Merger, abolition options for Telecom Commission
Industrial growth tails off at 4.9 per cent
Bilt Paper takes over Sinar Mas for Rs 538 cr
Cadila jabs competition with cheap AIDS kit
Enron softens Dabhol stand
Moonwalker on Omega mission
Glaxo may toe Pfizer line
Maruti shifts gear to get back on track
Panel moots scheme to settle SEB dues
Foreign Exchange, Bullion, Stock Indices

 
 
MERGER, ABOLITION OPTIONS FOR TELECOM COMMISSION 
 
 
FROM M RAJENDRAN
 
New Delhi, May 11: 
The government is planning to scrap the Telecom Commission or merge it with Department of Telecommunications (DoT) as part of its downsizing drive.

The move has triggered protests from many in the communications ministry while officials in the commission say they are not aware of the proposal. However, officials who have been pushing the the plan in the ministry say the issue is an old one, and the files have only been dusted off.

Communications minister Ram Vilas Paswan has hinted at reorganising and restructuring the department of telecommunications, the policy-making body, without cutting jobs.

The commission comprises four full-time and as many part-time members, who are all-secretary level officials. The DoT secretary heads the commission in which members who oversee finance, production, services and technology are full-time members. The part-time members are the secretaries of information technology, finance, industrial promotion and production ministries, and the Planning Commission.

“The Telecom Commission is an unnecessary burden which is better shaken off. It takes months for it to clear a deal after the BSNL’s approval. Files on procurement of equipment and new strategies to promote services have to be vetted by the commission, which delays the decision-making process. If this continues, the corporation will not be able to cope with competition,” a senior BSNL executive said.

The Commission was armed with the executive, administrative and financial powers it required to deal with policy issues in telecom. However, the corporatisation of Department of Telecom services (DTS) and Department of Telecom Operations (DTO) left the commission with a different role. Its brief is now largely confined to policy formulation, licensing, wireless spectrum management, administrative monitoring of public sector units, research and development and standardisation/validation of equipment.

Hints that the commission’s days may be numbered have made telecom equipment makers happy.

“We need a single window to sort matters. We would have been happy if the existing system was streamlined and points of delays reduced,” said an official whose company is a leading equipment supplier to BSNL.

He said it takes almost three months to a year to sign a deal and start supply of telecom gear to BSNL, while private firms go through the whole process in less than a month.

“The Telecom Commission should shift its focus to pressing policy issues which face the sector as a whole, including those of private firms,” a senior DOT official said.

   

 
 
INDUSTRIAL GROWTH TAILS OFF AT 4.9 PER CENT 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 11: 
The dog days of the industry are far from over. Fresh numbers from the government have pegged growth for 2000-01 at 4.9 per cent in a dramatic slump over 6.7 per cent in 1999-2000, largely because of a bottom-scraping tally of 1.3 per cent in the month of March.

Final figures culled from the index of industrial production (IIP) were expected to be better than the Economic Survey’s estimate of 5.7 per cent in the first nine months. Instead, it has snuffed out hopes of a pickup in the last three months.

Some argue that the industry looked up in March after a dismal 0.6 per cent growth in February, but that is not a consolation for those who had been used to the heady days of 8.3 per cent a year ago.

Many who have kept an eye on the way the economy twitched over the months were reconciled to the fact that the nine-month figure of 5.7 per cent would be maintained all through, but a last-lap knock sent all calculations awry.

The slide was led by manufacturing and electricity, two key sectors that languished at 1.6 per cent and 1.5 per cent respectively in March against 9 per cent and 6.7 per cent in the same month last year. The mining sector was reeling with 1.6 per cent in March compared with 2.9 per cent a year ago, while the consumer goods sector at 2.6 per cent (9.5 per cent) was dragged down by a decline of 2.4 per cent in consumer durable output.

Production of capital goods was down 4.3 per cent in March, hammering the year-end figure to 1.4 per cent compared with a robust 6.9 per cent during the previous financial year. Basic goods industry was down 1.4 per cent for the month, growing at a tepid 3.8 per cent for the whole year.

B.B.Bhattacharya of the Institute of economic growth says March has been unusually harsh, and prescribes a burst in public investment as the only way out of the funk.

