Bengal baulks at royalty rap
Duty shield for tea likely
Govt puts NTC mills in east on the block
L&T to refer Narmada Cement to BIFR
Tata Tele sounds FIs for funds

 
 
BENGAL BAULKS AT ROYALTY RAP 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Aug 5 
In a move which threatens to ignite a row between West Bengal and the Centre, the government has prepared a Cabinet note that denies the state the benefits of a steep hike proposed in the royalty rates paid on minerals.

West Bengal has been kept outside the purview of the increase because it already collects cess on minerals, something the central government claims it is not authorised to do.

The state’s illegal tax — as the government calls it — has invited a volley of court suits, and the Centre feels the judgements have vindicated its position on the contentious issue.

The CPM-ruled state, however, scoffs at the arguments, and says it is well within its rights to impose and collect the cess. It cites Assam as an example, but officials in Delhi say the north-eastern state has already withdrawn the levy last year.

The Cabinet note seeks to amend the Mines & Minerals Regulation Development Act, 1957, a legislation which covers all minerals except coal, sand and lignite. The change will meet a long-standing demand of state governments, which have been complaining that mining companies — most of which are owned by the Centre — are tight-fisted on royalties.

Among the key minerals which have been included in the royalty-hike proposal are iron ore, copper, zinc, gold, diamonds and phosphates.

“The increases proposed are sharp: 21 per cent on iron ore, 79 per cent on graphite, 43 per cent on dolomite and 25 per cent on limestone. On average, the gain for states will work out to 21.5 per cent if the proposal is cleared,” officials said.

Those who stand to reap a revenue windfall from the rate-revision are Andhra Pradesh whose royalty income will rise 24.7 per cent, Tamil Nadu-25.5 per cent, Haryana-32.5 per cent, Maharashtra-29 per cent and Gujarat-26.22 per cent.

Bihar, with one of the largest mineral reserves in the country, will see its royalty income swell by 18.2 per cent. Goa, a small but another mineral-rich state, will get 17.7 per cent more.

“These states largely produce bulk minerals, where the rate hikes have not been dramatic,” officials said.

The increases in royalty in some cases will be the result of the fact that calculations in the case of these minerals will be made on an ad-valorem basis. “Lead, zinc and copper are among those on which rates will be calculated this way,” officials said.

However, the rates on others will continue to be computed on the basis of the old method. “Globally, the advalorem rate is the accepted practice but we find it difficult to uniformly adopt this for all minerals now,” the officials said.    


 
 
DUTY SHIELD FOR TEA LIKELY 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Aug 5 
The Tariff Commission has assured the tea industry that it will look into its demand for raising the customs duty on imports to the bound rate of 150 per cent — the rate at which processed agricultural items are allowed into the country. The industry says the growing tide of imports have depressed prices for more than one-and-a-half years.

Members of the Tariff Commission, headed by M. K. Bezbaruah, met all sections of the tea industry, including producers, sellers, brokers and the Tea Board, to discuss tariff issues.

Industry officials said WTO does not have specific clauses on tea but several individual agreements have implications for imports. By 2001, quantitative restrictions and non-tariff barriers to imports will have to be phased out and replaced by tariffs.

The current restrictions on domestic tariff area (DTA) sales for non-tariff Saarc imports will also have to go. The only ‘protection’ will, therefore, remain in the form of custom and auxiliary duties.

“The increase in basic customs duty on tea from 15 per cent to 35 per cent has been neutralised by the preferential duty extended to imports from Sri Lanka, which currently attract a basic customs duty of only 7.5 per cent,” a senior tea industry official said.

Market sentiment, particularly in South India, continues to be hit. “The rise in basic customs duty becomes all the more imperative when we take into consideration the fact that other tea-producing countries have already put in place high tariffs in anticipation of the WTO regime,” officials said. “The bound rate for tea under WTO is 150 per cent. The increase in customs duty assumes greater importance in view of the dismantling of quantitative restrictions, which have to be completed for the remaining 700 items,” they added.

Tariff Commission has also assured the tea industry that it will look into the industry’s demand of duty-free import of tea-bagging machines and filter paper used in the manufacture of tea bags.

The industry has also urged the commission to ensure that ISO 3720 standard is incorporated as part of the letter of permission and standard conditions for tea companies operating as EOUs and export processing zones    


 
 
GOVT PUTS NTC MILLS IN EAST ON THE BLOCK 
 
 
BY AMIT CHAKRABORTY
 
Calcutta, Aug 5 
The Union government has decided to sell the eastern region subsidiary of National Textile Corporation which has accumulated a loss of over Rs 900 crore.

The Industrial Development Bank of India has sought bids from prospective buyers to buy out the 16 mills of NTC located in West Bengal, Assam, Bihar, Orissa, as on-going concerns. Of these, 12 mills are in West Bengal, two in Bihar and one each in Orissa and Assam.

The combined capacity of these mills are 2,96,113 spindles, 1,829 looms and a cloth processing facility for 1,17,000 metres.

The government has virtually washed its hands of these mills and the corporation has stopped providing working capital to them. Thought the government continues to provide wages to the workers, the payment is usually deferred by a month to 45 days.

