Railway finances chug along rickety tracks
Sigh of relief in markets
Modest hike seen in cement prices
Industry gives a thumbs down to Mamata
Freight hike spoils SAIL, Tisco mood
Mamata makes wagon industry happy
UTI case adjourned, taxmen seek time
Stock slump forces out Globsyn IPO
Maars, Mascon set to merge
Foreign Exchange, Bullion, Stock Indices

 
 
RAILWAY FINANCES CHUG ALONG RICKETY TRACKS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb. 26: 
In search of the elusive grail of raising money without charging more, the railways are betting that more travellers, a modest increase in freight rates, greater private participation and infotech will keep it chugging along.

As Mamata Banerjee pampered passengers in her second budget in as many years, the Railways teetered on the brink of a loss. The predicament was averted by deferring its dividend payments worth Rs 2,500 crore — Rs 1,500 crore for 2000-01 and Rs 1,000 crore 2001-02 — to the government. The practice might be repeated next year if the gamble of raising resources in non-traditional ways does not pay off.

Railway Board chairman Ashok Kumar told the customary post-budget press conference that the target for non-traditional sources of earnings has been set at Rs 1,000 crore while earnings from traditional sources are expected to rise 5.4 per cent.

Of the Rs 1,000 crore, Rs 700 crore will be generated through a Rail Tel project to lay optic fibre cables along tracks; Rs 200 crore will come from commercial exploitation of land, while commercial publicity will yield Rs 100 crore. “The government will provide Rs 300 crore from the cess imposed on diesel. The railways absorbed the Rs 200-crore cost increase arising from higher diesel prices,” Kumar said.

Despite the cash crunch and no increase in budgetary support of Rs 3,540 crore, the annual plan outlay for 2001-02 has been stepped up by 11 per cent at Rs 11,090 crore against Rs 10,002 crore this year.

The freight target for next year has been pegged at 500 million tonnes for 2001-02, a 25 million tonne increase over the current year. The expectation is that the 3 per cent hike in will help it garner an additional Rs 500 crore in revenues.

The Railway Board chief said this will not have a cascading effect on prices. The cross-subsidisation of passengers tariffs by freight charges is estimated at Rs 3,500 crore for the current financial year. It is likely to increase further in 2001-02 because passenger fares have not been revised for the second straight year.

Board member (traffic) Shanti Narayan said the thrust of this year’s budget is to achieve an annual growth in freight earnings higher than the 6-7 per cent witnessed in the past few years. “We have moved on from the traditional 3-4 per cent annual growth rate to a range of 6-7 per cent. But we want to go higher, keeping pace with the economy,” he added.

While tickets cost the same, the railways hope to maintain the 10 per cent growth in passenger traffic attained this year. This will give it the resources that would have otherwise been raised by charging travellers more. “The number of coaches will be increased and the practice of running additional trains to a destination curbed,” Kumar said.

The Kumbh Mela has boosted earnings from ticket sales, which is expected to be Rs 300 crore higher this year. Kumar said he sees buoyant revenues in the next financial year, but hinted there might be a mid-course revision in fares. Private companies and state governments will be roped in to fund new lines. Andhra Pradesh, Karnataka, Maharashtra and Tamil Nadu have been invited to participate in urban metro rail projects.

Budget estimates

Gross traffic receipts are estimated at Rs 39,439 crore while ordinary working expenses have been pegged at Rs 30,190 crore, an increase of 8.53 per cent over revised estimates. Working expenses are estimated at Rs 38,683 crore while the net traffic receipts have been pegged at Rs 755 crore. Net miscellaneous receipts are put at Rs 928 crore, including Rs 300 crore from general revenues for safety works. Net revenues have been projected at Rs 1,683 crore.

Market borrowings have been pegged at Rs 4,000 crore while Rs 3,550 crore is expected to be raised from internal resources, non-traditional revenues and contribution from general revenues for railway safety works.

