Govt conjures up visions of policy consensus
FDI limit in bulk drugs may be raised to 74%
Phased schedule for governance code proposed
Rescue effort by institutions averts stock meltdow
Fresh move to clean up banking system
New tariff based on availability of power
Europe weighs dumping duty on polyester fibre
Project Uptech to update foundries

New Delhi, Jan 5 
India is getting ready with a Vision 2020 statement a la Malaysia to chalk out the path of socio-economic development for the country over the next two decades. This is expected to give the nation the benefit of stable developmental policies regardless of quick changes in government.

Prime minister Atal Behari Vajpayee has commissioned a steering committee to be headed by Planning Commission deputy chairman K.C. Pant and a nine-member central committee to be headed by leading economist and plan panel member S.P. Gupta to draw up the Vision statement.

The BJP government’s plan is to get all political parties and state governments to accept this and make this Vision document the guideline for policymaking for all governments in the decades to come. Several Asian countries have formulated such plans after Malaysia’s Prime Minister Mohammed Mahathir came up with a 20-year plan.

Even in India, Andhra Pradesh chief minister Chandrababu Naidu came up with a Vision 2020 statement with the help of McKinsey & Co a couple of years back.

State governments have already been asked to formulate their own Vision statements which will form part of the overall statement for the country and which will also act as a building block for economists working on the draft for the central government.

“We plan to formulate an overall Vision which will outline the socio-economic and environmental parameters we are hoping to achieve at the end of the two decades and a broad overview of the path to be taken,” said an economist who is being named as a member of the central committee.

Besides aiming at a high GDP growth rate of 8-9 per cent, the statement will also seek a double-digit export growth rate, over 80 per cent literacy rate, a lower birth rate, and a 70-plus life expectancy.

Sectoral plans for infrastructure, highways, water resources, environment, farm sector, financial and banking sectors, etc, will also be drawn up.

But the stress will be on state plans with the Central statement acting as a link between their goals and that of the whole nation.

“There has not been much perspective planning in the past at the state levels. Most of them have worked to merely solve everyday problems. We want them to start thinking where they want to be and make the national plan an aggregate of their vision,” sources said.

The nine five-year plans which were drawn up by the Planning Commission since 1951 have been imposed “from above” where the Centre would formulate a vision and then tell the states to tailor their plans accordingly.

State inputs were routinely called for by the Planning Commission but when it came to formulating the five-year plans, the commission would usually sit down and collate its own thoughts instead of letting the plan evolve from the grassroots.    

New Delhi, Jan 5 
The Union Cabinet is likely to take up a proposal to hike the foreign direct investment (FDI) limit in companies manufacturing bulk drugs from 51 per cent to 74 per cent.

The Cabinet note, which may be taken up tomorrow, has proposed 74 per cent FDI in bulk drugs, their intermediates and formulations. FDI of over 74 per cent will be allowed on a case-by-case basis in pharmaceutical companies specialising in areas where investment is not forthcoming.

Finance ministry officials, who vetted the proposal, said” “We will be looking to allow case by case proposals of over 74 per cent FDI in such particular areas as manufacture of bulk drugs from basic stages; bulk drugs produced by recombinant DNA technology or specific cell/tissue formulations.’’

For this purpose, the government will substitute the present provision of allowing up to 51 per cent FDI for one allowing 74 per cent FDI, enunciated in Para 22.4.1 and Para 22.4.2 of the Drug Policy, 1986.

This policy was earlier used to allow only minority foreign equity in bulk drug companies; however, a few years back, this was amended to allow majority holding of up to 51 per cent.

The latest changes are intended to make India a key destination for global pharmaceutical majors. “Pharmaceuticals has been selected as one of the sunrise areas where we wish to attract investments,’’ the officials said.

The proposals will act to the advantage of drug multinationals which have been trying to set up 100 per cent subsidiaries in the bulk drug business.

The government has been trying to open up the sector to greater competition from both domestic and foreign investors over the last decade. In 1995, the government reduced the number of drugs, under Drug Pricing Control Order, from 146 to 74.    

Mumbai, Jan 5 
The Kumar Mangalam Birla committee on corporate governance, set up by the Securities and Exchange Board of India (Sebi), has outlined an implementation schedule for its mandatory provisions, while insisting on the presence of a financial institution nominee on the board of a company only in the event of a loan default.

