Sinha vows to pull down tariff walls
Local aspirantsfor IBP keen to thwart Shell bid
Tax raid on Usha group
RBI backs one-time settlement of NPAs
Five-year rollover for Spic FRNs
No qualms on SBI exit scheme
Foreign Exchange, Bullion, Stock Indices

 
 
SINHA VOWS TO PULL DOWN TARIFF WALLS 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Feb. 14: 
Finance minister Yashwant Sinha today indicated the budget will take the country closer to a unified, nation-wide central value-added tax (VAT) of 15-16 per cent, without the sops and tax holidays that the industry is clamouring for.

Speaking at the Assocham’s annual general meeting, he asked the captains of industry to brace for a low import duties, and chided industrialists who were pressing for high tariff walls. “Everyone knew that imports were being opened up, that the government has a long term goal of reducing tariff rates. Companies should have been ready for it.”

He did not accept Corporate India’s contention that it was being swept out of business by the deluge of cheap imports. “We have looked at the figures and it shows that imports, other than petro goods and gold, have actually declined.”

The minister said there is nothing to suggest that the country has been inundated by imports, even though an impression has been created that easier imports have been responsible for much of the troubles faced by the industry,” Sinha said.

Sinha’s remarks on indirect taxes, which seemed to indicate a hard budget that will leave little leeway for tax dodgers, is already expected by India Inc. Most firms are getting ready for a tough fiscal regime in the coming months.

Sinha, however, assured industrialists there would be little or no change in income tax rates, something that lit up the faces of many barons. In a bid to pump in a feel-good wave, he even talked of a direct tax package which would please them all.

Corporate and personal incomes are being taxed in three slabs for the past few years, and there has hardly been a change in the structure. However, the need to raise funds to cope with the Gujarat earthquake forced the government to impose a 2 per cent surcharge on income tax. The move was welcomed by industry in public, but many baulked at the new burden and called it a ‘retrograde’ measure. It has sparked fears of more quake-related tax doses in the budget.

Sinha’s indications that excise rates might be revamped appeared more like an afterthought. Initially, he berated industrialists who wanted the tax rate to be locked in the lowest slab of 8 per cent. He made it clear to them that the lowest tier was a special and temporary arrangement. “Salvation for all lies in a regime of a 16 per cent nationwide VAT.”

A unified VAT has been recommended by several public finance expert committees set up by the finance ministry and accepted by the BJP government as the ultimate goal. Sinha’s remarks at this juncture is important because it comes only 14 days before the budget is presented in Parliament.

The minister asked the industry to resolve its differences, and present a common list of demands to the government so that there can be a broad consensus on what the budget should do.

According to ministry officials, Sinha wants to ensure that there is no post-budget jockeying for tax amendments. This prompted a Delhi-based industrialist to tell his colleague that the minister is trying to pre-empt complaints over the harsh budget that he appears to be sewing up. “Everyone knows rival businesses will never agree on a single tax or tariff rate. So he wants no one coming with complaints.”

Growth babble

At the three-day summit, ‘India can make it’, being organised at Assocham’s 80th AGM, the recipes offered for faster growth were as diverse as the economists themselves.

Bibek Debroy shifted the focus to what he called unsustainable government consumption. He said it would take savings equivalent to 30 per cent of the GDP to achieve a 9 per cent growth.

“The problem is inadequate private consumption. Free up the money spent on subsidy, government wages and defence expenditure. This can lead to a 2 per cent increase in the existing 6 per cent GDP growth rate. The rest can be achieved through a spurt in private consumption,” he suggested.

According to I. Natarajan, chief Economist at National Council of Applied Economic Research, increasing consumption is the issue. He cited a market information survey of households conducted by his institution which showed that rural consumption — durables and expendables — is booming.

   

 
 
LOCAL ASPIRANTSFOR IBP KEEN TO THWART SHELL BID 
 
 
FROM R. SASANKAN
 
New Delhi, Feb. 14: 
Indian Oil Corporation (IOC) and Reliance Petroleum (RPL) may try to outbid Shell in acquiring the government’s stake in junior trading company IBP.

The bidding process has already started, and expression of interest has been invited from companies, Indian and foreign.

Shell has already said it is keen on bidding for the stake. The government holds 59.58 per cent in IBP, of which it plans to disinvest 33.5 per cent to a strategic partner. IBP has no refinery of its own and its share in the retail market is less than 5 per cent. Most of its retail outlets are in the eastern region.

