Bengal calls in the spin doctors
Banks, FIs may get tax breaks for bad debts
Cognizant Tech to invest Rs 70 cr in city centre
Tayals’ stake in BoR likely to go up
ONGC chairman may have a say in successor’s choice
SEB metering drive fails to buoy revenues

 
 
BENGAL CALLS IN THE SPIN DOCTORS 
 
 
FROM SATISH JOHN AND SUTANUKA GHOSAL
 
Mumbai/Calcutta, Jan. 28: 
West Bengal is calling in the spinmeisters to shake off its image as a tacky business destination with a surly and truculent workforce, and plagued by myriad infrastructural problems.

The West Bengal Industrial Development Corporation (WBIDC) — the nodal agency to kickstart the pace of industrialisation in the state — has called PR firms to conceptualise an image-building strategy that will correct the perception of Bengal and draw investments into the state.

Three agencies — Bangalore-based Corporate Voice/Shandwick, and Chennai-based RK Swamy BBDO and one other firm — have made presentations to WBIDC chairman Somnath Chatterjee.

“The three agencies have made a preliminary presentation to us. We have not yet decided to whom the mandate will go. We will appoint one of them to carry out the image-building exercise,” WBIDC chairman Somnath Chatterjee told The Telegraph.

“The brief was clear and precise — to bring the state back into the limelight,” said a source who participated in the presentations. Some of them have previous experience in this area. For example, RK Swamy has been associated with Maharashtra Industrial Development Corporation to sell the state as a business destination and counter the hype surrounding states like Andhra Pradesh and Karnataka.

Top-level WBIDC sources said they had received advice from several quarters emphasising the need for a proper image-building exercise. “The chambers have also made several presentations to us on this issue. Based on their observations, we have decided to come out with an exercise that will add value to the state. However, we have not yet decided the amount that WBIDC will spend on the entire exercise,” sources added.

Chatterjee said, “We want to put forward the factual details to the prospective investors. We want to focus on the truth about industrialisation in the state. And for this we need a proper image-building exercise to market our state. We want to dispel the negative perceptions about the state in the minds of investors.”

Chatterjee was an active participant at the presentations and lobbed a number of questions at the Shandwick and RK Swamy officials and also fielded a number of queries from them.

However, a section of industry feels that an image-building exercise alone will not ratchet up the pace of industrialisation in the state.

“The government should start working immediately and implement things rapidly. The message should trickle down to all the layers of administration to facilitate the process of industrialisation of the state,” sources said.

Chatterjee blamed the media for playing up the negative aspects of the state and ignoring its achievements. For instance, he said, one English weekly had derisively remarked that cricket captain Sourav Ganguly was the state’s only achievement in the recent past. He deplored the fact that the media had failed to play up the positive measures like the establishment of Infinity Park.

The state’s image as a poor business destination has been reinforced in recent weeks after the bloody incident at Baranagar Jute Factory where two company officials were killed after a worker was shot dead by one of them.

“It’s basically a perception problem,” said a public relations professional who was present at the presentations. “The popular view that the state has militant labour and a slothful state administration are just a few of the misconceptions that we need to correct.”

With the image-building exercise and its new package of incentives, the state government would like to drum up investments into the state.

Recently, state commerce and industry minister Bangsagopal Chowdhury has asked Madhukar Kamath, CEO and managing director of Bates India (erstwhile Clarion) to prepare a blueprint to market West Bengal as a brand to woo investors. The offer was made at a Bengal Chamber of Commerce and Industry meeting held here on January 12.

Bates, which has carried out a similar exercise for the Maharashtra’s tourism department, has already sought the study papers made by McKinsey on West Bengal to help it prepare the blueprint.

   

 
 
BANKS, FIS MAY GET TAX BREAKS FOR BAD DEBTS 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Jan. 28: 
To hasten the restructuring of the banking sector, the finance ministry may change norms, giving tax breaks for bad debts or non-performing assets run up by banks and financial institutions.

At present, banks are allowed to set off only 5 per cent of their total income against either their doubtful or loss-making assets for tax purposes. The ministry is considering a proposal which seeks to allow them to set off their entire loss-making and doubtful assets.

The new move being thought of for the coming budget could be significant as it could mean weak banks like United Bank of India and Indian Bank could be allowed to set off as much as 15-20 per cent of their income against loss making and doubtful assets.

According to the new RBI norms, banks classify their NPAs as sub-standard, doubtful and loss assets. Bankers, as well as the Institute of Chartered Accountants of India, have long been pleading that all three categories of assets be eligible for tax deduction.

The revenue department now thinks at least the last two can be allowed. “Earlier, we were allowing one of the two categories with a cap, but with the current emphasis on helping banks clean up their balance sheets, we feel both types of NPAs without any ceiling could be allowed,” top officials said.