In its final report submitted today, the Birla panel has recommended that companies in the “A” group of the Bombay Stock Exchange (BSE) and in National Stock Exchange’s Nifty should adopt its provisions by March 31, 2001.

The companies in these two categories make up almost 85 per cent of the total market capitalisation of the stock markets.

Companies with a paid-up capital of Rs 10 crore and above or with net worth of Rs 25 crore should adopt the provisions latest by March 31, 2002; companies with paid-up capital between Rs 3 crore and Rs 10 crore should do so by March 31, 2003.

Sticking to its earlier stand, the panel said financial institutions (FIs) should have a presence on the board of a company only in the event of a loan default.

The panel, however, has recommended its provisions should be made immediately applicable on companies going in for initial public offers.

The panel discussed the role played by FIs and their nominated directors and decided these entities should appoint a representative on the board if there is a violation of a loan agreement.

Sebi officials maintained there have not been any significant changes in the final recommendations from those in the draft report.

The panel said directors nominated by FIs should be treated on par with other directors in terms of responsibilities, and the same set of laws must be made applicable to them.

It said financial institutions should build ‘China walls’ between their investment department and the divisions where their board nominees report on the performance of a company.    

Mumbai, Jan 5 
Indian stocks joined a global slump on Wednesday but a burst of local buying rescued Dalal Street from the brink of a massive crash that would have wiped out much of the gains recorded since the start of trading this new year.

The Bombay Stock Exchange (BSE) sensitive index (sensex) plunged a whopping 307 points over its overnight finish of 5491.01 to its intra-day trough of 5184.48. Earlier, it opened 226 points weaker at 5265.09, hit a high of 5464.35 before closing at 5357 in a roller-coaster session that ensured it lost only 134.01 over Tuesday’s finish.

The NSE recorded a volume of Rs 7, 137 crore, the highest since its inception. It also witnessed the highest number of deals at 6,51, 968.

Brokers said it was the triple whammy of a world-wide stock slump, a rash of speculative deals and the surprise imposition of anti-volatility margins by exchanges that caused today’s meltdown.

Events in the market appeared to confirm this theory as a stomach-churning session saw prices of pivotals take a tumble and recover smartly to cover part of the early losses. Economy stocks — traditionally not the best vehicles to ride out a crashing market — ultimately saved the day for most investors who could have left with large holes in their wallets made thick by the bull run of the past few days.

The roller-coaster movements on the stock market was mainly the result of heavy buy-sell orders, selective purchases by domestic institutions and operators riding piggy back on these big-ticket deals.

“Had it not been for the dramatic turnaround by heavy-weighted cyclicals and others like aluminium giant Hindalco, MTNL, Reliance, Mahindra & Mahindra and ITC, the sensex would have been clobbered,” a dealer affiliated to leading mutual fund said. Reliance increased by Rs 13 to Rs 285.50, M&M by 35.20 to 525, MTNL by Rs 17.95 to Rs 243, Hindalco by Rs 71.95 to Rs 971.95 and ITC by Rs 17.10 to Rs 730.

The decline followed Tuesday’s sharp losses on global bourses like the New York Stock Exchange, the Nasdaq, Hong Kong’s Hang Seng index and the London Footsie after a roaring new-year run.

Foreign institutional investors (FIIs), many of whom were expected to join work only later today after an extended year-end break, are expected to pour in more cash once they find low-priced, quality Indian stocks a good bargain compared with similar picks in south-east Asia or the far east. This has given local operators hope that FIIs will swivel their focus to India when they make their major fund allocations next week.

Earlier, the shine faded off the scrip of infotech stars like Infosys technologies and NIIT. Other software scrips also met with strong resistance and lost heavily on selling triggered by a sudden crash in the technology-heavy Nasdaq composite index in New York on Tuesday. As a result, Satyam Computers slipped by Rs 124.85 to Rs 2440, Pentafour by Rs 124.65 to Rs 1433.60, NIIT by Rs 285.65 to Rs 3285.35 and Infosys by Rs 1,352.80 to Rs 15,557.40.

