Lyons Range on knife edge
Govt weighs expansion of MTNL mobile reach
Banks, FIs consider cap on default penalty
Maruti plans Gypsy variant
Political crisis should not slow reforms: CII
Call to unveil aviation policy

Calcutta, March 18: 
A crisis bigger than the one it weathered last week threatens to engulf the Calcutta Stock Exchange (CSE).

Even though the pay-out for settlement number 149 is believed to have been completed, there are growing fears that the entire settlement guarantee fund (SGF) of the exchange may be wiped out to meet the pay-out commitment in the next clearing, slated for March 22.

If this happens, the bourse will have to shut down under regulations laid down by the Securities and Exchange Board of India (Sebi).

According to market operators, Rs 22 crore has been used from the SGF’s Rs 60-crore corpus to settle pay-outs on Saturday.

“Since all bank guarantees and fixed deposits of defaulting brokers have been invoked, the fund remains the only pool of cash which can be used to meet the Rs 200-crore shortfall expected in the next pay-in on Friday,” a former CSE director said.

More than 550 active brokers had contributed Rs 10.5 lakh each to the base minimum capital (BMC).

While this remains the main component of the settlement guarantee fund, the bourse had transferred a part of its earnings to the fund, which stood at Rs 83 crore before the fresh crisis erupted.

Fears that the entire corpus will be wiped out in the next pay-out have deepened the sense of uncertainty. Sources say the bourse may call for fresh capital from brokers to replenish the settlement fund and to keep itself going.

However, CSE executive director Tapas Dutta said no such decision has been taken in this regard so far. “Once matters about the next pay-out are sorted, we will take a decision.” Sebi was helping the exchange streamline its functioning and gear up to face the challenges ahead, he said.

Meanwhile, the market regulator is believed to have detected serious lapses on the part of the CSE management in the collection of mark-to-market margins. “The crisis would not have assumed the proportions it did if the authorities had ensured proper collection of margins,” sources said.

A large number of terminals remain deactivated for payment defaults, and there are little indications that the brokers who own them can clear their arrears.

“Most of us have become bankrupt overnight and if there is no support in the form of loan from Sebi or the government, we will not be able to resume business,” a senior broker said.

CSE, sources say, is loathe to declare errant brokers defaulters at this juncture because it feels doing so will send wrong signals to domestic and foreign institutional investors.


New Delhi, March 18: 
The communications ministry has decided to pit Mahangar Telephone Nigam Limited (MTNL), the best company under its fold, against private cellular operators in Delhi and Mumbai.

MTNL has been preferred over Bharat Sanchar Nigam because the government feels it is in the best position to give private cellular service providers a run for their money.

A note sent by DoT secretary Shyamal Ghosh to communications minister Ram Vilas Paswan and his deputy, Tapan Sikdar, says MTNL should be offered service areas now under BSNL.

“If MTNL is to compete with private cellular operators, on a level-playing field, they should operate in the same service area. It appears that its present licence does not cover the entire area under private cellular operators in the Delhi circle,” the note states

DoT secretary Shyamal Ghosh concedes that MTNL’s service area in Mumbai and Delhi can brought on par with cellular operators only at the expense of Bharat Sanchar Nigam, which will oppose any move that undermines its turf.

“The chairman and managing director BSNL made a presentation, requesting the government not to change MTNL’s service area. However, the decision has been prompted by MTNL’s need for a level-playing field,” says a note sent by a DoT director (value-added services) to the Telecom Commission.

Private basic fixed telecom operators, who have been allowed to offer limited mobility within their circles, will also be against the move. Their circles even include metros such as Mumbai.

Ghosh argues that BSNL already operates across the country, except those covered by MTNL. Therefore, it will be in fairness of things if MTNL — which offers services in Delhi and Mumbai — has a service area similar to cellular licencees in two cities.

“At best, there could be some mutual arrangements between MTNL and BSNL for use of facilities in the areas proposed to be added to MTNL’s cellular services in Mumbai and Delhi,” he added.

Under the scheme, local areas served by BSNL like New Mumbai and Kalyan Telephone Exchanges will form part of the Mumbai metro cellular service area.

Similarly, local areas served by BSNL like Ghaziabad, Faridabad, Noida and Gurgaon Telephone exchanges will form part of Delhi metro cellular service area.


Mumbai, March 18: 
Banks and financial institutions (FIs) are considering a move to fix a ceiling of 2 to 3 per cent on the penal charges — above the contracted rate of interest in case of default — while disbursing loans to companies.

The suggestion emerged at a recent meeting of banks and financial institutions, held to bring about a more effective co-ordination among the two, particularly in respect of jointly-financed large-value projects.

The meeting also discussed various solutions for tackling the issue of huge non-performing assets (NPAs) in the industry.

Members felt that the reason for the high level of NPAs in the domestic financial system is not only the application of a high rate of interest at the time of the sanction of the loan, but also levy of various other charges, such as penal interest, overdue interest and liquidated damages, at very high rates by the lenders.

Even as such levies are believed to have inflated the amount of NPAs, particularly when viewed in the current low interest rate regime, opinion differed on whether a ceiling should be imposed on the levy of such charges, so that the level of NPAs is not unduly distorted.

One view held that the concept of penal interest and liquidated damages should be dispensed with altogether as it has failed to serve the purpose of disciplining borrowers.

Another suggestion was for placing a ceiling of 18 per cent on all levies taken together (interest, plus these charges) as it would adequately cover the cost of funds even while taking into account the earlier high interest rate regime.

It was suggested that instead of prescribing an absolute ceiling on total charges, the ceiling on penal charges should be fixed at 2 to 3 per cent above the contracted rate of interest, regardless of the amount of the contracted rate.

