Catch-22 to put brakes on used car import
Wagon-R base model priced at Rs 3.49 lakh
Panel to vet FDI policy
Pentasoft plans mega placement
Nine-month export growth at 12.93%
2:1 bonus from Sun Pharma
Hyundai plans to divest 24%
State budget to be trade-friendly
Public sector bottomline remains flat
Foreign Exchange, Bullion, Stock Indices

New Delhi, Feb 1 
Car makers who were spooked by the looming prospect of having to fight a sudden tide of second hand cars in an increasingly competitive market can finally breathe a little easy.

The government has devised a brilliant Catch-22 like mechanism to continue with the curbs on the import of second-hand cars even after quantitative restrictions (QRs) — a slew of tightly regulated import benchmarks designed to protect local industry — are totally eliminated by April 2001.

All that the commerce ministry will do is delete all references to the import of second hand cars in its Indian Trade (Harmonised System) Classifications of Export and Import Items.

ITC (HS) Classifications of Export and Import Items came into being after sweeping changes were introduced in the Exim Policy 1992-97. It became imperative for India to adopt the nomenclature under the harmonised system of commodity classifications, which is used all over the world, as a basis for its export/import transactions. The code was developed by the Customs Cooperation Council in Brussels. India has adopted the system for customs, excise and duty drawback purposes.

At present, chapter 87 of the ITC(HS) Classifications mentions second hand/used motor cars (including jeep and land rover) assembled as a restricted item and not “permitted to be imported except against a licence or in accordance with a public notice issued in this behalf.”

Trade strategists in Udyog Bhavan say their predecessors in their wisdom categorised the import of cars under two categories — import of new cars and second hand imports while preparing the ITC(HS) manual.

However, it has now been decided that there is no need to categorise import of cars under two heads as car imports are listed as a single entry all over the world.

But here comes the catch. While deleting the reference to second-hand cars in the ITC (HS), the government will continue to retain the omnibus clause 5.3 under chapter 5 of the Export Import Policy which says “all second-hand goods shall be restricted for imports and may be imported only in accordance with the provisions of this Policy, Handbook (Vol 1), Public Notice or a licence issued in this behalf.”

Officials say the government is fully entitled to retain this clause under the Export Import Policy even after eliminating QRs, which conforms to the prevalent practice in the case of second-hand imports worldwide.

The government has been under considerable pressure from the carmakers’ lobby to stop the sudden tide of second cars which would severely undermine the viability of companies that have set up spanking new facilities at a considerable cost.

Their argument was that they ought not to be penalised for reposing confidence in the Indian economy by making their investments in the country.

Last November, Jacques Nasser, Ford’s president and chief executive officer, had warned India against allowing second hand cars as similar moves had wiped out the domestic industry in countries like New Zealand. “India has to decide whether it wants to become the scrapyard of the world or harness the latest automobile technologies,” he had said during his visit to launch its latest model — the Ford Ikon.

The chief of the world’s second largest car maker had then maintained that India was under no compulsion from the World Trade Organisation (WTO) to allow the import of used cars since the issue was not covered by any licensing agreement. The refrain was picked up by other car makers and the chorus reached a crescendo at the recent Auto Expo in Delhi.

After much brainstorming, the government has found the simple bureaucratic sleight of hand as the best way to meet the demand of the developed countries to open up its automobile sector and yet stonewall used car imports. Any possible dispute arising out of such a policy will be negotiated at the WTO forum, officials say.

By retaining such a clause in the Exim Policy and by clubbing import of cars under one head in the ITC(HS) manual, officials hope to obviate the need for the commerce ministry to seek strict compliance to emission control norms, vehicle age etc for second-hand imports.

As for QRs, India still has import curbs on 1,429 items. These include 700 on the restricted list, 685 under the Special Import Licence (SIL) list and 44 items on the canalised list of items.    

New Delhi, Feb 1 
Market leader Maruti Udyog Ltd (MUL) today launched the Wagon-R, its offering for the premium end of the mid-size segment.

The vehicle will be available in three variants, with the base model priced at Rs 3.49 lakh.

