Tenth Plan to target 8% GDP growth
Tata Power to partner Tisco in coal mining
Finance firms get some leeway
Markets remain on rate alert
Trouble at Taratola unit of Alstom
Foreign Exchange, Bullion, Stock Indices

 
 
TENTH PLAN TO TARGET 8% GDP GROWTH 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, June 27: 
The Centre and the state governments today agreed to peg the growth rate of gross domestic product (GDP) at 8 per cent for the period 2002-07 during day-long confabulations even as the finance ministry cleared the approach paper to the Tenth Plan.

However, sources said finance minister Yashwant Sinha was of the opinion that the aim would be to attain 9 per cent GDP growth during the decade. Real GDP growth in the Ninth Plan has never risen above 6.6 per cent (in 1998-99) and touched a low of 4.8 per cent in 1997-98 (the first year of the Ninth Plan). Real GDP growth in 2000-01 has been estimated at 6 per cent.

In his opening remarks at the full Planning Commission meeting, Prime Minister Atal Bihari Vajpayee said, “We will have to revise our policies, procedures and institutions in order to unleash the productive potential of our people...I also accept that this will require an all party consensus and political unanimity.”

The Prime Minister said the vision of attaining an 8 per cent growth would require significant changes in the manner in which the government carries out its economic and development activities.

The Tenth Plan approach paper proposes to step up disinvestment target to Rs 16,000 crore annually, raise investment ratio to 32 per cent from 24 per cent and increase the tax-GDP ratio to 11.7 per cent from the current 9.2 per cent.

Sources said the two sides agreed to increase the gross budgetary support to 4.5 per cent of GDP during the plan period which would go up to 5 per cent by the end of the Tenth Plan in 2007.

At present, the gross budgetary support is about 3.7 per cent of the GDP.

A committee under the chairmanship of member planning commission N. K. Singh is to be set up to examine the issue of “delinking external aid from gross budgetary support”.

The approach paper has proposed a hike in budgetary support to states and modification to the Gadgil-Mukherjee formula for central assistance to achieve the higher 8 per cent GDP growth target.

Speaking to the reporters after the first phase of the meeting, finance minister Yashwant Sinha, said “On every issue in regard to the approach to Tenth Plan, there is complete identity of views between the Planning Commission and finance ministry.”

Sources said, under the revised Gadgil-Mukherjee formula accepted by the finance ministry, “a higher weightage would be given to performance but necessary elements would be incorporated to help backward states also reach such levels.”

Earlier, no weightage was given to performance by population. However, performance weightage by population is being included so that backward states which show an improvement in population control will benefit equally along with states such as Kerala and Andhra Pradesh which have managed to achieve low population growth rates.

Senior officials in the Planning Commission said, “The formula would ensure equitable benefits. The mechanism will be built in a way that all states get to grow equally. As part of performance indicators, the states’ revenue efforts would be widened to include both tax and non-tax revenue while the concept of states’ own resources would now be regarded as states own funds.”

On the issue of raising the investment ratio to 32 per cent from the present level of 24 per cent, sources said there was general agreement that growth had to be brought about by boosting the investment rate and enhancing the investment in capital assets.

Sources said Pant emphasised that there should be a combination of improvement in resource mobilisation as well as a cutback in public expenditure. As part of the Centre’s expenditure control efforts, the Tenth Plan paper envisages downsizing the staff strength by 3 per cent per annum.

Addressing the meeting, Pant said, “In the next two days, the NDC will have to consider various issues like special category status to the states of Jammu and Kashmir and Assam with retrospective effect from 1969, to place Uttaranchal on the special category list and per performance of core plans, revision of the Gadgil formula and change in the loan grant ratio in respect of central assistance to state plans.”

“We thought it might be a good idea to take up our discussion of approach paper in two parts. Today, we will have a brief presentation on the macro dimension, including objectives, targets and strategy for the Tenth Plan. This could be followed on Friday by a discussion on the major issues and decisions that need to be taken,” Pant added.

