October 2002

DEPRECIATION RATES FOR THE FINANCIAL YEAR 2002-03 AMENDED

New Delhi: Asvina 12, 1924
October 04, 2002

The Central Government have issued a notification on 27th September, 2002 substituting Appendix-I to the Income-tax Rules, 1962 relating to rates at which depreciation is admissible. As per the substituted Appendix, a rate of 80% has been prescribed in case of certain air pollution control equipment, water pollution control equipment, solid waste control equipment, energy saving devices, renewable energy devices, etc. which are at present eligible for 100% depreciation.

Books other than annual publications used by assessees carrying on profession shall now depreciate at the rate of 60% as against the present rate of 100% whereas books owned by assessees carrying on the business of running lending libraries would continue to depreciate at 100%.

Buildings have been classified as buildings mainly used for residential purposes excluding hotels and boarding houses (rate 5%) and all other buildings (10%) as against the present classification of buildings used for residential and mainly for commercial purposes. The existing rate of 20% available to buildings used as hotels and buildings with dwelling units each with a plinth area not exceeding 80 square meters will no longer be available.

A single rate of 15% for depreciation of furniture and fittings as against the present rates of 10% and 15%. For computers including computer software, a rate of 60% depreciation has been prescribed.

Another category under the heading "Buildings" has been added so as to include therein buildings which are acquired by the assessee on or after the 1st September, 2002 and in which machinery and plant forming part of water supply project or water treatment system are installed and which is put to use for the purpose of business of providing infrastructure facility as envisaged in the provisions of section 80-IA(4)(i). These assets shall depreciate at the rate of 100%. Further, a rate of 100% depreciation has been prescribed for machinery and plant acquired and installed on or after 1st September, 2002 in a water supply project or a water treatment system and which is put to use for the purpose of business of providing infrastructure facility as envisaged in the provisions of section 80-IA(4)(i). The concessions have been provided with a view to encourage private initiatives for setting up of plants for desalinization/demineralization and purification of water and supply of purified water to members of public.

A copy of the notification as well as the substituted Appendix-I is available on the web-site of the Ministry of Finance (finmin.nic.in) located under CBDT in the Department of Revenue.

NK/RS/BY/BTP/GN

CLARIFICATION ON DEPOSITS INTO INVESTOR EDUCATION AND PROTECTION FUND

New Delhi Asvina 15, 1924
October 7, 2002

It has come to the notice of the Government that some companies are interpreting the requirements of Section 205-C on Investor Education and Protection Fund (IEPF) and the rules framed there under differently and the purpose and result of the provision were not followed in letter and spirit. The interpretations gave scope for reckoning the period of seven years from the date on which the provisions of Section 205-C came into force. Hence the Department of Company Affairs (DCA) issued a clarification by way of Circular No. 22 of 2002 dated 16th September, 2002.

The circular clarified that all amounts remaining unpaid for a period of 7 years in "Unpaid Dividend Account" on or after 31.10.1995, should be transferred to Investor Education and Protection Fund forthwith, unless already transferred. It is learnt that several companies, including some very large companies have started depositing such due amounts to the IEPF.

Government expects all companies and banks would adhere to the correct legal position given in the circular and transfer all remaining unpaid and unclaimed amounts to the following accounts to IEPF in the DCA. DCA also plans to undertake survey of companies which have failed to adhere to the circular in co-ordination with Indian Bankers Association and Reserve Bank of India and take strict penal action as per law against such defaulting companies.

The following amounts that remained unclaimed or unpaid as on 30.10.1991, irrespective of the number of years they remained unclaimed or unpaid in the following accounts should also be forthwith transferred to the aforesaid Fund:-

(a) The application moneys received by companies for allotment of any securities and due for refund;
(b) Matured deposits with companies;
(c) Matured debentures with companies;
(d) The interest accrued on the amounts referred to in clauses (a) to (c)

Investor Education and Protection Fund (IEPF) was established on 1st October, 2001 pursuant to the provisions of Section 205-C of the Companies Act, 1956 which came into force on 31st October, 1998. Necessary rules for operationalising the Fund were also notified.

