Rising sensex sucked into vortex of arrest rumours
Market sees Tata stake in key firms rising to 30%
Darjeeling tea firms link pay to productivity
Venezuela keen to invest in oil sector
Across-the-board hike in Maruti car prices
Govt reduces levy sugar quota
SEB supply cut threat to CESC
Cellular firms in a spot
Overdraft limit for states increased to 12 days
Foreign Exchange, Bullion, Stock Indices

 
 
RISING SENSEX SUCKED INTO VORTEX OF ARREST RUMOURS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan. 10: 
The Bombay Stock Exchange (BSE) today gyrated on rumours, ending a roller-coaster session with a loss of 77.67 points at 4047.64 in a selloff that left Hindustan Lever and software star Infosys Technologies clobbered.

The bears came out of the woodwork and laid siege to most key counters, helped by swirling rumours about the arrests of more people in connection with the Bharat Shah case.

Himachal Futuristic, a share which usually ramps up high volumes on stock exchanges, was forced to issue a statement to BSE, squelching rumours that its officials were interrogated, or even arrested, in connection with the ongoing investigations by the Mumbai police in the Bharat Shah case.

Earlier in the day, the market was agog with speculation that Vinay Maloo, the company’s managing director, had been arrested. “It is utter nonsense. It is being spread only to cause panic and push the share price down,” chairman Mahendra Nahata said.

Big Bull Ketan Parekh also issued a volley of denials in print media and TV channels on rumours around him. This had an adverse impact on the scrips in which he has big investments.

The sensex fluctuated in a wide range of 120 points, hitting an intra-day high of 4,157. The plunge in the prices of Lever and Infosys — both heavyweights in the sensex — set the pace for losses. Under its influence, other pivotals like BHEL, ACC, HPCL, ITC, MTNL, Reliance and Telco trod water.

“The sensex is already halved. But there’s still some time left for the bear phase to end. We need to create a strong bottom,” Ramesh Damani, a leading broker on Dalal Street, lamented.

He played down the importance of rumours in the slide, saying operators look for excuses in a bear market. “In my eight years here, I’ve even heard rumours of the death of leading industrialists. This is typical of a bear market.” The downgrading of Infosys from ‘buy’ to ‘hold’ by UBS, a leading foreign institutional investor (FII), came as another blow to the sentiment.

Software counters other than Infosys ended with moderate gains or losses. Media shares, battered for the last two days, recovered marginally on good buying support at low levels.

The 30-share sensitive index opened firm at 4151.58 and touched a high of 4155.86 immediately, driven mainly by a smart 45-point recovery in the Nasdaq Composite Index on Tuesday.

However, a heavy sell-off after opening session dragged it down to the day’s low of 4035.44 before closing at 4047.64 as against Tuesday’s finish of 4125.31, a loss of 77.67 points or 1.88 per cent.

HFCL was the top traded share with a turnover of Rs 893.75 crore. It was followed by Satyam Computer (Rs 848.48 crore), Infosys Tech (Rs 783.18 crore), Global Telesystems (Rs 325.73 crore) and Wipro (Rs 298.18 crore).

Himachal Futuristic declined by Rs 12.30 at 1168.10, Satyam Computer by Rs 13.25 at Rs 378.70, Infosys by Rs 257.60 at Rs 5665.60, Global Telesystems by Rs 12.35 at Rs 740.85 and Hind Lever by Rs 8.70 at Rs 207. Others losers included HPCL which fell by Rs 3.60 at Rs 146.30, ITC by Rs 11.65 at Rs 908.35, MTNL by Rs 7.70 at 183.45, Reliance by Rs 5.95 at 352.45, Telco by Rs 5.20 at 93.80 and HDFC by Rs 21.60 at 572.75.

The gainers included Wipro, which jumped by Rs 7.35 at Rs 2715.65, Hindalco by Rs 17.55 at Rs 782.25, NIIT by Rs 7.40 at Rs 1651.20, SBI by Rs 6.95 at Rs 217.25, Zee Telefilms by Rs 3.20 at Rs 258.40 and Pentamedia Graphic by Rs 6.55 at Rs 287.55.

