Petronet LNG walks into Dabhol-type price trap
IDBI seeks sops to become universal bank
S&P rating rap for Reliance, 11 others
Rupee rebounds
RBI unfazed by slump, sticks to growth target
BSNL sees red in tariff cuts
Sebi bar on Rajarathinam
New role for Supriyo Gupta in CSE
Court boost for investors of Castrol India
Foreign Exchange, Bullion, Stock Indices

New Delhi, Aug. 8: 
Indian negotiators have done it again—they have signed themselves into another Dabhol-like price trap. But this time it will have graver implications for the Indian economy.

Public sector-sponsored Petronet LNG Ltd has proposed to sell its imported liquefied natural gas (LNG) at a price of $ 4.88 per million British thermal unit (BTU) on the basis of an irrevocable, take-or-pay agreement with Ras Gas of Qatar. And that could lay the seeds for another potentially bruising battle that will make the dispute between Enron and Maharashtra appear like a kid’s brawl in the park. Petronet LNG Ltd has still not announced the price at which it will be selling the imported gas.

Bharat Petroleum Corporation, one of the promoters of Petronet LNG, let that slip at a seminar organised by Tata Energy Research Institute. "The price quoted by BPCL is incredibly high," said a participant.

But that’s not all: as in the case of Dabhol, there are no price collars that will rein in the eventual price of gas which could go through the roof if crude rates surge. Shell, which is setting up a gas terminal at Hazira, has set a price cap of $ 26 per barrel of oil while working out its gas price. Petronet LNG does not seem to have either a floor or ceiling price for its gas. The standard industry practice all over the world is to link the price of gas to the crude price—that linkage is a key determinant of the eventual price to end-users.

When Gas Authority of India Ltd (GAIL) invited bids for supply of liquefied natural gas (LNG) before Petronet LNG Ltd was formed, it sought a linkage of 2 cents increase per dollar hike in the price of crude. However, the direct linkage with crude being followed by Petronet LNG Ltd would result in a 14 cents increase for every dollar hike in the crude price.

According to sources, the representatives of oil companies on the board of Petronet LNG believed that the price of crude would not cross $ 15 a barrel and there was no need for putting a cap on the crude price for the purpose of linkage. At present, crude prices are ruling at just a tick over $ 24 per barrel.

Enquiries reveal that former petroleum secretary S. Narayan made a serious attempt to re-open the agreement and re-negotiate the terms. He could not, however, accomplish this as he was shifted to the department of revenue. There was a golden opportunity for Petronet LNG to re-open the agreement when Qatar shifted the responsibility of LNG supply to Ras Gas-II which was non-existent when the bids were invited. It was Ras Gas-I which was shortlisted for the supply of LNG. The tender insisted that the bidder should have a record of either selling or buying 5 million tonnes of LNG per annum with requisite reserves. Ras Gas-II would not have qualified under that criterion.

If Shell comes up with its terminal and supplies gas at a cheaper price, as it has promised to do, Petronet LNG will be in deep trouble.

Petronet’s plans could go completely out of whack if Iran enters the Indian market. Iran is confident of supplying both piped gas and LNG at $ 2.50 per million BTU. This is based on the calculation that for LNG, liquefaction will cost $ 1 per million BTU, transportation 40 cents, re-gasification 50 cents and price of gas 60 cents per million BTU. Any local supplier can easily make a profit of 50 cents per million BTU, taking the total price of gas to $ 3 per million BTU.


New Delhi, Aug. 8: 
The Industrial Development Bank of India (IDBI) today kicked off its long-term strategy to emerge as a universal bank by seeking certain exemptions from the government and Reserve Bank of India (RBI).

The exemptions sought by IDBI to transform itself into a universal bank include permission to show cash reserve ratio (CRR) and statutory liquidity ratio (SLR) on an incremental basis and club infrastructure sector lending as part of priority sector lending to conform with the prudential norms laid down for banks.

RBI has agreed in-principle to consider these proposal which will allow developmental financial institutions like IDBI to transform into universal banks after few years, offering products from credit cards, insurance, banking services and project finance.

