Govt plans to dish out food doles
Policy change to charge power sector
Software firms unfazed by US profit warnings
Silverline acquires Sky Capital for $ 22 m
ONGC south well of wealth
Low tide in FDI flows at $ 2.2 billion
Foreign Exchange, Bullion, Stock Indices

 
 
GOVT PLANS TO DISH OUT FOOD DOLES 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Oct 3: 
In a pre-Diwali populist move designed to muffle the raging criticism over last week’s petroleum price increase, the BJP government plans to dole out wheat and rice to one crore families identified as the poorest in the country at just Rs2 and Rs 3 a kg respectively.

Partly to liquidate its huge foodgrain stocks and partly to counter criticism that its reforms have further impoverished the poor, the BJP-led government has sent a note to the Cabinet seeking its approval for the sale of foodgrain at cheaper rates to about 5 per cent of the country’s population.

These “poorest” families will get 25 kgs of foodgrain a month at these highly subsidised prices through the nationwide chain of ration shops.

The Cabinet note also seeks to bring down the price of wheat sold to other poor families from Rs 4.20 to Rs 3.50 a kg. However, the price of rice, which is the staple food in southern and eastern parts of the country, is not being cut. Instead, it will be frozen at Rs 5.65 a kg despite a recent increase in the procurement price of rice.

The procurement price is the rate at which government agencies buy foodgrain directly from farmers to replenish the country’s buffer stocks.

The middle class — which is the largest beneficiary of the ration shop system — will also benefit from a proposal to rationalise prices.

At present, ration shops charge the middle class families (classified as those “above the poverty line families”) Rs 11.30 for a kg of rice and Rs 8.20 for a kg of wheat, which is also the cost price at which the central government buys, stores and wholesale’s foodgrain.

But there are hardly any takers for food at these prices as grain can be bought in the open market at lower rates. Hence, the government’s bid to bring down prices slightly by about Rs 1-2 a kg even if it means adding to the subsidy bill.

In a bid to thwart political opposition to this populist plan, the BJP government has also adopted Congress leader and Madhya Pradesh Chief Minister Digvijay Singh’s proposal that all MPs be allotted 2,000 tonnes of foodgrain a year which will be chanelled into the various food-for-work programmes in their constituencies.

The subsidy as a result of this largesse could be as high as Rs 2,000 crore, which would ratchet up the government’s food subsidy bill to over Rs 10,000 crore this fiscal. The Cabinet note, which is to be taken up for consideration tomorrow, is however being opposed by the finance ministry which feels the government can ill-afford this largesse.

By selling rice at Rs 3 a kg and wheat at Rs 2 a kg to the poorest families, the subsidy being forked out by the government amounts to Rs 8 a kg for rice and Rs 6 a kg for wheat.

It also points out that with three different rates for selling foodgrains there was bound to be a lot of confusion in the market with a lot of food meant for poor people being siphoned off and sold in the open market. But the finance ministry is not opposed to rationalising food prices for middle class families as it thinks this is a much-needed market savvy move.

However, food minister Shanta Kumar who had at one stage mooted a dramatic proposal to give away free rice and wheat has pointed out that the government granaries were at bursting point with few takers for what it had to offer.

Without these giveaways, the government would eventually find its storehouses full of rotten food. Officials estimate that it has about 122 lakh tonnes of food in its granaries now against a buffer norm of 65 lakh tonnes. (The government maintains a pre-determined minimum level of foodgrain in its buffer stock to guard against natural calamities like drought or flood which could disrupt grain production).    


 
 
POLICY CHANGE TO CHARGE POWER SECTOR 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Oct: 3: 
The government will work out a new comprehensive power policy aimed at improving generation and transmission. This was indicated by new power minister Suresh Prabhu today.

The minister also announced the extension of deadline for independent power producers (IPPs) to achieve financial closure to March 2001. The earlier deadline lapsed in June this year with many companies still to tie up funds.

Prabhu who took over as the new power minister today stressed the need to have a comprehensive policy to meet the Ninth Plan target of power generation which has already been scaled down from 57,000 megawatt to 47,000 mw and now to about 23,000 mw.

He also pointed out that the private sector was expected to contribute about one third of the targeted 1,00,000 mw capacity addition.

He said, “My priority would be to get the electricity Bill passed as soon as possible and double the power generation capacity to 2,00,000 mw in a decade.”

Prabhu said existing policies on power sector reforms would be continued to encourage private investment. However, if there were areas where a few changes were needed in the existing policies necessary amendments would be made to state clearly what we are going to do and what we want from the IPPs.”

The power ministry will also follow up the commitments and initiatives taken by Prime Minister Atal Behari Vajpayee during his recent US visit, the minister said.

