State Bank, IDBI take rate cut lead
Poor investment leads to $ 5 bn BoP surplus
Koshika seeks fresh concession
Nasdaq to set up shop by year-end
Bhel set for infotech foray
Star aims for greater share of TV pie
Cenvat credit norms in place
Prabhu to make a pitch for Haldia Petro
ONGC net up 27%

 
 
STATE BANK, IDBI TAKE RATE CUT LEAD 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 3 
State Bank of India (SBI) and the Industrial Development Bank of India (IDBI) today wrested the initiative in nudging the financial sector to lend money cheap by announcing a flurry of reductions in their loan and deposit rates that ranged from 50 basis points to 100 basis points — one basis point being one hundredth of a percentage point. The banking monolith announced a 75-basis point cut in its prime lending rate (PLR) — the rate at which a bank’s most valued customers are given loans — to 11.25 per cent and a 50 basis point reduction in its medium-term lending rate to 11.50 per cent.

IDBI, the country’s largest financial institution, cut its minimum-term lending rate by a percentage point to 12.5 per cent. IFCI followed suit with similar reductions. ICICI, the other FI major, however chose to wait and gauge the market conditions before taking the rate-cut plunge. Even so, there was intense speculation in the market that it would cut its key lending rate of 12.5 per cent by 25 to 50 basis points.

Banking circles say the SBI’s decision to bring down lending and deposit rates will prod other banks to the same, many of which are expected to announce a revision during the course of this week.

On the deposit side, SBI reduced by 50 basis points to 6.5 per cent interest rates on its one-year deposits. Deposits maturing after three years will now offer 9.5 per cent, down from 10 per cent.

Deposits above one year but up to two years will yield 8 per cent instead of 9 per cent earlier; rates on deposits between two years and up to three years have been reduced to 8.5 per cent from 9.5 per cent.

The cut in deposit rates spread to the new-generation private sector banks as well. IDBI Bank led from the front, slashing its deposit rates across the board. While rates on deposits between 15 and 30 days were brought down to 6 per cent, those between 31-45 days will now carry 8 per cent.

Rates on deposits maturing between 46 and 90 days have been pegged at 8.25 per cent while it is 9.25 per cent on those between 91-180 days, 9.5 per cent on deposits between 181 days and a year and 10 per cent on those between 1.5 years and 3 years. Quite curiously, the bank did not say what its deposit rates were before today’s round of reductions.

Call rates soften

The RBI’s four-way drive to cut interest sent rates in the call money market tumbling to 7 per cent today from 10 per cent at the end of last week. Dealers said the fall in rates was caused by the presence of enough money in the banking system and limited demand from the borrowing banks. The rates opened at 8.25-8.50 per cent but dropped to 7 per cent at the close with most transactions wrapped up around 8 per cent. Sources said the lower repo rate of 5 per cent is likely to serve as the floor for call rates to settle eventually.

On the other hand, prices of key government securities perked up as a result of the central bank’s decision to loosen the liquidity taps. While prices in the short-end of the securities market increased by Rs 2 to Rs 2.50, medium and long-dated papers appreciated by around Rs 1.50 to Rs 2.00. Dealers, however, said the scope for further increases in the prices of government securities is now limited. “The market had been expecting the RBI’s move for a long time. However, with the suspense now over, any further upside is limited,” M R Madhavan of I-Sec said.

Analysts say the government’s massive borrowing plan of Rs 1,17,000 crore for the current fiscal is another factor that could put some pressure on the liquidity in the banking system. Money market analysts are already expecting government securities auctions of Rs 15,000 crore per month.

Modest sensex gain

The BSE sensex closed at 5052.94 in a modest gain of 51.66 points, belying expectations that the rate cut will trigger a stock surge. The interest in trading was confined largely to index heavyweight Lever and some old-economy stocks. Infotech majors were battered as investors, unsettled by last week’s losses on the Nasdaq, sold heavily. Brokers, echoing the view expressed by their counterparts in the money markets, said the government’s borrowings has led bourses to discount the interest rate reductions.    


