Mega road project cleared
Parent to make open offer for Castrol India
Insurance firms launch first set of life policies
SBI taps market with Rs 2500-cr bond issue
Oriflame plans
Bishnauth Tea set to merge with Eveready Industries
Bengal Chamber to woo investors
Centre warns states of debt trap
Foreign Exchange, Bullion, Stock Indices

New Delhi, Dec 12: 
The Cabinet Committee on Economic Affairs (CCEA) today approved the Rs 30,300 crore road construction project to link four metros as part of Prime Minister Atal Behari Vajpayee’s ambitious Rs 58,000 crore Golden Quadrilateral road project under the National Highway Development Project (NHDP).

The approval for the project includes the construction of 5,952 kms of Golden quadrilateral linking four metros of Delhi, Mumbai, Chennai and Calcutta

with four,six and eight laning of highways. The project is expected to be completed by

December 2007.

The CCEA had earlier accorded in principle approval to the NHDP to construct roads covering a length of 13,252 kms and connectivity to major ports at a cost of Rs 4,000 crore.

The committee also approved the revised cost estimate amounting to Rs 371.99 crore for four laning and strengthening of the National Highway 1 from Karnal to Haryana Punjab border. The project was cleared earlier at a cost of Rs 314.20 crore

The CCEA also approved the second revised cost estimate for widening of the Bhubaneswar-Cuttack-Jagatpur section of NH 5 in Orissa at a cost of Rs 275.13 crore against an earlier estimate of Rs 218.412 crore. The project involves construction of a two lane new carriageway with cross drainage structure and strengthening of existing two-lane carriage way.

The CCEA also cleared the revised cost estimate of Rs 215.34 crore for the modernisation project at Marine Oil terminal at Jawahar Dweep at mumbai Port. The project will have a foreign exchange component of Rs 48.47 crore. In 1997, the government had cleared the same project at an estimated cost of Rs 167.99 crore. The project is expected to be completed by February 2003. With the execution of this project, the transfer rate of crude oil will increase from 2,500 tonnes per hour to 4,250 tonnes per hour. The project is being funded by the Asian Development Bank and through internal resources of Mumbai Port Trust.

The committee also approved a programme for detailed drilling in 34 non Coal India Limited blocks at an estimated cost of Rs 73.18 crore. Under the programme, a detailed drilling of 37.500 metres in non-CIL blocks would be undertaken at an estimated cost of Rs 9.38 crore.

The CCEA also sanctioned the plan to set up the East-West transmission systems to be taken up at an estimated cost of Rs 237.38 crore. Under the project, a transmission line would be constructed by Powergrid Corporation of India Limited linking Raipur in Madhya Pradesh to Rourkela in Orissa covering a distance of 401 km. The project to be commissioned in 36 months will be funded by the Asian Development Bank and through the internal resources of Power Grid.

CCEA also approved a transmission system to connect Dhauliganga Stage-I Hydel electric power project at an estimated cost of Rs 150.53 crore. The project is to be commissioned in 48 months.


New Delhi, Dec 12: 
Castrol Limited, the British subsidiary of BP-Amoco Plc, today said it will make an open offer for 20 per cent of the issued equity share capital of Castrol India at a price of Rs 311.91 each.

The offer is being made under regulation 12 of Sebi (substantial of shares and takeovers) Regulation 1997. The move follows the deemed change of control at Castrol India, after the acquisition of Burmah Castrol Plc., the parent company of Castol India, by BP Amoco Plc in July this year.

The offer will remain open between 29 January and 28 February. A letter of offer and a form of acceptance-cum-acknowledgement containing the detailed procedure for applying will be sent to shareholders soon.

Castrol India was a subsidiary of Burmah Castrol Plc, which holds a 51 per cent stake in the company. Castrol India accounted for 9 per cent of the sales of Burmah Castrol.

Following BP-Amoco’s takeover of Burmah Castrol, the combined lubricants business of BP Amoco (BP and Duckham’s brands) and Castrol (Castrol and Veedol brands) was re-organised into nine business units globally.

India, West Asia and South Asia (IMESA) were recognised as the key markets and clubbed into a single business unit.

Castrol India had a turnover of Rs 1,028 crore this year. Its market capitalisation was Rs 2,574 crore, while the return on the capital employed was Rs 55.55 crore.

Castrol has a presence in 50 countries, but sells its products in more than 130 countries.


Mumbai, Dec. 12: 
HDFC Standard Life Insurance Company and ICICI-Prudential Life Insurance Company today became the first among the new breed of private firms to launch their life insurance products, storming a bastion so far lorded over by state-owned giant, Life Insurance Corporation.