Shell’s entry can pose a big challenge to Indian Oil and Reliance Petroleum. Though the two companies are partners in marketing the products of the Jamnagar refinery at present, they could go alone once Reliance Petro sets up its own marketing network. However, their immediate concern is to prevent multinationals like Shell from entering the retail market by picking up the government’s stake in IBP.

Neither Indian Oil nor RPL has any idea about the bid to be submitted by Shell or other MNCs. IOC will submit one bid alone, and another through a planned joint venture with Reliance Petro, which has to be cleared by the government.

Under an agreement between the two companies, the joint venture will market 48 per cent of the products made by Jamnagar refinery; Indian Oil will have only 52 per cent to sell.

Oil industry circles expect aggressive bidding by domestic giants. Shell cannot be unaware of this. Its chief executive in India, Vikram Mehta , is considered a canny professional. It is unclear how Shell will meet the mandatory investment of Rs 2000 crore in the petroleum sector required for it to start retailing. There was speculation that it would pick up Enron’s 30 per cent stake in upstream joint ventures such as Panna, Mukta and Tapti to secure marketing rights.

The global oil major, not known to harness small fields, has scotched the buzz. There are other ways of meeting the investment condition: It could invest Rs 2,000 crore in a refinery.

However, Shell has been shying away from refineries of late, and it is unlikely that there will be a different strategy for the Indian market. It remains committed to develop the port of Hazira, and to set up an LNG terminal there.

   

 
 
TAX RAID ON USHA GROUP 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Feb. 14: 
Income tax sleuths today swooped down on offices and other premises owned by the Vinay Rai family controlled Usha group. Tax department sources said the raids were conducted in nearly 50 places in Delhi, Haryana, Himachal Pradesh, Rajasthan and Uttar Pradesh. “Power connection had been cut off in Usha Bhawan, their south Delhi-based headquarters. So, initially, we were unable to access their computerised records,” official sources said.

Among other places, the residence of Vinay Rai, the group chairman, was also raided. The Usha group’s managing director, M C Gupta, however, claimed “The group has nothing to hide and is giving full co-operation to the officers of the Income Tax team.” He said, he supported the finance ministry’s effort to investigate business groups. The department, sometimes, have “no option but to conduct such searches,” he added. The IT department is also carrying out surveys on the premises of the group’s offices in Mumbai and Calcutta. The Usha group’s line of business involve telecom, hotels, infotech and manufacturing of engineering goods, iron and steel.

   

 
 
RBI BACKS ONE-TIME SETTLEMENT OF NPAS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 14: 
The Reserve Bank of India (RBI) today directed banks to actively push through a one-time settlement scheme to recover bad debts, even at the expense of foregoing some interest.

In a meeting between the RBI deputy governor, S P Talwar and chiefs of various banks here today, the RBI urged the banks to adopt a more pro-active stance on the one-time settlement scheme, set to close on March 31 this year. However, the scheme has so far not met with much success.

According to the guideline, banks can go for in a one-time settlement of all assets not exceeding Rs 5 crore.

“The deputy governor told bankers to try and recover the money, taking full advantage of the scheme,” senior RBI officials told The Telegraph.

However, bankers present in the meeting were optimistic that with the financial year drawing to a close, the scheme may evoke a better response.

RBI officials added the meeting also touched upon the ongoing voluntary retirement schemes (VRS) in most nationalised banks.

As regards the accounting of VRS expenses, banks have been advised to take their VRS-related decisions by March and follow the accounting norms issued for the purpose. Some banks had planned to account for part of the VRS expenses in the current fiscal and show the rest in the next financial year. Here, the RBI also asked bankers to ensure that the paring of the workforce does not affect business and efficiency.

“Banks were also told that in such an environment, they should concentrate on staff redeployment and rationalisation of their branch networks,” RBI officials added.

On amortisation of expenses for retirement, the central bank said it would discuss the technical details with the Institute of Chartered Accountants of India next week and later issue guidelines.

The issue of the delay in encashment of Travellers Cheques (TCs) was also discussed at the meeting and banks have been advised to expedite the encashment of TCs by simplifying the procedures. RBI said that the banks, on production of identification documents like passport, could promptly release the currency against the TCs. Today’s meeting comes amidst repeated concerns expressed by the RBI on the swelling NPAs in the domestic banking sector, particularly among the public sector banks.

The RBI had earlier noted that a significant part of the problem owed its origin to the carry-over of old NPAs in certain sunset industries.

