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FEB. 11, 2007
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Taxing Times
The phase-out of central sales tax is yet another move towards ushering in the national goods and services tax (GST). The compensation to the states, in lieu of CST phase-out, will include revenue proceeds from 33 services currently being taxed by the Centre as well as 44 new services of an intra-state nature that will be traded by the states. However, VAT is the way forward, though much needs to be done to iron out the anomalies in the current VAT regime.

India, Ahoy!
Indian investments overseas are growing and how. For instance, total Indian investment in Latin America and the Caribbean has topped $3 billion (Rs 13,500 crore) so far. The latest investment is by ONGC Videsh, which acquired an oilfield in Colombia for $425 million (Rs 1,912.5 crore). Earlier, ONGC bought an offshore oilfield in Brazil for $410 million (Rs 1,845 crore).
More Net Specials
Business Today,  January 28, 2007
The Party's On, So Far
The initial numbers for the third quarter don't disappoint.

The first flush of quarterly results rarely disappoint, but the surge in revenues and profits registered by 265 companies (till January 19) for the three months between October and December came as a pleasant surprise for market watchers. The top line surged 41 per cent and net profits spurted by 67 per cent. In comparison with the previous quarter, the increase is 2 per cent in net sales and 6 per cent in net profits. Says Avinash Gorakshakar, Head of Research (PCG), Emkay Shares and Stock Brokers: "The first batch of results has been good across sectors."

Reliance Industries was clearly the surprise. For the third quarter ended December 31, 2006, the company posted a 58 per cent rise in net profit to Rs 2,799 crore (Rs 1,776 crore), on a 46 per cent jump in net sales to Rs 26,472 crore (Rs 18,168 crore). Impressive refining margins have been the reason for the jump in bottom line growth for Reliance Industries. Refining margins for the company improved to $11.7 per barrel from $9.1 per barrel even as petrochemical margins dipped.

Among the other major companies, Sterlite Industries, UltraTech Cement, Wipro, TCS, HDFC Bank and Siemens continued their impressive run. It remains to be seen whether the giants of the old economy-Tata Steel, Tata Motors, Hindalco et al-can maintain the blistering pace.

Battle In The Skies
Air Deccan claws back to #2 slot. Can it stay there?

Air Deccan: It's still losing money, but it is gaining passengers
Air Deccan has booked itself into the second spot again. It was for the second time in 2006 that Air Deccan managed to pip government-owned Indian to become the country's second largest domestic carrier. (See Following the Leader). Air Deccan's market share for the crucial festive season month of November is at 19.7, which is marginally ahead of Indian which is at 19.1. Jet Airways, meanwhile, continues to remain the country's largest airline.

An upbeat Captain G.R. Gopinath, Managing Director, Deccan Aviation, told BT that Air Deccan's new position in the charts was just the beginning of a "tectonic paradigm shift" in the Indian domestic aviation industry. "We are flying on routes that nobody else is. Our low-cost model has removed the price barrier to flying. The way we are going we hope to displace Jet, and be number one by 2008," says Gopinath. Industry sources reveal that Air Deccan has maintained its slim lead on Indian in December 2006 also. The budget carrier occupied the #2 slot, for the first time, in June 2006 when it showed a market share of 21.2 per cent as compared to Indian's at 20.8 per cent.

Some like Kapil Kaul, CEO of Centre for Asia Pacific Aviation (CAPA) for the Indian subcontinent and West Asia, believe that Air Deccan's recent performance can be attributed to the fleet underutilisation of Indian (formerly Indian Airlines). "If you look behind the numbers, it is clear that it's Indian's fleet underutilisation which has caused the problem. Otherwise, there is no way in which an airline like Indian with 73-odd aircraft can lag behind an airline with 40-odd aircraft," says Kaul.

It's a fact that's not lost on Captain Gopinath. "An advantage of being a private airline is, of course, efficiency. We have faster turnarounds as a result of which we fly an aircraft more than Indian. We have 68 crew per aircraft as compared to 420 in Indian," quips Gopinath. Air Deccan's move up the rankings is also representative of a larger trend where low-cost carriers are gaining market over their full service competitors. According to CAPA, the market share of low-cost carriers will reach 70 per cent by 2010. Of course, now all Air Deccan has to do is to maintain its #2 position over the medium term.

Problem Of Plenty
Few are celebrating the lifting of the ban on sugar exports.

Bountiful sugar supply: But exports are another story
The union cabinet's recent decision to reverse a seven-month-old ban on sugar exports has attracted, at best, a lukewarm response from domestic sugar mill owners and international markets alike. This, when India is expected to have a record sugar output of around 23 million tonnes in the new season (up from 19.3 million tonnes in the previous season), thereby leaving the country, the world's second largest producer of the sweetener, with an exportable surplus of 4 million tonnes.

Exports, say mill owners, are not viable at the prevailing international rates of $320-330 (Rs 14,400-14,850) a tonne. For one, they point out, a global bumper harvest has ensured that the international market has a plentiful supply of sugar. Moreover, Pakistan, the largest buyer of Indian sugar (it had bought 650,000 tonnes of the 1.1 million tonnes exported till July last year; exports were banned after that), is no longer in the market, following its own bumper harvest. Even Bangladesh, another significant importer, is shoring up its own processing facilities. No wonder, the London futures market was cold to this announcement, and settled at a 13-month low. Experts, however, say that India could tap non-traditional markets such as Yemen, Sri Lanka, Thailand and Africa.

"This is certainly a welcome step, but to make exports viable, the government should subsidise inland transport and ocean freight," says Vinay Kumar, Managing Director, National Federation of Cooperative Sugar Mills. Privately, however, several players contend that not all is lost. "With Brazilian exports not hitting the global market before April this year, India can still hope to export at least up to 2.5 million tonnes, including the export obligation of 1 million tonnes," says an industry veteran on condition of anonymity. India, say experts, would also be helped by the fact that the European Union would post a shortfall in export surplus of 4 million tonnes.