HDFC Standard Life received three applications for policies aggregating Rs 5 lakh. It has set an ambitious target of selling 2,5000 policies by the end of March. ICICI-Prudential actually handed out seven endowment policies sponsored by India to underprivileged children. The policy holders, including four girls, are all in the age group of 7-8 years, and will see their money mature in 10 years.

The industry was abuzz with speculation over the fact that the two companies decided to launch their products on the same day. Curiously, both institutions received IRDA approvals in the afternoon.

There were indications that customers can expect competition between the two companies, but that will largely be in products and services. Neither said they would resort to a price-war, and both view the rural market as a viable business avenue.

Deepak Satwalekar, managing director of HDFC Standard Life, said his company will compete with better service, such as faster claim settlement.

“HDFC and Standard Life have a reputation for customer service. Products will be differentiated by providing improved services with the help of technology,” he said.

ICICI-Pru managing director Shikha Sharma said her company will start commercial operations in Mumbai and Delhi soon. “We will enter the market with simple products and innovative riders. Operations will be spread across the country in a phased manner over the next 12 months,” she added.

Both companies were among the first batch of companies that filed for licences with the Insurance Regulatory and Development Authority (IRDA).

HDFC will use its wide branch network and that of its subsidiary, HDFC Bank, to peddle policies. Its army of agents will also be roped in.

ICICI is tight-lipped about its marketing strategy, though corporate grapevine has it that the advertisements will revolve around Amitabh Bachchan, the group’s new celebrity brand ambassador.

HDFC has announced two policies in endowment and money-back with riders which can be attached to the schemes such as an assured double sum, accident benefits, premium waivers and critical illness.

ICICI-Prudential’s four products are a ICICI-PRU single premium bond, an endowment policy called ICICI-Pru Save and Protect, ICICI-Pru Forever life pension products and ICICI-Pru regular premium deferred pensions. Officials said 65 agents, who cleared IRDA’s stiff norms, have been recruited.


Mumbai, Dec 12: 
Fresh after its foray into the overseas market, the State Bank of India entered into the domestic market to tap Rs 2500 crore through a subordinated bond issue.

Merchant banking circles say that the issue, which was lead managed by SBI Caps, was the largest among the non-commercial debenture (NCD) issues by public sector banks in recent times. It comes close after after the successful $ 5.5 billion India Millennium Deposit scheme.

The bonds were available in two tranches — a 63-month paper carrying 11.55 per cent and another for 87 months carrying a coupon rate of 11.90 per cent. The core size of the State Bank issue was Rs 1500 crore. Following the bond issue, its capital adequacy will improve from 11.49 per cent to 12 per cent.

The deals were done with the two insurance majors LIC and GIC, besides a few mutual funds led by the Unit Trust of India. Dealers in the money market say yields offered by the SBI bonds were quite attractive in comparison with those offered by government paper with similar maturity. The yields of government paper range between 10.48 per cent and 11.65 per cent respectively.

The liquidity in the money markets has prompted several financial institutions to hit the market with debt issues. Recently, HDFC raised Rs 357.50 crore by privately placing NCDs with commercial banks and mutual funds.

Meanwhile, the 11.30 per cent government paper maturing in 2010 for Rs 3000 crore came up for auction today. Dealers were confident that the issue will be oversubscribed, considering the liquidity in the markets. The last auction conducted by the apex bank was on November 24, which saw a 92 per cent subscription.


New Delhi, Dec 12: 
Oriflame, the cosmetic giant that uses the direct selling method the world over, plans to open its operations in Bangladesh next year. The Rs 98-crore Oriflame India, a subsidiary of Sweden-based Oriflame International, entered the Indian market five years back.    

Calcutta, Dec 12: 
Bishnauth Tea is being amalgamated with Eveready Industries India Ltd (EIIL). The board of Bishnauth Tea is meeting on December 14 to consider the proposal.

The gameplan of the B.M. Khaitan group, according to a top level source of the company, is to first merge Bishnauth Tea with EIIL. Later, it will demerge the tea business of EIIL from the battery business and two separate companies will be formed.

Sources added that ICICI is advising the group’s restructuring plan.

Bishnauth Tea, which has 15 gardens in Assam has already decided to dispose of its unprofitable gardens and will sell off two gardens to George Williamson. “The sale of those two gardens will take place in another seven days,” the official said.

Bishnauth Tea has formed a committee to identify its unprofitable gardens and decided to sell off the gardens to retire its debt burden from Rs 160 crore to a manageable Rs 90-95 crore. The total tea production of Bishnauth Tea is 18 million kg.