At one stage as many as 10 mills were in production on conversion basis. At present, six mills, Arati at Howrah, Bangalaxmi and Rampuria at Serampore, Bengal Fine, Sodepur Cotton at other parts of West Bengal and Associated Industries in Assam are operational on conversion basis.

The yarn merchants of city’s Cotton Street in the Burrabazar area — popularly known as Sutapatti — have practically taken charge of the operation of these mills. Most of the spindles at these mills have been given away to the traders who converted their cotton to yarn by using NTC facilities including the labour force.

NTC earned an income of Rs 2.97 crore from conversion charges in 1998-99 against Rs 2.19 crore in 1997-98.

Neither the NTC management nor the trade unions seemed to mind this arrangement. “Apart from keeping the machines in working condition the labour who work for the conversion agents get some work,” said a union leader.

“Although about 20 to 25 yarn dealers from Sutapatti had joined the NTC as conversion parties, there is hardly any fun in the business,” said Kamal Patwari of Rajkumar Textiles. NTC entered into conversion contract with the traders at Sutapatti on a quarterly basis and a production of 400 to 500 kg was not an attractive business proposition, he said.

The best part of the deal was payment of wages to the workers on time. Nearly 1,000 mill workers engaged in the conversion job get their wages in time while others have to wait for up to a couple months for salaries.

The NTC management has been stressing on reducing workforce through voluntary retirement for quite sometime. From an original strength of over 35,000 workers at the time of formation of NTC’s eastern region operations in early 70s, the number has come down to around 6,350.    


 
 
L&T TO REFER NARMADA CEMENT TO BIFR 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Aug 5 
Larsen & Toubro Ltd has decided to refer Narmada Cement Company Ltd to the Board for Industrial and Financial Reconstruction (BIFR). The engineering and construction company acquired Narmada Cements last year and controls a 95.54 per cent equity stake of the company.

Narmada Cement’s accumulated loss has eroded over 50 per cent of its peak net worth during the preceding four financial years. It attributed the decline to the prevailing scenario in Gujarat where capacity outstrips twice that of consumption. The company has a carry forward loss of Rs 39.55 crore.

L&T, one may recall, had acquired the entire stake of the Chowgule group and followed it up by making three public offers in a bid to mop up the entire equity of the company.

As per the provisions of section 23 of the Sick Industrial Companies Act (SICA), the board of directors will be reporting the fact of the erosion of such net worth to the BIFR.

They are also placing the matter for the consideration of the shareholders at the ensuing annual general meeting.

During the year, the clinkerisation plant at Jafrabad was overhauled, its foundation strengthened and the kiln feeding system upgraded to operate at a higher capacity.

This, coupled with re-engineering process, enabled the company to optimise its production. Narmada Cement has partly repaid and substituted most of its high interest bearing loans in an attempt to reduce the cost of borrowing.

Larsen & Toubro is confident that its initiatives will pay off.    


 
 
TATA TELE SOUNDS FIS FOR FUNDS 
 
 
FROM VIVEK NAIR
 
Mumbai, Aug 5 
Tata Teleservices Ltd (TTL), which is implementing a Rs 4,000 crore basic telephone service project in Andhra Pradesh, is believed to have intimated financial institutions led by the Industrial Development Bank of India (IDBI) for a Rs 1,000 crore assistance for expansion in the state.

Highly placed institutional sources confirmed that though a formal application is yet to be received from Tata Teleservices, the company is set to approach the FIs for assistance. Funds garnered from the institutions is expected to be used for expansion of the company’s services in other parts of the state.

TTL kicked off operations a year ago in Hyderabad. It is expanding the services to other regions such as Vishakhapatnam and Vijayawada, to be followed by the coastal belt. It aims at covering the major part of Andhra Pradesh. The Tata group company had earlier targeted a customer base of over 3 lakh in the state and 35,000 in Hyderabad alone, which had been achieved. Officials, however, did not comment on the possibility of the institutions picking up a stake in the basic telecom project consequent to the assistance being disbursed.

Tata Teleservices was initially a joint venture of the Tata group, Bell Canada International and American International Group (AIG). However, in 1998, Bell Canada pulled out divesting its 39 per cent stake in favour of the other partner, AIG. Consequent to this move, while the stake of the Tatas in the venture rose to 77 per cent, that of the US insurance and finance company stood at around 10 per cent.

Since then, the Tatas have been scouting around for a partner. Unconfirmed reports had indicated that they were in discussions with companies like Telstra, British Telecom, apart from the International Finance Corporation (IFC). The company was also looking at the possibility of a public offering either in the local or international market and to bring in money through financial investors.

Tata Teleservice’s investment in the state, over a licence period of 15 years , is estimated to go up to over Rs 8,000 crore at a later stage and the company is expecting revenues of over Rs 7,000 crore from operations in Andhra Pradesh.

Sources close to the company said that TTL’s 35,000 subscribers in Hyderabad alone came following the introduction of various facilities. The company recently launched the “Call Forward Busy” and “Call Forward-No reply” schemes.    

 

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