Decks cleared for reduction in oil duties
Crude steady
Equal accessfor banks to invest in mutuals
Bruised rupee plunges to 46.38
Sensex slips 102
Labour pangs jam Maruti
VSNL warms up for competition
Foreign Exchange, Bullion, Stock Indices

 
 
DECKS CLEARED FOR REDUCTION IN OIL DUTIES 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Sept 19: 
Even before sitting down with the petroleum ministry at the bargaining table, the finance ministry has conceded ground by accepting a cut in oil duties to cushion the impact of an inevitable price increase.

At end of a day-long meeting with officials, minister of state for revenue Dhananjay Kumar said: “The government will have to consider a duty cut.”

The move follows petroleum minister Ram Naik’s stand that he would not agree to raise prices unless the finance ministry reduced duties, customs or excise.

Dhananjay Kumar did not specify if the cut the finance ministry is ready to consider will be in excise or customs.

He said the ministry was “doing a preparatory exercise for an anticipated request by the petroleum ministry for a cut.”

The finance ministry, which stands to benefit from higher customs duty collections as international prices go up, has so far been resisting the demand for a duty reduction.

Finance minister Yashwant Sinha is worried about the impact of duty cut on efforts to hold the fiscal deficit around the budgeted level of 5.5 per cent of gross domestic product.

But a compromise will obviously have to be arrived at since, apart from Naik’s resistance, a sharp rise in petroleum prices is fraught with political danger.

It is not clear if the finance ministry overture today by itself will lead to a compromise as Naik may ask for more. In that case, official sources believe, Prime Minister Atal Behari Vajpayee will intervene. He may be advised to reduce the excise duty on diesel from 16 to 8 per cent. At current international prices, the subsidy on diesel works out to Rs 6 a litre, on LPG Rs 160 per 14 kg cylinder and Rs 5-6 on every litre of kerosene.

Petrol and aviation turbine fuel have been cross-subsidising LPG and kerosene. But even these items will not be spared a hike this time.

Officials pressing for a substantial increase in prices acknowledge that a rise of Rs 3-4 per litre of diesel can be politically disastrous. They want a hike of at least Rs 50 per LPG cylinder and Rs 3 per litre of kerosene. However, Naik may not agree to anything above Rs 30 for LPG and Rs 2 for kerosene.

The government mobilises substantial revenue from the petroleum sector. For instance, crude attracts a customs duty of 15 per cent. Again, taxes account for 52 per cent of diesel prices. On an average, taxes on petroleum products constitute 50-60 per cent of prices.

Diesel is being singled out for excise duty reduction because its annual consumption is about 40 million tonnes, nearly half of the total. If excise duty is halved, it will allow the government to limit a price increase to Rs 1.50-2 per litre.

Diesel is also facing a glut in the domestic market with consumption dropping for the last few months.    


 
 
CRUDE STEADY 
 
 
 
London, Sept 19: 
Sizzling oil prices steadied on Tuesday after posting fresh 10-year peaks as consumers in the West continued to fret over possible winter fuel shortages.

London Brent crude futures for November delivery slipped 34 cents to $ 34.12 a barrel, having powered $ 1 a barrel higher on Monday to a new 10-year high of $ 34.98 a barrel.    


 
 
EQUAL ACCESSFOR BANKS TO INVEST IN MUTUALS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Sept 19: 
The Reserve Bank of India (RBI) is likely to do away with a recommendation which says banks that do not have in-house expertise in capital market research should invest less than two-third of the amount set aside for investment in mutual funds.

The decision was taken at a meeting held today between the Reserve Bank governor and chairmen of leading banks. At the meeting, which discussed the recent recommendations made by a RBI-Sebi committee on banks’ investment in the capital markets, bank chiefs rallied against the proposal, which sought to link their investment in mutual funds to their research-skills in the area of capital markets.

“While the bank chairmen were in favour of other recommendations, they sought that the two-third norm should be done away with. They asked the governor not to lay down a specific ratio, but wanted the decision in this regard to be left to the bank boards. We seem inclined towards the proposal,” a senior RBI official told The Telegraph.

The official said the central bank would now proposes draft guidelines based on the report and the feedback received from today’s meeting with bank chief executives. The final blueprint will be framed after taking into account the response to these guidelines.

The meeting was attended by the chairmen of State Bank of India, Bank of India, Bank of Baroda, Vijaya Bank, Canara Bank, Union Bank of India apart from private banks such as HDFC Bank, ICICI Bank, Centurion Bank and Vysya Bank.