 
 
POOR INVESTMENT LEADS TO $ 5 BN BOP SURPLUS 
 
 
FROM R. SASANKAN
 
New Delhi, April 3 
The government and its economists are worried about a $ 5 billion balance of payment (BoP) surplus during fiscal 1999-2000 which is a sure sign that an economic recovery through fresh capacity creation in the manufacturing sector has not begun as yet.

They feel that the surplus springs from the fact that pump-priming investment has not kept pace with the savings in the economy.

Normally, a BoP surplus for a country like India, which is usually steeped in a foreign exchange crisis, should be a matter for rejoicing. But the experts do not quite see it that way. In macro-economic terms, a BoP surplus is equal to savings minus investment. Put differently, a BoP surplus means that the availability of saving is higher than the level of investment. For a developing country like India this should not be the case. What it needs is growth through investment.

The estimated surplus of $ 5 billion in foreign exchange reserves accounts for 1.2 per cent of the gross domestic product. This is the amount of excess saving in the system. A country like India at this stage of development need not maintain foreign exchange reserves beyond the requirement of financing imports for four months which should be around $ 16 billion. At present, the country has foreign exchange reserves of $ 33 billion.

The growth in reserves should be in tune with the growth in imports. The present mismatch arises from the fact that imports have been growing at the rate of 9 per cent against a 15-16 per cent growth in forex reserves.

The government expected a current account deficit of 1.6 to 1.7 per cent of the GDP. However, it turned out to be much less at 1.2-1.3 per cent, mainly on account of slow imports. For a 7 per cent growth in GDP, imports should have grown at the rate of 12.5 per cent. The components of current account are trade balance and invisible receipts. The capital flows consist of foreign direct investment (FDI), portfolio investment and remittances.

Official sources say remittances and portfolio investment exceeded their expectations. Huge forex reserves create problems for monetary managers.

A recovery in the manufacturing sector should have meant larger imports of capital goods. However, there has been no significant growth in this area. The official perception is that India can afford a current account deficit of 2.2 per cent of GDP to spur growth in the economy.

The industrial recovery so far has been only in terms of better capacity utilisation and not in terms of the creation of fresh capacity.

There are signs of a pick-up in demand for cement and steel. The incentives given in the budget for the infrastructure sector should spur construction activities in power and road sectors. In the housing sector, the growth rate is close to 9 per cent against the projected 6 per cent.    


 
 
KOSHIKA SEEKS FRESH CONCESSION 
 
 
FROM M. RAJENDRAN
 
New Delhi, April 3 
Koshika Telecom has asked for a 10-year period to pay back its Rs 400-crore licence fee dues instead of the mandated four years. The request was made less than a week after the Cabinet restored the company’s cellular licences for the Uttar Pradesh (West), Orissa and Bihar telecom circles.

Its argument is that it needs more time to be able to migrate from the licence fee system to the revenue-sharing regime. The Cabinet is likely to discuss the issue at this week’s meeting.

At the heart of the request for a 10-year fee payment period is something called the normalisation process. Normalisation is the system of calculating the licence fee over the actual licence period (over 10 years in the case of Koshika) as against the time given to the company (four years for Koshika).

The normalisation process which applied to other telecom companies was not extended to Koshika because it agreed to pay the entire fee in four years while accepting its licence under the terms of the 1994 National Telecom Policy (NTP).

Koshika Telecom has been told to pay outstanding dues from December 1, 1999 which, excluding the penal interest, amounts to Rs 430 crore. According to officials of the department of telecommunications (DoT), the company will have to only pay Rs 180-Rs 200 crore instead of the Rs 400 crore if the government accepts its request for normalisation.

