Stage set for full fertiliser decontrol
Cement hiveoff gets L&T board go-ahead
Breathing space for tea traders
Iran wants 10 million kg of tea
Sinha targets below 5% deficit
Tata Finance to lift 100% in group registrar firm
Cellular sureties to be reviewed

New Delhi, July 4 
The committee of secretaries today decided to embrace a fertiliser policy which seeks to raise urea prices annually through partial decontrol while reducing the subsidies paid to fertiliser companies at the same time.

The controversial decision, which is likely to raise the hackles of BJP’s partners in the coalition and large sections of the opposition, has been taken as part of the central government’s plan to prune subsidies, which have stoked the ever-increasing fiscal deficit. The objective is to set the pace for totally freeing urea prices over the next four years, officials said.

The prices of phosphatic and potassic fertiliser have already been decontrolled but urea — one of the most widely used farm nutrients — is being moved out of price control in a progressive manner. In other words, the stage is being set for the free interplay of market forces in the entire fertiliser industry.

The government has already raised urea prices this year and reduced subsidy payouts to the industry, a move which provoked howls of protest from the opposition. Today’s policy decision merely makes this an annual feature.

Late last month, the Cabinet Committee on Economic Affairs (CCEA) had slashed the base rate of subsidy it paid to fertiliser companies. The base rate of concession for indigenously produced di-ammonium phosphate (DAP) was reduced to Rs 2,800 per tonne from Rs 3,900 per tonne. There was no change in the rate of imported DAP, and it stood at Rs 4,500 per tonne.

However, the base rate for muriate of potash was increased to Rs 2,800 from Rs 2695 per tonne. Before the budget, the rates stood at Rs 3250 per tonne. The base rate of single super phosphate was cut to Rs 700 from Rs 800 per tonne.

Today’s decision, in large part, reflect the compulsions of a government that is saddled with a massive fiscal burden, a large part of which is used to finance a fertiliser subsidy bill of Rs 12,650 crore.

The other reason is that the Centre, as part of its commitments made to the World Trade Organisation (WTO) on phasing out import curbs, wants fertiliser prices to be freed before the quantitative restrictions on the import of urea are lifted next year.

The finance and commerce secretaries have even been asked to work out high levels of tariff for imported urea to ensure that domestic companies are not swept away by the rising tide of imports.

To meet the requirements of a decontrolled regime, the panel of secretaries decided that a regulatory body will have to be set up. The body, comprising economists, agro-experts and legal experts, would ensure that farmers’ interests are protected in a situation where prices are determined by demand and supply.

Significantly, the policy wants all naphtha-based fertiliser plants to switch to LNG.

This is expected to reduce their cost of production. However, the meeting could not decide how LNG gas will be supplied to urea producers. Plans to buy gas from Bangladesh and Iran, bringing it through pipelines, have all but remained pipe-dreams till now.    

Mumbai, July 4 
Larsen & Toubro Ltd (L&T), the Rs 7,424 crore engineering and construction major, today decided to demerge its cement division into a separate company.

The L&T board gave its assent after a long drawn out presentation made by the management on the merits of a demerger of the cement operations.

The spin-off of the cement division into a subsidiary will help the company park a part of its equity with a strategic partner or a strong financial ally. This, in turn, will help in unlocking value for the company in its core businesses.

Demerging its cement operations is in line with the recommendations of the Boston Consulting Group on restructuring of the company placed before the board on January 14.

The board today also approved appointment of an investment banker to assist and advise the management on “issues relating to strategic financial partner or capital market-related transaction, if any, and helping in negotiations and other matters relating to the financial structure of the de-merged company”.

Today’s meeting lasted for more than five hours. Shortly after the meeting, the company, in a statement, termed the proposal as an effort towards “enhancing shareholder value”.

The stockmarkets already had a whiff of the developments and the company’s share price surged by Rs 14.55 to Rs 262.50 from yesterday’s close of Rs 247.95.

The company is a dominant player in the Indian cement industry having multi-locational plants with a combined capacity of more than 12 million tonnes per annum. Its plant capacities compare well with the capacities of rival Associated Cement Companies.

The move will pave way for L&T to look for partners in its cement venture. The possibility of a hive-off generated interest in the counter with the capital market and investment managers watching the scrip very closely.

