Chambers lobby for tariff walls, surcharge aboliti
Godrej Soaps may spin off chemicals unit
VSNL unveils flurry of tariff cuts
Ministry mutiny rocks oil industry
Sensex slips, cyclicals in spotlight
Sympathetic state hints at sales tax review
HM awaits go-ahead for Proton project

 
 
CHAMBERS LOBBY FOR TARIFF WALLS, SURCHARGE ABOLITI 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Jan 7 
The country’s top chambers today handed finance minister Yashwant Sinha a package of suggestions to be incorporated in the budget and closed ranks to tell him that high tariff walls should underpin all initiatives aimed at liberalising the economy and speeding up growth.

The three chambers — Ficci, CII and Assocham — wanted the government to retain the 4 per cent special additional duty, remove the 10 per cent surcharge on corporate and personal taxes, cut interest rates at least by 3 percentage points, clamp a total ban on second-hand imports (barring capital goods) and, most important, spare them fresh taxes.

Emerging from the three-hour marathon meeting, CII president Rahul Bajaj said: “There was complete unanimity between the views of CII, Ficci and Assocham. We don’t want any kind of reform reversals.”

Nicholas Piramal chief Ajay Piramal said the industry was split on the issue of extending the benefit of zero-duty capital good imports to sectors like power. CII opposed the continuation of the zero-duty scheme vehemently, saying it hits the interests of domestic producers. However, one of its members, Sanjiv Goenka of RPG, favoured it.

The meeting was attended by the presidents of CII, Ficci and Assocham — Rahul Bajaj, G P Goenka and Shekhar Bajaj. Leading industrialists like Ratan Tata, Nusli Wadia, AC Muthiah, Hari Shankar Singhania, Ajay Piramal, Sanjiv Goenka, Rajeev Chandrashekar and Arvind Pande joined the chamber chiefs in the brainstorming session.

The chambers told Sinha they were unhappy at the manner in which the uniform sales tax was being implemented by various states. They reiterated that value-added tax (VAT) should be implemented as scheduled, from April 2001. “All of us took up the issue of uniform sales tax because the average rates have gone up across the country,” CII president Rahul Bajaj told reporters.

Assocham president Shekhar Bajaj said the industry wanted the withdrawal of the 10 per cent surcharge on corporate tax because it has negative implications for the bottomline of companies. He also called asked the government to cut interest rates to stimulate industrial growth —now that fears of a high rate of inflation have almost receded.

The industry was unanimous in demanding three rates of excise duty — 8 per cent, 16 per cent and 24 per cent — instead of the structure of duties introduced in last year’s budget.

The corporate captains also asked the government to push through the privatisation of PSUs more aggressively so that it could raise Rs 50,000 crore, but insisted this money should not be used to bridge the yawning fiscal deficit.

Ratan Tata said these funds could be better used to finance infrastructure projects — something the government now does by imposing a cess on petrol and diesel BPL chief Rajeev Chandrashekar demanded that the Centre keep the sales tax on e-commerce trading within 4 per cent. Ficci president GP Goenka wanted the tax base to be widened. “All services, including infotech, should come under the tax net.” he said. Rahul Bajaj said venture capital funds should be given tax exemptions like mutual funds.

He assured industry leaders that there would be no policies in the forthcoming budget which would amount to reversing the reform process and harm domestic industry.

Rogue firms

Consumer organisations have sought higher budgetary allocations in the Union budget for 2000-2001 to safeguard consumer interests by setting up more consumer courts and provide legislative safeguards against proliferation of rogue companies. They asked Sinha to provide more budgetary funds to set up more consumer courts.    


 
 
GODREJ SOAPS MAY SPIN OFF CHEMICALS UNIT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan 7 
Godrej Soaps Ltd (GSL) is exploring ways to spin off its chemicals division into a separate company, as part of a restructuring drive, started last year, to become the market leader in the fast moving consumer goods (FMCG) segment.

Sources said the plans are at a preliminary stage. The company may even go for partial divestment of its stake in the chemicals unit if the move to spin it off fails to materialise, they added.

The chemicals division manufactures mainly raw materials for the soap industry such as fatty acids, glycerin and alpha olefin sulphonate. In 1998-99, it contributed about Rs 235 crore, in domestic sales and export, to GSL’s turnover of over Rs 879 crore.