Koshika was required to pay a total licence fee of Rs 843 crore for the four circles — UP East and West, Orissa and Bihar. However, the company was given a letter that authorised migration only for the UP West circle. Letters for migration in other three circles were not issued because the licences had been terminated due to non payment of licence fee. As a result, the company could not migrate to NTP-99.

For UP West, the company has to pay the licence fee over a 10 years. It has already forked out Rs 400 crore as part of the offer given to cellular operators who wanted to migrate from the licence-fee regime to a revenue-sharing (August 1, 1999) mechanism. In addition, it paid Rs 13 crore as liquidated damages and penalties.

For the other three circles Koshika Telecom agreed to pay the licence fee over a four-year period. In UP East, for instance, it is required to pay Rs 210 crore; it will pay Rs 21 crore in the first and second years, and Rs 84 crore in the third and fourth.

Similarly for Bihar the company had agreed to pay licence fee of 136.5 crore over four years under licence fee system. In the first and second years it had agreed to pay a licence fee of Rs 13.65 crore and in the third and fourth years Rs 54.6 crore.

In the case of Orissa, the company had to pay a licence fee of Rs 84 crore. In the first and second years, the company has promised to pay Rs 8.5 crore while in the third and fourth years, it will shell out a licence fee of Rs 34 crore.

The government approved the migration of Koshika telecom and Aircell Digilink to the new telecom policy only last week after the service providers accepted the migration package without any conditions. Koshika was asked to make the payment within 15 days of the issue of DoT’s letter.    


 
 
NASDAQ TO SET UP SHOP BY YEAR-END 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, April 3 
The Nasdaq Stock Exchange has decided to set up an office in India by the end of this year. The office would be set up in one of the metros though a final decision has not been taken on this, Alfred R. Berkeley III, president of Nasdaq, said here today.

Berkeley said Nasdaq is in touch with 12 Indian companies for a possible listing on the exchange. “We would be delighted if about half of them list themselves next year.”

Patrick Sutch, vice president, Asia Pacific, of Nasdaq said these companies are planning to raise funds in the range of $ 50 million to $ 500 million from the exchange with the total amount being in the range of $ 12.2 billion.

He said companies in the pharmaceutical, telecommunication, entertainment and information technology sectors have shown interest in the Nasdaq. Berkeley said the high valuations to Infosys and Satyam stocks on the Nasdaq indicate a perception among investors of their strong fundamentals and good future earning prospects.

There are large number of US investors who understand the specialised areas of technology, capital is cheaply available and there is a perception that India is a happening place, Berkeley said.

He said Nasdaq is keen to tie up with Indian bourses for exchange of information in the lines of a pact signed between Nasdaq and the Hong Kong stock exchange.

However, the Nasdaq president ruled out the possibility of trading in the country unless there is full capital account convertibility. Meanwhile, Nasdaq will soon commence trading in Japan and Europe. “The idea is to make Nasdaq stocks available to Japanese and European investors,” Berkeley said, adding that it will create a market for Japanese entrepreneurs to make money.

However not all stocks on the Nasdaq would be available to the Japanese investors. Initially a few select stocks of well-known companies with large market capitalisation would be offered for trading which is expected to commence by July this year. A similar style of trading would be adopted for Europe as well, Berkeley said.

With trading happening in three places across the globe, it would be a 22-hour trading day. Trading would begin in Japan, then in Europe and later in the US.

“This will lend a truly global characteristic to the markets. The time is ripe, technology is there, interest is there for Nasdaq stocks and liquidity is there,” Berkeley said.    


 
 
BHEL SET FOR INFOTECH FORAY 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, April 3 
Bharat Heavy Electricals Ltd (Bhel) plans to set up a Rs 1,000 crore business-to-business (B2B) vertical portal for the electrical engineering and power industry.

Announcing the company’s annual financial results, K. G. Ramachandran, chairman and managing director, said, “Bhel has decided to venture into the domain of information technology. We have the necessary expertise in infotech and rich experience in power station engineering, servicing and allied areas. We will soon appoint a consultant to locate a partner for the dot.com venture.”

