`A protected regime gave us enough time to restructure'
IA plans new dry-lease tender
Spat holds up Tenth Plan blueprint
Settlement scheme lifts loan recovery
FIIs repose faith in badgered bourses

 
 
`A PROTECTED REGIME GAVE US ENOUGH TIME TO RESTRUCTURE' 
 
 
BY SHASHWATI GHOSH
 
New Delhi, April 29: 
What is the future like in a WTO regime?

Industry can be divided into efficient and inefficient parts. Inefficient units will have to become competitive to stay afloat.

How do firms turn competitive?

The outlook must change. A protected regime gave us enough time to restructure. Those who haven’t cannot be sheltered forever because the economy will have to keep pace with the world. The sooner it is done, the better.

How can the government help firms gain competitive edge ?

It should ensure that irrational taxes do not hinder industrial progress. For instance, the surcharge paid by the industry on the movement of cargo from ports to the hinterland are used to finance rural schemes. Why should the industry cough up that amount? Let agriculture pay for itself.

Why are chambers are always looking for sops?

We appeal to the government on behalf of our members. We have to articulate their demands. However, sops will not help, and everyone will have to realise that.

What should be done to provide cheap and easy finance?

Bourses should be revamped. Money should be made available to small enterprises. The terms and conditions should be made easier and the interest rate should go down. These will happen if the market is left to its own devices.

What is the taskforce that CII plans to set up on stock markets supposed to do?

The group, to be formed in a week, will look at problems in the way shares are priced and traded. It will suggest steps for Sebi to make markets safer, see if the regulator’s policies have been effective, and submit its report in two months.

What will be the CII code for corporate governance?

We can only ask our members to ensure complete transparency. It will be recommended, not imposed. Firms that are not open about the way they run will be punished by investors.

How will the US infotech slump affect Indian software firms?

The repercussion will be positive. Global majors will look for low-cost production centres like India and China. I know about two multinationals already who are planning to set up call-centres in India.

Where can investment make a big difference to the economy?

Infrastructure. Investing in it will always pay off.

   

 
 
IA PLANS NEW DRY-LEASE TENDER 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, April 29: 
Indian Airlines (IA) plans to float fresh tenders for dry-lease of five 120 seater aircraft as US-based GIAL International has failed to fly in the planes.

IA also plans to slap a $ 4-million fine on GIAL International, if it is unable to fly in the hired aircraft.

GIAL was supposed to have flown in the Boeing 737-200s into IA’s hangars last February.

The domestic aviation major desperately needs the aircraft to replace its ageing fleet. IA wants to bring in these planes, as well as, two Airbus 320s to part replace six 118 seat Boeings 737 and eight 245 seat Airbus 300s which are more than 20 years old.

While speaking to The Telegraph, IA chairman Sunil Arora said: “GIAL has been facing a liquidity crunch. Their team has come here and we are talking to them. At the same time we have asked our lawyers to prepare the invocation of penalty clauses.”

“We will look at both Boeings and Airbuses, if we issue a fresh tender. The new planes are a must if the airline has to shore up its bottomline,” Arora added.

The airline, which is due to be sold off to a strategic partner, has not been able to go in for planned purchase of some 23 planes over a five-year time-span as its board feels the new investor should have the right to select the new aircraft.

Consequently, IA decided to hire aircraft to shore up its fleet. Arora said, the Ghosh Committee — set up to evaluate the rival financial bids from Boeing and Airbus corporations — has submitted its suggestion two weeks ago. “But these are lying in sealed covers.”

The loss-making domestic airline has been looking at Boeing 737-900s, Airbus 321 and Airbus 320s to replace 11 250-seater Airbus 300 planes. IA is also interested in Boeing 737-600s, Boeing 717s and Airbus 319s to replace 12 Boeing 737-200s.

   

 
 
SPAT HOLDS UP TENTH PLAN BLUEPRINT 
 
 
FROM R. SASANKAN
 
New Delhi, April 29: 
The National Development Council (NDC), the highest policy-making body, is expected to meet in the last week of June to finalise the approach paper to Tenth Plan (2002-07) amid sharp differences over growth targets.

The draft is expected to be ready early next week, after which it will be circulated among ministries for comments. While there is a consensus among planners that the target of doubling per capita income in 10 years is not feasible, the political leadership is unlikely to settle for anything less.

The doubling of per capita income entails a gross domestic product (GDP) growth of 8.7 per cent against 6.1 per cent being achieved in the Ninth Plan.

Planners had warned the government against setting an unrealistic target for the Ninth Plan. They presented two growth scenarios, one 6.5 per cent and the other 7 per cent. The latter required hard decisions which governments have shied away from.

The character of the political leadership remains the same. To double the per capita income in 10 years, the investment rate will have to go up from 24.5 per cent at present to 36 per cent.

