Battered rupee breaches 46-mark
Tariff walls likely to protect small units
State Bank hikes PLR, deposit rates
Exide may split into two
Britannia open to stock split plan
ISPs to pay Rs 20lakh in monitoring costs
Mercedes returns to city
Govt looks at ways to increase dollar inflows
Industry growth rate drops to 5.4% in Q1
Foreign Exchange, Bullion, Stock Indices

 
 
BATTERED RUPEE BREACHES 46-MARK 
 
 
OUR BUREAUX
 
Mumbai/New Delhi, Aug 11: 
The rupee today plunged below the 46-mark to 46.07/08 against the dollar, but later rallied sharply to close at 45.79/81 after indications that the export earners’ foreign currency accounts (EEFC) norms will be reviewed to ensure that more greenbacks are released into the market.

The slump came on a day when Reserve Bank governor Bimal Jalan was locked in huddles with key economic ministries in Delhi, explaining to them the reasons and the remedies for the currency’s woes.

Emerging from a meeting with the finance minister, he told reporters that the central bank will examine how the $ 2 billion stashed away in EEFC accounts can be unlocked.

He could not say how exactly this would be done, largely because the passage of the Fema Bill had changed the policy parameters drastically.

In addition, he said companies have been asked to bring back the unused portions of their ADR/ECB issues.

“Whenever they have been the money abroad for a long time, we have asked them to bring it back. There is nothing new in this,” Jalan said. ‘

He, however, refused to disclose the names of the firms. In all, seven companies have raised $ 1 billion through ADRs.

He said the move was part of the Reserve Bank’s measures to halt the slide in the value of the rupee, which has been blamed on a dollar rush and sparse supplies. Jalan said this is not the first time when companies were being asked to bring back the funds parked abroad.

“In the past too, firms which raised money through GDRs were asked to bring back funds,” he added.

Existing guidelines allow companies to retain about 50 per cent of the money raised from overseas equity offering abroad. The RBI chief said the market could witness massive dollar inflows, and the pressure on the rupee will ease, once the measures start yielding results.

In Mumbai’s inter-bank forex market, the rupee opened weak at 45.85/90 and tumbled below the crucial psychological threshold of 46 per dollar due to an early-session scramble for dollars.

However, exporters sold dollars when the currency plumbed its intra-day low of 46.07/08, but dealers said many were expecting it to sink to 46.20 so that they could book bigger profits.

The sale of dollars picked up after reports said the Reserve Bank had asked banks to furnish information on their EEFC balances.

By noon, the rupee had staged a good turnaround, and was trading around 45.80. It remained confined to a narrow band of 45.80-90 for the better part of the day, closing at 45.79/81 in a 6 paise gain over Thursday’s finish of 45.86, but a recovery of 28 paise from its intra-day trough.

Dealers expect the rupee to trade in the range of 45.80-45.90 when trading resumes on Monday. According to them, much will depend on the RBI’s success in getting exporters to bring back the unused funds from their EEFC accounts.

“If the RBI targets the corporates apart from exporters, we may even see the rupee touching the 45.50-60 mark,” a dealer said.    


 
 
TARIFF WALLS LIKELY TO PROTECT SMALL UNITS 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Aug 11: 
With the rupee in doldrums, the Prime Minister’s Office has asked the ministries of finance and commerce to work out ways to protect domestic producers from a potential tide of cheap imports.

“Although dollar imports are turning costlier, the PMO is worried that imports denominated in the currencies of other major trading partners— yen, pound and euro — are turning cheaper. This can pose a serious threat to domestic manufactures, especially consumer goods. The PMO wants fiscal steps to be taken,” top officials said.

The PMO’s concerns are accentuated by the fact that the import restrictions on a host of consumer goods will be lifted early next year and the small scale units will be among the worst hit.

Small businesses have been the ruling BJP’s main vote bank and the PMO is naturally concerned that they should be protected.