“It is time the government realised that the only way of correcting this slide is to pour public money in roads, power stations and dams. The private sector cannot be called on to play saviour.”

Economists like Bhattacharya feel what the country needs is a Marshall Plan-style stimulus spending, but the government believes a package that combines cheaper credit with fiscal dollops will do the trick.

Finance minister Yashwant Sinha told a meeting of industry shoguns on Thursday his ministry was sewing up a package which would address their growth concerns.

The quick estimates of IIP for March 2001 are accompanied by once-revised indices for February 2001 and the final set for December.

According to the index, nine of the 17 two-digit industry groups clocked positive growth in March over the same month last year.

Jute and other vegetable fibre textiles (except cotton) lead the pack with a 21 per cent growth rate. It is followed leather and fur products with 17.6 per cent and rubber, plastic and coal industries with 12.6 per cent.

Transport equipment and auto component makers suffered a decline of 11.9 per cent, wood products and furniture 11 per cent and metal products (except machinery and equipment) 9.2 per cent.

   

 
 
BILT PAPER TAKES OVER SINAR MAS FOR RS 538 CR 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 11: 
Bilt Paper Holding, part of the Lalit Mohan Thapar group, has acquired Sinar Mas Pulp & Paper India Limited (SMI) in a deal valued at $ 114.5 million (Rs 538.14 crore).

Speaking on the occasion, Gautam Thapar, vice-chairman and managing director of the group said, “The acquisition will strengthen our position as the largest paper and paper-board manufacturer in India and enable us to emerge as a significant player in the Asian region.”

Sinar Mas will be rechristened Bilt Graphic Papers Ltd, subject to shareholders’ approval.

The deal has two components—a purchase price of $ 62.5 million for the equity and assumption of liability in Sinar Mas amounting to $ 52 million.

The deal was financed through ICICI Limited, Standard Chartered Bank and Rabo Bank.

He said following the acquisition, Rs 150 crore earlier earmarked for investment in Bilt may be redirected into Sinar Mas.

Giving financial details, B. Hariharan, group president and chief finance officer, said of the $ 62.5 million (Rs 290 crore), the promoters have paid Rs 90 crore, while Rs 50 crore is advance against the equity of BILT Paper Holdings.

The remaining Rs 150 crore is bridge loans from the financial institutions, to be paid by 12-18 months.

Sinar Mas Pulp and Paper (India) Ltd is a wholly owned subsidiary of the Indonesia-based paper major. Sinar Mas had decided to exit India because of financial trouble with the parent company in Indonesia. Sinar Mas, which had been making cumulative losses for some time, made a marginal profit of Rs 6 crore in the last calendar year on a turnover of Rs 400 crore.

Thapar said the BILT Group has embarked on a programme of enhancing production capacity by one lakh tonnes by 2003. This, he said, has been financed through sale of assets and a Rs 150-crore bond issue.

The production capacity of Sinar Mas is 1.75 lakh tonnes per annum at its Bhigwan plant near Pune.

Bilt Paper Holding Company, previously known as APR, used to handle pulp. Prior to its restructuring, BILT had a 50 per cent stake in APR.

At present, however, Bilt Paper Holding Company has a small stake in Bilt. The pulp-business of APR was transferred to BILT as part of the second phase of restructuring at Bilt.

   

 
 
CADILA JABS COMPETITION WITH CHEAP AIDS KIT 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 11: 
Cadila Pharmaceuticals (CPL), the Ahmedabad based pharma major, has launched an AIDS detection kit called Rapid NEVA HIV detection, capable of detecting the virus within 3 minutes for about Rs 39 per test.

Cadila has developed the kit in collaboration with the University of Delhi, South Campus (UDSC) and the department of biotechnology, Government of India. The kit costs Rs 1,950 and can perform 50 tests.

Speaking on the occasion, I. A. Modi, chairman of CPL said the NEVA kit identifies the absence or presence of HIV in a rapid test. If the kit shows someone as having AIDS, the person then has to go in for a more elaborate test to fully confirm the dreaded disease. For this purpose, Cadila is launching another kit called ELIK, within 10 days. ELIK will be 30 per cent cheaper than present kits conducting the ELISA test, he said.