Allocation for new lines has been increased to Rs 1,015 crore while Rs 200 crore will go to passenger amenities against Rs 144 crore in revised estimates.

   

 
 
SIGH OF RELIEF IN MARKETS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 26: 
The markers heaved a collective sigh of relief after trade and industry were let off in the Railway Budget.

The relief, however, did not turn into an euphoria as market operators were disappointed over the fact that railway minister Mamata Banerjee did not raise passenger fares and doled out a ‘populist Budget’.

Brokers said bourses were looking forward to a harsh budget, one that would raise passenger fares and freight rates. “It was felt that freight rates would go up in the range of 7-10 per cent,” a broker said. The fears had sent shares of many cement and steel companies declining in the early hours.

However, with the rise in rates lower than expected, the markets felt that impact of the move would be marginal. This led to a rally the stocks which had lost value in the morning.

“On balance, the budget was perceived to be okay though it was disappointingly populist,” an analyst with a foreign broking house said.

The sensex opened strong at 4168.71 over last Friday’s close of 4122.16. It scaled a high of 4174.85, largely because of the 18-point gain in the Nasdaq Composite Index on Friday. It slumped to 4074.12 later, but closed at 4112.69 in a modest 9.47-point gain over its previous finish. Hindustan Lever, Hindustan Petroleum, Zee Telefilms and Reliance Industries were among the companies whose shares were hammered in the early-session selloff.

The rally, which began after the railway budget was presented, fizzled out as bears gradually tightened their grip and they sold off heavily in several old-economy stocks.

Mahindra & Mahindra was clobbered over reports that its workers, embroiled in a dispute over higher wages at its Nagpur plant, have issued a notice to strike work from March 5. The scrip crashed by 5 per cent to Rs 157.40 after opening at Rs 168.

However, the Moser Baer share shot up 8 per cent following its inclusion in the BSE’s A group. Reports that it would gain from firm product prices in the global markets also helped. The scrip closed higher at Rs 244.35 after opening at Rs 228.

Many auto stocks perked up on expectations that the industry will be given excise benefits in the budget on Wednesday.

   

 
 
MODEST HIKE SEEN IN CEMENT PRICES 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 26: 
The cement industry is expected to wait for the budget before raising prices. Most companies expect an increase of Rs 1 to Rs 1.50 on a 50-kg bag as a result of the 3 per cent increase in freight charges announced today.

“The correct thing would be to wait for the budget, which is only a couple of days away, before we decide on a price revision,” an ACC official said. The company is one of the major producers of cement with a capacity of 12 million tonnes in plants which are located across the country.

Larsen & Toubro, another key player with more than 12 million tonnes in capacity, said it will be incurring an additional expense of Re 1 per bag. This includes the cost of carrying raw material like coal and clinker and the finished goods.

A Gujarat Ambuja official said the cost escalation would be marginal because only 10 per cent of the six million tonne that it produces is transported by the railways. The company uses road and sea extensively to move raw materials and finished goods.

“We believe that the impact on the cement industry on account of the increase in freight rates would be marginal,” a cement industry analyst said. However, industry circles are not sure if freight-classification schedules have been changed in the budget. This could have an impact on the amount they pay.

At present, the railways charge Rs 1365 for carrying a tonne of coal over 2000 kms and Rs 836 for a tonne of cement over 1000 kms. The cement industry uses 11 million tonnes of coal while 40 million tonnes of finished cement are transported.

   

 
 
INDUSTRY GIVES A THUMBS DOWN TO MAMATA 
 
 
OUR BUREAUX
 
Feb. 26: 
Railway minister Mamata Banerjee’s refusal to hike passenger fares in her second budget may have made her the queen of hearts, but industry appears unmoved.

While on one hand the chambers of commerce welcomed the minister’s move not to increase passenger fares, the across-the-board 3 per cent increase in freight rates has not gone down well, the unanimous view being the hike may prove counter-productive to increasing the volume of freight traffic.