NK/RS/BY/AMA -071002 IEPF-DCA

WORLD BANK CREDIT OF RS.531 CRORE FOR ANDHRA COMMUNITY FOREST MANAGEMENT PROJECT

New Delhi: Asvina 16, 1924
October 8, 2002

Andhra Pradesh Community Forest Management Project was signed today with World Bank for an IDA Credit of US $ 108.0 m (equivalent to Rs.531.36 crores). The total cost of the Project is US $ 127.12 m. The project was signed by Mr. Michael Carter, Country Director on behalf of the World Bank and Dr. Adarsh Kishore, Additional Secretary, Ministry of Finance on behalf of the Government of India.

The Project will be implemented in 14 districts with high poverty incidence in the forested northern, coastal and southern belts with a total of 3.86 million hectares of forest land.

The Project is a sequel to Andhra Pradesh Forestry Project which was approved in February, 1994 for an IDA credit of US $ 77.4 m. The Project closed as scheduled on September 30, 2000 and the amount was fully disbursed. The present Project will help in reducing rural poverty through improved forest management with community participation. The Project is expected to improve the welfare of participating households in terms of cash incomes and in availability of forest products including Non-timber Forest Products and firewood.

NK/RS/BY/BTP/GN

NEW ONE RUPEE COIN IN COMMEMORATION OF BIRTH CENTENARY OF LOK NAYAK JAYA PRAKASH NARAYAN

New Delhi: Asvina 18, 1924
October 10, 2002

The Vice President of India Shri Bhairon Singh Shekhawat will release a new one Rupee coin in commemoration of Birth Centenary of Lok Nayak Jaya Prakash Narayan tomorrow at National Archives of India in New Delhi.

The new coin will be circular in shape with outside diameter of 25 millimeters and 4.85 grammes in weight. Its metal composition will be 82% Iron and 18% Chromium.

The obverse of the coin shall bear the Lion Capitol of Ashoka Pillar in the center with the legend "lR;eso t;rs" inscribed below, flanked on the left upper periphery with the word "Hkkjr" in Hindi and on the right upper periphery flanked with the word "INDIA" in English. It shall also bear the denominational value "1" in International Numerals flanked on the left lower periphery with the word "#i;k" in Hindi and right lower periphery with the word "RUPEE" in English.

The reverse of the coin shall bear the portrait of "LOK NAYAK JAYA PRAKASH NARAYAN" flanked on the left upper periphery with the words "yksduk;d t;izdk'k ukjk;.k" in Hindi and on the right upper periphery "LOK NAYAK JAYA PRAKSH NARAYAN" in English and flanked on the left lower periphery with the word "tUe'krh" in Hindi and on the right lower periphery with the word "Centenary" in English. The figure "2002" shall be shown below the portrait in International Numerals.

This coin is a legal tender as provided in the Coinage Act, 1906. The existing One Rupee Coins in circulation shall also continue to be legal tenders.

NK/RS/BY/BTP/GN

REVENUE COLLECTION FOR THE PERIOD ENDING SEPTEMBER 2002

New Delhi Asvina 19, 1924
October 11, 2002

The following are the revenue collection figures for the period ending September 2002:-

(i) Aggregate Collection

As per provisional estimates, total collection of all taxes, including both direct and indirect taxes, during the current year upto September 2002 is Rs. 90647.71 crore as compared to Rs. 77479.54 crore during the corresponding period last year, registering an increase of 17%.

(ii) Direct Taxes

The collection of income tax during the period ending September 2002 is Rs. 14341.03 crore as compared to Rs. 12885 crore during the corresponding period last year, registering an increase of 11.30%. Collection of corporation tax during the period ending September 2002 is Rs. 15264.28 crore as compared to Rs. 11487.96 crore during the corresponding period last year, registering an increase of 32.87%.