Finance ministry officials feel that while it would be difficult to push back the time frame for dismantling quantitative import

restrictions, given the country’s international trade pact commitments, suitable tariff walls can be devised.

Planning commission member S.P.Gupta, who has been involved in preparing a report on small-scale sector enterprises, said the government would in all probability decide not to lower tariff below bound rates. Sections within the cabinet have long been arguing that tariff rates can be lowered even after three years under the pacts that India has signed. This argument is likely to be accepted by the two ministries which will be working out the tariff protection wall.

At the same time a plan is being worked out to continue with some 9-10 subsidies which are now being extended to the SSIs. “We are devising a way to ensure that these subsidies do not flout WTO norms,” officials said.    


 
 
STATE BANK HIKES PLR, DEPOSIT RATES 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Aug 11: 
Getting its act straight after scores of smaller banks beat it to the post, the State Bank of India (SBI), the country’s largest bank finally hiked its prime lending rate today.

However, while its rivals were first out of the blocks in announcing the revision of lending rates earlier this week after the Reserve Bank of India raised the cash reserve ratio (CRR) and the bank rate last month, SBI, in a deft move, also raised deposit rates across the board by 50 basis points.

In addition to hiking the PLR by 75 basis points to 12 per cent, the medium term lending rates (MTLR) will be revised upwards by 50 basis points to 12 per cent, according to a decision taken by the bank’s asset liability management committee here today.

Its prime lending rate (PLR), medium-term lending rate (MTLR) and deposit rate hikes across the board will come into effect from tomorrow, the bank announced in a late evening press communiqué.

While the banking industry was expecting a hike in lending rates, the hike in deposit rates clearly took them by surprise. Bankers say that the decision to tinker with deposit rates will create ripples as other banks will be forced to follow suit in the days to come.

The Reserve Bank, in a bid to stem the declining rupee had raised the CRR and the bank rate on July 21 to suck out excessive liquidity in the banking system. The measures were primarily aimed at raising short-term interest rates.

The central bank had raised the bank rate by one per cent to 8 per cent and the CRR by 50 basis points to 8.5 per cent to rescue the rupee.

However, the move failed to pay as the rupee continued its southward journey to touch an intra-day low of Rs 46.07-08 today.

Following the RBI move, many banks announced upper revisions in lending rates, conspicuously avoiding tinkering with the deposit rates, while SBI had maintained an enigmatic silence.

Thus, though smaller banks had a headstart earlier this week with an upward revision in their PLRs, the State Bank’s surprise move hiking deposit rates has put it way out of the reach of the league.

Incidentally, SBI has pegged its lending rates in line with other leading banks like Bank of Baroda (BoB) and Corporation Bank, who earlier this week announced a hike in their prime lending rates (PLR) by 75 basis points and 50 basis points respectively, to 12 per cent.

Some of the other banks that have so far raised their lending rates include HSBC, ICICI Bank, Oriental Bank, Vijaya Bank, Punjab Bank, Dena Bank and Union Bank of India, among others.    


 
 
EXIDE MAY SPLIT INTO TWO 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Aug 11: 
Exide Industries Ltd (EIL), the Rs 900-crore battery major, plans to hive off its automotive and industrial divisions into two separate companies. EIL is also weighing options to induct joint venture partners for the two companies, who will bring in both funds and modern technology. It is believed to be in talks with several multinational battery majors in this regard.

Confirming the move, EIL executive chairman and chief executive officer (CEO) S. B. Ganguly told The Telegraph that the company has already started the process of separating the assets of the two divisions.

“We plan to be a major global player in the battery industry in the next few years. Towards this end, we are considering setting up two companies,” Ganguly said.

The EIL chief also indicated that the company is scouting for positive alliances to achieve this target. For now, the two divisions are being separated into two strategic business units.

“The two units will have completely different administrative and marketing set-ups. The manufacturing facilities are also being separated to strengthen the focus in each unit,” he said, adding the two units will work as autonomous profit centres.

