Atal asks FM to avoid harsh budget
Lufthansa buys unutilised A-I flying rights
Netguru looks for internet partner
Rallis India sells pharma wing
Insurers push for quake clause in housing cover
Portal to charge up Exide plan
City leather complex move to woo investors
Guessing game on Lever growth
Foreign Exchange, Bullion, Stock Indices

 
 
ATAL ASKS FM TO AVOID HARSH BUDGET 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Feb. 12: 
Prime Minister Atal Bihari Vajpayee has been holding a series of consultations with his finance minister Yashwant Sinha to get him to tone down what could otherwise be a harsh, hardline budget with heavy doses of taxation, higher diesel, food and fertiliser prices, and large-scale job cuts.

Vajpayee is under pressure from Cabinet colleagues not only from among the BJP’s many allies but also from BJP Cabinet ministers like Murli Manohar Joshi who are scared that a hard budget will lead to a popular backlash during the elections in West Bengal, Tamil Nadu, Kerala, Assam and later Uttar Pradesh to be held later this year.

Allies like the Telugu Desam, Trinamool, Shiv Sena and Akalis also fear a sharp drop in popularity ratings and lost elections in their home states and have therefore urged Vajpayee to rein in Sinha.

Akali minister S S Dhindsa has shot off letters to Vajpayee and Sinha asking for a rethink on the plans to increase fertiliser prices by 5 per cent and diesel prices by 50 paise to a rupee.

Both Desam and Trinamool have been pressuring Vajpayee not to “use Gujarat as an excuse to impose high taxes or impose too many unpopular spending cuts.”

They also resent the move to force the ministries to voluntarily accept steps to slash both non-plan and plan spending.

Sinha is also seeking to speed up the process of divestment and is even toying with the idea of linking funds raised through the selloff of public sector units with the rebuilding in Gujarat, which is being opposed by the parties like the Trinamool.

BJP ministers are upset by the prospect of both higher taxes as well as moves to usher in wide-ranging labour reforms including one that which would do away with prior permission from the government to shut down a firm. They feel it will reinforce the party’s pro-business image and distance urban middle and lower middle class voters who form the single largest voting block.

These ministers and parties became vocal after both Vajpayee and Sinha made it clear both within and outside Cabinet conclaves that since the Union government needs to raise money to help rebuild Gujarat, harsh steps may be taken.

One of their key contentions is that nothing even near these wide sweeping measures were thought of when Orissa was hit by a super-cyclone, Andhra by drought and West Bengal and Bihar by floods.

The finance minister, who has been under pressure from within the NDA government over his alleged role in helping transitional financial institutions operating in India to avoid paying taxes by registering in Mauritius, is believed to have given a carte blanche to his top aides — finance secretary Alit Kaman and chief economic advisor Rakish Moan — to push through as many hard-line economic reforms as possible in the guise of steps needed to help Gujarat.

Normally, budget decisions do not percolate outside the close coterie of the finance minister, the Prime Minister and one or two other very senior ministers who are consulted. But as many of the ‘reformist’ decisions sought to be included in the budget this time have relevance to other ministries, there have been inter-ministry discussions and news has started filtering out to other Cabinet ministers of the steps that might prove electorally damaging for them.

This has expectedly sparked off rumblings of discontent. Some of these Cabinet ministers wish to take advantage of a meeting of the Union Cabinet being called ostensibly on power sector reforms tomorrow to voice their differences with the Sinha line.

Sensing the mood, Vajpayee has already started confabulations with Sinha in an effort to rein in the latter’s inclination to set the pace for the next stage of reforms.

What is strengthening Vajpayee’s hands is a better-than-usual fiscal situation. The government is likely to be just slightly over its targeted fiscal deficit of 5.1 per cent of GDP or Rs 1,11,275 crore. Low utilisation of plan funds and better direct tax collections have meant a higher comfort level on the fiscal side for the union government. Total direct tax collections till January has been Rs 47,166 crore, nearly 28 per cent higher than figures posted by the revenue department last year in January. While total tax collections have been Rs 1,42,310, more than 13.5 per cent higher than last year.

The Prime Minister’s Office is arguing that this means harsh steps to right the economy or government’s finances are not immediately needed. One of the first casualties of the PM-FM exchange may be a planned across-the-board surcharge on excise which may well have been heavily inflationary in nature, besides hurting an already bruised industry lobby.