FII cap in HFCL

FIIs will now have to take prior permission from the Reserve Bank to buy shares of Himachal Futuristic Communications and Housing Finance Development Corporation because their stakes have hit the upper limit of 28 per cent and 38 per cent respectively.

   

 
 
MARKET SEES TATA STAKE IN KEY FIRMS RISING TO 30% 
 
 
FROM SATISH JOHN
 
Mumbai, Jan. 10: 
After using the creeping acquisition route to increase their holdings in most core group companies to 26 per cent, the big question in the marketplace is whether they will now raise the strategic threshold to a level of 30 per cent.

Market talk suggests that the Tatas are now raising the threshold to 30 per cent and above in the key group companies. Speaking to The Telegraph, N.A. Soonawala, non-executive vice-chairman of Tata Sons, denied that the Tatas had revised their target after having attained close to 26 per cent in all the leading group companies. “We are more or less close to that level,” he revealed.

“This (30 per cent threshold) is a policy matter which only the board of directors of Tata Sons (the holding company for most of the core group companies) can take,” he said. The board has had no discussions on the issue as yet, he added.

Recently, a section of the press reported that the Tata stake in Tisco had crossed 26 per cent. Soonawala said it was marginally above 26 per cent and nothing more should be read into it.

The rapid restructuring in the Tata group companies has been seen as one of the reasons for the sharp appreciation at Tata counters. This is clearly in evidence at the Tata Steel counter where analysts tracking the industry house have noticed a surge in value-based buying by institutional investors. Tata Sons is the key holding company for the Tata group. When the holding company started acquiring shares of its group companies through the creeping acquisition route, the companies failed to post good performances. This was largely due to the slowdown in the economy and the diversification outside its core competencies, say analysts.

The Tata group managed to ramp up its shareholding in three of its core group companies — Tata Engineering (Telco),Tata Steel (Tisco) and the three Tata Electric Companies (TEC) — by almost 5 per cent in 1999-2000 itself to bring its holding close to 26 per cent.

In Telco, the group’s holding had increased to around 22.67 per cent in 1999-2000 from 17.7 per cent in the previous fiscal, while in Tisco the Tata group’s shareholding rose to 24.24 per cent from 19.72 per cent in 1998-99.

Similarly, the company has increased its stake in Tata Electric Companies to 26 per cent during the year under review from the previous year’s level of 21 per cent. This figure was arrived after cancelling the cross holdings of around 13 per cent in TEC.

In three other core group companies — Tata Tea, Tata Chemicals and Indian Hotels — the Tata stake was pegged at around 30 per cent. Consequently, the Tatas did not have to resort to the creeping acquisition route.

   

 
 
DARJEELING TEA FIRMS LINK PAY TO PRODUCTIVITY 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Jan. 10: 
Wilting under an unprecedented financial crisis, the Darjeeling tea gardens have decided to introduce performance-linked wages for their 75,000 workers for the first time.

The matter will be discussed in wage talks with unions on January 16. According to R. K. Dixit, the newly elected chairman of Darjeeling Planters’ Association (DPA), wages account for 62 per cent of the production cost. The industry has 55,000 permanent workers, apart from 20,000 on contract.

The average cost of production is Rs 190 per kg while the average sale price is Rs 165 per kg — a loss of Rs 25 a kg. Therefore, total revenue losses for the industry, which produces 9 million kgs every year, is in the region of Rs 18 crore.

Dixit warned the situation would get worse if the next round of wage-hikes are not linked to performance. “We will ask unions to understand our problems before making more demands,” Dixit said.

The DPA chief said workers will be persuaded to work for eight hours daily — something the Plantation Labour Act says they should —instead of the six hours that they now put in.

The additional time workers spend on the gardens is expected to boost productivity by 20 per cent and help offset the per kg loss of Rs 25. The total area under tea plantations in Darjeeling is 16,500 hectares with an average yield of 540 kg per hectare.

