China check on Destination India
Big gap between investment cup and lip
TV slots may come under gavel
Study on Haldia dock second arm soon
Dunlop factories start rolling today
IOB sets August date for selloff
Shell-shy Enron woos Petronet

Mumbai, May 18 
The Morgan Stanley Capital International (MSCI) index today scaled down India’s weightage to 7.45 per cent from 9.08 per cent in a widely expected revision that signals the country is now less attractive as an investment destination relative to the other emerging markets.

The global investment bank’s review has more to do with the fact that Taiwan and China have gained in weightage while Malaysia — a country now recovering from the two-year-long Asian economic crisis — has returned to the index. Essentially, it means India will have to work that much harder to convince global money managers that its stock markets are a good place for their money.

Another important aspect of the change is the number of companies whose shares have been included or dropped from the index.

In all, 14 new stocks have been added, while 10 have been given the boot. That many of the new entrants are shares of software and media companies is a reflection of Morgan Stanley’s faith in the potential of the so-called New Economy led by big technology names.

Zee Telefilms, DSQ Software, Himachal Futuristic, Global Telesystems and Hughes Software are among the prominent first-timers in the index while Reliance Petroleum, Thermax and Indian Rayon are among the big ones which have lost out. Reliance Petroleum’s departure was as unpredictable as the entry of Jaiprakash Industries.

Another important change made is that only 30 per cent of Wipro’s market capitalisation will be reflected in the index compared with 100 per cent earlier. On the other hand, 60 per cent of Zee’s market cap will be included in the country index.

Stock markets across the country reacted to the changes in the MSCI index by rewarding some of the companies that made it to the index while knocking down those which were tossed out.

While Zee Telefilms gained and Wipro lost on the Delhi Stock Exchange, Reliance Petroleum fell the maximum it could (12 per cent) on the Bombay Stock Exchange (BSE), where the sensex dipped by 41.79 points to close the day at 4192.44.

Refinery and telecom shares were in the limelight following institutional buying, coupled with short coverings by bears. However, repeated bouts of profit-taking in several index-based scrips drove down the 30-share index to a loss.

Refinery stocks like those of HPCL, BPCL, Madras Refineries, Cochin Refinery and Indian Oil were in good demand right from the onset of trading as local institutions and mutual funds bought heavily in them. All of them closed at their day’s best.

Telecom shares like Himachal Futuristic and Global Telesystems and media giant Zee Telefilms were big draws in the last hour of business when reports about their inclusion in Morgan Stanley Capital International index filtered in.

The fall in the sensex was much attributed to the selling in index-based shares like Bhel, Glaxo, MTNL,Reliance, State Bank, ICICI and ACC. The sensitive index opened slightly lower at 4205.48 and moved in a narrow range of 4254.35 and 4159.90 before closing at 4192.44, a gain of 0.99 per cent over Wednesday’s finish. The BSE-100 index also dropped by 39.63 points to 2071.86.

On balance, however, the market displayed a listless trend, the undercurrent was still one of uncertainty and operators preferred to wait for stronger signals of buoyancy.

One of the scrips in good demand was Tisco following the company’s good performance during 1999-2000.

In the specified section, HFCL, BPCL and HPCL hit their 12 per cent upper circuit filters at the close. The total volume of business was substantially lower at Rs 1902.53 as against yesterday’s turnover of Rs 2608.08 crore.    

New Delhi, May 18 
While India has thrown open its doors to foreign investment since 1991, its reluctance to remove roadblocks has evoked a lukewarm response from investors, with actual projects falling far behind approvals. A performance analysis by the commerce and industry ministry has shown that less than a third of the foreign investment approvals translate into actual projects.

Though the actual inflow of foreign direct investment indicates an upward trend over the last two years, the realisation rate since India opened up remains at a measly 31.3 per cent.

The first year of liberalisation saw the actual foreign direct investment (FDI) inflow of Rs 351.43 crore which amounted to 65.8 per cent of FDI approvals.

Post 1991, the gap between the approval and actual inflow ratio started widening. In the calendar year 1992, it dropped to 17.4 per cent after which it languished between 20 and 29 per cent over the five year period between 1993-97. However, the realisation rate of inflows during 1998 increased to 43.29 per cent, where FDI approvals were worth Rs 30813.50 crore and the actual inflow was at Rs 13339.84 crore. This further increased in 1999 to 46.6 per cent when the actual inflow was Rs 11092.83 crore against FDI approvals of Rs 23795.59 crore.

