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FEB. 11, 2007
 Cover Story
 BT Special
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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
Quota Chaos at IITs, IIMs
Global tech firms are now relocating top management functions to India.
The IITs, IIMs and AIIMS have always had a regimen they pride themselves on, and for good reason; they are, arguably, the toughest schools in the world to get into, and get out of, successfully. But if you are a prospective student, be prepared to jostle for room, literally, if you do make it past the exam; and don't blame the institutes for your woes. They have to implement the 27 per cent OBC quotas over the next three years. In order to ensure that there is no reduction in the number of general category seats, the government has mandated a 54 per cent increase in the total number of seats. All the IIMs will implement the increase in a phased manner: 6 per cent in the first year, 30 per cent in the second year and 18 per cent in the third. But six months before the admissions process for the next session starts, the Centre is yet to clear their proposals for creating new infrastructure. Result: most of these institutes do not have room to house the additional students.

Consider this: IIT-Delhi, which has an annual budget of Rs 110 crore and a combined student strength of 4,800, will see that number swell beyond 7,200 over the next three years. "We have no room to accommodate such numbers," says an institute official. "We're located in the middle of the city; increasing infrastructure (dormitories, canteens, classrooms, technical resources, recreational facilities, etc.) will require a capital expenditure of Rs 800 crore, but we haven't yet received any sanction from the government," he adds.

6 New Places On Wheels Planned
Gujarat Rakes It In
Bonanza Likely for Scientists
Guru aka Dhirubhai

IIM-A, which faces a similar predicament, has, in anticipation of such shortages, reportedly begun renting flats in its vicinity. "We are planning to construct new facilities, but that will take at least two years. So, in the short term, we have little choice but to go in for private accommodation," says an official.

"It will be a tight squeeze," says Anindya Sen, Dean, IIM-C, which will see the number of seats swell from 300 to 463 in three years. It has already earmarked an investment of Rs 50 crore from its own corpus to increase infrastructure.

Prakash G. Apte, Director, IIM-B, however, is confident that the increase will pose no major challenge. "Students of programmes such as executive education are not provided accommodation on campus anyway, so there shouldn't be an issue of over-crowding at IIM-B," he says. "We have enough spare capacity to house the additional students next year. Thereafter, we will build new hostel blocks on the campus itself."

IIT Powai, which occupies 500 acres of land and has a total on-campus student strength of 5,270, is considering setting up satellite campuses. "We're discussing proposals with the governments of Goa, Gujarat and Maharashtra," says its spokesperson.

Infrastructure woes aside, all institutes, without exception, are understaffed. "The present teacher-students ratio is 1:7; this may decline to 1:14. Is that the right approach (to higher education)?" laments Apte. HRD Ministry officials were unavailable for comment on the issues.

"IIM is a globally recognised brand and any controversy over something as simple as finding accommodation could affect its brand equity," says Kris Laxmikanth, CEO, The Headhunters, a Bangalore-based hr Consultancy.

The qualitative downgrading of India's finest institutes is obviously a small price to pay in the eyes of those who value their vote banks more.

Whither Cost Cutting

Some bureaucrats who continue to occupy office long after their tenures ended.
G. Madhavan, an IAS officer of the 1967 batch, retires as Haryana Chief Secretary on October 31, 2005, and joins as Chief Information Commissioner of the state the next day

Pratyush Sinha, an IAS officer of the 1969 batch, retires as Secretary, Department of Personnel and Training, in July 2006, and is made Central Vigilance Commissioner in September 2006

Labanyendu Mansingh, an IAS officer of the 1970 batch, retires as Secretary, Consumer Affairs, in November 2006, and emerges in January 2007 as the lead candidate for the post of Petroleum regulator

K. Padmanabhaiah, former Home Secretary, continues as the Centre's interlocutor with Naga rebels about nine years after he retired

This is not an exhaustive list

Prime minister Manmohan Singh may want his ministers to cut out wasteful expenditure. Finance Minister P. Chidambaram may want his colleagues to cut down flab in their ministries. But their exhortations are obviously falling on deaf ears. Want proof? Just look at the number of retired bureaucrats, policemen, military officers and judges who continue to hold official positions long after they have demitted regular office (see Babus Don't Retire).

