Govt relaxes cap on FDI in telecom
12% licence fee set for Category A basic circles
Janus sparks Infosys rally
Shareholders force vote on L&T resolutions
Hind Motors yet to find recovery route
National Test House door may be closed
Dell hints at big India plan
Foreign Exchange, Bullion, Stock Indices

New Delhi, Aug 31: 
The Cabinet today allowed 100 per cent foreign direct investment (FDI) in telecom through the automatic route, and cleared a restructuring plan for the income-tax department that will lead to job cuts and the use of cyber tools.

Hundred per cent FDI will be allowed in internet service providers (ISPs) that offer infrastructure support, electronic mail, voice mail and dark-fibre services. However, ISPs that set up gateways are not eligible for the higher limit.

In another important move which will boost investment flows into the country, foreign venture capital funds (VCFs) can now invest in local ones, and even in other companies through the automatic route. They would have to comply with Sebi guidelines.

The Cabinet also permitted 100 per cent FDI in all activities that come under Special Economic Zones (SEZs) except in defence, atomic substances, narcotics and pyschotropic substances, distillation and brewing of alcoholic drinks and cigarettes/cigars and manufactured tobacco substitutes.

Payment of royalty under the automatic route at the rate of 2 per cent on exports, and 1 per cent on domestic sales, has been permitted on the use of trademarks and brand-names of foreign collaborators, provided there is no technology transfer.

Royalty payments at the rate of 8 per cent on exports, and 5 per cent on domestic sales, by wholly owned subsidiaries to their parent companies abroad have also been allowed.

The income tax department will be split into tax assessment, collection and recording divisions. The number of commissionerates will be increased, and a part of the lower-end jobs in the department’s total staff strength of 57,989 will be axed. The government says the revamp will improve productivity, besides cutting down its high wage bill.

The number of chief commissionerates will be increased by 60 in two years to deal with the growing number of tax payers, whose numbers have swelled from a little under 8 million in the early 90s to 25 million at present. The rise in expenses that the move entails will be met through savings arising from the 5 per cent reduction in the number of jobs. In yet another crucial decision, the Cabinet decided to review and restructure the Indian Economic Service (IES).

The proposal to allow open market sale of 30 lakh tonnes of rice during 2000-01 in states where there is little or no procurement of the foodgrain has been cleared. The move has prompted by the need to create storage space for the forthcoming Kharif procurement season and to bring down the carrying costs of Food Corporation of India (FCI).

The open-market prices., to be fixed by a high-level committee of FCI, are likely to be at a discount to the government’s procurement price. Sources said the corporation will adjust the savings on the carrying cost of paddy against the economic cost which works out to around Rs 1,150 per quintal.

The present paddy stocks are much higher than the buffer requirement. Till July 31, government agencies procured 166.57 lakh tonnes of rice against the buffer norm of 100 lakh tonnes.    

New Delhi, Aug 31: 
The Telecom Regulatory Authority of India today recommended a licence fee of 12, 10 and 8 per cent respectively for category A, B, C telecom circles and insisted that the existing operators — Department of Telecom Services (DTS) and Mahanagar Telephone Nigam Limited — will also have to pay up. Trai has categorised these three circles based on their revenue generating capacities.

The regulator has also pegged the minimum combined net worth of the promoters of the joint venture at Rs.1,000 crore for category A and B circles with the exception of Kerala, Punjab and Haryana. The networth of the co-promoters for these three circles has been fixed at Rs 700 crore.

In the case category C circles, Trai has recommended a minimum net worth of Rs 500 crore, except for Himachal Pradesh, J&K, North East where the net worth can be Rs 200 crore. In the case of the Andaman & Nicobar Circle, the limit has been fixed at just Rs.20 crore.

There should be at least one co-promoter having experience in the telecom sector with an equity stake of more than 30 per cent. If more than one promoter has the requisite telecom sector experience, the 30 per cent equity can be split among them.

TRAI feels that 100 per cent coverage by each basic operator will not be sustainable on economic considerations. It will, therefore, suffice even if one of the private sector operator extends his service to the area covered by each such SDCA and establishes point of presence therein in addition to the existing players — MTNL/ DTS.