EIL recently has its assets revalued by S.R. Batliboi. “We went in for a revaluation of our assets to obtain a correct assessment of their value. Moreover, the non-performing assets need to be identified,” Ganguly said.

He said the value of the company’s assets increased by Rs 56 crore following the exercise.

The company, which has grown by over three-and-a-half times in the last five years, also plans to set up a joint venture in Bangladesh. While talks are on with a number of companies in this regard, Ganguly did not rule out the possibility of setting up a 100 per cent subsidiary to produce automotive batteries, with an installed capacity of 60,000 to one lakh units. The company will need to make an investment of Rs 10 crore in the first phase to set up a manufacturing facility in Bangladesh. Ganguly said the company was keen on the Bangladesh project because of the tax advantages vis-à-vis India.

Earlier, addressing the shareholders at the company’s 53rd annual general meeting, Ganguly said the company had renewed its technology transfer agreement with Furukawa batteries and Shin-Kobe of Japan.

Ganguly added that EIL was in the process of appointing nodal agencies to expand its rural marketing base. “A nodal agency will be appointed for every 10 villages, to look after the needs of tractor users and other rural vehicle owners,” he said.    


 
 
BRITANNIA OPEN TO STOCK SPLIT PLAN 
 
 
OUR BUREAU
 
Calcutta, Aug 11: 
Britannia Industries Ltd would examine the issue of stock split, chairman Nusli Wadia said today. Addressing the 81st annual general meeting of the company, Wadia said the board would meet shortly to discuss stock split in details.

Shareholders demanded that as the price of Britannia stock was high, quoting around Rs 690, a split would help bring it down.

On the company’s new dairy division, Wadia said it was contributing nearly 10 per cent to Britannia’s sales. The Milkman’ brand would be the umbrella brand for all dairy products of the company.

Besides cheese and ghee, the company recently launched butter under the Milkman brand. The company is also planning to launch a slew of flavoured milk brands this year.

During 1999-2000, the sales of the company touched Rs 1168 crore and it registered a net profit Rs 51 crore.

Wadia said the company was earning a surplus on the interest account as interest income was higher than the outgo. He said there are no plans to raise funds from the market at the moment.

Managing director of Britannia, Sunil K Alagh, later told reporters that the company has appointed Tata Energy Research Institute (Teri) to do energy audit for them.

The primary objective, he said, was to bring down fuel and energy costs.

On growth plans, Alagh said the dairy unit is expected to grow at a rate of 20 per cent in the current fiscal. The bakery division would also grow by 15 per cent.

Last year, sales improved by 14 per cent, with both the bakery and dairy divisions contributing to growth. Operating profit grew by 38 per cent at Rs 70.4 crore last year.

JL Morison buyout plan

J.L. Morison (India) Ltd, a Rasoi group company, is open to brand acquisitions in food items which could be sold through its own network. The company is also planning to buy brands in oral, hair and skincare segments that would not clash with flagship Nivea brand, the company chairman Raghu Mody said today.

Addressing reporters after the company’s 65th annual general meeting, the first one to be held here after the registered office shifted to the city, Mody said JLM plans to enter haircare business with a 24 per cent equity stake in European Haircosmetics (India) Ltd to be floated with a capital base of Rs 1 crore. The balance 76 per cent will be held by the overseas principal.    


 
 
ISPS TO PAY RS 20LAKH IN MONITORING COSTS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Aug 11: 
Internet service providers (ISPs) planning to set up submarine cable-based landing stations for international gateways will have to pay Rs 20 lakh as administrative charges to the government departments that monitor their operations.

In addition, they will have to fork out a ‘processing fee’ of Rs 50,000 when they file applications for setting up the landing stations with the Telecom Regulatory Authority of India (Trai).

According to the guidelines announced today for setting up submarine cable landing stations (SCLS), the transmission link will have to be obtained from the department of telecommunications (DoT), licensed basic service operators, Railways, state electricity boards, PowerGrid Corporation or any other operator authorised to lease connections to ISPs.