In addition to chemicals, GSL also has a presence in edible oils and medical diagnostics market.

The edible oils business had generated a turnover of Rs 10 crore in 1998-99. Managing director Adi Godrej may also either hive off this unit or sell the venture.

GSL’s restructuring is expected to gain momentum after it announces its third quarter results, sources said.

GSL officials, however, refused to comment on the restructuring moves, saying it was too premature to comment at this stage.

GSL last year had restructured its operations, on the advice of Anderson Consulting, reducing the number of business divisions from three — consumer products, chemicals and product supply — to two: consumer products and chemicals.

The company’s Mumbai, Malanpur and Silvassa units will manufacture items for the consumer products division, while the Valia unit will manufacture goods for the chemicals division.

GSL officials said the restructuring will ensure cost savings to the tune of Rs 20 crore. The company had also roped in Kotak Mahindra and Samsika Consultants for the recast.

GSL had also divested 22.5 per cent of its stake in household insecticide major, Godrej Sara Lee Ltd (GSLL), to holding company Godrej & Boyce for Rs 99.47 crore.

It also took over three detergent brands —Ezee, Trilo and Key — from Cussons India Pvt Ltd.

The company is a major player in the soaps and toiletries market with market leaders Cinthol, Ganga, Godrej No 1, Shikakai and Evita in its fold.    


 
 
VSNL UNVEILS FLURRY OF TARIFF CUTS 
 
 
OUR BUREAUX
 
Bombay, Jan 7 
Videsh Sanchar Nigam Limited (VSNL) today upped the ante in the internet tariff stakes, slashing connection charges by 19 per cent while making a 25 per cent across the-board cut in private international leased line rates.

The new tariffs will be applicable effective from January 15 this month after the statutory period of notification and forbearance by the Telecom Regulatory Authrority of India (Trai),if approved, a VSNL release issued here today said.

The company has sharply reduced the internet connection charges of all its schemes: the rate for a 500-hour connection is Rs 5,500 down from Rs 7,250; for 250 hours the rate is Rs 3,400 compared with Rs 4,700 previously.

The rate for 100 hours has been brought down to Rs 1,500 from Rs 2,150; for 50 hours it is Rs 900, down from Rs 1,500 previously, while for 25 hours the rate is Rs 450 compared with Rs 490 previously.

Moreover, the period of lease for such connections has been extended from one year to three years, providing internet users a double bonanza in the new year.

Along with the cut in internet tariffs, the company has also announced a steep cut in the tariffs for international private leased lines; this will be a 25-per cent across the board reduction for all private leased line customers of the company.

To strengthen the infrastructure of internet service providers (ISPs) in the country, VSNL has decided to cut by 50 per cent the rates paid by the operators to get a leased line through it to foreign internet networks.

The lower rates will be applicable both on satellite and fibre connectivity.

In addition, the company said it would allow a 20 per cent discount on private leased line charges to 100 per cent export-oriented units (EOUs) over and above the 25 per cent declared for normal customers. This is expected to help the country’s software industry.

The company also announced new tariffs for Integrated System Digital Network (ISDN): for 25 hour duration, the charges for 64Kbps ISDN channel has been put at Rs 855, while it stands at Rs 1570 for 50 hours; Rs 2850 for 00 hours; Rs 6410 for 250 hours; Rs 10450 for 500 hours; and Rs 18050 for 1000 hours.

Web hosting tariffs were also slashed as an incentive to Indian companies to get on the internet. The company said the reduction in original tariff amounted to around 90 per cent and the new rates have been aligned to those prevailing elsewhere.

Companies wishing to obtain space on the VSNL server will have to pay Rs 60,000 and a one time set up charge of Rs 5000 for storing 100 mega-byte (MB) of data. For 5 giga-byte of data, the tariff has been set at Rs 7 lakh.

The company said the initiatives are in line with the objectives of the National IT policy.    


 
 
MINISTRY MUTINY ROCKS OIL INDUSTRY 
 
 
FROM R.SASANKAN
 
New Delhi, Jan 7 
The petroleum sector appears to be in a state of abeyance. Even as officers of public sector oil companies prepare for a strike, junior ministers in the ministry of petroleum and natural gas are up in arms against their boss, Ram Naik.

