Violators beware: Taxmen on prowl

What: A new Computer Aided Selection of Scrutiny (CASS) system will be used by the Department of Income Tax (DoIT) to select I-T returns for scrutiny. The system selects the cases on the basis of "Revenue at Risk", i.e., the quantum of money that the government is likely to lose if those cases are not scrutinised. It is expected to select about 1 per cent of the total returns filed for scrutiny.

How: CASS takes into account the data from various sources like the annual information return (AIR), securities transaction tax, and cash withdrawal tax, among others. A senior DoIT official tells BT: "If, say, a businessman's returns are inconsistent with the returns filed by the others in the same business, it will be a fit case for scrutiny."

Potential: The 18 lakh units of information filed in 2005-06 have a total transaction value of about Rs 23 lakh crore. If the government can mobilise even 1 per cent of this, the revenue potential can be mind-boggling.

Downside: Taxmen can use this to harass honest taxpayers.

-Shaleen Agrawal

Congestion Surcharge

What is it? Airlines in India, which are bleeding money, have decided to add a Rs 150 "Congestion Surcharge" to their fares to compensate for air traffic delays.

Why? The airlines claim that they lose Rs 2,500 every minute a plane (Airbus A320/Boeing 737) circles over a city waiting for a landing slot and this contributes to their losses. Kingfisher, for example, lost Rs 104 crore in the first half of 2006-07.

The problem? Civil Aviation Minister Praful Patel thinks that the airlines should not charge consumers an "additional" surcharge over and above the hefty Fuel Surcharge they already levy and has instructed Indian not to charge this particular surcharge.

The situation now? So what if the minister doesn't like the surcharge; most private carriers have ignored the minister's diktat.

What does it mean for you? You see, the cheap advertised fares notwithstanding, the actual amount you pay is usually Rs 3, 000 more (on a return ticket) than the published fare.

-Kushan Mitra

ECONOMY WATCH

NET FII INFLOWS

Status: Rs 15,187 crore in the third quarter of 2006-07, up 35.45 per cent from the previous quarter.

Impact: Rising FII inflows augur well for the country's bourses as well as the economy. The recent buoyancy in dollar inflows have not only created depth in the market, but also strengthened the rupee.

SUGAR PRODUCTION

Status: 5.45% in 2006 compared to 4.6% in the previous year.

Impact: Despite a softening of crude oil prices, inflation is on the rise in the domestic market. Higher levels of inflation have the potential to increase the interest rates thereby affecting the consumer boom and savers. India Inc, which is in expansion mode, will be affected by rising interest rates as it will increase the cost of production.

-Compiled by Anand Adhikari

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

REGULATOR MOOTS CROSS SUBSIDY!

The force of the truckers' lobby is well known-diesel prices are never marked to market; they are subsidised by the government and oil companies. Now, it appears, they have flexed their muscles in the insurance business as well. The Insurance Regulatory Development Authority (IRDA) has mooted a solution that will subsidise the third party insurance costs of truckers. Left to the market, the premia would have vaulted 270 per cent in some cases. The IRDA has moderated this by allowing a pooling mechanism for third party insurance business.

The insurers will participate in the pool in direct proportion to their overall general insurance premium and will also get a 10 per cent commission on their motor insurance business.

Whether it is pragmatism or a case of succumbing to political forces, the "soft" approach of the regulator surely does not augur well for its image.

-Shalini S. Dagar

TALK MORE, PAY LESS

In a move that may well result in a steep reduction in STD tariffs in the country, the government is considering resale of domestic long distance bandwidth.

Currently, domestic bandwidth is sold by operators to BPOs, ITEs companies and large corporations, who are the end-users. The government proposes to allow intermediary operators who will be able to sell down bandwidth to the same end-users. They can use the physical infrastructure laid by the long distance operators. So, how does this help reduce costs? Since marketing expenses are as high as 30 per cent of service cost, creating a second layer of marketers will help defray this cost better, argue experts.

So, how far is it away from reality? A high-powered government committee has reportedly submitted its report to the Prime Minister's Office, terming the move as essential. Hopefully, this should create the necessary momentum for expeditious policy making.

-Shaleen Agrawal

FUELLING FREEDOM

Private airports are good for consumers-one can expect quality service. They will also be good for airline companies that spend up to 30 per cent of their bills on fuel. The government is planning to allow free competition amongst Aviation Turbine Fuel (ATF) retailers in private airports. Consequently, private operators will decide the supplier of ATF in their respective airports. Currently, public sector oil companies enjoy a virtual monopoly on selling ATF to airlines as they alone have the right to set up oil dumps in airports.

Competition will surely help, especially given the high crude oil prices.

-Amit Mukherjee

NHPC IN EQUITY MART

Rarely do companies on state-support head for the market. Early this month, the Cabinet approved an Initial Public Offering (IPO) by the state-owned National Hydro-electric Power Corporation (NHPC).

It is learnt that dilution in equity will be up to 24 per cent of NHPC's total capital. Listing the company on the exchange will surely make the company answerable to a larger audience, especially given its past performance.

-Shalini S. Dagar

Loading: Cargo business

CARGO FDI TO EASE

This is one baggage the country could have more of. Cargo. The Civil Aviation Ministry is planning to ease the foreign investment limit in the aviation sector from the prevailing 49 per cent to 74 per cent.

Civil Aviation Minister Praful Patel is planning to extend liberalisation to sea planes as well. Loosening the FDI belt will help for sure.

-Amit Mukherjee