The Wagon-R LX at Rs 3.49 lakh (ex-showroom Delhi), will come fitted with an AC, a heater and tinted glasses. The Wagon-R VX would be available for Rs 3.84 lakh, loaded with body colour bumpers, split rear seats, a Kenwood stereo, power windows and central locking. The third variant, the Wagon-R AX with three-speed automatic transmission, would be available for Rs 4.83 lakh (ex-showroom Delhi).

The Wagon-R has a four cylinder SOHC 16 valve engine for instant pick up and fuel economy and features multi-point fuel injection. The 1.1 litre engine produces 62 bhp at 6,000 revolutions per minute (rpm). It also comes equipped with eight-inch booster disc brakes at the front, featuring a pressure sensing valve and drum brakes at the rear.

Unveiling the car last year, Maruti Udyog Ltd managing director Jagdish Khattar said, “The midsize segment, accounting for almost 42 per cent of market share, has seen the fiercest competition. Wagon-R, which will be strategically positioned at the premium end of the mid-size segment will provide a superior value offering.” “Wagon-R’s competitive prices underscore Maruti’s commitment to always provide best value for money products to the customers. Wagon-R is positioned for leadership in the segment,’’ he added

Order taking for the Wagon-R would commence tomorrow and deliveries would start within a week.    

New Delhi, Feb 1 
In a bid to ratchet up the flow of foreign direct investment into the country, the Union Cabinet today decided to set up a ministerial group to rework its FDI policy by suggesting which items should be brought under the automatic route and the areas where the sectoral caps can be either relaxed, raised or removed.

The committee, which will comprise the ministers of finance, external affairs, commerce, telecom, chemical and fertilisers, and the minister of state for small scale industries, will also review the negative list.

The Cabinet also approved a list of items which will not be eligible for foreign direct investment under the automatic route.

The negative list will include all proposals which require an industrial licence under the Industrial (Development and regulation) Act 1951; wherever foreign investment is more than 24 per cent in those units which propose to manufacture items reserved for the small scale sector; and all items which require an industrial licence in terms of the locational policy notified by the government under the new industrial policy of 1991.

Automatic clearance for investment by foreign companies, non-resident Indians and overseas corporate bodies (OCBs) will be denied in the case of all those proposals where the foreign collaborator already has a previous joint venture or tieup or where the foreign/NRI/OCB investors intend to acquire shares in any existing Indian company.

Parliamentary affairs minister Pramod Mahajan told reporters that the negative list of items will include those proposals which fall outside the purview of notified sectoral policy or cap, or in which FDI is not permitted, or in which the investor chooses to make an application to Foreign Investment Promotion Board stating that he does not wish to avail of the automatic route.

Under the existing policy, licensing is mandatory in sectors like alcohol, cigarettes, equipment of electronics, aerospace and defence, industrial explosives, hazardous chemicals and pharamaceuticals.

The decision of the industry and commerce ministry to bring more items under the automatic route will strengthen the role of Reserve Bank of India.

Meanwhile, the cabinet also approved of setting up of a new airport of international standard at Devanhalli, near Bangalore and closure of the existing airport.

A memorandum of understanding (MoU) has been signed between Airports Authoriy of India (AAI) and Karnataka State Investment and Industrial Development Corporation (KSIIDC). The terms of MoU says that AAI and KSIIDC will jointly have a 26 per cent stake in the airport venture while the remaining 74 per cent stake will be given to a strategic partner which could also be foreign partner.

The cabinet also decided to close the state-owned Indian Road Construction Corporation which had accumulated losses of Rs 562.88 crore mainly due to outstanding dues for its projects in Libya, Kenya, Iran and Iraq.

The Cabinet has also revised the export ceiling of Bellary Hospet mines from 2 million tonnes to 3 million tonnes.    

Mumbai, Feb 1 
Pentasoft Technologies (PTL), which was formerly known as Pentafour Communications, is planning to raise over Rs 1,050 crore by placing up to 15 million equity shares on a private placement basis via the book-building route. The floor price for the placement has been fixed at Rs 700.

The funds raised would be used to finance the Rs 43-crore ($ 10 million) acquisition of two Australian companies, PTL chairman V Chandrasekaran told reporters here today.