"Scores of positions are 'created' for the continued employment of retired IAS officers. For example, a recently-retired Agriculture Secretary is tipped to become Chairperson of the National Rainfed Area Development Authority (NRADA)," says a retired bureaucrat on condition of anonymity. T.S. Krishnamurthy, former Chief Election Commissioner, believes that 25 per cent of the strength of the central government can easily be sheared. "Several commissions have advised the government against indiscriminate rehabilitation of former public servants. But no one is listening. The lure of public offices after retirement is compromising the character of public servants. And huge amounts of wasteful expenditure is being incurred on them," he says.

The P.C. Hota Committee on Civil Services Reforms says: "We received overwhelming evidence that the temptation of post-retirement assignments under government/statutory/constitutional authorities has made senior civil servants servile and pliable." T.S.R. Subramanian, former Cabinet Secretary, says there are any number of government bodies, tribunals and commissions that have no reason to exist. "Bodies like cat, BIFR, AAIFR have become self-perpetuating mechanisms. Commissions like the Liberhan panel (probing the Ayodhya episode) are still going strong after 13 years," he adds.

The irony couldn't be more stark. While retired mandarins continue to enjoy cushy sinecures-complete with bungalows, official cars and other bells and whistles of high office; it has been estimated that each of these retired officials costs the goverment a minimum of Rs 1 lakh a month-middle level bureaucrats complain of career stagnation and shortage of housing and other facilities. But does anyone care?


Hhe Indian railways continues to display its new market-savvy. Buoyed by demand for its super luxury Palace on Wheels, the Railways is all set to launch six more such trains, starting from September this year. The first train will ply from Bangalore and touch Mysore, Hassan, Hospet, Hubli, Humpi and Goa. Then, it is planning another Palace on Wheels for Rajasthan, with a route that's different from the one followed by the first. Other such trains are planned for tours of Punjab and the four southern states. The Railways is also planning another such train connecting India's top 10 tourist destinations. Since they are targeted mainly at foreign tourists, the dollar-denominated fares are a fairly steep $400 (Rs 18,000) per day for a week-long trip.

IRCTC (Indian Railway Catering and Tourism Corporation) is also considering a proposal by The Oberoi Group of Hotels to run and manage a third luxury tourist train for Rajasthan. "With a six-month waiting list for the Palace on Wheels, there is scope for more such trains," says P.K. Goel, MD, IRCTC.

Gujarat Rakes It In

It is raining investments in Gujarat and the Vibrant Gujarat Global Investors Summit 2007 merely confirmed that. The state has received investment commitments of Rs 4.5 lakh crore from some of the biggest names in Corporate India and importantly, the investments will be spread across a medley of sectors ranging from SEZs, textiles, engineering and energy. According to conservative estimates, a million jobs will be created in the process. Says Anil Ambani, Chairman, R-ADAG: "Gujarat is among the most exciting growth stories unfolding anywhere in India and perhaps even in the world." But the most telling comment came from Tata Group Chairman Ratan Tata. "You have to be stupid to not invest in Gujarat," he said.

Bonanza Likely for Scientists

It's now completely up to finance Minister P. Chidambaram to incentivise and motivate scientists working at government institutions and laboratories. Science & Technology Minister Kapil Sibal (left) has recommended that scientists who develop new technologies or products be granted a minimum of 30 per cent of the royalties that come from their commercialisation.

"This is necessary to encourage the commercialisation of genuine innovations. It will provide a fillip to Indian exports and domestic production and reward scientists," says Sibal, who proposes to bring in legislation similar to the Bayh-Dole Act of The Untied States to bring about this change. Will the fm play ball?


Ace filmmaker Mani Ratnam may turn blue in the face denying that his latest movie, Guru, is not based on the life of the late Reliance founder Dhirubhai Ambani, but the opening sequence leaves little to imagination. The movie opens with industrialist Gurukant Desai aka Gurubhai (sounds familiar?) taking a walk down memory lane, even as he waits for his company's shareholders' meeting to begin. The location: a cricket stadium in Mumbai that Dhirubhai Ambani himself used to hold annual general meetings in.

Even before its release on January 12, the movie generated a lot of heat about the plot closely following Ambani's life. The film industry and the corporate grapevine was abuzz with rumours that the late patriarch's elder son and Reliance Industries Chairman Mukesh Ambani had wanted a sneak preview of the movie before it hit the screens. Whether that happened or not is anybody's guess. Reliance officials declined to comment. However, Mukesh's estranged sibling and R-ADAG Chairman Anil Ambani, who owns Adlabs, may not have any great objection to the movie. In fact, many see Adlabs picking up the distribution rights of Guru for the Delhi, Punjab and Uttar Pradesh territories as his indifference to, if not approval for, the movie.