Defiant Sinha scoffs at rating blues, rupee fears
Indian Oil downgraded
Dresdner shuts shop, 40 employees sent packing
Bill on fiscal responsibility this session
It’s payback time: US boss barks at India
Naik boils as Indian Oil raises wages
Fixed-line phone licence issue set to resume
Lever vs Lever in import bout
UB Group uncorks BrewCo demerger
Foreign Exchange, Bullion, Stock Indices

 
 
DEFIANT SINHA SCOFFS AT RATING BLUES, RUPEE FEARS 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Aug 9: 
Bristling at the string of recent rating rebukes, finance minister Yashwant Sinha today said the downgrades would no have no effect on the rupee and the country’s resolve to push reforms “at its own pace”.

The swipe at the likes of Standard & Poor’s and Moody’s came days after they fretted about the government’s dalliance with economic change. Questioning their research prowess, he said it was preposterous to link the travails of the rupee to the downgrades.

The minister was speaking to reporters after a meeting with Reserve Bank governor Bimal Jalan, who scotched reports about another round of rate reductions. Interest rates, he said, were lower than they were last year, and yields on gilts were tumbling anyway.

Talking about the rating rebuffs, Sinha wondered what was new in the assessments made by the agencies. “Tell me what wisdom can Standard and Poor’s and Moody’s add to our knowledge. Was I not the first person to have admitted to our fiscal concerns in the budget?”

He dismissed fears over the impact of the downgrades on the rupee, saying with $ 43 billion in the forex kitty, there is no need to bother about the health of the currency. “The idea of a fall is simply crazy.” He attacked the agencies for their inconsistency, questioning their worthiness in handing high ratings to East Asian nations, just before they went belly up in the late 1990s.

He accused the agencies of not having adequate understanding of the way India runs its economic affairs. “You are aware of steps taken for better fiscal management. A legislation — Fiscal Responsibility and Budget Management Bill — is pending in Parliament. The agencies admit it. They also know we cannot short-circuit the Parliamentary process,” he added. “The agencies are impatient .We will have to proceed with reforms at our own pace.”

The government, he said, is committed to fiscal discipline outlined in the budget, and is working to achieve those aims.

Moody’s Investor Services on Wednesday lowered the rating outlook on India to stable from positive for the BA2 foreign currency country ceiling, and to negative from positive for the BA2 rating on the country’s domestic currency debt. That came a day after Standard and Poor’s rating rap. The agencies cited concerns over the deepening of macro-economic reforms.

   

 
 
INDIAN OIL DOWNGRADED 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Aug. 9: 
Moody’s Investor’s service today revised its outlook on Indian Oil Corporation’s (IOC) Ba2 issuer rating from positive to stable.

The agency said the outlook change follows the similar amendment in the sovereign foreign currency rating outlook, and does not reflect any change in Indian Oil’s underlying business risk.

The company’s rating is constrained by the sovereign rating of the country.

The move came along with a decision by Standard & Poor’s to revise its rating outlook to negative from stable for ICICI, IDBI and Bank of Baroda.

However, the “BB” the long term and “B” short term counter-party credit ratings on all three financial institutions have been re-affirmed.The agency said the changes reflect a revision in the long-term foreign currency outlook on India to negative from stable on August 7. At the same time, it said the local currency long-term rating on the country was lowered to “BBB-” from “BBB”.

   

 
 
DRESDNER SHUTS SHOP, 40 EMPLOYEES SENT PACKING 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Aug.9: 
Dresdner Kleinwort Wasserstein, a leading foreign broking outfit with a 5 per cent share of India’s FII business, has shut shop here and left 40 employees redundant.

The closure is part of its global plan to pull out of equity businesses in Asia, except Japan. “All of us were given pink slips today,” said an employee from Dresdner Kleinwort, adding the list included the head of investment banking, Raj Mishra. However, this could not be confirmed because Mishra was not available for comment. Dresdner’s exit touched off rumours that another leading FII broking outfit is on the verge of winding up operations.

“We saw it coming. We have not been taking fresh business from clients over the past fortnight,” a Dresdner official said. The move assumes significance as leading global rating agencies Standard & Poor’s (S&P) and Moody’s have lowered their outlook on the country’s long-term rating by a notch. S&P went a step further today, revising the ratings outlook to negative from stable for ICICI, IDBI and Bank of Baroda.