Of the total mopup from the placement, around Rs 880 crore ($ 205 million) will be used to meet the costs of acquiring business software division of group company, Pentamedia Graphics — formerly known as Pentafour Communications — as part of a group restructuring programme. The rest will be used to buy software firms identified by the company in the US, Chandrasekaran said.

The Australian companies — Rengain Pty and Ozi Resourcing Pty— were purchased to help Pentafour gain a foothold in the overseas market for solutions and consultancy.

Earlier this year, Pentafour Software hived off its business software division as an ongoing concern to Pentafour Communications for a consideration of Rs 850 crore ($ 205 million). The software business division contributed around 46 per cent of Pentafour Software’s turnover which, based on figures available at the end of March 99, was pegged at Rs 242 crore.

Pentafour says its restructuring plan has been drawn up to unlock the true value of its multimedia and software development businesses. After the recast, Pentamedia will focus primarily on the multimedia segment. Pentasoft Technologies specialises in the areas of education and training.    

New Delhi, Feb 1 
The country recorded a 12.93 per cent growth rate in exports for the nine months ending December 31, 1999, compared to the corresponding period of the previous year. In rupee terms, export growth rate was 16.48 per cent.

In December exports were up 14.69 per cent on a year-on-year basis at $ 3.19 billion compared with $ 2.78 billion in the previous year.

Imports in December rose 19.56 per cent on a year-on-year basis at $ 4.06 billion compared with $ 3.39 billion in the previous year.

Cumulative imports for the nine months was also higher by 9.02 per cent and stood at $ 3.44 billion compared with $ 3.16 billion in the previous year.

For the nine months, oil imports rose 57.82 per cent while non-oil imports grew by just 1.07 per cent during the same period.

During this period, trade deficit too has gone down from $ 7.32 billion to $ 7.03 billion.    

Mumbai, Feb 1 
The board of Sun Pharmaceutical Industries Ltd today recommended a bonus issue of two shares for every one held. This would raise the equity capital of the company to Rs 46.26 crore (post-bonus) from Rs 15.42 crore (pre-bonus).

The stock markets cheered the proposed bonus offer, and the Sun Pharma scrip jumped to Rs 2126.50 after opening at Rs 1999 and then falling to a low of Rs 1979.

The scrip was in the limelight for some time as the markets were expecting this bonus offer as well as good third quarter results.

The company reported a 35 per cent rise in sales to Rs 328.16 crore and a 56 per cent jump in net profit to Rs 65.71 crore for the nine months ending December 31, 1999.

The domestic prescription products business grew at 44 per cent.

The company has set itself the goal of becoming the number one gastroenterology company in the next three years. Sun Pharma has already obtained the top slot in neurology, psychiatry and cardiology.

The company has built up a considerable presence in gynaecology, fertility, oncology, pain management and anaesthetics.    

New Delhi, Feb 1 
South Korean car major Hyundai Motors will divest up to 24 per cent of its equity in its wholly-owned subsidiary Hyundai Motors India Ltd (HMIL) through the private placement route.

The company will sell the shares in two to four tranches. The first tranche is expected to be placed in the market in the calendar year 2000.

“We are looking at an expansion of our growth and to keep pace with it, we need to expand capacities. Hence, the plan for selling off stake has been pulled ahead,” said J.H. Kim, executive director (marketing and sales) of Hyundai Motors.

The decision to bring forward the plan to divest a part of its stake in Hyundai Motor was taken after the company reported a net profit of over Rs 20 crore in its first full year of operation.

“We are already contemplating the introduction of a few models which will require additional investment’’ Kim said.

However, the company will decide about the launch of a new vehicle after the Budget.

Hyundai’s current equity in HMIL is Rs 800 crore.

“A few financial institutions have already shown interest. Initially, we may offer a 4-6 per cent stake or little more and the rest would be offered in phases. According to our estimates, the market for our cars has expanded, particularly in January this year. If this trend continues we will announce the private placement of shares during this calendar year,” said B.V.R. Subbu, director sales and marketing, HMIL.

