Business standard updates 23-4-2012

Builders, cementmakers sparahead of CCI order

.<DILASHASETH New Delhi, 22 April Builders and cement companies are at war over the rising price of cement. A verdict is expected next week from the Competition Commission of India (CCI), on a charge made by real estate dealers, of cartelisation among cement companies. Builders say cement makers have increased prices by 50 per cent in the past six months and as much as 20 per cent after the Union Budget, blaming collusion for the supply problem. Cement companies say the complaint is “ridiculous”, as the prices are controlled by factors like demand and supply, railway freight rates and excise duty. A 50-kg bag of cement used to cost ~170. It went up to ~ 250 before the Budget and costs ~300 now, said R K Arora, chairman, Supertech. “Excise duty went up by two percentage points but cement prices have gone up by at least 20 per cent. Therefore, we are including a cost escalation clause in our buyer-builder agreement due to uncertainty in the prices,” he said. Shree Cement managing director (MD) H M Bangur told Business Standard cement prices in the National Capital Region were not more than ~260-270 per bag and there was no cartelisation. “Cement is a commodity and all commodity prices move in tandem. You can’t allege (from this) that there is cartelisation,” he said. Said Vinod Juneja, MD of Binani Cement: “Cement accounts for just three to four per cent of the cost of the whole project. What about the remaining 97 per cent?”. He denied manufacturers were holding any stocks in godowns, but admitted the increase in rail freight rates and general inflation had impacted the prices a bit. The National Real Estate Development Council had in November moved CCI, alleging an unduly steep increase in cement prices. The installed capacity of large cement plants had increased from 223 million tonnes in 2009-10 to 234 mt in 2010-11. However, capacity utilisation in 2010-11 declined to 76 per cent from 83 per cent in 2009-10, it had said. “Our production is in full capacity, of 85 to 90 per cent”, said the Binani Cement MD. According to him, the cement prices in Delhi and NCR are not more than ~260-270 a bag right now. An Ambuja Cement spokesperson told this newspaper cement production was acyclical business. During the monsoon in June-July, as construction falls, demand for cement also falls, thereby cooling prices, too. October to December is the peak season for construction and prices go up, he said. Manoj Gaur, CMD, Gaursons, aNoida-based developer, said there were just 12 to 14 major companies in the cement industry, and they were able to increase prices by 50-60 per cent in a short span of time. “They shut their plants in the name of maintenance, artificially reducing supply of cement, impacting prices”, he charged. Nayan Raheja, director, Raheja Developers, alleged cement prices were ~350 per bag right now from ~180-200 about six months before. The 14 manufacturers, he said, had stopped all supplies for a week in November. Bangur of Shree Cement countered that there were 70 cement companies, not 12 to 14 as claimed by the developers. “Second, in the last 30 years that I am in the industry, there has been no stoppage of supply even for a single day,” he said. Competition watchdog to soon rule on cartelisation charge by realty sector which claims more evidence; other side hotly denies it The National Real Estate DevelopmentCouncil had in November moved CCI, alleging an undulysteep increase in cementprices. BS PHOTO

Central registry to include all property deals DILASHASETH New Delhi, 22 April At a time when the real estate sector is struggling with issues related to transparency, the scope of the existing central registry on properties is being expanded by including those with no attached loans. Currently, only loan-linked properties are being put in the registry. A pilot project for registering all properties would begin before March 2013, the National Housing Bank’s Chairman R V Verma told Business Standard . It will start with states already having an e-registry platform. The Reserve Bank of India, in a notification on May 19, 2011, had announced operation of a central registry, meant to have details of all properties against which loans had been taken. A Central Electronic Registry of Securitisation Asset Reconstruction (Cersai) was incorporated to operate and maintain it. “We had meetings with the governments of Uttar Pradesh, Maharashtra and West Bengal early this week to begin with,” said Verma, who is also the central registrar and heads Cersai. This is basically to go beyond properties on which loans had been taken. A task force is being set up to launch a pilot project to bring in all properties under a central registry. Andhra Pradesh or Karnataka are likely to be part of this. “It will depend on the preparedness of the state,” said Verma. Within a year of operation, the central registry now has four million transactions recorded. Of these, 2.9 million are of those on which loans had been taken before March 2011 and 1.1 million are of those where loans were taken after March 2011. The information is presently available only to institutions but would soon be open to the public. “We are working on a mechanism for that,” Verma said. Meanwhile, the finance ministry has given an extension of three months to banks and housing finance companies for providing information and details of subsisting mortgage. Earlier, the deadline was March 31 and has been extended to June 30. At present, the central registry has details of encumbered properties and land against which a loan has been taken, with only the loan values recorded. However, “by the next six months or so, the value of the property or land will be recorded by the registry”, said Verma. The move is expected to help state governments, lender communities and also the borrower. Once the information is in the public domain, realty frauds are expected to be checked. A boy plays on a swing suspended from a tree in front of a residential estate under construction in Kolkata. PHOTO:REUTERS ‘GST would be single biggest reform after 1991’ Industry has been talking about the negative impact on investment sentiment of the Union budget