A NEVA (Naked Eye Visible Agglutination Assay) HIV kit detects antibodies against HIV 1 and HIV 2 in a drop of blood. A drop of NEVA HIV reagents when mixed with a drop of blood from an infected individual, results in visible clumping of RBCs within 3 minutes. In case of an un-infected person, no such clumping is seen.

Through the NEVA kit, Modi said the company aspires to capture about 40 per cent of the domestic market for AIDS diagnostics, estimated to be at a size of Rs 50 crore. The NEVA kit will have a huge export potential as well, he added. He said the primary export markets targeted will be south-east Asia, Africa, Europe and South America.

Modi said the Rs 550 crore closely-held company is likely to go public by the year 2003.

   

 
 
ENRON SOFTENS DABHOL STAND 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 11: 
Dabhol Power Company (DPC), promoted by the US energy major Enron, today softened its stand, expressing its readiness to “re-negotiate” the power purchase agreement signed with the Maharashtra State Electricity Board (MSEB) for the 2,184 mw Dabhol project.

In their first meeting with the state-appointed Godbole panel which lasted for more than two hours here, Enron India chief K. Wade Cline and DPC president Neil McGregor sent “positive signals” to MSEB officials and representatives of the state government.

“They have not refused to renegotiate the PPA. Moreover, the very fact that Cline and his colleagues agreed to attend the May 23 meeting could be construed as an indication the company is ready for a renegotiation,” officials who attended the meeting said.

They said during the meeting, both MSEB and DPC officials updated Madhav Godbole, who heads the committee, about the recent developments in the entire dispute.

When asked whether the issue of the Rs 401 crore penalty slapped on DPC by MSEB figured in the meeting, the officials said since the matter has now been referred to arbitration, it was not discussed at all.

DPC officials also did not mention the issue of the pending bills totalling Rs 213 crore for December 2000 and January 2001, for which the multinational has invoked the Centre’s counter guarantee, they said.

“DPC’s courtesy call lasted for more than two hours. We must say this has come to us as a real surprise,” the officials added.

In the afternoon, Cline had told reporters that “discussions with the panel went on fine” but declined to comment when asked if DPC was issuing the pre-termination notice to MSEB.

Last week, DPC had said company officials would meet the panel “as a matter of courtesy” and this should “in no manner be construed as an open offer from the company to renegotiate the terms of the contract.”

The US energy major had also made it clear that the purpose of the meeting was “to hear out the panel and understand their thoughts, and not present any proposals.”

   

 
 
MOONWALKER ON OMEGA MISSION 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 11: 
Swiss watch maker Omega is ready to bring a whiff of the moon to India. Though not quite promising the moon, Omega will bring in Eugene Cernan—the man who has walked on Earth’s closest neighbour in the solar system—as its brand ambassador.

Cernan, one of the world’s most experienced astronauts, who has spent 566 hours in space and 73 hours on the moon, will visit India from May 27 to May 29.

Omega’s association with space travel dates back to 1962, the year from which it forms a part of all NASA-manned space missions. The ‘Omega Speedmaster Professional’ became the first and only watch to be worn on the moon.

“The visit of our brand ambassador is a special treat which will cement our relationship with the discerning Indian intelligentsia,” said Stephen Urquhart, president Omega.

Relaunched here in 1997, Omega is available through leading watch retailers. In 1999, Omega Shah Rukh Khan became its brand ambassador here and Sonali Bendre later became the brand spokesperson .

   

 
 
GLAXO MAY TOE PFIZER LINE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 11: 
GlaxoSmithkline may join Pfizer in setting up a wholly-owned subsidiary here following the central government’s decision to permit 100 per cent foreign direct investment in pharmaceuticals.

The subsidiary is likely to be either for research and development (R&D) or export purposes and will not compete with the existing subsidiaries.

Sources close to Glaxo were, however, quick to deny any knowledge of such plans and said there was no immediate move to float such a unit.

“Glaxo is now more involved in the merger of Smithkline Beecham into it. Therefore, the company is unlikely to consider this at the current juncture,” they added.

During his visit to India in October last year, Sir Richard Sykes, the top boss of Glaxo, had said that the company might explore the possibility of setting up a 100 per cent subsidiary.

