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MARCH 12, 2006
 Cover Story
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Trade Battle
Hots Up

The never ending fight between European Union and the US has taken another twist. The EU has threatened to impose up to $4-billion-worth of sanctions on the US, after the WTO upheld a ruling that the latter failed to end an illegal tax rebate for exporters. Analysts believe that us now has three months to act to avoid the reimposition of retaliatory measures. A look at the flare up.


e-Credit: What Next?
In most developing countries financial service providers are not yet in a position to use modern credit risk management techniques. Many developing economies still need to establish functional credit information systems in order to improve the quality of financial information. Will they?
More Net Specials
Business Today,  February 26, 2006
 
 
TOP OF MIND
Abuse-Proof Phone
 

What: A four-key, LCD screen-less cellular phone that can dial and receive calls from only three pre-stored numbers. The idea: Stop children, drivers and maids from misusing the phone provided by parents or employers

Who: It is the brainchild of Pradyumna Vyas, a 45-year-old professor at NID Ahmedabad, who has been working on the concept for the last eight months. Named after his daughter Ana, the (concept) phone (patent pending) would cost under Rs 1,000

P-WATCH

Downside: No LCD screen, no SMS and the numbers would need to be pre-loaded. That means, if you as the parent are trying to reach your child not from your "registered" mobile phone number but from, say, a pay phone, your call won't go through

Prospects: Dim. With handset prices tumbling and pre-paid cards of all denominations, there are other ways of controlling cellular abuse. If you are optimistic, it can only mean one of the two things: Either you don't have teenage kids or you've never had to hunt for domestic help


Bird Flu Mass Test

SRL Ranbaxy: Ready for the bird flu pandemic

What: Mass diagnostic tests for bird flu that can be completed in a day against the two to 10 days that it currently takes

Who: SRL Ranbaxy, a pathology laboratory network promoted by India's pharma major, Ranbaxy

How: The primary reason for the long turnaround on tests is the logistics involved. Samples taken from remote locations need to be sent back to the laboratory (typically located in a major city). But SRL Ranbaxy "covers the full country", says Group Director Janak Singh Bajwa, with 550 testing centres in more than 350 cities. So turnarounds are much faster

Cost: Rs 2,500, although Bajwa says it could come down as the volumes increase. In the same breath, he adds, "but let us hope the situation never comes to that"

Relevance: Nice to know that at least somebody in India is thinking of a possible bird-flu epidemic and gearing up for it.


Rs 10,000 PCs: Are They Selling?

Low cost PCs : Few takers

This magazine has always maintained that value, and not price, is the issue when it comes to selling personal computers (PCs) in India. As it turns out, we weren't too wrong. A handful of sub-Rs 10,000 PCs launched last year aren't exactly flying off the shelves.The Kolkata-based Xenitis Group, which launched one last April, had shipped out just 1,300 units until the middle of February. HCL Infosystems, a much bigger player, has sold 40,000 of its two low-cost PC models since launching in August last year. Manufacturers like Xenitis say they are happy with the numbers. "Our expectations of this segment are conservative," says a senior official at Xenitis.

But analysts like IDC's Piyush Pushkal say that the low-cost PC market will never really be big. "The truth may be that the sub-Rs 10,000 PCs erode margins in an already low-margin business," he says. Besides, these PCs are almost nobody's idea of a PC. They come with rudimentary software (like DOS instead of Windows, in the case of Xenitis; and Linux for HCL) and cost more when the buyer starts adding features. In fact, IDC data shows that even PCs that cost less than Rs 15,000 had just 2 per cent share of total desktop shipments during July-December 2005. That's not to say the low-cost PCs haven't expanded the market base; they have, but not significantly enough.


P-WATCH
A bird's eye view of what's hot and what's not on the government's policy radar.

IN A NUTSHELL

» No national consensus on PSU banks' merger
» Employees still resisting merger moves
» Finance Minister P. Chidambaram pushing for consolidation
» Rising provisioning requirement may put pressure on PSU banks' capital
» Integration with global markets, complex products may fuel future mergers

BANK CONSOLIDATION STILL
A LONG WAY OFF

The Reserve Bank of India (RBI) has blessed the takeover of Bharat Overseas Bank by Indian Overseas Bank, the first time it has allowed a public sector bank to acquire a profitable private counterpart. Does this mark the beginning of consolidation in the banking sector? Public sector bank CEOs are not reading much into it. "There is a need to build a national (political) consensus on this before things can move forward," says one such CEO. Finance minister P. Chidambaram is pushing aggressively for this, so the idea has a powerful backer at last, but resistance from employees, who apprehend job cuts, remains the biggest hurdle. And except for one off events like the one mentioned above, the sector is expected to remain as it is till March 2009 when the banking sector will be thrown open to mergers and acquisitions by foreign banks.

WATCH OUT, LPG, PETROL, DIESEL PRICES MAY RISE AGAIN

If the government accepts the recommendations of the C. Rangarajan Committee on Pricing and Taxation of Petroleum Products, then the common man is in for hard times. The price of liquefied petroleum gas (LPG) will shoot up by Rs 75 per cylinder; petrol and diesel by Rs 1.21 per litre and Rs 1.96 per litre, respectively, and only people below the poverty line (BPL) will be entitled to subsidised kerosene. But it will help loss-making public sector refining and marketing companies like Indian Oil Corporation, Hindustan Petroleum, Bharat Petroleum and IBP no end. They will be allowed to fix their own retail prices, and the full subsidy burden on LPG and kerosene will be borne by the national Budget. Moreover, state governments will have to scrap octroi, entry tax and other local levies. The government will take a decision on whether or not to accept the report in the next couple of months.

INTEREST ON FIXED DEPOSITS MAY BECOME TAX FREE

Term deposits were brought under the ambit of taxes in the last budget; this means the accumulated interest, which had till then been tax free under Section 80L of the Income-Tax Act, is now liable to be taxed at the marginal rate. Result: depositors moved into Kisan Vikas Patra, National Savings Certificate, National Savings Scheme, public provident funds and mutual funds. The banking industry now wants tax breaks for term deposit holders up to Rs 1 lakh (principal) under Section 80C of the I-T Act to boost deposit growth. A 6.5 per cent tax-free return from bank deposits, it feels, will put the shine back into this once-popular instrument. And Finance Minister P. Chidambaram is likely to oblige on February 28.

SBI's A.K. Purwar: Top pay

BETTER PAY FOR BANK OFFICIALS

Top officials of public sector banks may get performance-linked pay packets at last. The basic salary structure of bank chairmen and executive directors will, however, remain unchanged, as these are pegged to those of secretaries and joint secretaries. "It will certainly happen, but no time-frame has been set for the implementation of this proposal," an Indian Banks' Association official says.

AHOY TRANSPARENCY

The e-governance project-code-MCA 21-envisaged in the Companies (Amendment) Bill, 2006, will enable various stakeholders to interact with each other in a simple, hassle-free environment. The public will have full access to all online public records (the current norms under the Companies Act don't provide for online filing). And financial institutions will be able to register and verify charges against assets anywhere in the country. Says Prithvi Haldea, Managing Director, Prime Database: "The initiative will make the corporate governance process more transparent."

 

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