   

 
 
TATA POWER TO PARTNER TISCO IN COAL MINING 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 27: 
The two leading Tata group firms — Tata Power Ltd and Tata Iron & Steel Company Ltd (Tisco) plan to set up a joint venture for coal mining.

The group has already identified four blocks — two each in the new states of Chattisgarh and Jharkhand.

This is the first time that the Tata group has made public its interest in coal mining after the government opened up this sector to private sector participation for captive use.

Tata Power needs coal as feedstock for its 67.5 MW Jojobera plant, whereas Tata Steel’s feedstock requirements are for producing steel.

“However, the plans are still at a nascent stage,” a senior company official told The Telegraph. According to him, the two companies are yet to work out the cost of the entire venture. “We have applied for necessary approvals from the central government.”

Moreover, approvals from several ministries like the environment ministry and the state governments will have to be obtained at a later stage, the official added.

Further, the reserves available at the four blocks are yet to be quantified, he said.

Meanwhile, Tata Power plans to launch its broadband services in Mumbai by the second quarter of 2001, and has already laid 400 kms of cables for the purpose. In addition to establishing a broadband network in Mumbai, the company is evaluating plans to set up similar networks in Delhi, Pune, Hyderabad and Chennai.

The company said it will connect these key cities, thereby creating a national broadband.

Tata Power will adopt a scalable technology model for lighting the optic fibre link. In fact, the company is the first in south Asia to select the Dense Wave Divisioning Multiplexing (DWDM) system for lighting the optic fibre network.

At present, Tata Power has an 1800 MW generating capacity and it is expected to absorb the entire growth in demand in Mumbai which is expected to grow by around 4 per cent annually.

Tata Power, in its presentation to analysts, said it intends to achieve a national presence in the power sector, by undertaking captive power projects and independent power plants, which, the company said, will enable it to sustain growth in the long term.

The company’s foray into the exploration and marketing of oil and gas and LNG and coal comes soon after the acquisition of group company Tata Petrodyne Ltd from Tata Industries.

Tata Petrodyne had formed a consortium with leading oil and gas companies such as Cairns Energy, Enron Hardy Exploration and Production, Oil and Natural gas Corporation and Hindustan Oil Exploration Company for exploration of oil and gas.

   

 
 
FINANCE FIRMS GET SOME LEEWAY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 27: 
The Reserve Bank of India today said funds mopped up by non-banking finance companies through commercial papers (CPs) would not be treated as public deposits, but laid down bank-style asset-liability management (ALM) norms for the crisis-prone industry.

Excluding CPs out of public deposits will give NBFCs more elbow-room in raising resources. The concession came along with a decree that firms which have accepted public deposits, but repaid all or parked a portion of it in escrow accounts, will also have to furnish quarterly and half-yearly reports on liquid assets and compliance with prudential norms.

In order to improve the accountability of the management, the auditor’s observations on the violation of directives will have to be disclosed in the reports to shareholders. The most important modification, though, was the introduction of an ALM system for effective risk management of NBFCs’ investment portfolios. The central bank has already announced similar rules for banks and financial institutions.

The regulations will cover all finance companies, irrespective of whether they accept/ hold public deposits. To begin with however, it will apply to those with assets of Rs 100 crore or public deposits of Rs 20 crore on March 31. Separate supervisory mechanisms are being considered for the rest.

These guidelines have to be implemented in the current fiscal. The first ALM return will be due in September 2002, and will have to be submitted to the RBI by October 31, 2002 under a half-yearly reporting regime being put in place.

NBFCs have been advised to constitute a small group under the chief executive officer or a senior official who overseas treasury functions. The team should be entrusted with the spade-work necessary for the introduction of the ALM system.

The RBI said progress in implementing the risk-management procedures will require strong commitment from the senior management of firms. It urged the board to assume overall responsibility for the management of risks and to set limits for liquidity, interest rate and equity price risks.