The software company will provide software integration and solutions. It will also provide computer-aided modelling analysis and applications services.

The company,however, recorded a 4 per cent dip in its net profit at Rs 525 crore for the year 1999-2000 as against Rs 545 crore last year. Its turnover was marginally lower during 1999-2000 at Rs 6,620 crore as against Rs 6,795 crore.    


 
 
STAR AIMS FOR GREATER SHARE OF TV PIE 
 
 
FROM SATISH JOHN & VIVEK NAIR
 
Mumbai, April 3 
Star TV is pulling out all stops in a bid to straddle all segments of the Indian TV industry.

The Star TV top brass is preparing a blue-print to initiate a plan of action which will crystallise by the month of July. The financial year for the entertainment network ends in June and the budgets are allocated beginning July, every year.

Already, Star has rolled off its bid to Indianise its premier channel Star Plus by introducing Hindi programmes that will cater to a bigger audience. The change in the content of Star Plus may also include a change in its name. However, sources add that this is at a very preliminary stage. The company is aware of the tremendous brand equity wielded by the channel and any change will be made only after carefully weighing the benefits accruing from a possible re-christening.

Another initiative that the network plans to take will be in the events management segment, an area where its presence has been insignificant in the last few years. The move comes about with the growing realisation within company echelons that event management helps in clocking substantial television rating points (TRPs).

According to Star officials, the first event will gain fruition from January 2001 onwards.

Star has also appointed Sunil Mehan to draw up plans for the new division.

The channel was a sponsor for the Miss India contest till newcomer Sony beat it to the telecast rights.    


 
 
CENVAT CREDIT NORMS IN PLACE 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, April 3 
The department of revenue has announced simplified user-friendly rules on Cenvat credit to corporates.

The department has introduced ad-valorem duty on induction furnaces and re-rolling units on goods manufactured from April.These two industries had earlier been brought under capacity based system of duty payment in 1997. Goods manufactured before April 1, 2000 would not be subject to ad valorem duty.

Induction furnaces and re-rolling units can now avail of Cenvat credit for raw and intermediate inputs lying in their stockyards, provided the items are supported by duty payment documents.

The department has also allowed the facility of deemed credit, April 1, 2000 to April 30, 2000, to users of goods manufactured by induction furnaces and re-rolling units. The department also announced the extension of excise duty exemption on watches and clocks costing not more than Rs 500 to components and parts.

Changes have also been announced in the way capacity based scheme of duty abatement is applicable to independent textile processors.

The pre-budget position allowing duty relief for closed and sealed stenters has been restored with effect from April, 1, 2000.

However, this will be permitted on closure of stenters for a period of not less than fifteen days.

The abatement will from now on be sanctioned by the joint commissioner of central excise instead of by the commissioner.

The power to determine the annual capacity of a textile factory run by an independent processor has also been delegated to deputy and assistant commissioners of central excise with effect from April 1.

The deemed credit of Rs 18 a kilo allowed in respect of texturised polyester yarn has also been extended to manufacturers of woven pile fabrics falling under heading No. 58.01.

Cenvat credit will not be available to independent texturisers on inputs used in manufacture of texturised yarn (including draw-twisted and draw-wound yarn) under heading No 54.02.

However, where an independent texturiser is also involved in manufacture of goods other than texturised yarn (for example fabrics) on which he discharges normal excise duty, the Cenvat credit shall be allowed in respect of inputs used by such independent texturisers.

Besides minimising procedural requirements, the new rules are expected to reduce the areas of dispute and litigation in relation to Cenvat.    