Their grievance is that the Cabinet minister has not allocated ‘meaningful’ work to them. The aggrieved group comprises E. Ponnuswami of PMK and Santosh Kumar Gangwar of the BJP.

Gangwar won his seat in Uttar Pradesh with a margin that was bigger than Prime Minister Atal Behari Vajpayee’s lead over runner-up Karan Singh in Lucknow. In the previous government, he was a minister of state in the same ministry with Vazhapadi Ramamurthy as his boss.

Not only Ponnuswami, but the entire PMK leadership, is agitated over the fact that its nominee has no significant assignment in Delhi. He has been given petroleum conservation and refineries such as Barauni, Bongaigon Refinery and Petrochemicals, Haldia and Panipat.

He has no control, whatsoever, on Madras Refineries, located in his home state or in the case of Cochin Refineries, in neighbouring Kerala. Since the refineries under his charge belong to Indian Oil, all the relevant files go to IOC, not to him as the minister.

Gangwar is unemployed. No work has been given to him. He does not even have an office in Shastri Bhavan. He was promised some work after the end of Parliament’s winter session, but the minister does not seem to have applied his mind as yet on the issue of sharing his administrative burden with junior colleagues.The PMK leadership is understood to have taken up the matter with Vajpayee.    


 
 
SENSEX SLIPS, CYCLICALS IN SPOTLIGHT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan 7 
The market, some would say, is a great leveller. Proof of that came with disturbing regularity today when a scramble to dump infotech shares and a rush for bricks-and-mortar companies put the Bombay Stock Exchange (BSE) on a roller-coaster course that left the sensex weaker by 7.05 points at 5414.48.

That the 30-share index finished above Thursday’s 5421.53 after a 100-point swing both ways was a testament as much to the renewed interest in cyclicals as it was to the abrupt — even fickle at times — changes in the way the market perceives high-tech scrips.

There were several reasons the infotech hammering, but it was the losses on foreign bourses, including the Nasdaq, that drove investors to sell their way out of trouble.

BSE’s decision to increase special margins to 50 per cent from the range of 25-30 per cent, coupled with the reduction in circuit-filter limit on select shares to 4 per cent, also made the market sentiment fragile. Marketmen were unanimous this would leave little room for trading in these scrips.

Operators swarmed the counters with sell-orders in key infotech counters, a day after the technology-heavy Nasdaq composite shed 150 points in another day of losses. The drop in Nasdaq has been linked to reports that the US Federal Reserve may raise interest rates, forcing many top funds to shift from equities to bonds in overseas markets.

At the end of a day that wasn’t kind to many investors who looked at hi-tech firms as invincible money-machines, it was the economy and FMCG stocks that kept the market from selling its way to a crash.

FIIs and local speculators sold heavily in technology stocks across the spectrum. Those testing the lows included Infosys Technologies which remained locked in the lower-circuit band throughout the day, NIIT, SSI, Tata Elxsi, Wipro, Pentafour Software, Aptech, Silverline and Satyam Computers, and even Zee Telefilms. Interest in economy and FMCG stocks like Reliance Industries, Hindalco, Grasim, ITC and Hindustan Lever arrested the slide caused by the selloff in software scrips but it was the diversified petrochemical conglomerate, Reliance Industries, that surprised the market with the highest turnover of Rs 470.25 crore.

Coming after a long time, buying interest in the scrip was fuelled by rumours that the company was close to a New York Stock Exchange listing. The fact that it won 12 blocks under the new oil exploration policy on Wednesday also helped matters.

Among cyclicals, Telco, Grasim, Hindalco and Tisco witnessed heavy buying interest. Consumer goods major Lever continued its recovery run; it dipped from its previous close of Rs 2304.50 to Rs 2250 in the early hours but it finished higher at Rs 2376.

In the specified group, 19 scrips hit the lower price band while 10 counters were locked in the upper circuit filters after exhausting their daily price limits; over 60 software scrips from cash section hit the lower price band.    


 
 
SYMPATHETIC STATE HINTS AT SALES TAX REVIEW 
 
 
OUR BUREAU
 
Calcutta, Jan 7 
With pressure from industry and trade lobby intensifying to scrap the uniform floor rate of sales tax introduced in West Bengal from January 1, the state government has decided to seek a review of the new arrangement at the finance ministers’ meeting on Monday.