“The two per cent increase in freight rates for iron, steel and coal is bound to impact industrial growth in major sectors all over the country....the railways should review its entire policy in order to attract larger freight traffic,” president of the Federation of Indian Chambers of Commerce and Industry (Ficci) Chirayu R. Amin said here.

The Associated Chambers of Commerce and Industry (Assocham) president Raghu Mody said, “Yet another opportunity of carrying out fundamental reforms, rationalisation of tariff and commercialisation of huge idle properties has been lost.”

Mody said the budget could have explored more innovative methods such as establishing partnership with the private sector for specific projects and commercial use.

Arun Bharat Ram, president, Confederation of Indian Industry (CII) said the budget had bypassed the second generation of reforms. Against the backdrop of poor financial health, the minister should have taken pragmatic and visionary measures to put finances on track, he added.

“There is always the fear of losing freight traffic to road,” said S. B. Ganguly, president of the Bengal Chamber of Commerce and Industry. Ganguly however welcomed the initiative taken by the railway minister in refraining from introducing any new lines and concentrating on completing ongoing projects.

C. K. Dhanuka, president of the Indian Chamber of Commerce said the Railway budget will be moderately inflationary, but was along expected lines. “Once again, freight rates have been hiked without touching the passenger fares, demonstrating that cross subsidies will continue despite the pressure it creates on industry,” commented Dhanuka.

The two chambers welcomed the ministers attempt to put greater emphasis on non-traditional methods of raising revenue such as right of way for optical fibre layout, commercial utilisation of railway land and commercial sponsorships. “How far she will be able to meet the budgetary gap of more than Rs 1000 crore is to be seen viewed against the poor realisation of raising resources through non-traditional ways introduced last year,” Ganguly said.

Another grouse was the complete cold shoulder to exports.

Regretting the railways’ “indifference” towards anything to do with exports, Federation of Indian Export Organisations’ president K. K. Jain said this omission was “all the more disappointing since the railways continued to be the major mode for export cargo from the hinterland to the ports.”

Further, FIEO said the number of express trains required for moving export cargo from internal commercial depots to the major ports was still limited.

The Merchants’ Chamber of Commerce, which termed the budget a ‘populist’ one, said it has “rightly focussed on safety and security of railway travel and allotted a 26 per cent higher outlay on track renewals and modernisation of signalling and telecom system.”

   

 
 
FREIGHT HIKE SPOILS SAIL, TISCO MOOD 
 
 
BY A STAFF REPORTER
 
Calcutta, Feb. 26: 
The steel industry has expressed its disappointment over the 2 per cent hike in freight charges in the Railway Budget for 2001-2002. Tata Iron & Steel Company has hinted that it will increasingly opt for the roadways to transport its products.

Tisco managing director J. J. Irani said: “A few years ago Tata Steel transported only 5 per cent of its products by road, which has now increased to around 50 per cent due to consistent increase in the railway freight. The present proposal, to increase railway freight further, will encourage steel producers to use the road transport.”

Steel Authority of India Limited (SAIL) chairman said, Arvind Pande, “The budget will have an adverse impact on SAIL of about Rs 30 crore in the next financial year.” He said the steel industry was looking forward to an end to the practice of cross subsidisation of passenger fares. “While the increase in freight will put further pressure on the steel industry, which today cannot afford any kind of cost escalation, we welcome the commercial aspects, like, volume discount announced in the budget,” he added.

Irani said: “For the transportation of both, finished steel as well as raw material, the freight charges will be substantially increased as proposed by the railway minister. This is unfortunate as railway freight in India is already high compared to other countries. Even the Prime Minister had, recently, mentioned that it costs more to move a tonne of steel from Jamshedpur to Mumbai than it does to move the same steel from London to Mumbai. By continuing the practice of subsidising passenger traffic by increasing railway freight, the railway minister is moving rail traffic to road traffic.”