proposals on retrospective amendments to the Income Tax Act and the General AntiAvoidance Rule (GAAR). Finance Minister Pranab Mukherjee has so far only said he may put some safeguards on GAAR. Is there a kind of standoff between the government and industry on these issues? Idont think so. We have made it very clear to the government that aside from any effect on taxation, these proposals have created a negative perception about India and that is not good. Overall, we need more investment, higher growth. In our (CII) annual general meeting, where finance ministry officials also came, they said theyd understood some of the problems. I am hoping the issues will get resolved. Does resolving mean the proposals should be taken out? Retrospective is bad. GAAR has to be carefully applied. If there is a clear tax evasion, something should be done. Avoidance is a difficult term to define. There are GAAR provisions in many countries; they must be sensible provisions. The GAAR provisions will create a lot of difficulties for investments in India. What about the counterquestion posed to industry -do you want India to be a notaxation country or a tax haven? There can be zero tax situations if these have been provided for. If you have atax treaty with a country and because of that a lot of investment comes in and you benefit from this, it is wrong to complain that it was tax exemption. That is the kind of incentive that brings the investment. Past CII president Rahul Bajaj has spoken of draconian powers to tax officials. How do you view those comments? Those (powers) are totally unacceptable. It is against the Constitution, to my mind. We have taken it up with the finance minister. What reforms did you emphasise at your meeting with Prime Minister Manmohan Singh on Wednesday? Various kinds. The most important reform, which will have a very strong positive effect on growth and the macroeconomic situation, is the Goods and Services Tax (GST). GST is the biggest single reform after 1991. It can add 1.5 per cent to GDP. States are not coming on board as they feel the finance ministry is not fulfilling its commitment on compensation to them for cut in Central Sales Tax (CST) rates. Will CII take up this issue? We have communicated some of the issues that states have. In fact, the meeting the finance minister had with the empowered committee of state finance ministers went very well and we understand GST is on track. can be done. It is a question of how you tackle it. Cutting subsidies will also mean deregulating diesel and effectively deregulating petrol as well, which will also have inflationary impact. So, there are always pros and ADI GODREJ ,chairman of the Godrej Group, recently took charge as president of the Confederation of Indian Industry (CII). In an interview with INDIVJALDHASMANA &SHAIKH ZOAIB SALEEM ,he says he hopes the government would address industrys apprehensions over some of the Budget taxation proposals on stalled reforms and so on. Edited excerpts: ADI GODREJ Chairman, Godrej Group, & President, CII LEGAL DIGEST Insurance company loses case The Supreme Court last week dismissed the appeal of United India Insurance Co Ltd, which had argued that a cheque for renewal of premium for a motor vehicle insurance had bounced and therefore it was not liable to pay compensation for a fatal road accident. In this case, United India vs Laxmamma, the head of a family died in a bus accident on May 11. The owner of the bus obtained policy of insurance for a period from April 16 to April 15 the next year. The premium was paid through cheque on April 14. The accident occurred on May 11. It was only thereafter that the insurance company cancelled the policy by letter dated May 13 on the ground of dishonor of cheque. This letter was received by the owner on May 21. The Supreme Court stated that the cancellation of the policy having been done by the insurance company after the accident, the insurer became liable to satisfy the award of the motor accident claims tribunal, which was upheld by the Karnataka high court. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Fine formisuse of cheque bouncing The Supreme Court imposed a fine of ~20,000 in acheque bounce case for “abuse of process of court” in the case, Karuna Singh vs state of Delhi. There were allegations of criminal charges between two women and the trial was pending in the magistrate’s court. Meanwhile, Karuna Singh was aggrieved by the conduct of the trial and moved the Delhi high court and the Supreme Court, though alternative remedies were available and were being pursued in the high court. “Such behaviour cannot be countenanced,” the judgments said, and added that “the effort seems to be to browbeat the opposite party or the magistrate dealing with the Negotiable Instruments Act so that the proceedings progress as per her desire.” >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Bankmanagerreinstated The Supreme Court has ordered the reinstatement of a bank officer with back wages amounting to ~10 lakh as he was terminated without following the rules. The appellate authority did not give reasons for his dismissal. In the case, Baroda Uttar Pradesh Gramin Bank vs Ashok Kumar,the manager was accused of sanctioning loans to people outside his command area and operating a fictitious account. However, the Allahabad high court found that the order was without reasons and against the undertaking of the bank that he will be given a lighter punishment. It also ordered payment of 50 per cent wages for the period the manager was out of job. The bank appealed to the Supreme Court. It modified the order regarding the back wages, as the amount was high, and fixed ~10 lakh. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Appointmentof arbitratorsetaside The Supreme Court has allowed the appeal of Minerals & Metals Trading Corporation (MMTC) and set aside the judgment of the Delhi high court appointing a former judge of the court as arbitrator in the corporation’s dispute with Ocean Knigh Maritime Co Ltd. By a charter party agreement, the shipping company let its vessel MV Ocean Knight to MMTC for carriage of a cargo of rock phosphate in bulk. Disputes arose between the parties in respect of demurrage charges. More disputes arose over the appointment of arbitrators and the delayed arbitration. The high court therefore chose an arbitrator. The Supreme Court stated that the application for appointment of arbitrator by the shipping company was beyond the period of limitation and the high court erred in appointing the arbitrator. Thus the dispute which started in 1989 has come to an end. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Claim of SICAshield rejected The Delhi high court has dismissed the appeal of Haryana Steel & Alloys Ltd in its dispute with Transport Corporation of India over payment of dues ordered by a district court of Delhi. The main grievance raised by the Haryana firm was that the recovery suit filed by TCI was barred by Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) as no permission was sought under Section 22(1) of the Act before filing the recovery suit. It was also its case that it was registered with the BIFR. The high court observed that no material was placed on record by the company to show that the amount in respect of which TCI laid its claim in the recovery suit was reflected in the scheme laid before the BIFR. There was a mere contention that a prohibition under Section 22 would come into operation immediately once an inquiry under Section 16 is pending before the board or an appeal is pending relating to the said inquiry before the appellate authority. The high court rejected the argument and asked the company to pay the amount as ordered by the trial court. MJ ANTONY THINKSTOCK THINKSTOCK A platform to conduct online interviews; companies explore option MSARASWATHY Mumbai, 22 April When Bangalore-based startup Wooqer was relatively new to the business, it faced a big challenge. Talent was aplenty, but the time required to sort the talent was not adequate. The three founders of the company, Harish Reddy, Vishal Purohit and Pavitra Saxena, also could not always be together to conduct the lengthy interview processes. Moreover, they did not want young recruiters of the organisation to sift through people for senior management positions. Getting candidates from abroad to come to Bangalore for interviews did not seem feasible. That is when they stumbled upon the idea of conducting online interviews. Having a ready platform at Wooqer worked to their advantage, as they were able to design the process on their own platform. Wooqer is a platform that offers a searchable interface for consumers to find best deals and offers analytics to brand managers for various products. It also provides a do-it-yourself collaboration platform to users to mentor/monitor/measure themselves and activities with the scope. The Wooqer platform is used to sift candidates and interviews are conducted online. The success of this strategy can be gauged from the fact that big corporates including a leading Indian retail firm and a major business consultancy are in discussions with the start-up to get this human resources (HR) strategy implemented within their company using this platform. “This is a time-saving exercise for people. Organisations in the business consulting field, who recruit in bulk, can not only save thousands of hours but qualitative analysis is also possible though this platform,” said Vishal Purohit, founder and CEO, Wooqer. Since it is done online, overseas candidates can also take part. Purohit explained big corporates can benefit from this factor. Moreover, HR tends to ignore several aspects of a candidate’s profile, which if viewed online, may be more effective and user-friendly, according to him. He said there was also additional time available for a candidate to research and come back better prepared for an interview, through this process. Whenever they come up with a new profile for hiring, the person responsible mentions a process in the platform, where he outlines the core common attributes required for the given profile. A standard set of 12 such questions is then fixed, based on the set company point of view. Here, eight such questions require video responses. If they like a profile, they assign the process to an individual. The prospective candidate gets a notification, giving details of what he needs to do. Creation takes six to seven minutes and the assignment takes a few seconds. A fall-through rate of 50 per cent is seen, where 50 per cent candidates do not respond beyond this point, similar to offline recruitment processes. Then, by the remaining 50 per cent candidates, video responses are given by taking a video which is possible by using a phone or webcam, which is then uploaded on to the Wooqer platform. Written responses are done in a document which is also uploaded as an attachment. The candidate also gets to see what comments have been given to his responses by all the three interviewers. They take their own time looking at the profiles and put their comments on that. If there is a difference of opinion, the videos are viewed together and a consensus is arrived. This is followed by a final personal interview. If a candidate has passed through the video interview, then there is a 90 per cent chance of being recruited. The attempt here is to minimise the number of sessions needed with the candidates during the hiring process. “Our platform has enabled all these possibilities. Out of 150 candidates, 11 people have been recruited, which is similar to the figures offline. Around 75 per cent of the hiring in the last few months has been done through this technique. Since the start-up is based on technology, the aim is to see how comfortable candidates are with the platform,” added Purohit. On an average, he estimates, 25-30 hours of time is saved in each hiring process. Wooqer had recently also created a process within the platform to allow prospective candidates to get into a networking environment. Here, people can share their experiences to make it a knowledge pool for other each other and future candidates. ‘Out of 150 candidates, 11 people have been recruited, which is similar to the offline figures’ “This is a time-saving exercise. Business consulting organisations, which recruit in bulk, can not onlysave thousands of hours but qualitative analysis is also possible though this platform" VISHALPUROHIT Founder and CEO, Wooqer