Total collection of direct taxes during the period ending September 2002 is Rs. 29756.74 crore, as against Rs. 24550.21 crore during the corresponding period last year, registering an increase of 21.21%.

(iii) Indirect Taxes

The collection of excise duty during the period ending September 2002 is Rs. 37147.20 crore as compared to Rs. 31365.79 crore during the corresponding period last year, registering an increase of 18.43%. Collection of customs duty upto September 2002 is Rs. 21344.07 crore as compared to Rs. 19581.43 crore during the corresponding period last year, registering an increase of 9%.

The total collection of indirect taxes during the period ending September 2002 is Rs. 60890.97 crore, as against Rs. 52929.33 crore during the corresponding period last year, registering an increase of 15.04%.

NK/RS/AMA - 111002 Revenue Collection

CENTRE AND STATES AGREE FOR TOUGH MEASURES TO CHECK DETERIORATING FISCAL SITUATION

New Delhi: Asvina 26, 1924
October 18, 2002

The Prime Minister, Shri Atal Behari Vajpayee today chaired a meeting of State Chief Ministers to evolve solutions to the critical fiscal situation faced by the states. The Union Finance Minister, Shri Jaswant Singh, the Deputy Chairman Planning Commission, Shri K.C. Pant, Chief Ministers and Finance Ministers of the state governments attended the meeting. The meeting which was the first of its kind, sought to address the problem of deteriorating public finances and arrive at a consensus on solutions.

The Prime Minister underlined the serious dimensions of the problem and stressed the need to take immediate corrective action. He reiterated that the country could not postpone the switch over to Value Added Taxes at the state level if the trend of decreasing tax collections was to be reversed.

The meeting discussed the issue of unsustainable level of State debt. The need to take corrective action immediately to contain both debt as well as guarantees was stressed by all participants. The need for the states to formulate state specific medium term fiscal reforms programmes aiming at fiscal sustainability and debt stability was underlined.

The debt swap scheme, which has been formulated to enable the states to swap high cost debt contracted in the past with lower interest bearing loans, was discussed in detail. While the scheme was appreciated on merits, certain reservations about implementing the scheme from the current financial year, on account of liquidity problems remains to be sorted out.

The meeting also focussed on the need to route funds released by central ministries to agencies in the states through the state governments. It was felt that this would create greater accountability. It was also discussed that a broader consensus was necessary before steps could be taken both by the Centre and the States relating to salaries and emoluments.

Many Chief Ministers voiced concern over the cash flow problems faced by the states resulting in overdrafts with the Reserve Bank of India. It was noted that the RBI has already constituted a committee to give its recommendations on this issue.

The meeting concluded with expectations that steps deemed necessary by the states and Centre to reverse the deteriorating trend of state finances would be taken. The state governments expressed their appreciation over the consensual approach adopted by the Centre and the states in attempting to arrive at these solutions.

NK/RS/BY/BTP/GN

INDUSTRIAL PRODUCTION GROWS BY 6.2% IN APRIL-AUGUST 2002

New Delhi: Asvina 30, 1924
October 22, 2002

The index for industrial production for the period April-August 2002 has registered an overall industrial growth at 4.9% which is higher than 2.4% in April-August 2001. This growth was contributed by the growth of 5.7% in August 2002 which was substantially higher than 3.0% recorded in August 2001.

Sectors which registered substantial growth are mining (6.2%), manufacturing (5.9%) and electricity 3.7% as compared with 0.6%, 3.3% and 2.7% respectively. The mining sector has posted a significant growth rate of 6.2% during August 2002 as compared with 0.6% in August 2001. Capital goods showed a significant improvement from a negative growth (-7.7%) in August 2001 to 10% in August 2002

NK/RS/BY/BTP/GN

Finance Minister's visit to BSE on 26th of October, 2002

The Finance and Company Affairs Minister visited the Bombay Stock Exchange(BSE) on the 26 October, 2002. Chairman, SEBI, Members of the BSE Board, Shri Kirit Somaiya, MP and others were present.