Senior officials from the country’s largest developmental financial institution, led by acting chairman S.K. Kapur who met finance secretary Ajit Kumar in the presence of senior RBI officials today, also gave their commitment to reduce non-performing assets (NPA) from 14.8 per cent last fiscal to at least 10 per cent by the end of this fiscal through aggressive recovery and cost reduction by replacing high cost borrowings with low cost debt.

The meeting, which reviewed IDBI’s business strategy, was called to discuss the 18.6 per cent drop in net profits at Rs 181.9 crore during the first quarter of the current fiscal due to higher NPA provisioning at Rs 264 crore as against Rs 80 crore made in the same period of the last fiscal. IDBI proposed to go in for an umbrella issue of Rs 3,000 crore bonds with a coupon of 10 per cent within the next two months. A part of the proceeds will be used to pay off higher interest bearing Flexi-bonds by exercising the call option. ”We have already raised a short-term loan of Rs 55 crore. Our next step is to file our prospectus with Sebi for a Rs 3,000 crore umbrella issue which is likely to hit the markets in about two months’ time” senior IDBI official sources told The Telegraph after the meeting.


New Delhi, Aug. 8: 
Global credit rating agency Standard & Poor’s today followed up its rating downgrade for India with a lowering of its rating outlook for Reliance Industries, the country’s largest business conglomerate, and 11 other corporate giants including five state-run insurance companies.

The other Indian blue chips downgraded include Larsen & Toubro, Tata Power, Indian Oil, NTPC, Indian Railway Finance and Power Finance Corporation. The outlook of these companies has been brought down from stable to negative, while their rating has been pegged at double B. Tata Engineering’s rating at double B has been kept on credit-watch with negative implications.

S&P also downgraded the public information (PI) ratings of General Insurance Corporation (GIC) and its four former subsidiaries -- New India Assurance, National Insurance Corporation, Oriental Insurance, and United India Insurance to `BBB’ minus from BBB.

At the same time, S&P affirmed its double B long term and single B short term foreign currency sovereign rating and A-3 short term local currency sovereign credit ratings for the country.

The international credit rating had yesterday lowered India’s local currency rating, citing “mounting worries that public finances might worsen further in the years to come as vested interests continue to thwart public sector reforms.”

Analysts said this downgrade of India Inc’s top performers was expected after yesterday’s sovereign rating cut. Credit rating agencies normally downgrade companies in any country whose currency rating is lowered. The logic is that if the economy is slowing down and the currency is likely to be hit, then the ability of these companies to pay back will also be hurt.

Finance minister Yashwant Sinha, however, today dismissed the downgrading of India’s sovereign credit rating by Standard and Poor’s saying the stability of the markets has proved the global credit rating agency wrong.

”The stability in the market is the biggest commentary, much more than what words can express,” Sinha said, adding all the parameters were stable, all projections of crumbling rupee and bond markets have not happened.

The lowering of India’s top companies would mean that the cost of hard currency funds for these companies would go up. “It obviously would make things costlier for them,” said H.P.Nag Choudhury, former Exim Bank chief.


Mumbai, Aug. 8: 
The markets appeared to have shrugged off Standard & Poor’s (S&P) downgrade as the rupee rebounded smartly from an intra-day low of 47.18 against the dollar and the Bombay Stock Exchange (BSE) sensex ended with a modest 17-point loss.

The sharp turnaround in the forex markets confounded sceptics, but forex dealers attributed the appreciation in the rupee to the fact that there was not enough dollar buying by companies. The currency closed at 47.11.50/12, unchanged from its previous finish, even though it had opened weak at 47.16/18.

However, a reaction to the rating rap was witnessed earlier in the day, when banks began bidding for dollars in anticipation of a corporate scramble. Forex circles, however, characterised today’s buying as mere speculation, without genuine demand.

Early on, it was a different story: the rupee tumbled to an intra-day low of 47.18 as banks reacted to the S&P blow. The international rating agency had downgraded the outlook on India’s sovereign credit rating to negative from stable on Tuesday; the long-term local currency rating was slashed to BBB minus from BBB.

On Dalal Street, the sensex closed just a tad lower over Tuesday’s close in a growing signal that investors are ignoring the Standard & Poor bombshell. At 3302.32, the 30-share index lost 0.52 per cent over its previous finish amid a volume of 44 million shares. Unit Trust of India was reportedly one of the key sellers.


