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This refers to your edit, ‘Change or perish’. The main reason for the subdued performance of the top IT companies is the slow recovery in the US. Our IT industry gets the lion’s share of business from the US. When the US grows at a healthy pace, our IT industry tends to do exceptionally well. The point that these companies are not aggressive on acquisitions is valid. These companies sit on huge piles of cash which drag the return ratio which in turn affects the valuations. These companies should pay 70 per cent of profits as dividends if they don’t have any plans for big ticket acquisitions. The sluggish performance of Infy in the past few years is because of obsession with high margins.
Our IT companies should expand their portfolio of services and change the way clients are serviced. History shows that the monetary up cycle in the US is a great period for our IT industry. We are on the cusp of a monetary up cycle, which should be good news.
CR Arun
Indian IT firms are reluctant to diversify despite huge cash reserves. Diversification assumes huge business importance on account of increased competition in making traditional applications software, which has rendered suppliers less creditworthy. Therefore it is imperative for firms to focus on emerging businesses like social media and analytics.
Vikram Sundaramurthy
Chennai
Abolish MAT
The IT department always treats taxpayers like they are tax evaders. Take the minimum alternate tax (MAT) which has become the biggest fear for foreign investors in India. Foreign portfolio investors (FPI) are afraid of India’s taxation department because of how they distrust taxpayers without rhyme or reason. As many as 68 FPIs have been asked to pay MAT, which is 20 per cent tax on long-term capital gains. Naturally foreign investors feel the Indian government is not trustworthy. Now even SEBI says the fear of taxes has rattled offshore investors; and the fear must be dispelled at the earliest.
According to press reports, the I-T department says 81 per cent of tax demand arrears are difficult to recover. The reason for non-recovery is no or inadequate assets to recover. How did this kind of situation arise? Either the tax defaulters are so clever that they have managed their funds in such a way that no assets exist in their names from such taxable income as claimed by the I -T department, or the demand of the I-T department is wrong. In any case, to win the confidence of foreign investors and also of Indian taxpayers, it is better to abolish MAT retrospectively or withdraw it.
Mahesh Kumar
New Delhi
Transforming Indian Railways
This refers to ‘Confused signals on Railways reform’ by Vivek Sahai (June 5). While the Bibek Debroy Committee has given valid reasons for the failure of running the Railways as a state-owned entity, it has fallen short of recommending corporatisation because “several pre-conditions are necessary for that to be possible”.
There is no reason why an essentially transport business spread all over the country should be run as a government department. It would have been better if the committee had addressed the pre-conditions to hive off the Railways as a separate business. Also, the proposed bifurcation of the Railways into infrastructure and operations would have to face conflict of interest and face-saving in case of accidents and maintenance delays.
YG Chouksey
Pune
Plain unfair
Some airlines levy a flat convenience fee for air tickets if booking is done using credit/debit cards. But this fee is charged based on the number of passengers and is exorbitant. For instance, at the rate of ₹300 per passenger as fee for using credit card the amount payable for three passengers will be ₹1,200; this is unjust and usurious. At most they may recover the cost. Further as airlines normally get fresh bookings against cancellations at the prevailing price, the huge cancellation fee they levy is also not justified. The authorities should bring in rules to curb these unfair practices.
M Raghuraman
Mumbai
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