Market analysts said the cement division hive-off would add value to the company and also make it more focused in the engineering and construction businesses.

The Boston Consulting Group’s recommendations are aimed at transforming the company into a knowledge-based premium conglomerate. The plan involves divisionalising its cement business which was recommended to be carved out into a separate company, apart from an entry into the fast growing internet and telecom businesses.

Based on the Boston Consulting Group recommendations, the blueprint foresees that in the long-term L&T’s portfolio will consist of a core engineering business, including, construction, engineering projects, heavy engineering and electrical & electronic businesses and two thrust areas in cement and information technology & communication.

As part of the restructuring process, small businesses, which contribute less than 10 per cent to the company’s turnover, are being reviewed.    

Calcutta, July 4 
In the face of a barrage of criticism from buyers, sellers and brokers, the Tea Board of India has relaxed the newly introduced tea auction norms but has said the changes will remain in place only for the current financial year. The new rules will come into force from 2001.

The board has issued a notification, requesting the organisers of the auction in Calcutta, Siliguri, Guwahati, Cochin, Coonoor and Coimbatore to implement the relaxations with effect from July 17 and 18, coinciding with sale number 29. The amended rules have suggested that the buyer will have to purchase 0.225 per cent of the tea compared with previous years to get free trade samples. This is lower than the 0.25 per cent that they would have had to buy under the new norms.

Earlier, the buyers got free samples if they bought 0.2 per cent of the tea sold at the auction. The new purchase norms will be effective from sale number 15 to the last sale in March 2001.

With effect from 2001-2002, a buyer shall not be eligible for free trade samples if his annual purchases (out of preceding three consecutive purchase years) fall below 25 per cent of the minimum qualifying quantity.

The size of free trade samples has also been revised. For small CTC leaf and dust tea varieties, it will be 30 gms, for the medium category it will be 55 gms and for large leaves it will be 85 gms. Earlier, the sample sizes were 30 gms, 60 gms and 90 gms for small, medium and large sized teas respectively. Tea Board initially suggested that the sample size should be reduced from 30 gms to 25 gms for small tea, 60 gms to 50 gms for medium sized tea and from 90 gms to 75 gms for large sized tea.

However, from the year 2001-2002, the size of the samples will be reduced to 25 gms for small teas, 50 gms for medium sized and 75 gms for large tea.

“The buyers’ association attached to tea auction centres submitted their demands for modification of norms issued on April 24. The representations received have been examined by the sub-committee. The panel recommended that a few norms be modified. The board approved the recommendation on June 28,” a senior Tea Board official said.

Traders had resented Tea Board’s norms that a buyer must purchase 10 packages for the division of a lot. Earlier a buyer used to purchase 5 packages.

According to the new rule, large lots with number of packages between 16 to 34 will be divisible in two contracts with a minimum of five packages. Lot size with 35 packages and above is divisible in three contracts with a minimum of 10 packages.

The minimum lot size to be offered in the auction will be 20 packages for gardens having annual production of more than 250,000 kg. For gardens whose annual production is below 250,000 kg the lots can be offered ranging from 5 to 19 packages.    

Calcutta, July 4 
Iran has shown keen interest to import Indian tea. The Iran State Trading Organisation (STO), which plans to buy 10 million kg of tea, has targeted India to meet its requirement.

The STO chairman along with other officials will visit Calcutta shortly for a formal discussion with the Tea Board.

Iran’s renewed interest in Indian tea is a fall-out of the Consultative Committee of Planters’ Association’s (CCPA) recent visit to that country.

Iran is interested in buying orthodox tea. Indian tea industry has kept an ambitious target of exporting 225 million kg of tea this year compared with 190 million kg of tea 1999.

Gautam Bhalla, chairman of the export promotion and marketing sub-committee of CCPA said, “There is a lot of activity in the private sector too. A number of such Iranian buyers are likely to visit Calcutta in July since they are convinced that more orthodox is going to be manufactured this year compared to last year.”    

New Delhi, July 4 
Finance minister Yashwant Sinha today asked all departments and ministries to institute cost control measures to bring down the fiscal deficit from the budgeted 5.1 per cent to below 5 per cent.

At a meeting attended by minister of state for expenditure, Balasaheb Vikhe Patil, secretary expenditure C.M. Vasudev, member (finance) telecom, financial commissioners of railways and 28 financial advisors (FA) of various ministries, Sinha asked the FAs not to allow expenditure to overshoot the budgeted figures of their ministries. He added that expenditure should be properly spaced out in a fiscal.