The norms for classifying these assets for tax breaks, too, will be brought in line with RBI’s new prudential norms. Officials hope new tax incentives will help banks cope with the times and get back into shape.

The banking sector is currently saddled with a whopping Rs 53,600 crore in non-performing assets. This is also over 14 per cent of gross advances made by nationalised banks. Previous measures to reduce this loan overhang have not succeeded so far. Banks managed to get back just Rs 3,050 crore in NPAs in the first half of this financial year. Nearly 44 per cent of the loans have been made to the corporate sector.

Banks have already been asked to tighten up measures to avoid further piling up of bad debts. Monitoring has been made stricter with monthly routines brought in instead of quarterly monitoring of debt recovery.

Bank chief executives have been asked to personally supervise bad debts of Rs 10 crore and above and take quarterly decisions on whether to rehabilitate or restructure loanee companies or to file suits against them.

Banks have also been advised to follow established models such as setting up independent settlement advisory committees headed by retired high court judges to scrutinise and recommend compromise deals with companies which have run up bad debts.

Nevertheless the situation remains alarming. A weak bank like United Bank reported Rs 1,520 crore or 27.6 per cent as NPAs. Even State Bank of India—reported Rs 15,246 crore as NPAs during the last financial year.

   

 
 
COGNIZANT TECH TO INVEST RS 70 CR IN CITY CENTRE 
 
 
BY A STAFF REPORTER
 
Calcutta, Jan. 28: 
Cognizant Technology Solutions (CTS), the $ 137-million (Rs 650-crore) global IT solutions and service provider, plans to invest Rs 70 crore to develop infrastructure for its operations in the city.

At present, the company operates out of a built-in space of 38,000 sq.ft. spread over four development centres. It has already acquired 3 acres of land at the Salt Lake Electronics Complex (Saltlec) and is negotiating for acquisition of another 2 acres.

“Our expansion plans include recruiting trained and semi-trained personnel at all our centres,” says N Lakshmi Narayanan, president and chief operating officer, CTS. “CTS has around 3,500 employees. This number will go up to 5,000 by the year-end. We have already created space for 2,000 personnel in Chennai.”

In Calcutta, CTS plans to increase its human resources from 550 to 1000 by the year-end.

It has also set up an independent body, Cognizant Academy, that has arrangements with various engineering institutes, IITs and universities, to facilitate training for its employees. The company spends about 4 per cent of its revenues on training.

Cognizant’s Calcutta operations is expected to generate revenues worth Rs 100 crore by March 2001.

The centre contributes around 18 per cent of the total revenue generated by the Indian operations of CTS.

Besides Calcutta, the company has four development centres at Chennai and one each at Bangalore and Pune. Two more centres will be added in 2001. There are, however, no plans to expand to other cities.

   

 
 
TAYALS’ STAKE IN BOR LIKELY TO GO UP 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Jan. 28: 
The Tayal group, the promoters of Bank of Rajasthan, intend to mop up any equity warrant that remains unsubscribed. The warrants are being issued as part of a rights issue. The promoters’ holding in the bank is expected to move up marginally after the conversion of warrants.

The bank has come out with a rights issue in the ratio of five equity shares for every two shares held. Each rights share also carries a detachable warrant that confers the right to subscribe to one equity share. The bank is now converting these warrants into equity at a discount to the current market price.

“We could not pay dividends to our shareholders for the past three to four years and the conversion will be at a discount so that shareholders stand to benefit,” Pravin Kumar Tayal, chairman of Bank of Rajasthan, told The Telegraph.

Tayal revealed that even after conversion, the promoters would still be below the mandatory level of 40 per cent stipulated by the Reserve Bank of India (RBI) for private sector banks.

The central bank has stipulated that the promoters’ holding in these banks should be below 40 per cent.

The Bank of Rajasthan chief also revealed that after turning the corner recently, the bank is now planning to add new products that include credit cards, debit cards, mobile banking and internet banking.

It has already appointed KPMG Consulting to help in its overall restructuring. The consultancy will help the bank design new plans and draw up an IT strategy. The final report is expected to be submitted before March 31, 2001.

The bank has also appointed PricewaterhouseCoopers (PwC) to help restructure its treasury operations. While PwC will help the bank in drawing a new generation treasury, Tayal said the bank’s efforts have already paid off and the division has started yielding profits.

In the current fiscal year, the bank has placed a target to recover non-performing assets worth Rs 100 crore. Tayal averred that by the end of this year, this figure is likely to be Rs 75 crore.

As a result, the NPAs as on March 31, 2001 is likely to be in the region of Rs 300 crore. In the previous fiscal, the bank had recovered around Rs 52 crore.