Another casualty has been offered by Sinha himself — moves to rollback the retirement age to 58 may be given up and instead a voluntary retirement scheme based on the Gujarat government’s model which gives 45 days’ salary for every year served or 25 days’ salary for every year of service left and the right to retain government accommodation, may be opted for.

But the rationalisation of indirect taxes (both customs and excise), and the increase in the number of professions and services currently covered by a service tax will continue to be on course.

The finance minister has also made it clear to his boss that financial sector reforms which include changing laws governing both banks and financial institutions and recapitalisation of banks as well as ushering in foreclosure laws instead of a cumbersome Sick Companies Act should not be axed.

   

 
 
LUFTHANSA BUYS UNUTILISED A-I FLYING RIGHTS 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Feb. 12: 
The government has started selling part of its old silver even before disinvestment in its airlines can take place.

In a trend setting bilateral agreement signed with Germany, the civil aviation ministry has sold Air-India’s right to operate seven frequencies between India and Germany to Lufthansa for an undisclosed amount. Lufthansa plans to start using two of these frequencies from this summer with direct flights to Bangalore. Two flights will be added next year and three more in 2003.

The German airline will now negotiate the finer terms of this deal with Air-India through a royalty agreement. What is raising eyebrows in the aviation industry is that the government has chosen to sell these unutilised frequencies even as bidding for the ailing airline is on. One of the attractions to bidders for Air-India is the huge inventory of unused flying rights the airline has to various lucrative destinations.

Air-India uses up just 2 lakh of the 5.5 lakh seats that have been earmarked for it annually under various bilateral pacts that India has signed with other countries.

For instance, its rights to fly to south east and east Asia largely lie unused to the extent that Air-India does not use some 31,000 out of some 47,700 seats that it is entitled to fly and sell in a year to that region. Similarly it has over 35,000 unutilised seats entitlements to Europe, including the UK and some 7,600 seats to Gulf and West Asia also lie unused.

Without the huge number of unutilised bilaterals and locked up assets worth about $ 2.7 billion, Air-India itself is no pretty bride. It turned up a net loss of Rs 75 crore last fiscal, the fifth consecutive year it posted a loss. It has 26 ageing planes, most of which need to be replaced. And it has the world’s highest employee to aircraft ratio of over 680 workers for every plane it owns. Most airlines have less than 100 employees to a plane.

Though rival airlines vying to snap up management control in Air-India, remained tight lipped, sources said, some of them were planning to lodge protests with the government. What is worrying these airlines is that the civil aviation ministry which has all along been dead against A-I’s divestment may start selling similar unused rights to other national carriers on other routes too.

   

 
 
NETGURU LOOKS FOR INTERNET PARTNER 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Feb.12: 
Netguru India will rope in a strategic partner to operate its internet services, launched a couple of months back. The wholly-owned subsidiary of the US-based Netguru Inc is in talks with a large internet service provider (ISP) for a deal expected to be clinched soon.

Confirming the development, chief operating officer Gurudas Sarkar said his firm does not have the expertise to run such a business, and was therefore looking for an ally. “We shall provide the infrastructure while the partner will run the business with its professional expertise,” he said.

The internet services division may even be hived off into a 51:49 joint venture in which the partner will hold a minority stake. Existing laws cap foreign equity in an internet service firm at 49 per cent.

“Regardless of the holding pattern that emerges, management control will be vested in the partner as far as internet services are concerned,” Sarkar said. However, he made it clear that the ISP business may continue to be a division of Netguru India if the partner agrees to it. It is also in negotiations with Lorell Cyber Star for satellite bandwidth.

Netguru India, called Research Engineers earlier, had decided to pick up 30 per cent, valued at Rs 9 crore, in the Delhi-based Vital Communications to run its internet services. It had shelled out Rs 2.5 crore as advance for equity and named KPMG for due diligence.

Vital Communications, wracked by an internal tussle, did not cooperate in the due diligence, after which Netguru India moved the Delhi HC to recover its money.

   

 
 
RALLIS INDIA SELLS PHARMA WING 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 12: 
Signalling its exit from the pharma sector, Rallis India Ltd, a Tata group company, today announced that it has sold its pharmaceutical business to Shreya Impex Pvt Ltd for a consideration of Rs 49 crore.