HMIL has recorded a net profit of over Rs 20 crore for the year ending December 31, 1999, as against a loss of Rs 64 crore during the calendar year 1998-99.

The company sold 8,645 units (7,402 Santros and 1,243 Accents) during January 2000. HMIL, which has set an annual sales target of 78,000 units (Santro-66,000 units and Accent 12,000 units) for the calendar year 2000 plans to capture a 14-15 per cent market share.

“We hope to sell 17,000-18,000 units during February and March,” Subbu said.

HMIL also plans to export about 10,000 completely built units (CBUs). “We would like to be prepared for exporting CBUs as part of export commitments, which starts from March 2001. We will have to export over Rs 2,000 crore worth of units spread over a 10-year period,” said Subbu.

Meanwhile, the company will export transmission equipment and engines to its other automobile manufacturing units world-wide.

HMIL plans to export its small car Santro to Nepal, Sri Lanka, Bangladesh, West Asia and Africa.

HMIL has set a tentative export target of Rs 200 crore for the calendar year 2000, as against a Rs 50 crore target set for the calendar year 1999, which the company claimed was achieved in November 1999.    

Calcutta, Feb 1 
State finance minister Asim Dasgupta today assured the Calcutta Chamber of Trade (CCT) president Feroze H. Ali, that he would take into account suggestions placed before his government to create a favourable climate for trade and industries in West Bengal while preparing the state budget proposals for 2000-01.

The budget session of the state Assembly will begin on March 2 and Dasgupta is likely to place his budget proposals in the third week of March.    

New Delhi, Feb 1 
The turnover of 227 public sector undertakings (PSUs) increased by 13 per cent to Rs 3,22,327 crore in 1998-99 despite the fact that the year coincided with one of the most savage recessions the country has seen in recent times.

Even though the turnover increased, there was a decline in the number of units reporting a profit. The combined net profit of these units remained unchanged at Rs 13,766 crore.

According to a department of public enterprises report which reviewed the financial performance of 227 PSUs, 126 are profit-making while 101 suffered losses. In 1997-98, the corresponding figures were 133 and 95. The report was presented to the Cabinet committee on economic affairs today.

In all, 126 PSUs, for which results were available, posted a total net profit of Rs 23,164 crore compared with Rs 20,262 crore profits posted by 133 companies in 1997-98. The 101 PSUs reported a loss of Rs 9,398 crore during the last financial year

Two-thirds of the total net profit during the year was contributed by ten PSUs mainly in the petroleum, power and telecom sectors.

Two-thirds of the losses by the loss-making PSUs came from ten companies in steel, coal and aviation, he said.

The top ten profit-making PSUs accounted for 61.44 per cent of the aggregate profits of Rs 23,164 crore reported by all 126 PSUs.

These included Oil & Natural Gas Corporation (ONGC), National Thermal Power Corporation NTPC), Indian Oil Corporation (IOC), VSNL, MTNL, Gail, Hindustan Petroleum Corporation, Northern Coal Fields Limited, South Eastern Coal Fields and Bharat Petroleum Corporation.

On the other hand, the top ten loss-making PSUs account for 63.01 per cent of total losses of Rs 9398 crore. These included SAIL, Rashtriya Ispat Nigam Ltd, Air India, Fertiliser Corporation of India, Hindustan Fertiliser Corporation, Bharat Cooking Coal Ltd, Eastern Coalfields, Indian Iron & Steel Co, Hindustan Steelworks Construction Ltd and Hindustan Photofilm Manufacturing Company Ltd.

The increase in turnover of PSUs in the consumer goods sector during 1998-99 was 17 per cent — higher than the average of all PSUs combined. The net losses of these PSUs also fell 35 per cent from Rs 481 crore to Rs 312 crore in 1998-99.

The performance of contract and construction services has declined during 1998-99. While turnover has remained unchanged, net losses have increased from Rs 446 crore to Rs 520 crore.

This was due largely to Hindustan Steel Works Construction where losses went up from Rs 225 crore to Rs 298 crore. The capital employed has, however, increased 15.5 per cent from Rs 2,24,185 crore in 1997-98 to Rs 2,58,858 crore in 1998-99.    

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