Voices of reason vote for S&P downgrade decision
Audit fumble leaves MTNL stock weaker
Reliance for broadband tieup
Decision on Alloy Steel in six months

 
 
VOICES OF REASON VOTE FOR S&P DOWNGRADE DECISION 
 
 
FROM R. SASANKAN
 
New Delhi, Oct 22: 
Despite the adverse reaction from finance minister Yashwant Sinha, the general impression in government circles is that global rating agency Standard & Poor’s (S&P) decision to lower India’s rating from positive to stable has been legitimate.

According to senior officials in the economic ministries, S & P applied a rational yardstick in measuring the health of the economy. The expected acceleration did not take place and the government slowed the process of economic reforms.

The present rating does not make a significant difference to the situation. It will not have any adverse impact on foreign investment.

The government, these officials say, should worry only if the rating is lowered from stable to negative.

The situation does not call for that. In the past, credit rating agencies magnified even less important issues to lower the credit rating.

The fact that it has not done so this time is being interpreted as an expression of confidence in the Indian economy.

The fiscal distortion created by the rising oil prices and the government’s failure to hike the domestic prices of petroleum products also influenced the decision of the global rating agency.

It has now been clarified that the industrial recovery has not gone in the reverse gear, as was being projected in certain quarters.

The sudden spurt in industrial growth between November 1999 and March 2000 was based on a distortion in data. The industrial growth remained steady in the range of 6 to 6.5 per cent. The government is expected to come out with a statement correcting the distortion.

Official circles reckon that a 7 per cent GDP growth may not be attainable this year. However, there is a strong possibility that it may be 6.5 per cent. They do not take seriously the lower GDP growth projected by the Centre for Monitoring the Indian Economy (CMIE), which is being criticised for being consistently pessimistic and being likened to HSBC Securities for making wide-of-the-mark predictions.

The finance minister has claimed that the fiscal deficit target of 5.1 per cent of the GDP would be achieved this year. So far this year, the deficit has remained under control and there are no indications the target will remain elusive.

Credit rating agencies are known to be sensitive to fiscal deficit. The government remains committed to reducing it further. This will have a positive impact on the rating agencies’ perceptions about the Indian economy.

Despite the spurt in the rate of inflation, the government remains confident that after peaking at 7.5 to 8 per cent, it will begin to move down. There is no danger of an inflationary spiral, official sources say. Though certain parts of the country may face drought on account of poor rainfall, comfortable foodgrain stocks will take care of the situation.    


 
 
AUDIT FUMBLE LEAVES MTNL STOCK WEAKER 
 
 
FROM SATISH JOHN
 
Mumbai, Oct 22: 
Mahanagar Telephone Nigam (MTNL) has found itself in a quandary after its auditors, N M Raiji and Company, qualified its books of accounts heavily.

The company, which provides basic services in Mumbai and Delhi, has seen its share price plumb new lows; a fortnight back, it touched a 52-week low of Rs 107, before recovering in recent days.

While analysts say not much should be read into the fact that auditors are qualifying the accounts, and its links with the share price movement, they agree that the differences in the company’s unaudited and audited figures are too glaring for comfort.

The auditors say MTNL took a long time to reconcile its books of accounts with the department of telecommunications (DoT) for the previous financial year. The process is still continuing even now. Even the subscribers deposit accounts and sundry debtors are yet to be reconciled, the report states.

“The amount recoverable on current account is Rs 586.26 crore. The amount payable to DoT on current account is Rs 486.23 crore. The net amount to be recovered is, therefore, Rs 100.02 crore. This has to be reconciled, confirmed and opened to adjustments,” the auditors said in a terse qualification. MTNL has responded to the remark with a lame response, saying the process of reconciliation of accounts between DoT and MTNL for the year ended March 31, 2000 is ‘currently in progress’.

“Necessary entries, if any, arising out of this reconciliation would be passed after confirmation,” the company said.

The balance in subscribers’ deposit accounts of Rs 1123.26 crore, interest accrued, dues amounting to Rs 4.86 crore, and sundry debtors of Rs 699.76 crore are subject to reconciliation with respective subsidiary records. In addition, the auditor says the receipts from subscribers to the extent of Rs 101.09 crore have not been allocated to debtors who were supposed to have received it.

MTNL’s says in its response that both units have been asked to reconcile sundry debtors control account and the subsidiary records. “This is an ongoing process,” the company said.

The amount capitalised during the year as fixed assets in respect of the Delhi unit includes Rs 284.7 crore, where the expenditure has to be sanctioned internally. Responding to this, MTNL has set up a task force to examine in detail all such unsanctioned projects for appropriate action.    


 
 
RELIANCE FOR BROADBAND TIEUP 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Oct 22: 
Reliance Infocom may enter a joint venture for its broadband network in West Bengal. The company is undertaking such projects elsewhere in the country on its own.

The Reliance group company is in talks with I-Win for the broadband network project in the state with an investment of around Rs 200 crore.

Sources said the company has made presentations to I-Win, a joint venture of the ICICI and West Bengal Industrial Development Corporation.

The broadband network, which will pave the way for convergence of telecom, power, television and information in the state, involves setting up of optic-fibre cable through 1,600-km overhead transmission line of the West Bengal State Electricity Board.

Sources said the WBSEB may pick up a minority stake to be the joint venture partner with Reliance Infocom for this project.

“ If the project is carried out by a joint venture, the private partner should take a 74 per cent stake,” a senior I-Win official said.

I-Win, which was commissioned by the state government to find out the potential for a second cable network, has submitted a feasibility report on the project. I-Win sources said the population benchmark for the study was 75,000 at any place which is designated for the optic-fibre project.

“We have studied the railway, road and power transmission line networks where the broadband network can be laid. It is found that the power transmission line is the best option for the project,” the sources added.

Out of the 2,560-km long WBSEB transmission line, there is a potential for a 1,600-km long optic fibre project. The rest of the portion can be connected through micro-wave cables.

The project can also be expanded to the panchayat level at a later stage which will help the state government to introduce e-governance down the line through this network.    


 
 
DECISION ON ALLOY STEEL IN SIX MONTHS 
 
 
FROM OUR CORRESPONDENT
 
Durgapur, Oct 22: 
The fate of the ailing Indian Iron And Steel Co (IISCO) and Alloy Steel Plant (ASP) will be decided within six months, Union steel minister Brajakishore Tripathy said here today.

Three multinational companies have been shortlisted to save the sick SAIL subsidiary.

The minister regretted that precious little has been done to revive IISCO during the last 15 years. He said he will not close down the company, as recommended by McKinsey.

He said he has written to the defence ministry to bring ASP under its fold.

According to Tripathy, ASP is supplying “best quality” alloy to the defence ministry for defence and atomic research.

“Therefore, it is the defence ministry’s responsibility to see that the ASP survives,” he said.    

 

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