A committee appointed by Sebi and RBI had recommended that banks’ exposure to capital market may be linked to their total outstanding advances. The upper limit, it said, should be fixed at 5 per cent. The report had said the present norm under which banks can invest 5 per cent of their incremental deposits of the previous year in shares and debentures did not reflect the shift in the asset portfolio from credit to investments.    


 
 
BRUISED RUPEE PLUNGES TO 46.38 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Sept 19: 
The rupee was on the ropes today, teetering at a record low of 46.38 after mounting concerns over the stubbornly high crude prices sent banks and companies scurrying for dollars, and raised fears that the beleaguered currency could hurtle to the 47-mark within days.

After plumbing its historic intra-day low of 46.40/42, the rupee recovered marginally to finish at 46.35/38, its lowest closing quote ever. The steep 34-paise fall over Monday’s finish of 45.99/46.01 occurred in spite of an early-morning reassurance from the Reserve Bank of India (RBI) that it would meet oil-import needs arising from the rising crude oil prices.

The statement did bring about a respite for the falling rupee, but was not enough to hold back companies and banks from bidding for dollars amid thin supplies. Banks were seen rushing to cover dollar positions and, in the process, pummelling the rupee.

“There are also no substantial sources of dollar supply in the market now. All inflows, even those from the EEFC accounts and other sources, have dried up. With FII investments also petering out, dollar supplies may remain thin,” Rohan Lazrado, general manager of ICICI Bank, said.

Forex analysts now say the Indian currency is likely to lose more value as the market is yet to shrug off the fears caused by rising crude oil prices, even as dollar demand from corporates and banks continue to remains strong. With other currencies remaining on a weak wicket, and global equity markets in the throes of volatility, key players in the market feel that the rupee is headed lower in the immediate term.

“We may find the rupee inching closer to the 47-barrier if the current spate of dollar buying were to continue. People are still worried about the impact of oil prices,” said a nervous dealer with one of the foreign banks. There were a few, however, who felt that the rupee is likely to rule in a band of 46.25-60 in the next few days if the central bank does not intervene.

Earlier in the day, the central bank said it will continue to meet, either partially or fully, the foreign currency requirements of oil companies to pay for the import of crude and petroleum products.

However, the mild recovery did not last long. Skittish corporates, not satisfied with what the Reserve Bank had to say, emerged to scoop up the dollar supplies. Though the State Bank of India (SBI) was seen selling the greenback at regular intervals, the rupee’s fall was accentuated at the close of trading hours, when it dipped to an intra-day low of 46.40/42, before edging up marginally to finish at 46.35/38.

Today’s massive fall follows Monday’s 22-paise decline, and a 1.20 per cent plunge in the course of just a week after two weeks of relative stability in the interbank forex market.    


 
 
SENSEX SLIPS 102 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Sept 19: 
As information, communication and entertainment (ICE) stocks melted on a sudden and unexpected bout of selling on premier bourses with a Big Bull doing a bear, the BSE sensex continued its journey downhill for the third consecutive day.

Market rumours suggested that leading a FII and a big bull were heavy sellers in technology stocks. In fact, dealers are not ruling out a further decline in share values following the massive unloading of long positions in technology stocks especially in front-line software, media and telecom stocks.

After a weak start, equities generally staged a smart recovery lifting the sensex to touch the day’s high of 4390.21 around noon. However, it crashed suddenly after midsession to the day’s low of 4171.89 before closing at 4264.34 as against yesterday’s close of 4366.41, a fall of 102.07 points or 2.34 per cent.

The BSE-100 index was down by 39.55 points at 2160.55, from the previous close of 2200.10.

Attributing early setbacks that had pushed the sensex below the 4300-mark to soaring crude oil prices, dealers said operators made good buying, aiding a majority of heavyweighted scrips to recover initial losses and a few to even score impressive gains within a short time after resumption of trading.

However, stocks went into a tailspin during the latter part of the session reportedly because of heavy unloading by a leading bull in his favourable counters like Himachal Futuristic, Global Tele, DSQ Software, Zee Telefilms and Satyam Computer.

Mutual fund major Unit Trust of India is also said to have sold shares in huge quantities. According to marketmen, UTI was especially harsh on Satyam Computer. The institutional sales forced operators to cover their open positions. The day also saw a number of PSU heavy weights hitting the lower band, as scrips like Bhel, MTNL, Nestle, Grasim, Tisco, Glaxo, ITC, HLL and Reliance were badly mauled.