Trai has also ruled out the re-sale of licence for an unspecified period . “At the present stage of development of the telecom network in the country, a mandated unbundling of the local loop may not be feasible. Resale is a feature of mature markets where there is an excess of facilities with the incumbent. The Authority would like to review the situation once the market matures and unbundled costs are available.”

Trai has also allowed direct interconnectivity among all service providers in the same service.

Six circles — Maharashtra, Andhra Pradesh, Gujarat, Rajasthan, Punjab, and Madhya Pradesh — have licensed private basic operators . These operators have accepted the migration packages offered by the government. For these operators, the licence fee due under the earlier arrangement up to the date of migration i.e. 31.7.99 has been reckoned as their entry fee.

“It is recommended that while in the interest of introducing effective competition, these six circles may also be opened to unlimited competition, in the interest of maintaining an economic level playing field, the licence fee payable by the existing operators may be waived for a limited period. This will not bring them entirely at par with the new service providers in terms of initial investment but, considering the advantage of their early entry in to the market, it will enable them to nurture and maintain the competitiveness of their business,” Trai said.    

Mumbai, Aug 31: 
The Infy story worked its magic on the bourses today after a brief hiatus, with the scrip topping the turnover charts in both the exchanges with a combined turnover of around Rs 2,129 crore, a record for the scrip.

Aggressive buying by foreign institutional investors believed to have been led by Janus, saw the Bangalore-based dream machine clock huge volumes of over 25 lakh shares.

On the Bombay Stock Exchange (BSE) alone, the scrip clocked a turnover of Rs 930.28 crore on the BSE, rising sharply to close at Rs 8373.15, a huge gain of Rs 548 over the opening price of Rs 7825.

The story was repeated on the NSE with the counter closing higher at Rs 8326.80 after opening at Rs 7825, clocking a turnover of Rs 1,198.51 crore. Unconfirmed reports attribute rapid purchases in the counter to Janus, which itself is said to have bought more than 2 lakh shares. Brokers said that this buying soon culminated in both operators and domestic institutions joining the spree.

“Though the scrip began on a mild note as compared with its previous finish, there was all-round buying as soon as the FIIs stepped in,” a broker remarked.

As sustained buying came in from the FIIs, several speculators who had gone short on the counter soon rushed to cover their positions.

Market circles attributed the buying to some positive news regarding the much-awaited acquisition of a US software firm.    

Mumbai, Aug 31: 
Shareholders angry over the performance of Larsen & Toubro (L&T) forced a vote on four of the 13 resolutions moved at the company’s annual general meeting held here today.

However, the resolutions are expected to sail through because the management has the support of institutional stakeholders and a large number of minority shareholders.

Century Textiles and Tata Chemicals had faced similar shareholder outbursts at their annual meetings in recent months.

Investors voiced their displeasure over the company’s lacklustre performance. Company chairman S S Marathe tried to convince them that the slump was a result of several factors such as excess capacity and poor realisation of cement, even though there was considerable growth in volumes.

The resolutions that will be put to vote included those on the adoption of the balance-sheet, revision in salaries, sitting fees for directors and the re-appointment of auditors, Sharp & Tannan.

Marathe said the divestiture of the cement business was taking time because the management was waiting for a preliminary report to be presented by advisors, DSP Merrill Lynch and J P Morgan. According to managing director A M Naik, the exercise will take at least six to eight months.

The company will have capacity of producing 16 million tonnes of cement by 2001, the highest in the country, Marathe said. It will set up a grinding unit in West Bengal which will mark its entry into eastern region.

The investment bankers are advising the company on various issues related to the demerger of its cement business. “In the next two months we will take a final decision and approaching shareholders for approval,” Marathe told the AGM.

Marathe stressed the fact that his had orders worth Rs 8146 crore, up 6 per cent over Rs 7688 crore in the previous year. The order backlog at the end of 1999-2000 was Rs 6819 crore, an increase of 16 per cent over Rs 5870 crore in March 1999.

The AGM was unique in that the company set a time limit for shareholders to speak. It installed an amber and red light in front of the speakers’ podium. In spite of this, shareholders failed to be brief. One of them said the chairman himself took 35 minutes to finish his opening remarks.    