The issues of early implementation of the Kania Committee report and introduction of an Ordinance, if required, introduction of margin trading, allowing screen based trading in Government securities and sorting out the turnover tax issue of the brokers were raised in the meeting.

In his remarks the Finance Minister indicated a time-table for certain actions:

i) The Government wants to promote healthy competition in the capital market and not to facilitate monopoly. Demutualisation has to be viewed in the above context so that other exchanges also survive and provide efficient services.
ii) A decision on the Kania Committee report on demutualisation will be taken within four weeks.
iii) Policy decision on central listing authority will be taken within a month and actual setting up may be completed within this financial year.
iv) Screen based trading in Government securities to be allowed within this financial year.
v) SEBI and RBI shall work closely to facilitate T+1 settlement cycle even before 2004.
vi) SEBI Act shall be amended shortly.
vii) UTI Act shall be repealed shortly.
viii) A new web-site of Ministry of Finance will be launched on 29th October, 2002 in which the Naresh Chandra Committee report will also be placed for eliciting comments.
ix) Taskforce on direct taxes will also submit its report next month where again comments will be elicited.
x) The proposal from BSE office bearers regarding regular consultation and dialogue with Ministry of Finance was acceptable and that in the event of FM not being available this dialogue can be held with officials of the Ministry.

ANNUAL LICENSING POLICY FOR OPIUM FOR THE CROP YEAR 2002-03 ANNOUNCED
New Delhi: Kartika 6, 1924
October 28, 2002

The Government today announced the Annual Licensing Policy for opium for the crop year 2002-03. As per the policy, about 1 lakh cultivators in Madhya Pradesh, Rajasthan and Uttar Pradesh will be eligible for licence.

All cultivators who have tendered an average yield of opium of not less than 53 kg/hectare in the state of Madhya Pradesh and Rajasthan and an average yield of not less than 45 kg/hectare in Uttar Pradesh during the last crop year 2001-02 will be eligible for licence. Cultivators who have ploughed back their entire poppy cultivation during the crop year 2001-02 under the supervision of Government or whose appeal against refusal of licence has been allowed etc., will be eligible for licence. Cultivators who cultivated poppy in the crop year 2000-01, and were eligible for licence in 2001-02, but did not obtain the licence for any reason or who after having obtained the licence in the crop year 2001-02, did not cultivate poppy due to any reason, would also be eligible. Cultivators who cultivated opium during the year 2001-02 in area lesser than the licensed area or in a plot of less than 10 ares or in more than 2 plots would be eligible for licence in the crop year 2002-03 provided they have tendered the opium in accordance with the Minimum Qualifying Yield (MQY) and fulfil other conditions of the Opium Licensing Policy 2001-02. The policy thus takes care of genuine cultivators who could not sow opium crop or sowed opium in lesser area or in more than two plots due to water problem.

The individual licensed area per cultivator would depend upon the yield of opium tendered by the cultivator in the previous crop year. Thus cultivators who have tendered opium upto the average yield of 60 Kg. per hectare would be allocated an individual licensed area of 10 ares, cultivators who have tendered opium between the average yield of 60 to 65 Kg. per hectare would get an individual licensed area of 15 ares and cultivators who have tendered opium above the average yield of 65 Kg. per hectare would get an individual licensed area of 20 ares.

The forewarning for MQY has been fixed as 53 Kg. per hectare for Madhya Pradesh and Rajasthan and 47 Kg. per hectare for Uttar Pradsh. The forewarning has been fixed with a view to containing any diversion of opium for illicit purposes.

A cultivator, who is granted an opium licence for the crop year 2002-03, but is unable to undertake cultivation for any valid reason (including shortage of water) and informs the Narcotics Commissioner well in time, will be eligible for licence in the next crop year, i.e., 2003-04.

It is also proposed to substantially raise the Opium Procurement Price, which has been last increased in the crop year 1999-2000, for the crop year 2002-03.