Zee Telefilms was down 7.42 per cent to Rs 431.45, Infosys Technologies was down 3.75 per cent to Rs 7,690 and Satyam Computer was down 3.32 per cent to Rs 508.20.

However, amidst the mayhem, a few scrips like HCL Tech, up 8 per cent to Rs 1,166 and Sonata Software up 4.25 per cent to Rs 740 and Polaris Software recorded gains.    


 
 
LABOUR PANGS JAM MARUTI 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Sept 19: 
The winds of unrest are gathering into a storm at Maruti.

About 4,500 members of the Maruti Udyog Ltd Employees Union (MUEU) today decided to strike work to force the management to implement its demands, which it claimed had been agreed to a year ago.

Mathew Abraham, general secretary MUEU shot off a letter to the management stating: “The management had misunderstood our endeavour to settle our demands across the table as weakness and we are forced to go on a hunger strike, tool down strike, fast unto death and total strike without any further notice.”

The union is demanding a new pension scheme, finalisation of annual production targets and an incentive scheme.

However, the employees’ union, which had been demonstrating for the last few days, today found the Gurgaon-based Maruti factory’s gates locked, with the company declaring a two-day holiday, ostensibly to cut down on excess production and liquidate old stocks.

Abraham claimed phyrric victory, charging the company’s decision to suspend vehicle production for two days was forced by its actions. A late evening release from Maruti, however said, “The current level of vehicle stocks are marginally higher than normal levels. In order to achieve stock correction at the plant, the company has decided to reschedule its production for two days.”

Stocks piled up following a sales slowdown in the month of June and the company has on various previous occasions, rescheduled its production to check inventory levels, the release pointed out.

MUEU president Dinesh Kumar said: “Maruti officials have stopped production following our agitation. The plant is fortified by the police but we are continuing our peaceful agitation.”    


 
 
VSNL WARMS UP FOR COMPETITION 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Sept 19: 
Videsh Sanchar Nigam Ltd (VSNL) has decided to invest around Rs 1000 crore to set up undersea optic-fibre cables and internet gateways.

Confirming the decision, a senior VSNL official said the investment would be made in the current fiscal.

“The decision has been taken in view of the competition, which is expected to hot up with the gradual opening of the telecom and related sectors,” the official said.

Part of the investment will be made in building an optic-fibre network to connect some cities.

VSNL is gearing up to provide internet services in around 20 cities as soon as the government gives its approval. At present, the organisation is providing internet services in six cities, Calcutta, Delhi, Mumbai, Chennai, Pune and Bangalore.

“We have the infrastructure in more than 15 cities where we can provide internet services instantly. But this depends on the licence we are seeking from the government,” he said.

The official further pointed out that the company will not have to invest much to expand its internet services since the infrastructure is already in place in several cities.

“Currently, the department of telecommunications and several private ISPs are providing internet services, sourcing the bandwidth from us. We ourselves will be able to provide the same service as and when we get a licence,” he said.

The official, however, admitted that the competition will hot up even among the state-owned internet service providers like DoT and Mahanagar Telecom Nigam Ltd, after VSNL is given the freedom to work as a national ISP.

The last few months have seen a large number of players vying for a slice of the ISP market.

“But the industry is bound to witness a consolidation and only those who can provide quality services will exist,” he said.

The VSNL board, which is meeting on September 26, is also likely to discuss another round of reduction in its bandwidth tariffs.

The company has substantially increased its bandwidth capacity over the last couple of months and a further expansion is on the cards.

“The company will reduce prices for bandwidth very soon. But we can’t comment on that since the decision is pending,” the official, who is also a board member, said.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.38	HK $1	Rs. 5.85*
UK £1	NA	SW Fr 1	Rs. 25.50*
Euro	NA	Sing $1	Rs. 26.10*
Yen 100	NA	Aus $1	Rs. 24.75*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta	Bombay

Gold Std (10gm)	Rs. 4550	Gold Std (10 gm	4525
Gold 22 carat	Rs. 4295	Gold 22 carat	4185
Silver bar (Kg)	Rs.7950	Silver (Kg)	8050
Silver portion	Rs. 8050	Silver portion	8055

Stock Indices

Sensex	4264.34		-102.07
BSE-100	2160.55		-39.55
S&P CNX Nifty	NA		-
Calcutta	118.32		-2.61
Skindia GDRNA	NA		-
   
 

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