Calcutta, Aug. 31: 
Even after back to back losses for the last two years, the Hindustan Motor (HM) management today, failed to fix a deadline for a tentative recovery of the company.

Addressing the shareholders at the company’s annual general meeting, chairman C.K. Birla said, “We are making efforts to cut down the losses but we cannot fix a time frame for the company’s recovery.”

Talking about future plans, Birla said that they have undertaken a sales promotion exercise to increase the offtake of the Ambassador and rural transport vehicles. “We are trying to reach out to new areas in Rajasthan, Gujarat and Madhya Pradesh. The number of dealers is also being increased from 100 to 150,” he added.

“We hope that development of infrastructure projects along with economic recovery will help in increasing the profitability of the company,” Birla said. According to him, the increased indigenisation of the Lancer car will contribute positively to the process.

Hindustan Motor has already achieved 45 per cent indigenisation in the Lancer car. In the current fiscal, it will be able to increase the level to 70 per cent, said executive director A. Sankaranarayanan.

On its memorandum of understanding (MoU) with the Malaysia-based Proton, Sankaranarayanan said “Proton has not responded till now. We do not know whether they will extend the MoU beyond this year.”

According to the MoU, Proton was to manufacture cars at HM’s factory at Chennai with a capacity of producing 24,000 cars per annum. The present production level of the factory is around 10,000 -12,000 Lancers.    

New Delhi, Aug 31: 
The Calcutta-based National Test House, one of the premier test houses in Asia, is now on the brink of closure, while its parent, the department of supply, is being scrapped altogether.

The Cabinet secretary has ordered the transfer of all its functions to the Bureau of Indian Standards (BIS), throwing the status of the 88-year-old statutory test house in jeopardy.

Its 290 scientists based in Calcutta and in six branches across the country face an uncertain future, as they may or may not find a place in BIS, which itself has some nascent testing facilities of its own.

In a note addressed to the consumer affairs secretary, the Cabinet secretary has stated, “The Prime Minister has approved...the functions discharged by the NTH Calcutta, may be transferred to BIS, under your ministry.”

The Alipore-based National Test House was set up in 1912 to test railway equipment. In time it grew to be the country’s premier engineering test house, testing bridges, rails, ropeways, machines, buildings and engineering and scientific products.

The NTH also became the statutory third party legal arbiter in court cases and referral centre for tests by the federal and state police agencies such as the CBI, as well as the state criminal investigation departments. Even where the BIS had filed a case or was itself an accused, the courts sought the NTH’s expert opinion.

With the organisation’s functions now being handed over to the BIS, the NTH’s statutory duties as an arbiter will cease to be exercised by anyone, since the BIS itself will be a party in most cases where standards are being challenged.

“The decision makes no sense. The functions of a test house which acts as a legal arbiter should certainly not be handed over to an organisation which itself will be a party to the cases,” said Aabani Roy, MP, who has been associated with the NTH.

NTH scientists say successive Parliamentary committees have been advocating just the opposite course of action for the test house — give it greater independence and recognition as a top notch scientific organisation. Among others, BJP leader Sikander Bakht, former Prime Minister I.K. Gujral and the chief architect of India’s economic reforms programme Manmohan Singh, have led probe committees which have recommended more funds, facilities and powers for the test house.

A few of NTH’s scientists have also sought railway minister Mamata Banerjee’s intervention to take the test house under her ministry. However, Mamata, who is known to have a soft corner for institutions in her state, has not made any commitments as yet.

“The irony of the entire situation is that the department of consumer affairs to whom NTH’s functions have been transferred, itself is under a cloud and may be eventually merged with the department of civil supplies and public distribution,” said a top consumer affairs department official.    

Mumbai, Aug 31: 
Dell Computer Corporation, the direct computer systems major is looking at the feasibility of manufacturing in India apart from leveraging the call centres which it intends to set up to service other countries.

The company today, announced plans to begin direct sales and support operations in major Indian cities. It would be targeting the corporate sector along with government, educational and research institutions, for attaining a triple digit growth in the next few years.

Dell recently received the approval from the Foreign Investment Promotion Board (FIPB) to set up an Indian subsidiary.    


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