However, there are some who are happy with Dresdner’s departure: they are rival broking houses, about seven to eight of them, which are hoping to lap up some of Dresdner’s clients at a time when the size of business has shrunk to a measly Rs 217 crore.

FIIs, finicky about orders, place them through foreign brokerages. Foreign investors insist that broking outfits are affiliated to leading stock exchanges — a condition that makes only FIIs eligible.

Dresdner is the not the first of the foreign broking outfits to have called it a day in India: Peregrine, Marlin Partners and a few others have done so earlier. The closure of Dresdner’s Hong Kong, India, Korea, Malaysia, Singapore and Taiwan offices led to the retrenchment of 350 employees.

The investment bank said Thursday that the job cuts would reduce its global headcount by around 4 per cent. Dresdner Kleinwort Wasserstein, the investment banking arm of Germany’s Dresdner Bank AG, said employees who would lose their jobs as a result of the closures across much of Asia, were told about it today.

A company spokesperson, however, refused to mark out the divisions where the job reductions would be made.

“They are being made across the whole business through Asia, but obviously the bulk of the reductions will be in equities,” a Dresdner official said. The official further said the equities businesses being closed include sales, trading and research.

   

 
 
BILL ON FISCAL RESPONSIBILITY THIS SESSION 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Aug. 9: 
Finance minister Yashwant Sinha today said the fiscal responsibility Bill is likely to be tabled in this session of Parliament. The Bill is currently lying with the standing committee.

Sinha also said the government has not decided whether to extend its current borrowing programme. Sinha was speaking to reporters at the end of a seminar on international finance system.

Earlier delivering the keynote address Mervyn King, deputy governor of Bank of England said the IMF should not turn into a lender of the last resort to countries experiencing fiscal crises.

King said, “IMF should stand ready to assist countries provided appropriate conditions are satisfied. For example IMF could help give bridging finance to countries facing severe liquidity pressures.”

He pointed out that in practice, however, exceptional access has often been more the norm in recent years. Normal access is typically defined as 300 per cent of IMF quota.

King said, “If creditors and debtors continue to believe that exceptional access is readily available, then international credit will be over extended and the incidence of crisis will increase.”

He also said the two major counties in Asia that escaped the financial crisis of 1997-1998 were India and China which had in-built safety measures.

   

 
 
IT’S PAYBACK TIME: US BOSS BARKS AT INDIA 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Aug. 9: 
US trade representative Robert B. Zoellick pulled off his kid gloves and did some straight talking today when he said India will have to be more flexible on world trade issues if it wants the rest of world to sympathise with its concerns.

Addressing industrialists at a conference jointly organised by the three apex chambers—Ficci, CII and Assocham, Zoellick said there has to be a quid pro quo at Doha where the next round of World Trade Organisation talks takes place next month.

“To make other countries realise your problems, you will also have to be more sensitive to their needs. India will have to come with a more positive mind to Doha if it wants to address its own problems constructively,” Zoellick said.

The US trade representative said it was payback time for India: after benefiting immensely through increased trade after the Uruguay Round, India would now have to pull down its protective trade barriers and hack its regulatory regime to give foreign companies greater access to its markets.

While conceding that India had signalled its positive intent by removing quantitative restrictions in April, Zoellick said that even though the average tariffs had been brought down to 30 per cent, this was still twice as high as China’s average rate and 10 times as high as the US. Still, he said, he was encouraged by the government’s recommendation of reducing the average tariff rate to Asian levels of 20 per cent or lower in the next few years.

“India’s exports to US have nearly doubled due to the reduction of US barriers through the Uruguay Round. While its agricultural exports grew by 74 per cent, information technology exports surged by 246 per cent and furniture grew by 400 per cent. But America’s exports have remained more or less stagnant,” said the US trade representative.

Zoellick said the prevarication had gone on for too long. It was time that India wisened up to the fact that “self-sufficiency isn’t an option any more if it wants its economy to grow.”

“The US accounts for 25 per cent of world trade,” Zoellick said as he drove home the message that India stood more to lose than gain by remaining intransigent on world trade issues like environment and labour which the developed countries have been keen to discuss at the Doha round.

India has opposed all moves to widen the ambit of the agenda for talks blocking earlier efforts at Singapore and Seattle.