He also asked the FAs to speed up the exercise on zero-based budgeting in their ministries and send a report to the finance ministry latest by August 31. Under the zero-based budgeting policy, fresh budgetary allocations would be made only after a thorough review of the targets and achievements set for each department. This could result in an overhaul of the functioning of government departments and achieve reduction in wastage.

Sinha also emphasised the need to control expenditure to ensure that the country is not faced with any serious fiscal crisis. The advisors have been asked to ensure that the expenditure of their ministries does not exceed the target under any circumstances and in rare cases if expenditure exceeds the target in one area, the ministry will have to offset that by matching savings in another area.    

Mumbai, July 4 
In an exercise to consolidate its presence in the financial services segment, Tata Finance Ltd today announced its intention of acquiring a 100 per cent stake in group company Tata Share Registry Ltd (TSRL) through its subsidiary Niskalp Investments & Trading Company Ltd.

TSRL is registered with the Securities and Exchange Board of India (Sebi) as a category 1 registrar and is a closely held company, with a paid-up share capital of Rs 2.53 crore. The shares of TSRL are presently held by Tata companies which avail of its share registry services.

Besides acting as share registrars and transfer agents for Tata group companies as well as non-Tata companies, TSRL handles the administration of the fixed deposit portfolio of a few Tata companies and services almost 2 lakh investors of the Tata Mutual Fund.

A late evening statement from the Tatas, stated that in the services sector of the Tata group, financial services is seen as an important area. Bringing TSRL under the TFL umbrella “would not only enable optimal utilisation of infrastructure, expertise and the branch network of both companies, but would also offer a more comprehensive and well integrated end-to-end range of financial services to the Indian investor,” it stated.

TFL is a non-banking finance company offering a wide range of financial services that include lending as well as investment products, either through itself or through its subsidiaries. In fact, selling retail investment products has been one of TFL’s most significant strengths.

It is a major player in the retail distribution of debt/equity products of FIs, corporates and mutual funds, full-fledged money changing services and broking services for secondary market trading.

Its own fixed deposit portfolio is over Rs 950 crore, which caters to over six lakh investors, making it the largest retail resource mobiliser in the NBFC sector.    

New Delhi, July 4 
The Telecom Commission is soon expected to take up for discussion contentious issues such as the review of financial and performance bank guarantees of cellular operators and to provide direct connectivity between a cellular operator and other service providers. The companies had asked the government to consider these issues since they are critical to enhance and expand their services.

The meeting is expected to discuss the key issue of financial bank guarantees. Cellular operators have demanded that the high-value financial bank guarantees now in its possession should be returned and lien on them withdrawn if operators furnish new sureties, agree to securitise their licence fee as a revenue share for two quarters and the amount payable and wireless planning commission (WPC) charges.

Sources said the meeting would also discuss the demand of cellular operators to review and return the performance bank guarantees of those operators who have achieved the prescribed targets agreed under the licensing conditions.

Under the licence conditions, performance-based guarantees will be furnished and maintained during the entire licence period in the form of a security. Other important issues which are likely to be taken up at the next Telecom Commission meeting include the provision of direct connectivity between cellular operators and other service providers.

This has been a contentious issue since the department of telecommunications (DoT) had ensured that all traffic would flow through its network. Now, with the emergence of private basic telecom operators and development in technology, it is possible to route connections through cable, wireless and other media allocated to a service providers like, internet and cable television.

Another important issue which is expected to come up for discussion is whether cellular mobile service operators should be allowed to provide all types of mobile services, including public call office (PCOs).

Private telecom cellular service providers had recently sought more sops from government in return for their help in helping the department of telecom services (DTS) achieve its village public telephone targets.

The Cellular Operators Association of India (COAI) has asked government to rationalise spectrum charges. At present, these rates are calculated on the basis of city-wise coverage. However, this system discourages cellular operators from entering areas where the business potential remains low.

The association has also sought fair and non-discriminatory access charges so that it can provide services at affordable prices to customers. It also wants import duties on fixed cellular terminal equipment to be waived as soon as possible. In addition, it has sought an end to service tax, and asked for financial support from Universal Service Obligation Fund.    


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