The other area of concern for the industry is the sale of its rains teas, which makes up 60 per cent of its production. According to Dixit, the industry has not fetched good prices from Germany and Japan — the main buyers of this variety.

“Earlier, they used to pay Rs 1,000 per kg for the premium first and second flush teas. But now, the rate has dropped to Rs 500-600. The rain tea fetches prices which are less than the cost of production. We are planning a publicity campaign to make them popular. We have even approached the central government to help us in the effort,” he said.

Meanwhile, DPA’s wishlist for the budget include the removal of excise duty of Rs 2 per kg, reduction of agricultural tax and more subsidies for uprooting and re-planting.

   

 
 
VENEZUELA KEEN TO INVEST IN OIL SECTOR 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Jan. 10: 
Venezuela is interested in investing in the Indian petroleum sector. The state-owned Peroleos de Venezuela, S.A (PDVSA) is even considering offers of collaboration with refineries, both public and private, according to Aires Barreto, vice-president of PDVSA.

Barreto here to attend the Petrotech -2001. Venezuela which already supplies crude to Reliance Petroleum is looking for more business opportunities here.

He said both countries, after extensive efforts, have identified business opportunities in the hydrocarbon sector.

Walter Marquez, the Venezuelan ambassador in India, said besides strengthening crude sales, his embassy was trying to expedite collaborations with Indian energy companies to manufacture and trade in Orimulsion and sale of fertilisers as well as technological cooperation specially in the area of exploiting heavy crudes of India.

Barreto said PDVSA and Reliance Petroleum signed an agreement to sell 20 million barrels of Venezuelan crude during this calendar year. It has also signed a memorandum of understanding with ONGC Videsh to explore opportunities of doing business together and cooperation in the energy sector.

   

 
 
ACROSS-THE-BOARD HIKE IN MARUTI CAR PRICES 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Jan. 10: 
Maruti Udyog (MUL) today raised the prices of all its models by Rs 1,000 to Rs 12,000 in a move it said was necessary to recoup higher input costs, a part of which has been caused by the weakening of the rupee that makes imports expensive for the country’s largest auto maker.

According to managing director Jagdish Khattar, only a part of the increase in production costs is being passed on to customers. The revision, the second after October last year, comes days after Hyundai, Daewoo, Ford, General Motors and Toyota announced hikes ranging from Rs 1,000 to Rs 17,000. However, the rise is smaller than the 5-7 per cent mark-up planned on December 5.

Maruti vehicles will cost more at a time when the company is coping with problems arising out of the three-month-old labour unrest, which ended only on Tuesday after the unions and the management signed a new settlement.

Though the company claimed an average daily production of 1,311 vehicles in November — up from 1205 for the six months to September — despite the workers’ strike at its Gurgaon plant, sales slumped 18.6 per cent between April and October.

The decline was sharper at 35.7 per cent in October and 23.3 per cent in December; the nine-month tally was down 21.1 per cent at 2.3 lakh vehicles compared with 2.9 lakh in the same period last year. The troubles notwithstanding, the company retained a market-share of 64 per cent in November.

The increase for the 800cc models ranges from Rs 2,180 to Rs 5,204. For Zen, it will be between Rs 4,157 and Rs 6,224. The LX Alto model will cost Rs 7,640 more while VX will be dearer by Rs 7,707. The increase in Wagon-R prices ranges from Rs 1,177 to Rs 7,726 while Omni vans will cost Rs 2,374 more.

Esteem prices will go up by Rs 5,172-10,225 while the two Baleno models will cost a whopping Rs 12,271 more — the steepest hike.

Maruti registered record sales in 1999-2000 at 4,06,290 vehicles. After this boom, the domestic car market turned sluggish. The dip was part of a larger first-quarter slump in the industry blamed on a variety of reasons, such as the implementation of the uniform sales tax and compliance with Euro-II norms — both combined to drive up prices and depress sales.

The proposal for disinvestment ran into rough weather inside Parliament and on the negotiating table with Suzuki, the 50 per cent partner in the joint venture.