The Rallis board met today to approve the “sale/transfer of its pharmaceutical business”, a late evening communiqué said.

Over the past three years, the Tata group has been trying to rationalise and streamline its business portfolio through planned disinvestment in non-strategic and non-core businesses.

“In consonance with this strategy, the board of directors of group company Rallis India today approved plans to divest its pharmaceutical business,” the statement said.

Earlier, the Tata group sold its stake in Merind India Ltd to Wockhardt.

The exit from the pharmaceutical business would strengthen Rallis’ balance sheet and enable it to focus on its core strengths in the areas of agrochemicals, seeds and agri-business, the statement added.

Shreya Impex is a joint venture company of a Moscow-based non resident Indian Sujit Kumar Singh. The parent company is a leading pharmaceutical marketing and distribution company in Russia which reported a profit of $ 17 million for the financial year 1999-2000 on a turnover of $ 168 million.

Shreya Corporation operates in Russia through a network of 29 branches spread across the country and employs 2,300 people. At present, Shreya Corporation is the third largest marketing and distribution company in Russia and is connected with almost all the top pharmaceutical multinational companies of the world.

Shreya’s Indian operations comprise two outfits set up recently in Mumbai—Shreya Healthcare Pvt Ltd, its manufacturing and domestic marketing company and Shreya Impex Pvt Ltd, its export unit. Between them, the two companies accounted for a turnover of $ 12 million in their first year of operations.

The Tata group stated that the sale of Rallis’ pharma business was in view of its strong belief that these divestments have strengthened its business focus and enabled it to establish a strong and competitive presence in its seven chosen business sectors—materials, engineering, chemicals, power, communications and information technology, consumer products and services.

   

 
 
INSURERS PUSH FOR QUAKE CLAUSE IN HOUSING COVER 
 
 
BY A STAFF REPORTER
 
Calcutta, Feb. 12: 
The devastating experience of Gujarat has prompted general insurers to push for an earthquake clause while giving insurance cover to the housing sector. B.D. Banerjee, chairman and managing director of Oriental Insurance Company today said, “We have also told banks, chambers of commerce, Housing Development Finance Corporation and National Housing Bank to bring the loanees within the insurance cover. We have also said that we could provide discounted premium to facilitate the process.”

Till May last year, fire and earthquake clauses were inbuilt in the insurance cover. Later the Tariff Advisory Committee made a distinction and the customer was asked to pay separate premiums for the two. Banerjee said till date they had received 10,000 claims from Gujarat and the outgo would be around Rs 600 crore. Talking about the future plans of the company, he said they would soon come out with savings linked and managed healthcare products.

   

 
 
PORTAL TO CHARGE UP EXIDE PLAN 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb. 12: 
Exide Industries is diversifying into the business of selling second hand cars, auto spare parts, offering car rentals and other services related to the automobile industry, including automobile finance and insurance. Helping Exide do all this would be its vertical portal on automobiles, autoexide.com, which was launched today.

The entire gamut of services include auto finance and insurance, servicing and maintenance, auto consultancy, on-line purchase of spare parts, batteries and other auto components. There would be sale and purchase of both new and old two- and four-wheelers. These would generate revenue from institutional buyers and sellers. To sell one’s car at the best price, online rating would also be available.

Speaking on the occasion, Exide chairman S.B. Ganguly said the company has tied up with various partners who have core competencies in these respective areas of the automobile sector. It includes financial institutions like HDFC, HSBC and National Insurance Company. Ganguly said, Exide was going beyond batteries but added that the portal would also be used for connecting Exide dealers to carry out online business with the company and their end customers.

So far about Rs 1.5 crore has been spent on the autoexide.com project but it could go up Rs 3-4 crore, Ganguly said and added that the project, which is independent of Exide, would break even in about two-and-a-half years.

According to Ganguly, it is not a dot com venture per se but an expansion drive in the area of automobile services.

   

 
 
CITY LEATHER COMPLEX MOVE TO WOO INVESTORS 
 
 
BY A STAFF REPORTER
 
Calcutta, Feb. 12: 
The Calcutta Leather Complex (CLC) is putting its best foot forward to attract potential investors. To expedite project clearance, it has set up the Centre for Leather Industries Promotion — a single window facility at West Bengal Industrial Development Corporation (WBIDC) — so that interested parties do not have to run from pillar to post.