Meanwhile, EIIL has also decided to sell off its unprofitable gardens in Dooars and Darjeeling. Saddled with a huge debt burden of Rs 644.91 crore and an interest outgo of Rs 83.48 crore, which is almost 10 per cent of its turnover of Rs 832.92 crore, EIIL has taken the route of selling its tea gardens to tide over the financial crisis. The group is also considering the sale of some of its low-yielding gardens in Assam. “We have already sold four Darjeeling gardens and two Dooars gardens out of its 25 tea gardens. We are aiming to sell another four to five gardens,” the official said.

The official added that the merger will not block the sale of their gardens by both companies. “That will go on side-by-side,” he said.

Confirming the move, Aditya Khaitan, the youngest son of B.M. Khaitan who handles the group’s tea operations, said that the entire exercise will help consolidate the tea business on one hand and the battery business on the other.


Calcutta, Dec 12: 
Bengal has nowhere to go up, but upwards, says the new president of Bengal Chamber of Commerce and Industry (BCCI), S B Ganguly.

Massive investments are lined up, to be made by companies over a decade, with a thrust on information technology.

Ganguli, who took over as president of the premier industry body recently, said his chamber will play a pro-active role and focus sharply on the state during his tenure. Companies have been told to help make Bengal an attractive destination for investment. “The state has several positive features. These have to be highlighted to lure entrepreneurs,” he said.

A ‘help desk is will be set up within the chamber, which will raise problems faced by entrepreneurs with the authorities to facilitate project implementation and remove hassles, Ganguly said.

The chamber will bring out two monographs: one entitled Industrial Potential in West Bengal, and second, Improvement in Economy — How to do it in Bengal.

He listed the availability of skilled and cheap labour as things that would help bring industrialists to the state. However, he urged managements to be transparent and try to bring about a sense of ownership in the companies they run.

Labour, he said, should be told that the factories they work for actually belonged to them and that even if management changed, they would continue to a work in these plants.

Ganguli dismissed the notions about the lack of work culture and archaic labour laws in Bengal. The chairman and managing director of the near Rs 1,000-crore Exide Industries pointed out that the productivity of labour at the company’s two factories in Bengal — Haldia and Shyamnagar — was higher than those in Maharashtra and other states. At the moment, the chamber would make relentless effort for improvement of infrastructure such as, roads and ports. BCCI, he said, will also work for the improvement in general transportation, including air-cargo handling facilities.

Concerned about the economic and industrial backwardness that has given rise to Kamtapuri movement the chamber has set up a North Bengal Cell which will function from its headquarter here to deal with socio-economic issues affecting the districts.

On the chamber’s usual activity of holding meetings with dignitaries, Ganguli said, a number of central ministers including Jaswant Singh, Mamata Banerjee have already been lined up.


New Delhi, Dec 12: 
The finance ministry has sounded a warning that the states are headed for debt trap. In a sharply worded presentation before the Planning Commission, the ministry made out a strong case for linking fiscal reforms with money doled out to states.

The finance ministry pointed out that as high as 63.23 per cent of states’ borrowings, including Plan assistance, is taken up for current consumption, leading to an unsustainable debt situation in the states, it added. Most of this borrowing tended to be high-cost, which means pay-backs are placing an even greater strain on state revenues.

The Centre has been trying to get states seeking financial assistance to put right their balance sheets to agree to a set of IMF-style conditions, which include freezing recruitment and raising utility charges.

Some 13 states have already signed up, but many including West Bengal have balked at signing these tough conditions, especially as inability to meet these conditions will not only mean loss of the promised extra funds, but even the normal allocations for various Plan schemes.

More dangerously, the annual rate of growth of government guarantees outstripped the growth in revenue receipts, finance ministry officials pointed out in a presentation made before K.C. Pant, deputy chairman of the Planning Commission.

The presentation noted that though the magnitude of state government guarantees has hovered around 5 per cent of GDP from 1993-94, the outstanding amount has more than doubled from Rs 48,866 crore in 1993-94 to Rs 99,476 crore in 1999-2000.

It said the ratio of revenue deficit to fiscal deficit had also risen from a level of 19.05 per cent in 1993-94, to 63.23 per cent in 1999-2000.

“This is a key ratio in understanding the nature of indebtedness and it means that most of what states borrow go towards meeting normal revenue expenses like salaries and fuel bills and not towards capital expenses like building hospitals or schools,” a Planning Commission member explained.

The presentation noted that the sharp deterioration in the ratio of the revenue deficit to the gross fiscal deficit has been especially alarming.

While the revenue deficit of states has gone up nearly six times from 0.45 per cent of GDP in 1993-94 to 2.96 per cent in 1999-2000, the fiscal deficit of states has doubled from 2.35 per cent of GDP in 1993-94 to 4.71 per cent in 1999-2000.

The finance ministry paper said the 11th Finance Commission had therefore recommended that states introduce a series of reforms to try bring down the revenue deficit to zero per cent by 2004-2005.



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