With other states dragging their feet on the issue, the state administration is also taking steps to see that traders are not unnecessarily harassed by inspectors trying to implement the uniform sales tax.

“The officials have been instructed not to take any action against traders not paying sales taxes on items exempted earlier,” commercial taxes commissioner, M.N.Roy said today. Among all the states, Bengal has the longest list of schedule I items (not taxable).

The state finance ministers are meeting on Monday to review the present situation in individual state and will take a decision on whether or not the issue would be reviewed at the chief ministers’ conference.

Roy, however, warned traders in the state not to raise a hue and cry on the sales tax issue. “If other states can survive this difficulty then Bengal too will also survive”, Roy said.

The move to introduce uniform floor rate of sales tax was criticised by the president designate of Bharat Chamber of Commerce S.K.Khaitan. “The traders wanted a uniform sales tax rate across the various states and not a uniform floor rate. Needlessly items which carried no sales tax earlier are now attracting higher taxes.”

The state government, Roy said, was keen to see the Centre prevail upon the Union Territories to adopt the uniform floor rate of sales tax. Tamil Nadu, home to a growing hosiery industry, is unwilling to change over to the new regime as it is not sure whether Pondicherry will follow it as well.    


 
 
HM AWAITS GO-AHEAD FOR PROTON PROJECT 
 
 
OUR BUREAU
 
New Delhi, Jan 7 
The Foreign Investment Promotion Board (FIPB) clearance for Hindustan Motors car manufacturing project with Malaysian auto major Proton is likely to be accorded by end 2000.

“We are waiting for the green signal from FIPB on our proposal of manufacturing Proton cars in India which we expect to get by the end of this year,” Hindustan Motors chairman C.K. Birla said here today.

He said HM would be manufacturing the cars for Proton and the latter would be marketing them in the domestic and international market. “We would be manufacturing the cars in the existing facility and Proton would market them,” he said and added that the cars would have a localisation content of 30 to 40 per cent to begin with.

However, Birla declined to divulge the details of the models to be introduced in the Indian market and said the Proton had 10 models under its range, including Sega and Ishwara, which are smaller than the Lancer.

About the company’s venture into the small car market, executive director A.S. Narayanan said HM does not have any plans at present but “decisions would be taken as per the market conditions”.

Asked whether the company has any manufacturing plans for the Mitsubishi Pajero multi-utility-vehicle (muv), he said, the domestic multi-utility vehicle market is very small and manufacturing such high-priced vehicles would be uneconomic at present.

Hindustan Motors today launched two variants of the Mitsubishi Lancer.

The company launched two super luxury petrol variants of the Lancer — SLX and SFX, which is a sports variant.

“The new variants will cost about Rs 25,000-50,000 more,” R. Santhanam, executive vice president Mitsubishi Lancer, said.

HM has reworked the Lancer with a new music system which has a CD changer, leather upholstery, air conditioning system and speedometer, oil and battery level indicators and additional back lights for greater safety.

The Lancer SFX, which has broad tyres and a sporty exterior, is targeted at the young at heart. The SFX sports a full set of wind tunnel designed air dams, rear spoiler, special alloy wheel and extra wide tyres, anti skid pads on all pedals, a special gear shift knob and a sporty tail lamp cluster.

Birla said, “We have designed two new versions of the Lancer which are aimed at an entirely new set of customers.”

The company has the potential to roll out four new variants of the Lancer.

“Mitsubishi has many models in its stable and the Lancer block itself can accommodate four new models, but currently there no plans to introduce any new models. But once the economic scenario improves, we may explore such a possibility,” Santhanam said.

HM plans to introduce a compressed natural gas (CNG) and liquefied petroleum gas (LPG) variant of the Lancer in May-June.

A new look Ambassador, with more leg and roof space and additional technical features, is also on the anvil.

Besides launching new models, HM is also sprucing up its dealer network.

The company will set up an exclusive flagship dealer for the Lancer and its variants in Calcutta by January, which will cover the eastern region. It also plans to set up neighbourhood service centres (NCS) in May.

HML will increase the current indigenisation level of 50 per cent to 70-75 per cent by July 2000.

However, it will not indigenise components like engine blocks and a few electronic systems.    

 

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