Further, it was felt that considering the very high rates at which various levies and charges have been debited to the borrowers in the past, any concession, if considered desirable for recovery of dues, should be extended only as part of an overall restructuring or rehabilitation package and not otherwise.

Banks and financial institutions are expected to take a decision in this regard shortly.


Calcutta, March 18: 
Maruti Udyog Ltd is planning to introduce a new model in the multi-utility segment in the next financial year.

The auto major is currently represented in this segment by its ‘Gypsy’ model, which is a favourite with the army and the police.

J. Sugimori, marketing director of MUL, said the sports car segment has a very high growth potential in India, which is witnessing a change in passenger tastes.

“We have a strong presence in the small and medium car segments and we have achieved phenomenal growth there. Now we are looking to launch new models in the sports and utility segments,” Sugimori said.

Maruti has the ‘Omni’ model in the utility car segment, which has achieved a very high growth over the last couple of years. It plans to introduce more cars in this segment too in the near future.

Sugimori said the company’s policy is to add one new model every year, with an investment of Rs 2,000 crore. “While in the five years from 1995 to 1999 we did not introduce any model, we have added five new models in the last one year,” Sugimori said.

The object of the policy is to keep market share intact at 60 per cent in a highly competitive market.

Sugimori, while refusing to provide any more details about the MUV model that the company is planning to introduce, said Suzuki, MUL’s Japanese partner, is very strong in this segment.

“Two Suzuki models in this segment — Vitara and Jeminy — are very high-performing models internationally,” he said.

Sugimori said Maruti will take some more time to take a decision on which of the Suzuki models it will manufacture.

Besides, Suzuki has decided to source its entire export requirements of Zen and Alto from MUL. The Japanese major will also use MUL as its South Asian base, he added.

MUL has geared up its marketing activities, expanding its network to 681 cities. Currently, the company has 219 sales outlets, 287 dealer workshops and 1363 authorised service stations. Following these initiatives, market share, it claims, has increased from 56.6 per cent in February 2000 to 64 per cent in February 2001.

The company has also opened a new showroom at Southern Avenue through its dealer Auto Hitech Pvt Ltd.


New Delhi, March 18 : 
The Confederation of Indian Industry (CII) has urged the Centre to go ahead with reforms despite political differences that threaten to retard the process.

Political differences should not hold back economic reforms, said Arun Bharat Ram, CII president in a press release here today. While the charges of corruption and differences in political parties will take its own course, the focus should not shift from economic reforms that will stimulate growth.

The CII statement comes even as fears mount in industry that the stand-off in Parliament might mean that the Union Budget — widely hailed as the harbinger of the second generation reforms — might not have a smooth passage.

For its part, the CII is continuing with its series of meetings with politicians, mostly members of Parliaments from all parties, to create conditions for consensus.

The CII president stated that the current environment of political uncertainty is an unfortunate development. Especially coming after an outstanding growth and investment oriented budget, these developments could effect sentiment in all spheres of economic activity, he added.

Ram urged all political leaders to come together and take the reforms process forward, which is critical for growth and creation of jobs. He reiterated that the decisions to disinvest beyond 49 per cent, undertake labour law reforms, agriculture reforms and financial sector reforms among others should be expedited. The important legislative changes announced recently by the finance minister, such as repeal of Sica, Fiscal Responsibility Bill should be carried out.

Particularly emphasising the need for disinvestment beyond 49 per cent, CII pointed out that it is necessary so that the PSUs are not subject to control, enquiry or directed to by various ministries and government agencies such as CVC, CAG and CBI. Only through this process of empowering the management can the public sector employees’ future be safeguarded, he added.

He said, contributions to political parties should be through cheques to ensure transparency. The industry should be allowed to declare it as a tax deductible expense.

He stressed that state funding of elections and political parties should be allowed so that financing of elections and political parties by the corporate sector become transparent.

According to Ram the economy is poised for an upswing.


New Delhi, March 18: 
CII has asked the government to release the pending Civil Aviation Policy, restructure the DGCA and set up an autonomous regulatory framework to boost development and growth of a modern civil aviation infrastructure.

The six-point agenda, which is part of a report on ‘The Future of Civil Aviation in India: Structure, Policy, Regulation and Infrastructure’ prepared by the NCAER on behalf of CII, was presented by Cyrus Guzder, chairman of the CII National Committee of Civil Aviation at a meeting with A H Jung, secretary, ministry of civil aviation and other senior officials, including the chairman of Airports Authority of India and the director general, DGCA. The report said that regulation, restrictive bilateral regime, low infrastructure investment, high duties and taxes on fuel have hindered the growth of the sector.

Reform is necessary in this sector for meeting the expected 8 to 10 per cent growth in passenger traffic in the next 10 years which will result in an air traffic of 70 to 100 million passengers by 2010 as against 36 million at present, CII said. The agenda provided suggestions on infrastructure, international air services, domestic air services, taxation, safety and regulatory framework.

CII has suggested the need to deregulate domestic air services which will stimulate growth of regional airlines operations, thereby connecting remote areas where existing transport is either saturated or poor. It recommended dismantling of route dispersal system, rationalisation of ATF and AVGAS prices by reducing sales tax, promotion of use of small aircraft for regional airlines and shorter routes, and encouraging competition by allowing more players.

Regarding infrastructure, it suggested development of a master plan, providing over-arching policy direction, prioritising the airports and facilitating investments. CII said, to begin with, two to three airports should be developed as key international hubs.

The report has urged the government to firm up deadlines for implementation of the category III A landing aid systems at key airports and strict control by the Airports Authority of India on urban development around airports.


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