   

 
 
FIVE-YEAR ROLLOVER FOR SPIC FRNS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 14: 
The Chennai-based Spic Ltd today obtained a five-year rollover on its $ 120 million floating rate notes (FRNs) that had a put option in January 2001. The restructuring process fixed a new interest rate of Libor plus 150 basis points. Sources added negotiations were completed within six months with full participation from noteholders.

Sources from Bank of America Securities, which acted as financial advisor to Spic, said the noteholders were divided between both Indian banks and overseas institutions.

Earlier this year, the company defaulted on its interest payments amounting to around $ 5 million, which it attributed to the sudden change in the policy of Indian Oil Corporation that affected its cash flows. Spic’s fertiliser plant in Tuticorin sourced naphtha and fuel oil worth Rs 80 crore from IOC. However, while Spic was initially allowed three months credit giving it a leeway of Rs 240 crore, IOC later withdrew the facility, which saw Spic paying around Rs 2 crore every day, putting a huge strain on its cash flows.

Spic is primarily engaged in the manufacture and marketing of agricultural inputs with interests in chemicals and petrochemicals, pharmaceuticals and services.

During the year ended March 31, 2000, overall sales turnover of the company grew to Rs 2,670 crore. Of this, the fertiliser division accounted for about 91 per cent. However, substantial outstanding debt coupled with a large investment portfolio severely affected its profitability and stretched cash flows.

   

 
 
NO QUALMS ON SBI EXIT SCHEME 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Feb. 14: 
Few employees who opted for State Bank of India’s (SBI) voluntary retirement scheme (VRS) have had second thoughts as the scheme winds down to a close on Thursday.

SBI, the only one among the flock of banks to have offered a withdrawal facility in its VRS offer, received 35,380 applications, most of which will have to considered by the management.

With just a day to go, no rush for withdrawals is expected.

The maximum number of withdrawals have been reported from the Bengal Circle, a zone where unions have been the most vociferous in slamming the early-retirement plan. According to a senior member of SBI Staff Association, only 350-400 of the 2,146 applications submitted — which includes 947 from officers — have been taken back so far.

V.K. Gupta, general secretary of SBI Staff Association in Delhi, said he knew of 250 withdrawals, of which 100 were from officers. “The circle, which comprises Rajasthan, Western Uttar Pradesh, Delhi and three districts of Haryana, has seen 4,099 employees opting for VRS, including 2,292 officers.

The story was no different in Mumbai, where 250-300 are believed to have decided to stay back at work. In all, 5,265 employees, which covers 2,417 officers, had filed for the VRS in the circle, which consists of Maharashtra and Goa. Response to the withdrawal facility was lukewarm in the Chennai circle as well.

SBI, the largest bank in the country with 2.33 lakh employees, received 33,000 applications for early retirement, and expects the pruning exercise to cost it between Rs 800 and Rs 1,000 crore. However, it has taken a decision to restrict the number to 23,000, 10 per cent of the total staff-strength.

Meanwhile, efforts are under way to cope with the post-VRS situation. Chief general managers have been asked to prepare a contingency plan so that employees who leave hand over charge on time, and to ensure that operations are not affected.

A section of the employees feel there will be a pressure on the SBI pension fund once the 23,000 employees call it a day. The bank spends Rs 7.08 crore on widow pension, besides Rs 83.89 crore on 18,000 pensioners. Another 8,000 will retire next month, which will cost it an additional Rs 37.29 crore. “There will be more pressure on the pension fund of Rs 116.52 crore after the VRS departures,” a senior official said.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.62	HK $1	Rs. 5.90*
UK £1	Rs. 67.91	SW Fr 1	Rs. 27.55*
Euro	Rs. 42.91	Sing $1	Rs. 26.35*
Yen 100	Rs. 40.08	Aus $1	Rs. 24.40*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4420	Gold Std(10 gm) Rs. 4355	
Gold 22 carat	Rs. 4175	Gold 22 carat	Rs. 4030
Silver bar (Kg)	Rs. 7550	Silver (Kg)	Rs. 7640
Silver portion	Rs. 7650	Silver portion	Rs. 7645

Stock Indices

Sensex		4363.11		+0.06
BSE-100		2252.23		-8.17
S&P CNX Nifty	1393.35		+2.15
Calcutta	133.88		+0.35
Skindia GDR	767.87		+0.04
   
 

FRONT PAGE / NATIONAL / EDITORIAL / BUSINESS / THE EAST / SPORTS
ABOUT US /FEEDBACK / ARCHIVE 
 
Maintained by Web Development Company