The annual Licensing Policy is framed at the beginning of the Opium Crop Year (October to September) every year and the Policy for the licence is decided by the Central government every year. The Policy provides for the eligibility criteria for grant of licence to individual cultivator, area to be licensed per cultivator, conditions relating to cultivation, Minimum Qualifying Yield for next year's licence, etc.

NK/RS/BY/BTP/GN

Restructuring of Unit Trust of India (UTI) and Repeal of the Unit Trust of India Act, 1963
New Delhi, the 28th October, 2002

The Cabinet Committee on Economic Affairs in its meeting held on 31st August, 2002 had decided to restructure the Unit Trust of India by splitting it into two parts, viz., UTI-1, comprising of US-64 and Assured Return Schemes, and UTI-2 comprising of the net asset value based schemes.

The Union Cabinet has today approved the repeal of the Unit Trust of India Act, 1963 through an Ordinance. The Ordinance will be replaced by a Bill, to be introduced in the ensuing session of Parliament. On repeal of the Act, from an appointed day which would be notified by the Government in the Gazette, the assets and liabilities of the UTI will vest into two entities.

US-64, Assured Return Schemes, the Special Unit Scheme - 1999 and the Development Reserve Fund will vest with the Central Government. These schemes and assets comprising UNIT-1 will be managed by a Government appointed Administrator, assisted by a team of Advisers. UNIT-1 will not launch any new scheme. As for Assured Return Schemes, the interest/dividend will be reset at lower levels, and some schemes considered for foreclosure, subject to, of course, SEBI Regulations. For managing the schemes that vest with the Central Government, the services and/or employees of the company can be used on such terms as may be decided mutually.

Thereafter, the NAV based schemes will be transferred to a company which is being set up jointly by a few public sector financial institutions/banks. It shall have a share capital of Rs. 10 crores and will be fully compliant with SEBI regulations. It shall be managed professionally. All the employees of UTI shall be treated as the employees of this company on the existing terms and conditions. The specified company shall subsequently be divested and the realization net of expenses transferred to the Central Government.

As announced earlier, the facility of redemption of US-64 at the committed prices will continue beyond May 2003.

Today's Cabinet decision operationalises the restructuring process of UTI. There is no bail out. By fencing in the liabilities of UTI, this restructuring would ensure that a permanent and final solution to UTI is now available.

SEBI ORDINANCE
Date: 28.10.2002

Recent experience of SEBI during episodes of market misconduct has revealed many limitations in the legal provisions of the SEBI Act. In addition, growing importance of the securities markets in the economy has placed new demands upon SEBI in terms of organisation structure and institutional capacity.

In response to these difficulties, and given the urgency of rapidly addressing these problems so as to obtain a vibrant capital market, today's Ordinance has been proposed.

The first element of this Ordinance is an organisational strengthening of SEBI. The SEBI Board will be expanded by raising the number of board members (including the chairman) from six to nine. At least three of them would be whole-time members, not counting the Chairman devoting themselves fully to policies and problems at SEBI.

Under the new provisions, all sums realised by SEBI by way of penalties or fines would go into the Consolidated Fund of India.

The major thrust of the Ordinance lies in strengthening the mechanisms of investigation and enforcement. As a consequence, SEBI will be better equipped in investigating and enforcing against market malpractice. The judicial mechanisms surrounding this enforcement process will also be strengthened.

The Ordinance involves modifying the SEBI Act to better clarify and define offences such as insider trading, fraudulent and manipulative trade practices, and market manipulation.

The Securities Appellate Tribunal (SAT) would be made a three member Tribunal. The Presiding Office of SAT would be a serving or retired judge of the Supreme Court or serving or retired Chief Justice of a High Court, to be appointed in consultation with the Chief Justice of the Supreme Court. It is proposed to empower SAT and courts to compound offences. In addition, appeals against SAT orders would lie before the Supreme Court on points of law.