The asset-liability committee, as the group comprising senior management will be called, will have to ensure that the management sticks to limits set by the board and to draw up strategies (on assets and liabilities sides) in tune with the budget and stated risk-management objectives.

The RBI conceded that there could be temporary mismatches in cash inflows and outflows, but said those which persist should be seen as early warning signals of impending liquidity problems. The focus should be on mismatches that occur for 1 to 30 days.

   

 
 
MARKETS REMAIN ON RATE ALERT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 27: 
The attention of markets was rivetted to a key meeting of the US Federal Reserve planned later today that would decide whether to nudge down interest rates in the world’s largest economy.

As investors remained on tenterhooks, prices of the government securities, which have been soaring over the past few days, eased a little on bouts of profit booking. Money market circles put the decline in the range of 5-10 paise.

In a reflection of the underlying trends, the yield on the benchmark 11.50 per cent 2001 security ended higher at 9.52 per cent compared with a historic low of 9.5 per cent on Tuesday — an indication of the scramble for profit booking. The uncertainty over which way the key Federal Open Market Committee (FOMC) will vote on the direction of rates spilled over into the corporate bond market, where yields dipped in anticipation of a cut. Sources said the spreads were around 98-100 basis points against Tuesday’s 95-100.

“The markets are keenly awaiting a decision from the US Fed and they remain cautious today. At present, the odds are evenly divided between a 25 basis point and a 50 basis reduction,” said Sanjeet Singh, senior analyst at ICICI Securities.

Analysts here say there could be an immediate negative reaction if Fed brings down rates by only 25 basis points. The dismay is, however, expected to last only for a couple of days and is likely to be followed by the buoyant mood witnessed so far. “If there is a 50 basis point cut, the market may react with a leap,” a dealer from a public sector bank averred.

Even as the markets continue to remain divided over the size of the cut that Alan Greenspan and his colleagues will finally settle for, there are expectations that the Reserve Bank of India will follow suit by slashing the bank rate.

The Fed has lowered rates by 250 basis points on five occasions this year, while the central bank here RBI has cut its key signalling rate twice by 100 basis points since February.

In anticipation of a cut in the benchmark rate by the RBI, yields have been continuously falling in the markets.

   

 
 
TROUBLE AT TARATOLA UNIT OF ALSTOM 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, June 27: 
Even as chief minister Buddhadeb Bhattacharjee seeks to put the state’s militant trade union past behind it, the Citu-affiliated Paharpur Works Union today blocked the gates of Alstom’s Taratola unit and stalled the movement of goods from the factory.

The Citu union has blocked the gates, demanding absorption of 35 casual workers employed in the Taratola factory before 1995.

The Alstom management had entered into an agreement with the Citu union in 1999 that the casual workers will be absorbed in a phased manner.

“Some workers had been absorbed in two phases, but these 35 are yet to be absorbed,” said a senior officer of the state labour department.

The management has already informed the state labour minister Md Amin and industry minister Nirupam Sen about the situation at the factory.

When contacted, factory in-charge A. K. Sengupta, said, “I cannot comment on the matter.”

Efforts were made to reach managing director K. K. Moradian at Chennai, but he was busy in a board meeting.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 46.47	HK $1	Rs.  5.95*
UK £1	Rs. 66.64	SW Fr 1	Rs. 26.25*
Euro	Rs. 40.56	Sing $1	Rs. 25.50*
Yen 100	Rs. 37.82	Aus $1	Rs. 24.15*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta				Bombay

Gold Std (10gm)	Rs. 4550	Gold Std (10 gm) 4450
Gold 22 carat	Rs. 4295	Gold 22 carat	 N.A.
Silver bar (Kg)	Rs. 7300	Silver (Kg)	 7380
Silver portion	Rs. 7400	Silver portion	 N.A.

Stock Indices

Sensex		3411.64		+4.32
BSE-100		1614.39		+1.95
S&P CNX Nifty	1096.10		-0.50
Calcutta	 115.54		+1.18
Skindia GDR	 N.A.		  -
   
 

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