He had also said that if the group decides to set up such a subsidiary, it will be solely for exports and not compete in the domestic market.

According to corporate observers, multinational pharmaceutical companies are likely to be extra cautious about 100 per cent subsidiaries following the reservations voiced by Indian shareholders against such units.

In the past, shareholders have opposed such units, fearing that the companies may transfer key products to such subsidiaries or introduce certain blockbusters through these units. a case in point is Parke Davis, which had transferred certain products to Warner Lambert India, its subsidiary.

Pfizer’s move to set up such a subsidiary also faced stiff resistance from the shareholders and the share price of the drug major took a beating on the bourses.

That the stock market is not favourably inclined to the idea was also evident today when the Pfizer India scrip dropped by around 6 per cent. The scrip which opened at Rs 501 crashed to Rs 447.45, a 5.85 per cent drop over the previous finish of Rs 507.15.

   

 
 
MARUTI SHIFTS GEAR TO GET BACK ON TRACK 
 
 
BY A STAFF REPORTER
 
Calcutta, May 11: 
The economy is stuttering, your sector’s been roiled as consumer confidence flags and potential buyers hold back purchases, you are selling below cost, and the company’s bottomline is soaked in red.

That’s just the sort of nightmare that makes executives break into cold sweat; but auto industry shoguns are actually living it.

Grim statistics show that car sales slumped 7.4 per cent to 5.9 lakh units from 6.38 lakh in 1999-2000 — enough to make any one in the industry wear a frazzled look.

So why is Jagdish Khattar still wearing a grin? The managing director of Maruti Udyog seems pretty chuffed because the country’s largest automaker winched up its market share to 60 per cent by the year-end from around 51 per cent midway through last year when the slowdown in the industry and a protracted labour dispute threw its plans out of kilter.

“We are the only automaker in the world with a marketshare of 60 per cent. Okay, we are way off the peaks of 75-80 per cent that we notched up a few years ago. But let’s put that in perspective: no automaker anywhere in the world has a share of more than 30-35 per cent,” says Khattar who was in the city to rally the company’s dealers in the eastern region to make the big push this year.

Rough road ahead

The slowdown has hurt Maruti as hard as everyone else. “We have fallen way short of the targets that we set at the start of last year. If the economy doesn’t recover, we’ll all be in trouble,” he says.

Maruti sold 3.44 lakh cars last year, down 13.3 per cent from the level of 3.97 lakh cars in 1999-2000. Khattar doesn’t want to hazard a guess about how things will pan out this year. “You tell me how the economy will grow, and I’ll tell you how many cars we’ll sell,” he says with a chuckle.

On Thursday, Khattar was at a brainstorming session with finance minister Yashwant Sinha to find ways to kickstart the three most troubled sectors — automobiles, cement and construction.

“We aren’t looking for any tax sops,” says Khattar. But he and other industry barons trotted out a couple of suggestions: the government must boost investment in infrastructure in order to kickstart demand in the three sectors.

Banks must be persuaded to enter retail financing of cars so that customers get the best deals on wheels and, lastly, cars which are more than 12 years old should be sent straight to the scrapyard. “That’s what happens in all other countries,” says Khattar.

Losing money

The country’s largest automaker is expected to report its first net loss this year, but Khattar isn’t letting on what the figure is. “Some reports have put the figure at Rs 200-250 crore,” he says with a shrug.

Khattar has his job cut out. “We are going to pare losses and return to the black,” he says. That means a round of cost-cutting through greater localisation of production and a reduction in the number of platforms from seven to four, which means greater commonality in features among the models.

“There’s no doubt about one thing: we are all losing money. We are all having to sell at a price that’s way below cost. The basic prices at which we sell the Maruti 800 and the Zen are below what they were in 1993,” says Khattar ruefully.

The other problem is that there is huge excess capacity in the industry: it can produce 13 lakh units a year, but demand is running at a little over 6 lakh units.

The Maruti boss isn’t running shy from another round of price hikes. “We’ll only charge what the market can bear. Right now competition is so intense that we are having to hand out discounts to boost car sales. But let’s see how things turn out,” he says.

New models

Maruti intends to introduce at least one new model every year. This year it could be the Suzuki Every — a cross between the Omni and the Wagon R.