Analysts point out that the recent FDI liberalisation programme approved by the Cabinet doesn’t tantamount to an increase in FDI flow. This is due to the fact that an entire range of activities covered under the negative list remains out of bounds for foreign investors through the automatic route, while procedures for compliance remain cumbersome.    

New Delhi, May 18 
Allotment of television slots through negotiations may soon be over if the government decides to sell them in open auctions.

The information and broadcasting ministry is toying with the idea and as a first step it plans to auction slot rights on DD Metro for an entire year. Successful bidders can take two slots a week for a 52-week block.

It is also planning to set up a 24-hour radio news channel to cash in on the popularity of broadcast news channels. But possibly the biggest news for the broadcasters themselves are plans for a voluntary retirement scheme for Prasar Bharti staffers.

Top information and broadcasting ministry officials told The Telegraph that the government was considering auctioning serial rights on DD Metro, instead of negotiating with producers, a practice which it felt gave rise to corruption. This would be the beginning of a trend which was likely to be replicated on all Doordarshan channels if found successful.

“If you sell rights through negotiations then there are problems—do it through a transparent bidding process and things turn out better. We did it in the case of Radio FM and look at the money we earned. We did it for Doordarshan Sports by purchasing cricket rights for Rs 44 crore and selling it for Rs 150 crore,” they said. Doordarshan, as a whole, is currently still a money loser. For the financial year ending March 31, it earned Rs 610 crore and spent some Rs 728 crore. Obviously with the current emphasis in the government on earning one’s keep, the ministry feels steps should be taken to make the public broadcaster more profitable. “Even though we can continue to remain a loss-maker as we are supposed to be fulfiling social and strategic responsibilities through many of our channels,” the officials said.

If slot rights were auctioned to producers, it would be their responsibility to get advertising support for the serials and programmes they produce. This in turn would obviously depend on audience perceptions of their production quality.

“If they are good, economic forces will let them stay on air, if they are bad they will quit on their own as there will be no ad support. There will be no petitioning for extension of serial time as there is now,” they pointed out.

Metro is currently considered a dead channel, with low viewership, indifferent programming and a lack of identity of its own. I&B authorities feel the “economic force push” planned might just do the trick and convert it into a channel which would be able to rival new but more funky competitors. On the other hand, plans for a 24-hour radio channel with news bulletins, current affairs programmes, chat shows, debates etc has sprung from the realisation that All India Radio has some 300 journalists spread throughout the country and their reporting strengths were being hardly tapped.

Initially the channel would be in Hindi and English. But this would be later extended to regional language programming.

AIR audience researchers feel a 24-hour news channel would gain popularity only if it were focussed on local events and was available in local languages.

But even as ways are being found to use the surplus manpower strengths of AIR and Doordarshan which together comprise the omnibus organisation—Prasar Bharti—the government is also working out a plan to shed staff and turn the public broadcasters into more lean and trim organisations.

I&B ministry officials said the report on Prasar Bharti prepared by the high level panel comprising Infosys boss N.R. Narayana murthy, ad-guru Shunu Sen and Discovery Channel chief Kiran Karnik had indicted the broadcaster for being over-staffed and had recommended a voluntary separation option. “This is naturally being given serious thought,” officials said.    

Calcutta, May 18 
The Calcutta Port Trust has shortlisted Frederick Harris (India) Pvt Ltd for undertaking an economic feasibility study for the proposed second arm and second lock entrance at the Haldia Dock Complex. CPT sources said the board has already taken a decision to this effect and is awaiting the government’s approval.

Frederick Harris, which has qualified as the lowest bidder among the 21 contestants, will have to complete the study within 45 weeks from the date of placement of the order. The consultancy firm will be paid Rs 2.20 crore for the study. Sources said the government was expected to give its approval shortly.

“We are desperate to initiate work on the second arm as the first arm at HDC has been completely saturated,” they added.

The second arm at HDC comprising 15 berths, will require an investment of around of Rs 3600 crore. The first arm of HDC has nine berths and two oil jetties.    

Calcutta, May 18 
Dunlop India Limited (DIL) will start operations at its Sahagunj and Ambattur factories from Friday, two months after they reopened. The two-year suspension of work was lifted on March 11 and February 7 respectively.

The entire range of products in the company’s portfolio such as truck tyres, off-the-road tyres, LCV tyres, ADV tyres, conveyor belting, V-belts, transmission belting, hoses and adhesives, will be rolled out once the machines start humming, Dunlop India president M. D. Shukla told The Telegraph.

However, the production of aviation tyres will begin on a priority basis from May 22 because of demands placed by the defence ministry. The resumption of work — something the company prefers to call a holding operation — is expected to lead to a turnover of Rs 35 crore in the first six months and Rs 50 crore at the end of the first year.