“There are a number of issues which will help enhance the power situation in the country and a major part of it are in the initiative announced by the Prime Minister.”

“We have also set up an inter-disciplinary committee under the chairmanship of power secretary to go into the entire gamut of power sector to ensure that Prime Minister’s target of generating 1,00,000 mw in next decade is achieved and also to generate power at least cost,” Prabhu said.

The minister also stressed the need to improve rural electrification. “Rural electrification should not be confined only to providing power to one village but to each house in each village. We will try to emphasis this point when we meet state power ministers, said Prabhu.    


 
 
SOFTWARE FIRMS UNFAZED BY US PROFIT WARNINGS 
 
 
FROM VIVEK NAIR
 
Mumbai, Oct. 3: 
The downbeat profit warnings issued recently by international infotech giants like Apple Inc and Intel may have roiled stock markets abroad, but domestic software companies aren’t losing any sleep over the possible impact that this might have on their businesses.

Most are sticking to their estimates of a plus 50 per cent growth rate in this fiscal. Senior officials from some of India’s top-rung software majors told The Telegraph that the stream of profit warnings abroad would not depress demand for their software services.

The mood is still upbeat because they reckon that the bad news is only restricted to a particular sector and not the industry as a whole.

“After these warnings were issued, we have not witnessed any slump in demand for software services. We expect to grow at the industry average of around 50-55 per cent this year too,’’ sources at Infosys Technologies said.

Infosys derives a major chunk of revenue from overseas operations. Of this, 50 per cent comes from on-site presence and a similar amount from off-site operations. Officials said about 35 per cent of the employees perform on-site operations with the rest being conducted off-site.

Traditionally, the company has focused on maintainance, re-engineering and customised software development. But it is now looking at e-commerce as a focus area, emboldened by the fact that several Fortune 500 companies are funnelling investments into business-to-business (B2B) and business-to-commerce (B2C) areas.

Nasccom, the apex forum for software services, estimates that software exports this year will surpass $ 6 billion, a 50 per cent increase over last year’s level of $ 4 billion. It expects software exports to surge to $ 50 billion by 2008.

However, there are a few industry analysts who baulk at such robust estimates.

A senior analyst with a leading foreign brokerage said that though the recent developments would not have directly impact Indian companies in the short term, their performance could be hit in the medium term as their are signs of a waning interest in the information technology sector.

The profit warning by the Big Boys is a clear signal that the show isn’t as spectacular as predicted earlier.

K Ramachandran, head of research at Birla SunLife Securities, says the situation is not alarming for the Indian software companies, but there is a danger that the investment valuations of the local corporates could be hit.

“Valuations of top IT majors in the US have been affected. This will certainly have its impact on Indian companies as well. Their performance may not be hit, but the price an investor is willing to pay for an Indian IT company may go down,” he said.    


 
 
SILVERLINE ACQUIRES SKY CAPITAL FOR $ 22 M 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Oct 3: 
Silverline Technologies today announced that it has acquired Sky Capital International (SCI) in an all-cash deal worth $ 22 million.

The valuation was done by PricewaterhouseCoopers based on discounted cash flows and market comparisons while a fairness opinion was obtained by Solomon Smith Barney.

Silverline said that the strategic acquisition will help the company establish its presence in the Asia Pacific region and de-risk revenue streams through a high quality customer base. The company expects the transaction to enhance its offshore business component leading to margin expansion.

Commenting on the deal, Shankar Iyer, president and CEO, Silverline said, “The acquisition of SCI is in line with Silverline’s strategy of becoming a truly global IT Services company. Given Silverline’s long standing relationship with SCI, we expect a rapid and seamless integration process to leverage SCI’s unique leadership position in the Far East region.”

Graham Simmons, founder and chairman, SCI said, “Sky Capital has over the years, built strong customer relationships in the Hong Kong and Japan markets. Being a part of Silverline’s global network will provide us the opportunity to utilise the combined strengths of the two organisations to expand our presence in other regions in Asia and Australia,” he added. SCI is a leading information technology consultancy firm based in Hong Kong.    


 
 
ONGC SOUTH WELL OF WEALTH 
 
 
FROM R. SASANKAN
 
Chennai, Oct 3: 
The southern region of Oil and Natural Gas Corporation (ONGC) holds the potential to emerge as the second biggest gas producing area with a daily output of 12 million cubic metres. However, ONGC is not in a position to tap all the fields and optimise production from existing fields for want of consumers. C.P. Saha, regional director, told a group of visiting journalists, that as many as 16 wells remained closed in the Narimanam area alone resulting in a loss of 100 tonnes of oil per day.