Telecom major Mahanagar Telephone Nigam (MTNL) was in the spotlight as a result of heavy purchases by a few foreign funds. Inexplicably, the Unit Trust of India (UTI) has been a major seller at the counter.

Of the 16 scrips that notched up gains in the specified group, Indian Shaving, Sterlite, Hindalco and MTNL hit their upper-end price bands, 122 shares suffered sharp losses and nine were locked in their lower-end circuit filters.

S B International

The Calcutta Stock Exchange has decided to relax the 8 per cent circuit-filter bands on the SB International scrip only for Friday after demands from shareholders.    

New Delhi, Jan 5 
Union finance minister Yashwant Sinha will meet chiefs of banks early next week to discuss issues such as non-performing assets (NPAs), corporate governance in banks and voluntary retirement scheme (VRS) for bank employees.

Sources in the ministry said this meeting is expected to thrash out all the problems faced by the banking industry to help clean up the system and make it more efficient and competitive.

The chiefs will also discuss loans given to the priority sector such as agriculture, small rural and urban borrowers and small-scale and tiny industrial units. These loans, sources said, are not only difficult to appraise, administer and monitor but also carry high-default risk. Hence, better mechanisms will have to be evolved to monitor such loans.

Banks are currently facing very high level of NPAs. As on March 31, 1999, gross NPAs of public sector banks stood at Rs 51,710 crore or 15.9 per cent of gross advances, while net NPAs were placed at Rs 24,211 crore, or 8.1 per cent of net advances.

Sources said most banks with very high net advances and high provisioning being made against bad debts, public sector banks will be unable to take the full hit and write off these NPAs. “Also, branch audits have to be conducted properly which otherwise leads to underwriting of NPAs. This issue will also have to be addressed,” said a senior banking official.

“The banking chiefs will also have to look at VRS which will be offered to weak banks in need of restructuring and even others which have excess flab,” said a State Bank of India official. “It is essential to get rid of excess staff, at the same time the management cannot antagonise the people who have worked for several years,” he added.

Among the other issues that will be taken up is that of governance in the banking sector. Like all other companies, it is essential for the financial sector to follow the best corporate practices, said sources.

With banks moving towards universal banking, customer service is the key. “Only those banks which provide excellent customer service will be able to survive and grow, especially with several foreign and private banks trying to woo consumers with various products,” said banking officials.

In his last budget, Sinha had announced the Kissan credit card scheme, which only a handful of banks had started issuing. The meeting will also review the progress made by banks on this front.    

New Delhi, Jan 5 
The Central Electricity Regulatory Commission (CERC) today announced a scheme of availability-based tariff (ABT) for central power generating units in a bid to foster grid discipline and prevent frequent power fluctuations. This marks a shift from power tariffs being determined on the basis of plant load factor to plant availability.

ABT, which will be applicable for users of the National Thermal Power Corporation (NTPC), the National Hydel Power Corporation (NHPC) and Neyveli Lignite Corporation (NLC), has two parts comprising a fixed charge and a separate energy fare.

For Nuclear Power Corporation, the CERC, after consulting with experts, will first assess whether that unit comes under its jurisdiction and will suitably announce ABT for that purpose, commission chairman S.L. Rao told reporters here.

The CERC’s order will come into effect in the south on April 1, while it will be applicable for the east from June 1. The northern and western regions will come under its purview from August 1 and October 1 respectively.

Under the order, annual fixed charge includes interest on loan, depreciation, operational and maintenance expenses, return on equity and interest on working capital. For NTPC stations, the basis for recovery will be between zero and 80 per cent availability in the first year and zero and 85 per cent availability in the next year.    

Mumbai, Jan 5 
In yet another blow to the domestic synthetic fibre industry, the European Union (EU) is contemplating levying anti-dumping duties on polyester staple fibre exports originating from India to the region.

Sources stated that the EU has already made its intentions clear on the issue to the domestic industry. The EU has stated that investigations made into imports originating from India and other countries have yielded that polyester staple fibre (PSF) was priced substantially cheaper than necessitated.

While the domestic industry is now drawing up an appropriate response to the EU’s findings, sources said that the duty, if levied, would hit companies like Reliance Industries Ltd, Indo-Rama Synthetics, Indian Organic Chemicals Ltd (IOCL) and JCT Ltd.