Dunlop claims promoter M. R. Chhabria has provided enough funds to start the process of production. Earlier, the management had scaled down its estimate of the initial funds required to reopen the two factories from Rs 26 crore to Rs 20 crore. The change came even though the initial expenses were pegged at Rs 26 crore in the earlier revival schemes.

The initial months of the ‘holding operation’ will see the plants being operated at 40 per cent of their capacity utilisation — something that will enable the company to break even.

“The manufacturing operations are planned in a continuous manner. This will ensure that the reduced scale of operations can be undertaken with the highest level of cost efficiency. This is because the capacity utilisation during the run will be considerably higher than 40 per cent,” Shukla said.    

Calcutta, May 18 
The Indian Overseas Bank will divest 25 per cent of the government’s stake through a public issue in August. The bank with a business turnover of Rs 36,000 crore will make a Rs 110 crore public issue at par which will bring down the government’s stake to 75 per cent and increase its post issue capital base to Rs 454 crore from Rs 334 crore.

Chairman and managing director R.V. Shastri said that to reinforce business growth the bank has made an investment of Rs 55 crore in information technology. Shastri said the IOB will open at least 25 more branches in the next few months and convert 100 existing branches into fully-computerised establishments.

Bank computerisation

RBI governor Bimal Jalan today rubbished fears that bank computerisation would pose a threat to bank employees. Inaugurating IOB’s any-branch-banking (ABB) system and inter-city banking between the four metropolitan cities, Jalan said that the introduction of information technology in the banking system is bound to increase business volumes/transactions, reduce costs and generate new employment, as it will spur growth.    

New Delhi, May 18 
Enron is understood to have offered the services of its liquefied natural gas (LNG) terminal, under construction at Dabhol, to Petronet LNG Ltd in a bid to upstage Shell, which is trying to make a foray into the Indian market.

Enron, which once perceived Petronet LNG as a business rival, now appears to be keen to bail it out. The business strategy is to stave off a threat from Shell which, in the event of Petronet’s failure, could emerge as a formidable rival. Enron also stands to benefit in terms of cost, if the terminal handles higher volumes.

Enron is setting up a terminal at Dabhol to process the LNG meant for its Dabhol Power Company. Dabhol will need 2.2 million tonnes of LNG per annum. The terminal, which will have an initial capacity of 2.5 million tonnes, can be expanded any time. Enron has proposed a pipeline to Mumbai to transport gas to Ispat Power, which could be extended to Hazira to suit the requirements of Petronet LNG.

Enron has offered to do the job of regasification and transportation up to Hazira for 80 cents per million btu. Its assessment is that if Petronet LNG takes up this assignment, regasification alone will cost 60 cents per million btu. The offer is for five years, during which Petronet LNG can set up its own terminal.

It is unlikely that the management of Petronet LNG will accept the offer. It perceives Enron to be a far more serious business rival than Shell. Despite petroleum and natural gas secretary S. Narayanan taking over as chairman of Petronet LNG, the proposed terminals at Dahej and Cochin are still facing an uncertain future.

His intervention is expected to be only for a brief period. Industry circles fear that once he is out, the steps he has initiated will lose their momentum.

Qatar is already feeling jittery. By the end of August, Ras Gas, with which Petronet LNG concluded a sale-purchase agreement, will review the progress in setting up terminals.

Together, Qatar Gas and Ras Gas have a surplus capacity of 3.3 million tonnes of LNG per annum which, on debottlenecking, could go up to 4.5 million tonnes. Qatar would not like to wait indefinitely for Petronet to buy gas. There is a strong possibility that Shell may strike a deal with Qatar for the surplus LNG, and bring it to Hazira.

The Gujarat government has already given it a licence to develop the Hazira port to accommodate an LNG terminal. Hazira is considered a better port location than the turbulent Dahej, where Petronet LNG has proposed a terminal.

There is no business purpose for Shell to develop Hazira, if it is not for setting up an LNG terminal. Shell is identified with Oman, where it has an equity stake in the LNG project.

However, when it came to selling the surplus LNG to Enron, the government of Oman did not even bother to consult Shell. Similarly, Mobil is an equity partner in Ras Gas and Shell is its business rival. This need not stand in the way of Qatar striking a deal with Shell.

The sale purchase agreement with Petronet LNG and Ras Gas is considered the best LNG deal so far in the international market. The deal will elude Petronet LNG if the financial closure is not going to be achieved within a reasonable time frame. On present reckoning, it should take at least 2-3 years.    


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