New Delhi, Aug. 8: 
Reserve Bank governor Bimal Jalan today said the central bank was sticking to its GDP growth forecast of 6-6.5 per cent for the current financial year despite signs of an industrial slowdown.

In April, RBI had forecast gross domestic product (GDP) would grow by 6-6.5 per cent in 2001-2002, compared with 6 per cent in the previous year.

But soon afterwards reports released by the government indicated a severe industrial slowdown with the industrial growth rate in June falling to just decimal points above zero.

Jalan also indicated that the RBI was not considering any rate cuts just now.

He said interest rates were “pretty reasonable right now ... they have been softening over a period of time.”

The country’s central bank had cut bank rates twice during this calendar year bringing it down by one percentage point to 7 per cent from 8 per cent ruling last year.

But industry chambers have nevertheless been clamouring for further rate cuts as they feel that is the only way to be competitive against the threat posed by overseas rivals.

But bankers have been reporting a decline in quality demands for loans and, consequently, have not been much in favour of further cuts in lending rates.

Jalan met finance ministry officials today to discuss the state of India’s various state-run financial institutions, including IDBI.

He is believed to have pointed out these institutions should be made to properly provision for the huge bad debts they have run up and informed the government of the lacunae the RBI has noticed in their functioning.

RBI officials are believed to have pointed out that IDBI was forced to provide Rs 2,640 crore in the quarter ended June 2001, more than two and a half times the provisioning it made for bad and doubtful debts/investments for the first quarter last year.

IFCI has already had to opt for a Rs 1,000-crore bailout package.

The central bank’s warning was clear unless the government woke up to the bad loans overhang that development financial institutions were suffering from, the entire long term lending system might well be in jeopardy.


New Delhi, Aug. 8: 
Bharat Sanchar Nigam (BSNL) today reported two consecutive years of losses — Rs 3,145.89 crore for 2000-01 and Rs 1,708.22 crore in 1999-2000 — and blamed tariff revisions ordained by the Telecom Regulatory Authority of India (Trai) for its bottomline blues.

The losses have been directly attributed to the two-step changes in the pulse rate and call charges in March 1999 and August 2000 under directions from Trai.

The Telecom Commission met here today to discuss the first report of a review committee which had been set up to assess the impact of tariff revisions on the telecom major.

The commission wanted to review the impact of new tariff on BSNL telephone traffic and metered call units. A standing committee on impact of tariff revision with deputy director general (Economic Research Unit) as convenor/member was recently set up.

The panel has been told to furnish collated data to the full Telecom Commission on a quarterly basis. “The estimated revenue loss in 2000-01 as a result of the impact of tariff changes which came into effect from May 1999, is Rs 2,092.29 crore,” the research unit report said.

“The loss as a result of higher pulse rate for the domestic and long-distance calls for this period (October 2000 to March 2001) works out to Rs 1,053.60 crore,” the report added.

According to a Telecom Commission member, the growth rate of metered call units fell to 10.24 per cent during 1999-2000 as a result of the May 1999 tariff revision.

Later, it increased to 12.33 per cent during the first six months (April-September) of 2000-01 and further improved to 16.12 per cent in the second half (October -March).

“However, the growth rate has been much lower than the average of 23.26 per cent during the pre-tariff revision period (1996-97 to 1998-99). As a result, the estimated loss has increased despite the apparent improvement in the generation of metered call units,” he added.

The research unit maintains a data-base on the slab-wise calling pattern of subscribers and calls for 28 selected telecom districts. The behavioural pattern of subscribers in these districts, which includes four metros of Delhi, Calcutta, Chennai and Mumbai, has been calculated to assess the impact of the change in the tariffs with particular reference to metered call units.

The tariff changes made effective by the company from May 1999 were a consequence of reduction in call charges and increase in pulse rates. The revised tariffs which were implemented from October 2000 entailed an increase in the pulse rates for domestic and long-distance calls.


Mumbai, Aug. 8: 
The Securities and Exchange Board of India (Sebi) has barred P. Rajarathinam and his associate companies from accessing the capital markets till they pay the dues to shareholders of Deve Paints (formerly Garware Paints Ltd).