Daewoo warranty

Daewoo Motors India has extended its warranty programme for its small and mid-sized cars from two years to four on a nominal payment, managing director Y C Kim said.

   

 
 
GOVT REDUCES LEVY SUGAR QUOTA 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Jan. 10: 
The government today cut the percentage of levy sugar, while ending the supply of ration sugar to about 600 million people above poverty line (APL).

In a move towards liberalisation of the sugar sector as recommended by the Mahajan committee, consumer affairs and public distribution minister Shanta Kumar said the percentage of levy sugar from the mills has been reduced from 30 to 15 per cent effective from April 1. This is expected to enable sugar factories to make timely payment of cane prices and liquidate price arrears, he said.

The minister also announced the government’s decision to increase the distribution of sugar through the PDS from 425 gms to 500 gms, for below poverty line (BPL) families. On the other hand, APL families are to be totally debarred from sugar under PDS, the minister said. The move will also be effective from April 2001 and will slash the subsidy quantum on sugar from Rs 238 crore in 1999-2000 to Rs 110 crore. In 1996-97, the sugar subsidy was Rs 900 crore which came down to Rs 400 crore in 1998-99.

The government has decided that the population to be covered for supply of levy sugar under PDS would be on the basis of the projected population as on March 1 last year.

   

 
 
SEB SUPPLY CUT THREAT TO CESC 
 
 
BY A STAFF REPORTER
 
Calcutta, Jan. 10: 
In an attempt to arm-twist CESC into repaying its Rs 963.54 crore dues, West Bengal State Electricity Board (WBSEB) has threatened to slash power supplies to the city-based power utility to 210 MW from the usual level of 300-320 MW.

The state-owned power agency has asked CESC to submit a time-bound action plan to liquidate its dues which include a late payment surcharge of Rs 184.27 crore.

CESC generally requires 960-980 MW of power. It generates about 680-700 MW normally and draw the rest from WBSEB.

“We have decided to restrict the supply to CESC to the extent of the monthly payment made by the company to CESC,” a senior WBSEB official said.

In December, CESC paid only Rs 17 crore against the billed amount of Rs 27.07 crore.

If the SEB carries out its threat, the consumers in the CESC area will face a bout of loadshedding.

CESC managing director Sumantra Banerjee was not available for comment. The company spokesperson said, “We are having discussions with WBSEB. It will take time.”

In a letter to Sumantra Banerjee, WBSEB’s member (finance and accounts) A.K. Das said the issue of liquidating dues was discussed with B. Roychowdhury (executive director, finance) and P. Basu (executive director, generation) of CESC.

“Even after prolonged discussion, CESC representatives failed to indicate any positive assurance towards payment of the current dues in full and liquidation of the outstanding dues within a reasonable time frame,” he said.

Senior officials of WBSEB confirmed that till date CESC has not been able to make any commitment on the repayment of the dues.

In his letter, Das said, “It is still more disturbing to note that inspite of their claim in various quarters that CESC is paying WBSEB’s current bills in full, in reality every month CESC is paying only a part of current dues leaving a sizeable portion uncleared.... It may be noted that WBSEB is raising its claim strictly as per provisions of the power supply agreement.”

Due to continued default by CESC, WBSEB said it was not in a position to purchase additional power from central power utilities. “We have been getting notices from central power utilities from time to time to stop supply of power to WBSEB in view of the running default. Due to consequential default in payment by WBSEB to West Bengal Power Development Corporation Limited and Durgapur Projects Limited, their plants cannot be maintained properly. Due to the restricted availability of inputs, WBPDCL and DPL also cannot increase their generation.”

   

 
 
CELLULAR FIRMS IN A SPOT 
 
 
FROM M RAJENDRAN
 
New Delhi, Jan. 10: 
Cellular operators never had it so bad. As if the scare of fixed telephone operators entering the mobile services arena was not enough, cellular operators now find arbitration may not be such a good idea after all.

CEOs of cellular firms today decided to go in for arbitration against the recommendations of the Telecom Regulatory Authority of India (Trai), permitting fixed telephone operators to offer mobile service in a limited area. They also decided to put all future investment plans and launches on hold.