Addressing a press conference here today, WBIDC chairman Somnath Chatterjee said the first zone of the complex, covering 54 acres of land, has already been developed and 53 tanneries have been handed over plots, out of which 19 were new tanneries and 34 were relocators.

“We are receiving trade enquiries from Saudi Arabia and Russia for setting up greenfield projects,” Chatterjee said.

The leather complex is coming up at Karaidanga on the Calcutta-Basanti Highway, 14 kms from the city. According to Chatterjee, the Italian government has assured to provide a $ 25 million line of credit for machinery.

The cost of the project is around Rs 300 crore and M.L. Dalmiya & Co (MLD), a firm floated by Jagmohan Dalmiya, has pumped Rs 92 crore into the project. The West Bengal government had chosen MLD as the partner for the first build-operate-transfer basis project in the state. The second zone of CLC, which covers 46 acres will be completed by February 28.

Chatterjee said a high-level delegation from the Calcutta Municipal Corporation has already visited the CLC and they are pursuing the idea of shifting the existing abattoir to this place.

   

 
 
GUESSING GAME ON LEVER GROWTH 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 12: 
Stock markets and share analysts cannot agree on just how well Hindustan Lever (HLL) — a company that makes everything for everyone in their daily lives — will fare, two days before the wraps are taken off its annual numbers.

Parent Uniliver, the global consumer goods giant, is tight-lipped, giving away nothing that could be of interest to a market oozing with anticipation. “The sales of our consumer brands in India have made some progress, building on the gains in mass markets,” was the cryptic comment.

That has not stopped people putting a wager on the scrip, which perked up after a few old-economy stocks were given fresh ratings. It closed higher at Rs 216 ( Rs 213.50 last week) on the BSE today after hitting an intra-day high of Rs 219.80. There are many who attribute the spurt to the pre-result excitement.

“We are concerned over topline growth than the bottomline,” an analyst affiliated to a FII broking firm said. Shalini Gupta of Motilal Oswal Securities was circumspect: “We expect a flat topline and expect a 16 per cent rise in profits over the previous year. The company has battled increased competition in an almost most product categories.”

Analysts are worried about the impact of a slowdown in consumer spending and limited penetration on sales volumes. They are confident about profitability, but say much of the gains will come from efficient treasury management, cost-cutting measures and a decline in prices of some inputs.

Optimists believe the growth in sales could be 4 to 5 per cent, but analysts feel this is too rosy a projection. For it to happen, fourth-quarter growth should have been 8 per cent. There are other analysts who do not give any credence to these figures, but have pinned their hopes on a sharp rise in exports. The company’s sales in 1999 were pegged at Rs 1,0142.49 crore while net profit stood at Rs 1069.94 crore.

Growth in soaps and detergents, a segment which contributed 39 per cent to the turnover, slackened in the first half of last year to 4.7 per cent compared with 9 percent in 1999.

Branded staples, Lever’s fastest-growing product segment, saw a 28 per cent increase in the first half; Annapurna, with a 17.5 per cent share of the market, is expected to hold its ground.

The rural market, a key factor in the company’s scheme of things, is cyclical in nature and relies heavily on the state of agriculture. A bumper harvest signals good times and a bad one portends to lower spends.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.51	HK $1	Rs.  5.90*
UK £1	Rs. 67.54	SW Fr 1	Rs. 27.75*
Euro	Rs. 43.22	Sing $1	Rs. 26.25*
Yen 100	Rs. 39.44	Aus $1	Rs. 24.65*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta				Bombay

Gold Std (10gm)	Rs. 4425	Gold Std (10 gm)Rs. 4350
Gold 22 carat	Rs. 4180	Gold 22 carat	Rs. 4025
Silver bar (Kg)	Rs. 7525	Silver (Kg)	Rs. 7610
Silver portion	Rs. 7625	Silver portion	Rs. 7615

Stock Indices

Sensex		4406.30		+ 8.97
BSE-100		2281.50		+15.12
S&P CNX Nifty	1402.20		- 3.50
Calcutta	134.35		- 0.23
Skindia GDR	761.26		+ 3.17
   
 

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