P. Rajarathinam, acting in concert with his associates Udaya Business financiers , Binod Holdings, Bharadwaj Holdings and Karthikeyan Metal Rolling entered into an MoU on October 31, 1994 with the promoters of Garware Paints to acquire 8,91,300 shares constituting 17.01 per cent of the voting capital of the target company at a price of Rs 40 per share.

Subsequently, a letter of offer for the acquisition of 20 per cent at a price of Rs 40 per share from other shareholders was made. The acquirers, however, failed to pay within four weeks of the offer’s closure.


Calcutta, Aug. 8: 
The Calcutta Stock Exchange (CSE) board has appointed Supriyo Gupta as the vice-chairman of the five-member management sub-committee.

Gupta, who was a former board member of the State Bank of India and UTI Bank, was an independent director on the CSE board. He was put on the CSE board after PricewaterhouseCoopers managing director Roopen Roy resigned in June.

Top CSE officials said the move is aimed at beefing up the management of the exchange, which is formally headed by the Mumbai-based chairman Dipankar Basu. Executive director Tapas Datta looks after the day-to-day running of the bourse. “Gupta lives in Calcutta and his appointment as the vice-chairman will boost the administrative strength of the bourse,” Datta said.

Besides Datta, Gupta and Basu, the two other members of the management panel are Shyamal Sen and V.N. Reddy. The decision to appoint Gupta as the vice-chairman was taken at the exchange’s full-board meeting on Tuesday. The management sub-committee also met earlier in the day.

The fact that Gupta was appointed as the vice-chairman of the bourse even as the CSE board is mulling over the reappointment of Datta, has led to speculation among the CSE members that the board may not recommend extension of Datta’s term. The board will take a final view on the matter on Saturday, August 11.


Mumbai, Aug. 8: 
Mumbai High Court today upheld a Securities and Exchange Board of India (Sebi) order on the cut-off date for calculating the price of Castrol India shares in the BP-Amoco open offer.

The decree has come as a blow to the global oil giant, which will now have to shell out much more than it estimated. “The court has held that the relevant date for calculating the price under the open offer is March 14, 2000. The order is also important because it will serve as a precedent for determining the price to be paid by an acquirer in an open offer,” a Sebi official said. BP-Amoco will now have to offer Rs 350 per share, up from Rs 311.91 earlier, to buy an additional 20 per cent in Castrol India, its Indian subsidiary. In addition, it will have to fork out an interest on the delayed payment.

Company officials were not available for comment, but there are signs that they will not contest today’s order in the apex court. They told the High Court that a fresh open offer would now be made over the next 21 days.

The ruling sent the Castrol share soaring to an intra-day high of Rs 266 from its overnight close of Rs 229.40. It finally settled at Rs 254.50 in a gain of Rs 25.10 over Tuesday’s finish as investors relishing the prospect of a better bargain scooped up the share.

BP-Amoco, which already owns 51 per cent of Castrol India, had made an open offer in December last year at Rs 311.91, a price based on the average of the past six months. However, the market regulator objected to the deal, saying the six months for the purpose of the calculation should have ended in mid-March 2000.

BP-Amoco acquired its stake in Castrol India as a result of its acquisition of Burmah Castrol Plc — announced on March 14, 2000 and completed on July 7. Foreign collaborators hold 51 per cent in Castrol India, foreign investors 9.47 per cent, Indian mutual funds 0.67 per cent, financial institutions 4.92 per cent, banks 0.54 per cent and the public around 33.4 per cent. Castrol India is one of the major players in the lubes industry with a market share of around 20 per cent.



Foreign Exchange

US $1	Rs. 47.12	HK $1	Rs.  5.95*
UK £1	Rs. 66.72	SW Fr 1	Rs. 27.10*
Euro	Rs. 41.22	Sing $1	Rs. 26.20*
Yen 100	Rs. 38.17	Aus $1	Rs. 24.00*
*SBI TC buying rates; others are forex market closing rates


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Gold Std (10gm)	Rs. 4440	Gold Std(10 gm)	Rs.4380
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Silver bar (Kg)	Rs. 7030	Silver (Kg)	Rs.7120
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