The wells which remain closed are both gas and oil producing. If oil was produced from these wells, the associated gas would have to be flared. ONGC is waiting to match both, Saha said. At present, gas sales account for only 2 billion cubic metres per annum. Oil production from the region, including the contribution from joint ventures in which ONGC holds 40 per cent stake, account for 2 million tonnes per annum.

Gas is supplied to a host of industries such as fertiliser, steel, ceramics, sugar, power and paper through pipelines in Andhra, Tamil Nadu and Pondichery. ONGC is willing to create the necessary infrastructure and pump more gas, but not enough consumers are coming up.

ONGC’s dilemma is that in the absence of takers, the investment would remain locked up.

The Ramnad region of Tamil Nadu has already emerged as a gas bearing area. It remained untapped for long. After ONGC put it on fast track exploration, a major discovery was made in this area. Of the total of 11 wells drilled there as many as 9 were hydrocarbon bearing. Further efforts for delineating the fields are taken up in the Palk Bay and Gulf of Mannar.

These efforts will put Ramnad on the gas map of India. Already, gas has been committed to Tamil Nadu Electricity Board, whose power plant is to come up in a couple of years. This area alone could produce around 1 billion cubic metres of gas annually.

The immediate project that is expected to contribute to the bottomline of the southern region is the planned platforms over the GS-15 and GS-23 fields in the Godavari. These fields would then be able to add to the existing pool of gas in Krishna-Godavari.

According to Saha, the geographical extent of the southern region is being expanded. Damoh in Madhya Pradesh had already come under this region. The Krishna-Godavari project is handling the drilling operations there.    


 
 
LOW TIDE IN FDI FLOWS AT $ 2.2 BILLION 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Oct 3: 
The foreign investment (FDI) tide is ebbing. According to Unctad’s World Investment Report 2000, foreign direct investments into India were down at $ 2.2 billion in 1999 compared with $ 2.6 billion in the previous year.

The report says the decline in the flow of funds to India — South Asia’s biggest investment destination — will not dim long-term prospects because the country has relaxed rules and opened the doors to foreign funds in several key sectors.

The volume of foreign direct investment in future will depend, in large part, on the pace of reforms and regional stability. Though India, and the south Asian region as a whole, witnessed a decline in FDI last year, the report said the sub-region has a greater potential in the longer term.

The report is optimistic about the future because it says the investment climates in India, along with those in the Russian Federation, Slovenia, Thailand and Cambodia, has changed due to dramatic changes made in FDI norms. The measures have made them more attractive investment destinations, the report said.

Most of these countries, including India, have eased the sectoral restrictions, allowing foreign investment in a host of key industries like insurance, telecom and energy. Due to these measures, the FDI inflows to India as a percentage of its gross domestic product (GDP) rose to 3.4 in 1998 compared with 0.5 per cent in 1990; outflows were only 0.2 per cent of GDP in 1998.

According to the report, the overriding objectives of regulatory changes in developing nations, including India, was to strengthen competition laws and improve corporate governance.

Total FDI in South Asia dipped 13 per cent to $ 3.2 billion due to decline of inflows to India. India’s neighbours were not unscathed: Bangladesh attracted only $ 150 million last year as against $ 308 million in the previous year while inflows to Pakistan were unchanged at a measly $ 0.5 billion.

The fall in inflows has been attributed to the South Asian meltdown, which had affected the economies of most major countries in the region. Many countries actually reeled under the impact of capital outflows.

However, capital outflows from India were only $ 0.136 billion. An important aspect mentioned in the report is that Indian companies are not investing in a big way abroad.

“Investment prospects in developing Asia are bright, given the quality of underlying economic determinants of FDI, recovery of the region from financial crisis and the ongoing liberalisation and restructuring efforts,” the report states.

The report also said FDI by multinational companies could surpass $ 1 trillion this year.    


 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.04	HK $1	Rs. 5.85*
UK £1	Rs. 67.47	SW Fr 1	Rs. 26.20*
Euro	Rs. 40.40	Sing $1	Rs. 26.10*
Yen 100	Rs. 42.37	Aus $1	Rs. 24.70*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta	Bombay

Gold Std (10gm)	Rs. 4595	Gold Std (10 gm	4540
Gold 22 carat	Rs. 4340	Gold 22 carat	4200
Silver bar (Kg)	Rs.8000	Silver (Kg)	8105
Silver portion	Rs. 8100	Silver portion	8110

Stock Indices

Sensex	4135.55		+45.17
BSE-100	2082.86		+7.19
S&P CNX Nifty	1280.00		+8.35
Calcutta	113.67		+0.61
Skindia GDRNA	NA		-
   
 

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