Pande, however, appreciated the railway minister’s move to consolidate the existing projects rather than taking up new projects.

   

 
 
MAMATA MAKES WAGON INDUSTRY HAPPY 
 
 
BY A STAFF REPORTER
 
Calcutta, Feb. 26: 
Wagon manufacturers have welcomed the Railway Budget for 2001-2002 saying, “This will greatly relieve the highly labour-intensive wagon industry.”

According to Texmaco president Ramesh Maheswari, the railway budget will have a very positive impact on the wagon industry, particularly in West Bengal, where about 50,000 people are directly involved.

Moreover, a large number of the ancillary units will remain operational which are a source of sustenance to many, he said.

“Mamata Banerjee must be complimented for making a repeat allocation to procure 23,000 four wheeler wagons in the next financial year to meet an enhanced freight target of 500 million tonnes,” Maheshwari said in a statement.

He, further, pointed out that the intake of wagons came down to 10,000 units in 1999-2000. But Banerjee made all efforts to help the industry by placing larger orders last year in her maiden budget.

Titagarh Industries chairman J.P. Choudhury said, “The four wheeler wagon orders is reasonably good for the industry. But there are about 50,000 outdated wagons which need to be replaced.”

The Railways had placed almost an equal number of orders for wagons to private and public sector companies. “Most of the public sector companies under Bharat Bhari Udyog Nigam Ltd (BBUNL) are now in a precarious condition due to lack of orders, especially, from the railways. But reasonably good procurement for two consecutive years will help revive them,” a senior BBUNL official said. Railways is said to have procured around 8000 wagons from the public sector units like Burn Standard, Braithwaite, Jessop and Bharat Wagons.

Industry sources said railways had procured wagons worth Rs 1,020 crore from West Bengal alone.

   

 
 
UTI CASE ADJOURNED, TAXMEN SEEK TIME 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 26: 
The income tax department, through its counsel Rafiq Dada, has sought time to put forth their arguments regarding the notice issued to the Unit Trust of India, asking it to file the interest tax returns for the last eight years which amount to more than Rs 1,100 crore.

Meanwhile, the high court in Mumbai, today, adjourned the petition filed by UTI challenging the notice issued by the income tax department, until March 5. The petition was adjourned by Justices S H Kapadia and V C Daga.

The main bone of contention is whether UTI’s interest earnings qualify as income. In 1991, the Central Board of Direct Taxes (CBDT) had clarified in a letter that “Since, under Section 32 of the Unit Trust of India Act, UTI is not liable to pay in respect of its income, the interest tax will not apply to UTI.”

However, later it argued that the letter, even if it was issued, was not binding as an officer can make a mistake.

UTI has contended that it was set up under a special statute. It was a mutual fund body and, therefore, not subject to regulations of the Securities and Exchange Board of India. It had no assets and liabilities of its own. The money, contributed by the unit holders, was invested in schemes and the returns were distributed in respective proportions.

While UTI has stated that it resembled a trust but claimed that it was not a trust. Whatever tax liability arose as a result of its schemes, was to be met by the unit holders. In short, UTI was a collective corpus of various investors and not a corporate body, it said.

UTI submitted that Section 32 of the Unit Trust of India Act 1963 provided that it was not liable to pay any tax in respect of any income, profits or gains derived from any source.

Interest earned by UTI was, in fact, income earned. When it was exempted from paying tax on income, how can UTI be held liable to pay tax on interest which is treated as an income, the petition argued.

UTI has, further, argued that it has floated several schemes, some of which have come to an end. There is no scheme left, to which UTI can allocate or charge any interest tax which is now sought to be levied.

   

 
 
STOCK SLUMP FORCES OUT GLOBSYN IPO 
 
 
BY A STAFF REPORTER
 
Calcutta, Feb. 26: 
Globsyn Technologies (GTL) has withdrawn its Rs 14.77-crore initial public offering (IPO), after launching it on February 13, due to depressed market conditions.