A representative from an industry body termed the investigation as a “non-trade tariff” one, adding that the local companies would present their reply to the body later. “We will soon assemble information relating to volumes and the value of polyester fibre exported from India to the region and respond suitably to the allegations,” he added.

Sources said that the EU action was not surprising, considering the fact that it has placed anti-dumping duties on synthetic and blended fibre exports from India and other Far East nations on several occasions in the past.

The European market accounts for a significant chunk of the country’s synthetic and rayon exports, pegged at Rs 4,000 crore.

However, industry circles contended that even if the anti-dumping duties are levied on PSF exports from India, it would not have a drastic effect on the entire synthetic fibre basket, as exports of the fibre are said to be slightly in excess of Rs 100 crore.

While the total capacity of the polyester fibre industry in the country is put at over Rs 6.33 lakh tonnes, Reliance, which is the largest producer, manufactures well over 2.70 lakh tonnes. The company had recently taken over two other producers in the sector, India Polyfibres (with a capacity of over 22,400 tonnes) and Orissa Synthetics Ltd (a capacity of 35,000 tonnes). Sales from the company’s PSF division have grown at a compounded annual rate of 44 per cent since 1995-96.

RIL’s nearest competitor is the Delhi-based Indo Rama Synthetics, with an annual capacity of over 1.32 lakh tonnes. Other significant producers include IOCL and JCT Ltd.

In the previous calendar year, the rise in international crude oil prices resulted in regular price hikes by local producers.

Though prices have since then climbed up to Rs 56 per kg from a low of Rs 42 per kg, it presently remains stagnant at the November 1999 levels.    

Calcutta, Jan 5 
The State Bank of India (SBI) will adopt 300 decrepit foundries in Howrah under a unique project that will offer them financial assistance and appropriate technological support so that they can take the big leap from being wobbly workshops to dynamic money-machines.

In a trend that blazes a new trail in the history development banking, SBI’s West Bengal circle is treating the scheme, called ‘Project Uptech’, more like a community service for the benefit of an industry which still has the capacity to create jobs and churn out value-added products.

Under the project, detailed firm-specific studies will be conducted by seasoned consultants, with scope for industry-level interventions, wherever feasible. SBI officials said the Project Uptech scheme will initially modernise units now being financed by the bank and, at a later stage, will take up other units for studies.

“The objective is to upgrade present technology levels, help units move with changing trends and make them competitive.”

Under the upgradation programme, case studies will first assess the level of technology which can be absorbed by a particular unit and later draw up an stage-wise financing plan.

Of the 18 units funded by SBI, seven have already agreed to be a part of the modernisation programme but the bank hopes more will sign up after they see the benefits of technology upgradation flowing to other firms in the Howrah region.

Sources in the foundry industry shared the feeling that Howrah’s floundering foundries are crying for immediate modernisation.

Unit-level studies of the seven units which have agreed to the revamp plan will be carried out soon with the help of eminent consultants to determine the kind of technological support which suits them best.

There are over 400 cast iron foundries in West Bengal, of which 300 are operational. Their total annual capacity is around 10 lakh tonnes, the capital invested in them is estimated at Rs 165 crore and they provide employment to 8,000 people.

In spite of excellent credentials, the industry is facing a test of survival, a situation that contrasts sharply with the western, southern and northern regions of the country where new, more technology-savvy entrepreneurs have kept pace with the changes — both in the market and machines.

Howrah foundries, despite their locational advantages, skilled manpower and long experience appear to have lost their pre-eminent position in the Indian foundry industry, and are now facing problems, which include those arising from tighter pollution norms.

Bengal, especially the Howrah region, has been a major source of supply for iron castings since the dawn of the iron-casting industry in the country. These foundries cater largely to the needs of the jute , sugar, textile engineering industries in the vicinity.

They also meet the demand from the railways, besides making several items of domestic use like rain water pipes and fittings, cast-iron utensils and the like.

Against this backdrop, SBI is the first bank to come forward with such a unique plan to breathe new life into these units.

“Competition has already spurred specialisation, leading to a more rational and efficient production scale of foundries elsewhere. The Howrah foundry industry is at the cross-roads. Technology upgradation is the key to its revival,” an SBI source said.    


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