While the bank now has 306 branches in the country, it has earned a net profit of Rs 17.32 crore during the first half of the current year ended September 30.

For the year ended March 31, 2000, the bank had reported a profit of Rs 12.07 crore against a loss of Rs 67.46 crore during the last year.

Tayal also said the immediate plan was to raise the capital adequacy ratio to above 9 per cent. He predicted that it would take the bank around two years to issue dividends to its shareholders.

   

 
 
ONGC CHAIRMAN MAY HAVE A SAY IN SUCCESSOR’S CHOICE 
 
 
FROM R. SASANKAN
 
New Delhi, Jan. 28: 
The changed personal equations in the government-controlled petroleum industry may enable ONGC chairman Bikas Chandra Bora to have a say in the selection of his successor after he hangs up his boots in April.

Though it is not mandatory either on the part of Public Enterprises Selection Board (PESB) or the ministry of petroleum and natural gas to follow the recommendation of the outgoing chief executive, there are strong indications that Bora’s views will be taken seriously by the minister, Ram Naik, and the secretary, P. Shankar. They consider him to be a fair-minded chief executive.

The ONGC chief did not enjoy the same equation with Shankar’s predecessor, S. Narayan. They clashed over the selection of candidates for the post of two directors in ONGC. Sources say Bora had even offered to quit at one stage.

It is not known whom Bora will recommend. Though four of his director colleagues are appearing for the interview, he is not known to be particularly close to any of them.

Sources in ONGC and the ministry see Atul Chandra, managing director of ONGC-Videsh, and Inder Nath Chatterjee, ONGC director (finance), as the front-runners. Chandra is the only reservoir engineer among the candidates, and ONGC’s biggest problem is the unpredictable behaviour of the Bombay High reservoir. As the boss of ONGC-Videsh, he struck two major equity oil deals with Russia and Iraq, and is in the process of finalising production-sharing contracts with Algeria. He has tremendous international contacts.

Chattterjee has a clean reputation and, as finance director, he has taken several tough decisions in the interest of the corporation. However, his disadvantage is that he is not a technical hand. But ONGC had a finance professional heading it before, and Chatterjee has a good grasp of the organisation and its problems.

The other candidates within the organisation are R. C. Gourah and Jauri Lal. Gourah has just sorted out certain issues pending with the Vigilance Commission, which he alleges, were the handiwork of his detractors. The decks have now been cleared for him to appear for the interview. Lal is not a technical hand, but he is the senior-most director on the company board, and is a force to be reckoned with.

It is not known whether Najeeb Jung will appear for the interview. Sources close to him say he had turned down an offer to this effect from the government. In the early 90s, he was a joint secretary in the ministry, in charge of the upstream sector, and is widely seen to be a strong administrator.

S. N. Mathur, the IBP chairman and managing director, acknowledged that he is a serious candidate. He is respected in the industry and in official circles. He considers the ONGC top job as the most challenging assignment. Subir Raha of IOC and Avinash Chandra of the Directorate of Hydrocarbons are also candidates with good track records in their own areas.

   

 
 
SEB METERING DRIVE FAILS TO BUOY REVENUES 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Jan. 28: 
The West Bengal State Electricity Board (WBSEB) has failed to achieve its revenue collection targets even after introducing some time-bound operational programmes like 100 per cent metering and meter-reading.

In an internal message to its employees, member (distribution) B. Mandal has said: “I am ... constrained to say that even after months of launching the time-bound initiatives, the status of revenue collection and consumer services have only marginally improved.”

He said this clearly indicated that the rank and file had failed to appreciate the precarious state that the board’s finances were in. “The message is loud and clear: our back has hit the wall; our survival is at stake,” Mandal said.

A top WBSEB official said, “If we fail to bring about radical changes in our dwindling financial affairs by bringing down to zero the Rs 65 crore monthly gap between income and expenditure, and generating adequate surplus to take care of upgradation and repair and maintenance of the power system within the shortest possible time, then the board cannot be saved from the sweeping changes towards corporatisation and privatisation that are taking place elsewhere in the country.”

This has already had a knock-on effect on its own dues to other suppliers. WBSEB’s outstanding dues to the creditors by way of purchase of power, coal and others have crossed Rs 4,800 crore.

The official said it had been underscored at various revenue review meetings that collections, particularly in medium and low voltage sector, has not been commensurate with the actual quantum of power sold through the distribution network.

After a lot of deliberation in review meetings and the joint management councils, the main reason for the state of affairs has been identified as the deficiency in meter-reading and billing. The board has devised some time-bound operational programme to streamline the revenue collection machinery to achieve the targets that have been fixed for the first time for its field units.

   
 

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