The other model under serious consideration is the Grand Vitara — a sports-utility vehicle that is bigger and more sophisticated than Toyota’s hot-selling Qualis. “It’s more like the Mitsubishi Pajero,” says Khattar but demurs when asked about the price range. The plans are to import the Grand Vitara as a completely built unit (CBU) at a customs duty of 120 per cent. Khattar refused to be drawn into any discussion on a possible launch date.

It’s also clear that the plans to bring in the Suzuki gearbox technology have been put on ice. “That will involve an expenditure of around Rs 3,000 crore. Would you rather have me bring in the gearbox technology or introduce new models? A new model involves an investment of just Rs 300-400 crore. If you don’t innovate, you don’t survive,” says Khattar.

The Maruti chief is also circumspect when asked about the selloff of the government’s stake. “That’s for the shareholders to decide. We are only the managers. Right now we are getting co-operation from both sides.”

Khattar is also betting on the future of petrol-driven cars, especially after the administered price mechanism for petroleum products is phased out next year. At present, it has led to a price differential between diesel and petrol. “But once the APM goes, the difference could disappear and petrol-driven cars would fight the diesel vehicles on level terms,” says Maruti’s honcho. That’s an ominous warning for the Indicas of the world.

   

 
 
PANEL MOOTS SCHEME TO SETTLE SEB DUES 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, May 11: 
An expert committee on power reforms today suggested a one-time settlement scheme to enable state electricity boards (SEBs) clear their dues totalling Rs 41,000 crore to the central power utilities.

The panel suggested a waiver of more than Rs 7,800 crore in the form of interest and an issue of tax-free bonds for the remaining Rs 33,600 crore.

The committee, headed by Montek Singh Ahluwalia, then member, Planning Commission, has suggested the waiver of a 50 per cent interest surcharge and issuing 15-year bonds for the principal and the remaining part of the interest. The bonds will be issued through the Reserve Bank of India with an annual tax-free interest rate of 8.5 per cent.

The bonds may be structured to achieve a moratorium of five years on repayment of principal, with the entire principal to be repaid between the 6th and the 15th year. The bonds will be subject to lock-in restrictions that will allow release of only 10 per cent of the bonds in the secondary market each year.

The Centre is expected to give its recommendations by July this year, which will then be examined by an empowered committee consisting of two chief ministers from each region, the finance minister, the Planning Commission chairman and the power minister.

Accepting the report, power minister Suresh Prabhu said, “The one-time settlement of dues of SEBs would be subject to the condition that all dues on current account are paid to CPSUs.”

“We will present this report to the empowered committee after the Centre takes a decision. The committee has suggested the report could be implemented only if 50 per cent of the states with an annual billing of over Rs 500 crore per annum from the CPSUs agree to it. This will be applicable only to those states which accept the scheme. If they don’t, we still have the bilateral mechanism to settle the issue.”

“The scheme has sought to balance the benefits and burdens relating to different stakeholders and, therefore, modifications aimed at reducing the burden on one or more of the stakeholders will only increase the burden on others,” Ahluwalia pointed out. “There should be no relaxation in the various disciplines prescribed in the scheme as this will seriously compromise its integrity.”

The decision to set up the committee for recommending a one-time settlement to the SEBs’ burgeoning dues to central utilities was taken at the meeting of the chief ministers presided over by Prime Minister Atal Bihari Vajpayee in January this year.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.88	HK $1	Rs.  5.95*
UK £1	Rs. 66.42	SW Fr 1	Rs. 26.50*
Euro	Rs. 41.16	Sing $1	Rs. 25.50*
Yen 100	Rs. 38.30	Aus $1	Rs. 24.25*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs.4440		Gold Std(10 gm)	Rs.4375
Gold 22 carat	Rs.4190		Gold 22 carat	Rs.4045
Silver bar (Kg)	Rs.7325		Silver (Kg)	Rs.7350
Silver portion	Rs.7425		Silver portion	Rs.7355

Stock Indices

Sensex		3559.77		-  8.50
BSE-100		1716.15		-  9.96
S&P CNX Nifty	1140.50		-  4.45
Calcutta	 120.59		-  0.47
Skindia GDR	 649.55		-  2.88
   
 

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