Landing stations — the point where a submarine cable comes on shore — will be used as international gateways by ISPs. The move to allow ISPs to lay under-water cables aims is aimed increasing the availability of international bandwidth (connectivity) in the country.

Trai will monitor the traffic at landing stations, and it will be given unlimited rights to do so by the bandwidth provider, which could be a submarine cable company.

The guidelines require that the ISP must get an assurance that the bandwidth provider will co-operate with the telecom watchdog by providing it any information that is asked for. The Net-access provider will have to inform Trai about the lapses.

The ISP must furnish the details sought by Trai immediately. Delays, if any, should be limited to 15 days at the most. The landing station, which must be used only for internet traffic, will be part of the service area of the licencee.

Landing stations will, however, not to be allowed in areas which are sensitive from the point of security. Internet nodes in high-security areas shall be routed only through VSNL. The list of these areas would change from time to time. As of now, it includes Punjab, Jammu & Kashmir, the north-eastern states, Rajasthan, Andaman & Nicobar Islands and coastal strips of Gujarat and Tamil Nadu (excluding Chennai).

The ISP will have to secure Trai’s approval before making changes or adding to its range of services. Complaints and disputes between the ISP and bandwidth provider on the one hand, and with subscribers on the other, will have to be resolved on mutual terms. The DoT shall not intervene. The licensee shall ensure that landing stations do not interfere with the other existing systems of department of telecom operations (DTO), or any telecom service provider.

The ISP which sets up the landing station cannot claim the right to, or will not, get any special preference in carrying voice traffic once the sector is opened up to private companies.

The following are the parameters for monitoring the landing stations:

Ensure that only internet data traffic is carried through landing stations, and not voice traffic.

Good-quality intrusion detection system to ensure that the landing station (link) does not become a launch pad for attacking sites in India

More than one security agency should be able to monitor traffic simultaneously

The guidelines were worked out by a committee consisting of representatives drawn from department of telecommunications (DoT), ministry of information technology (MIT), National Association of Software and Service Companies (Nasscom) and several other agencies dealing in infotech.    


 
 
MERCEDES RETURNS TO CITY 
 
 
BY AMIT CHAKRABORTY
 
Calcutta, Aug 11: 
Mercedes-Benz, the German maker of cars long seen as enduring symbols of social stature and emblems of regal opulence, has picked up Siddharth Automobiles as its dealer in the city after a hunt that lasted close to four years.

Mercedes-Benz India (MBIL), a 100 per cent subsidiary of the German auto major, will return to the city with greater vigour: it will offer the city’s rich and famous new models.

MBIL managing director and chief executive officer, Juergen Ziegler, will inaugurate next week the outlet which will sell the E-Class Mercedes (made at the company’s Pune plant), and the MB 100 vans. The vans, costing Rs 14 lakh, will be will be imported as completely built units (CBU). The premium S-Class Mercedes-Benz cars, priced at a staggering Rs 65 lakh, will also be launched in September. Unlike the vans, this model will be manufactured in the country.

Mercedes Benz India had been without a dealer in the city since late 1996 when its sales contract with Telco was terminated.

French Motor Car Company was dealing in Mercedes, along with Telco vehicles. It stopped doing so after the Tatas, which pulled out as a joint venture partner in Mercedes Benz India (MBIL), barred the dealer from selling India-made or imported Mercedes cars.

Companies and assorted multi-franchisee car dealers threw their hats in the ring to bag the dealership in a city that boasts of 400 Mercedes cars. To that number, add another 100 cars in other parts of the region. Loyalka, whose dealership ranges from two wheelers to six wheelers, is thrilled at having bagged the rights to sell Mercedes cars. “I have already learnt a lot while securing the Merc dealership. I look forward to learn more,” he beamed. Earlier, Mercedes Benz tried a number of city car dealers, including the Bothras of Bothra Ford, to sell their vehicles as an interim arrangement but none of them were formally given the dealership. Later, the company started operating from Car Craft, a workshop authorised to service its vehicles.

