for the British unit of Swedish healthcare company Capio, which owns a string of 21 hospitals and nine treatment centres in the UK.

The Sunday Telegraph has reported (without quoting any official) that private equity groups, Apax and Nordic Capital, (who together own Capio), were considering the sale of Capio's British unit in response to anti trust concerns.

The report also said that Apollo was looking at other hospitals including The Priory Group (owner of Britain's famous rehabilitation centre for pop stars and fashion models).

When contacted by TOI, PC Reddy, chairman of Apollo Hospitals said that his company was looking at international acquisitions including hospitals in the UK. "Apollo is ready to go global. We are already present in Nigeria, Kuwait and Bahamas.

As regards Capio, nothing has been finalised. To my knowledge, I don't think the sellers have called for bids. If and when they call for we will consider participating in it, provided the valuations are right."

He also said that the hospital chain would need decent financial muscle for international acquisitions. "Typically we (Apollo) can team up with private equity players who will fund the acquisition and we will manage the hospitals with our expertise.

Most of the big private equity investors are in constant touch with us and we are exploring various options. Since all these haven't reached a finite stage, I cannot comment," Reddy added.

It is learnt that the shopping could cost anything between $1 to $1.2 billion. "Market rumours suggest that Capio could cost around $1.2 billion. At those rates, I don't think it is worthwhile. In anycase, they have to sell out in one years time as per statutory requirements, we will wait and watch," he said.

According to Capio's website, Capio is the largest independent sector provider to the NHS in England, in May 2004 Capio was selected for the largest public sector care contract ever awarded by the NHS.

Under the contract 95,000 NHS patients will be treated between 2005 and 2010 in 10 specialist centres. Five have been newly built, two have been built in NHS facilities and three in existing Capio hospitals.

Apollo's international trip was short-circuited in Sri Lanka where it lost control of a super speciality hospital it jointly set up the local government there in 2002 when a local businessman mopped up the shares and elbowed Apollo out.

The stock price of Apollo closed at Rs 476.15 on the Bombay Stock Exchange on Tuesday, up by 0.82% from the previous close.

 

[Contrarian]

Corporate tax may go down by 3% in budget


NEW DELHI: Companies are expected to breathe a bit easy as statutory tax rates on them are likely to be reduced by 3% in the Budget either through abolition of 10% surcharge or reduction of corporate tax from the current level of 30%.

Either corporate tax rate is likely to be reduced to 27% or surcharge abolished to give 3% relief to companies, sources said.

The statutory rate of taxes on companies stands at about 33.66% with corporate tax of 30% and surcharge of 10% along with education cess of 2%. Corporates are demanding around 5% cut in taxes, but it is not likely to be accepted entirely, sources said adding the cut may be limited to 3% only.

Companies in India are given a host of tax exemptions. These include tax holiday for software technology parks, EoUs, infrastructure service providers and units set up in backward areas. Because of all these exemptions, effective rate of taxation on corporates works out to be much lower.

The government collected close to 50% more corporate tax at Rs 97,315 crore during the first 10 months of this fiscal against Rs 65,094 crore during April-January of the previous fiscal

Companies are pressing for a further cut in the tax rate to make them comparable with those in some Asean countries. Among these countries, Singapore and Malaysia have tax rates of 20 and 28% respectively.

Thailand has a corporate tax rate of 30% and Philippines 35%, whichis also likely to be lowered to 30% by 2009. Philippines and Thailand, where rates are closer to India — also offer tax offs for industrial projects. Effective rates there could be lower for some companies.

Most countries across the globe have been reducing corporate tax rates to attract investments. A survey by KPMG in 2006, covering 86 countries, showed that the average corporate tax rate over the last 14 years was cut from 38.1% to 27.1%.

In the Budget 2005-06, FM P Chidambaram had cut corporate tax rate to 30% from earlier 35%, but increased surcharge to 10% from 2.5%.

This reduced the statutory tax rate, including education cess, on corporates to 33.66% from 36.59%.In the Budget 2006-07, he retained this tax structure but raised the Minimum Alternate Taxation to 10% from 7.5% in the previous fiscal.