“We thought it prudent to hold the issue because investors might suffer if the market slides further,” chairman and chief executive officer Bikram Dasgupta said. The floatation coincided with a plunge in the Nasdaq Composite Index, which triggered a 140-point slide in the sensex on February 24,several technology scrips plumbed 52-week lows.

Company sources said the market has also been unnerved by fears that a 5 per cent tax surcharge will be imposed on infotech firms in the budget. The downtrend means the IPO will not appear in the current financial year.

The funds raised through the issue would have been used to set up an instructional research and development centre at Gurgaon in Haryana, a software development centre, besides wholly-owned subsidiaries in the UK and the US. Sources said the company will try to honour its commitments, but some cost-cutting on infrastructure facilities is possible.

With the IPO on hold, the Rs 18.6-crore IT training firm will raise Rs 12-14 crore it needs for new projects — worth Rs 17.28 crore — by issuing debt and dipping into its internal accruals.

Talks are under way with financial institutions to raise loans and agreements are expected in early March. “Ours is a zero-debt, profit-making firm. We will continue to register 100 per cent growth. We have drawn up plans to enlarge our brands, TechnoCampus and KnowledgePub,” Dasgupta said.

The Delhi-based firm expects a turnover of Rs 36 crore for the year ending June 2001 and a profit of Rs 6 crore. The company has signed an understanding with the $ 100-billion Singapore-based Samsung Asia group to market its products in the Asia-Pacific region, including China, Australia, Taipei and Indonesia.

   

 
 
MAARS, MASCON SET TO MERGE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 26: 
In a consolidation process involving two Chennai-based software companies, Mascon Global Ltd is planning to merge with Maars Software International Ltd.

A notice to this effect was sent to the stock exchanges today which mentioned that a meeting of the board of directors would be held on March 2 to consider the proposal.

Mascon Global — promoted by Arun Kumar Gera and Sandeep Kumar Gera and headed by Nandu Thondavadi as the chairman — was formerly known as Assan Leasing & Finance. It started off with leasing and hire purchase business and with the software boom it shifted its focus to information technology in late 1998.

For the period ended March 31, 1999, Mascon Global posted a revenue of Rs 3.50 crore and during this period it was successful in obtaining projects for software development from GE and Citibank. Among the local companies, it clients then included Wockhardt for which it implemented a software development project.

The company recently announced that it is planning to raise $ 150 million to finance planned acquisitions of around four companies for which it had targeted specific areas such as healthcare, finance, supply chain and telecom. Earlier this year, it set up a subsidiary in the US.

Maars Software, on the other hand, is now stressing on ERP segment. It had launched a product Maarsman which is a solution for small and medium companies.

On the BSE today, Mascon Global witnessed volatile movements before closing at Rs 279 after opening at Rs 282 and rising to a high of Rs 300.90. Similarly, the Maars scrip finished at Rs 41 after opening at Rs 30.60 and rising to a high of Rs 41.50. During the intra-day trades, the scrip touched a low of Rs 39.50.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.63	HK $1	Rs. 5.90*
UK £1	Rs. 67.63	SW Fr 1	Rs. 27.50*
Euro	Rs. 42.43	Sing $1	Rs. 26.40*
Yen 100	Rs. 40.16	Aus $1	Rs. 24.20*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4445	Gold Std (10 gm)Rs.4400
Gold 22 carat	Rs. 4195	Gold 22 carat	Rs.4070
Silver bar (Kg)	Rs. 7475	Silver (Kg)	Rs.7460
Silver portion	Rs. 7525	Silver portion	Rs.7465

Stock Indices

Sensex			4112.69		-9.47
BSE-100			2086.53		+2.62
S&P CNX Nifty		1312.40		-8.05
Calcutta		129.38		-0.70
Skindia GDR		713.17		-6.38
   
 

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