Car Craft, which earlier sold Daewoo cars, is also among those keen on the Mercedes dealership. Around 20 car owners responded to the Mercedes Benz India’s offer for exchange of old models. With a reasonable fleet of cars — of which a large number are old enough to need regular servicing — MBIL cannot afford to function without a regular dealer and authorised service vendor.    


 
 
GOVT LOOKS AT WAYS TO INCREASE DOLLAR INFLOWS 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Aug 11: 
Prime Minister Atal Behari Vajpayee today held a meeting of all key economic ministers to review the current economic scenario, focusing on ways to increase the inflow of NRI and foreign direct investments and hasten completion of major infrastructure projects.

At the 90-minute, fire-fighting meeting, which was held against the backdrop of the rupee’s plunge against the dollar, Reserve Bank governor Bimal Jalan briefed the government on the economic situation including the central bank’s prognosis on how the rupee had fared. Cabinet sources said the meeting was informed that a move towards more debt-free inflows would not only stymie a long-term slide in the rupee’s value but also help spur industrial recovery. Similarly, quick completion of major projects would revive flagging industrial demand.

After the meeting, disinvestment minister Arun Shourie told reporters that the ministers discussed the need to step up FDI and NRI flows in general terms. Later, sub-groups will be set up to devise specific measures.

“We have also identified that some 30 infrastructure projects account for 90 per cent of the government’s cost overruns. We will be dealing with them,” he said.

Shourie said he had also briefed Vajpayee on the parliamentary debate on divestment to prepare him for a crucial meeting with the trade unions tomorrow where Vajpayee is hoping to convince labour leaders that they have no cause to worry about the divestment policy.

The divestment minister said the meeting also discussed the need to reassess suggestions made by the pay commission to downsize government and freeze jobs in the light of a report by the Expenditure Reforms Commission that is expected to be placed before the cabinet soon.    


 
 
INDUSTRY GROWTH RATE DROPS TO 5.4% IN Q1 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Aug 11: 
The growth in industrial production fell to 5.4 per cent in the first quarter of the current fiscal compared with 5.7 per cent in the previous corresponding period, owing to a decline in growth in the manufacturing sector. Industrial production during the month of June stood at 4.9 per cent, lower than the five per cent recorded in the same period last year, according to the latest Index of Industrial Production (IIP) released by the Central Statistical Organisation today.

The manufacturing sector, which accounts for close to three-fourths of the total weight of the IIP, recorded a 5.5 per cent growth during the first quarter as against 6.7 per cent growth in the corresponding period last year. In the month of June it logged a 5.1 per cent growth compared with 5.8 per cent a year ago.

The mining sector saw a major revival registering a 4 per cent growth as against a negative 1.1 per cent in the same period last year. For the month of June, the sector grew by 3.8 per cent compared with a negative 1.7 per cent in the previous year. The electricity sector registered a 4.9 per cent growth during the first quarter, higher than the previous year’s 4.5 per cent but lower than the overall industrial growth. In June it grew by 4.7 per cent compared with 4.1 per cent last year.

Meanwhile, a negative 1.8 per cent growth in the capital goods sector in June saw it remaining stagnant during the quarter as against the previous comparable period.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 45.81	HK $1	Rs. 5.80*
UK £1	Rs. 68.99	SW Fr 1	Rs. 26.55*
Euro	Rs. 41.85	Sing $1	Rs. 26.40*
Yen 100	Rs. 42.12	Aus $1	Rs. 26.40*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta	Bombay

Gold Std (10gm)	Rs. 4530	Gold Std (10 gm	4510
Gold 22 carat	Rs. 4275	Gold 22 carat	4170
Silver bar (Kg)	Rs.7900		Silver (Kg)	8050
Silver portion	Rs. 8000	Silver portion	8055

Stock Indices

Sensex		4192.00		-17.85
BSE-100		1310.75		-17.25
S&P CNX Nifty	118.95		-1.02
Calcutta	121.42		-0.04
Skindia GDRNA	740.29		-11.79
   
 

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