However, the cellular firms are in a fix, as the Telecom Disputes Settlement and Appellate Tribunal is unable to take up cases due to the absence of any infrastructure.

That effectively puts the arbitration option on hold, since the cellular operators cannot go for arbitration at the high court as per the National Telecom Policy 1999. On the other hand, TDSAT cannot accept any case in the absence of proper infrastructure.

Under Chapter IV, Section 15 of the amended Trai Act, “No civil court shall have jurisdiction to entertain any suit or proceedings in respect of any matter which the Appellate Tribunal is empowered by or under this Act determine. No injunction shall be granted by any other court or any other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.”

Any grievances against the order of the TDSAT can be heard only in the Supreme Court. As a result, cellular operators will have to wait till TDSAT accepts their litigation.

“It is a very bad situation, we do not even have tables or chairs and, more importantly, no place to function. How can we accept any case from anyone. It has been more than six months since the TDSAT was constituted, but we are yet to find a permanent place from where to function,” said a TDSAT official.

Confirming the situation, TDSAT Registrar S. C. Rawal said, “We cannot accept any cases, as there is no place from where we can work.”

Moreover, the quorum, which is important for any case to be taken up is also not available. One out of the three members is out of station and is likely to return only next week.

Under the National Telecom Policy 1999, the government had bifurcated the role of the telecom regulator through an amendment in the Trai Act 1997.

   

 
 
OVERDRAFT LIMIT FOR STATES INCREASED TO 12 DAYS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan. 10: 
The Reserve Bank of India (RBI) today announced some relaxations in the revised ways and means advances (WMA) scheme for state governments whereby the total normal WMA limits will go up to Rs 5,296 crore as against the present limits of Rs 3,941 crore, a rise of around 35 per cent.

WMAs are issued by the central bank to state governments to meet their temporary liquidity mis-matches. The scheme, which will be operational from February, allows state governments to run an overdraft (amount exceeds the prescribed WMA limit) for 12 consecutive days instead of the earlier 10 days condition as an ad hoc measure. This decision, RBI said, has been taken after considering the problems encountered by state governments in their cash flow.

The central bank said that if overdrafts appear in state accounts and remains beyond 12 consecutive working days, RBI and its agencies would stop payments on behalf of concerned state governments, the apex bank said in a release here today adding, this step was an ad hoc measure and subject to review.

The new scheme has been based on the recommendations of an informal group of state finance secretaries constituted to review the existing scheme.

The central bank has also decided that the overdraft should not exceed 100 per cent of the normal WMA limit prescribed for states. It added that when the state exceeds this limit on the first instance, the apex bank would warn the concerned government against repeating the same.

“On second or such subsequent occassion of breaching this norm, state would be given five working days notice to bring down the overdraft amount within the 100 per cent limit. If the states failed to meet this stipulation, all payments would be stopped’’, hte RBI pointed out.

It was decided that the normal WMA limits will be worked out taking into account the three years’ average of revenue revenue receipts and capital expenditure for the fiscal years from 1997-98 to 1999-2000 and applying to this base a ratio of 2.4 per cent and 2.9 per cent for non-special and special category states respectively.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs.46.62	HK $1	Rs. 5.90*
UK £1	Rs. 69.52	SW Fr 1	Rs. 28.45*
Euro	Rs. 43.85	Sing $1	Rs. 26.55*
Yen 100	Rs. 40.07	Aus $1	Rs. 25.65*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta		Bombay

Gold Std (10gm)	Rs.4570	Gold Std(10 gm)	Rs.4490
Gold 22 carat	Rs.4315	Gold 22 carat	Rs.4155
Silver bar (Kg)	Rs.7550	Silver (Kg)	Rs.7610
Silver portion	Rs.7650	Silver portion	Rs.7615

Stock Indices

Sensex		4047.64		-77.67
BSE-100		2097.57		-25.73
S&P CNX Nifty	127.30		-24.35
Calcutta	123.37		-1.93
Skindia GDR	NA		-
   
 

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