This is not considered feasible. The other option before the government is to increase the efficiency of the industry. This cannot be done without policy changes to ensure that the capital stock becomes more productive.

The biggest economic problem facing the government is a lingering demand slump. There is a tendency on the part of a few industries to blame dumping for their problems. Almost everybody has a story to tell, but no one seems to know what has gone wrong. It could be, as a senior government official said, a psychological factor.

The demand contraction can be reversed through public investment, but the government has no surplus funds. Public investment stimulates the entire economy, including private sector firms.

Finance ministry officials and Planning Commission members say a 6.5 per cent growth target for the Tenth Plan will be a comfortable one. However, this will depend on whether reform proposals in the pipeline are implemented.

The government should rein in fiscal deficit, introduce changes in the Companies Act and revamp labour laws. Disinvestment in PSUs can generate resources, which can be ploughed back.

The tax-GDP ratio, which increased steadily in the 60s,70s and 80s, fell 2 percentage points since 1989-90. The tax-collection machinery remains slothful, riddled with a multiplicity of exemptions and flawed classifications.

Politicians believe setting a higher growth target, however unrealistic, is rewarding. Four years ago, when the government was debating the Ninth Plan growth target, finance minister P. Chidambaram and finance secretary Montek Singh Ahluwalia had called the plan unrealistic. Their views were ignored.

The most optimistic target for the plan is 6.1 per cent against 7 per cent fixed by the government.

   

 
 
SETTLEMENT SCHEME LIFTS LOAN RECOVERY 
 
 
FROM VIVEK NAIR
 
Mumbai, April 29: 
Public sector banks are expected to recover non-performing assets (NPAs) over Rs 3,000 crore last year through a one-time settlement scheme launched for borrowers.

According to figures available with the Indian Banks Association (IBA), the scheme helped recover Rs 1,800 crore worth of sticky loans in parts. Given the good response, sources say the mopup could range between Rs 3,300 and Rs 3,500 crore in this fiscal.

The finance minister gave banks more time, until June 30, to accept applications for the scheme and take a decision on them by September 30 at a meeting held earlier this month.

“The scheme has evoked a good response not only from banks, but from corporate customers. Branches are acutely aware of the problem.

The progress in making recoveries through this scheme should improve dramatically over the next few months,” a bank official said.

Though bank-wise figures are not available, State Bank of India, Bank of Baroda, Bank of India, Punjab National Bank and Canara Bank are believed to be ahead of the pack in recoveries, much of it in the case of loans below the Reserve Bank-stipulated cutoff amount of Rs 5 crore.

The one-time settlement plan has been made at a time when NPAs of nationalised banks have burgeoned while recoveries made by the settlement advisory committees have remained low.

The amounts salvaged from borrowers other than small sector units were not satisfactory.

The RBI modified the guidelines following requests from banks to bring NPAs related to the all sectors, including small units, under the ambit. However, cases of wilful default and fraud have not been covered under the scheme.

The guidelines covers all loans which have become doubtful or loss assets on March 31, 1997 with an outstanding balance of Rs 5 crore and below on the cut-off date.

The central bank had said the amount on which a settlement is reached should preferably be paid in lumpsum.

In cases where the borrowers are unable to pay the entire amount, at least 25 per cent should be cleared upfront and the balance paid in installments —along with the interest computed on the ruling prime lending rate (PLR) from the date of settlement to the final payment — within a year.

   

 
 
FIIS REPOSE FAITH IN BADGERED BOURSES 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 29: 
The recent crisis that engulfed the stock markets may have scared away even die-hard bargain hunters, but all’s not lost yet. Investment figures show the beleaguered bourses may have found a messiah.

Strangely enough, while domestic mutual funds have, of late, been selling equities and playing it safe by parking funds in debt securities, it is the much-maligned foreign institutional investors who seem to have reposed trust in Indian equity markets.

The figures released by the Securities and Exchange Board of India (Sebi) over the weekend reveal that net FII investment in equities, till April 27, stood at Rs 1929.3 crore. The month saw foreign investors sell equities worth Rs 2,889.5 crore, as against gross purchases worth Rs 4,818.80 crore.

Domestic mutual funds, however, failed to show any great enthusiasm for bargain hunting in the equity markets. Mutual funds sold Rs 8,226.17 crore, as against gross purchases of Rs 5364.23 crore, thus indicating a net sales position of Rs 2861.94 crore.

At the same time, the mutual funds bought heavily in the debt market, with purchases at Rs 6,696.55 crore as against gross sales of Rs 4,068.74 crore, a net accretion of Rs 2,627.71 crore in their investment portfolio.

Mutual fund circles say the slant towards debt securities may do more with the uncertainty prevailing in the stock markets.

“Mutual funds fear redemption pressure from their investors and, therefore, would like to keep a significant chunk in debt securities that are very liquid,” an official affiliated to a leading mutual fund said.

   
 

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