 
 
PRABHU TO MAKE A PITCH FOR HALDIA PETRO 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, April 3 
They might have been left out in the cold, denied a share of the glare of celebration that surrounded Sunday’s inauguration of the Rs 5,170-crore Haldia Petrochemicals Ltd. But they aren’t miffed and believe that they still have something to contribute to Bengal’s 23-year-old dream project. The Centre and local industry captains, who were largely absent from the pageant either because of some panjandrum’s oversight or pique over a perfunctory invitation, have come together to do their bit for what is being touted as the shining icon of state’s industrial resurgence.

For a start, Union fertiliser and chemical minister Suresh Prabhu and his officials will make a presentation on Haldia Petrochemicals before a 100-member Japanese delegation on April 10.

Prabhu will make his pitch when he comes to the state to inaugurate the Rs 1,600 crore PTA (purified terepthalic acid) of Mitsubishi Chemical Corporation on April 11. The Japanese delegation comprising officials from Mitsubishi Corporation, Mitsui, Nisso-Iwai Corporation, Sumitomo, Itochu, and Mitsui & Company Ltd is coming to the state to attend the ceremony.

This is the first time that the Centre will be making a pitch for chief minister Jyoti Basu’s “millennium project”.

Prabhu’s effort to market HPL comes in response to a request made by the Indian Chamber of Commerce and Bengal Chamber of Commerce and Industry to the minister to take some effort to push for HPL downstream projects which will hold the key to the viability of what has been called “West Bengal’s 23-year-old dream.”

The presentation has been organised to attract downstream projects for Haldia and also market its products to the Japanese. The meeting between the Union minister and the Japanese team will last for an hour. The minister will also the general petrochemical scenario in the country.

Prabhu will also meet the HPL management, West Bengal Industrial Development Corporation, the chamber presidents and industrialists. BCCI has already sent its views on HPL to the union minister. The HPL management too sent a presentation to him.

BCCI sources informed that the minister had assured them that the government would take some positive effort to attract investments in downstream projects of Haldia. The Indian Chamber of Commerce is also making some efforts on its own. On April 19, ICC had asked the HPL management to make another representation before its members. It’s obvious that the local industry barons are not brassed off by the antics of the people in charge of the celebrations who were keen to turn it into an epiphany for the state government’s triumph over pain and prejudice.

On the day after the Big Show, corporate covens were abuzz with talk about the botched invitations as a result of which hardly any major industrialist or important official had attended the dedication ceremony of Haldia Petrochemicals Limited. The official spokesperson for the company said, “The heads of different sections like marketing, projects etc had made their own list of guests. We also invited important officials. I do not know who had come. But we had sent out invitations to all those who matter.”

Except some of the home-grown industrialists like M.K. Jalan, S.K. Todi, Sisir Bajoria, Sanjay Budhia and S.K. Khaitan, no other industrialist was present.

Except for a few officials from Toyo Engineering, there were no major representation from the Japanese companies who are crucial to the success of the project.

Industry sources said the main reason for not skipping the ceremony was the poor infrastructure at Haldia. “Who fancies the idea of travelling for three hours or more to attend such a function on Sunday?” they questioned. A veteran in the industry said, “We have attended several functions of Jyoti Basu. This is not something different.” With the trial production having started, the marketing of HPL products is now the most important task for the company.

In a voice dripping with sarcasm, one industrialist said, “The state finance minister said at the dedication ceremony that within a month’s time he will be able to hand over a bottle of polymer granules. But will he sell it through the public distribution system?”

Richard Saldanha, director and managing director designate, said: “Our products have enough sales opportunity. We have already tied up with our customers. But I cannot divulge the names of our customers.”    


 
 
ONGC NET UP 27% 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, April 3 
Oil and Natural Gas Corporation (ONGC) has recorded a net profit of Rs 3501 crore in 1999-2000, up 27 per cent over that of the previous year, according to provisional figures released by the public sector oil giant.The sales revenue of the company also increased by 33 per cent from the previous year’s sales of Rs 15103 crore to Rs 20116 crore in 1999-2000.

The company has already announced a dividend of 40 per cent amounting to Rs 570 crore.    

 

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