“My request to you is to make your voice heard about your concerns but not at the cost of agreement at the Doha round,” he said. “If you scupper the talks, we will somehow manage to sustain, but India will lose this opportunity and the stakes will be against it,” Zoellick said.

He insisted further deregulation, privatisation, limited taxation and open trade would make India strong because in an age of rapid communication, transportation and financial flows, the world is not going to wait for any country—not even an important one like India.

Zoellick cautioned that if Doha were to fail, the global trading order would break up into bilateral and regional trading arrangements.

   

 
 
NAIK BOILS AS INDIAN OIL RAISES WAGES 
 
 
FROM R. SASANKAN
 
New Delhi, Aug. 9: 
Petroleum and natural gas minister Ram Naik has pulled up the management of Indian Oil Corporation (IOC) for undermining the competitiveness of the corporation by raising the wages of employees beyond what had been mandated.

The IOC board had stipulated that the wage hike should not exceed 36 per cent, but the tortuous negotiations ultimately resulted in a 60 per cent increase. The management approached the ministry for approval of the new wage settlement as it exceeded the limit set by the board.

Ministry officials from under secretary up to the additional secretary ignored the fallout of the wage settlement and treated it as a fait accompli. But Ram Naik differed.

He is understood to have recorded on the file that in a competitive market, national oil companies can survive only if they exercise control over costs and provide an efficient delivery system.

Implicit in this is the criticism that oil companies now look competitive because they are operating in a regulated market.

He has reminded them that the market was going to be deregulated with effect from April 1 next year and only the fittest would survive.

Sources say Naresh Narad, additional secretary, wrote to IOC chairman Mohamad Asad Pathan conveying the minister’s displeasure over the wage settlement.

Pathan is retiring next March. In the oil sector, IOC has the second largest workforce, close to 35,000.

   

 
 
FIXED-LINE PHONE LICENCE ISSUE SET TO RESUME 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Aug. 9: 
The department of telecommunications (DoT) is set to restart the process of issuing licences to fixed-line telephony operators, stalled on an order from the Chennai high court.

Last week, the Chennai high court had asked the Telecom Dispute Settlement Tribunal (TDSAT) to hear the contentious issue of limited mobility before August 8. BPL Telecom had filed a case in the Chennai high court opposing the government’s decision to allow fixed line telephony operators to provide limited mobility using the wireless in local loop (WLL) technology.

The court in its order had also said status quo on limited mobility services will be valid till August 8, after which the decision of the TDSAT will come into effect. Another case on the same issue filed by the Cellular Operators’ Association of India (COAI), pending before the TDSAT, will come up for hearing on September 4.

According to an official in DoT’s legal division, “The TDSAT did not mention anything about an extension of the stay while hearing BPL’s petition, which was filed in the Chennai high court. Later, the court had directed TDSAT to resolve the issue.”

“However, we will have to wait for the written order before we can commence the process of issuing licences or call the interested parties,” he added.

DoT had issued letters of intent in June to Reliance Communications Pvt Ltd, Bharti Telenet Ltd, HFCL Info Tel Ltd and Tata Teleservices Ltd, for offering fixed-line services in the country. The telecom companies had filed applications for more than 50 licences to provide basic telecom services.

Out of the four companies that were given LoIs, only Reliance has signed licences for the 16 circles, which include Andhra Pradesh, Delhi, Karnataka, Maharashtra, Haryana, Kerala, Punjab, Rajasthan, Himachal Pradesh, Uttar Pradesh (east and west), Bihar, Orissa, West Bengal, Madhya Pradesh and Andaman and Nicobar Islands.

Bharti had been given LoIs for Andhra Pradesh, Delhi, Karnataka, Maharashtra, Haryana, Kerala, Punjab and Tamil Nadu. However, the company is interested in picking up only four circles — Delhi, Haryana, Tamil Nadu and Karnataka.

DoT has also issued LoIs to HFCL for Delhi, Tamil Nadu, Karnataka, Maharashtra, Haryana, Kerala and Uttar Pradesh (west).

Hughes has been given LoIs to operate fixed line services in Orissa, West Bengal, Uttar Pradesh (east and west), Delhi, Tamil Nadu, Gujarat, Karnataka, Maharashtra, Punjab, Haryana, Kerala, Rajasthan, and Bihar.

The government had invited bids from telecom companies on January 25 to offer basic fixed telecom service in the country.

   

 
 
LEVER VS LEVER IN IMPORT BOUT 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Aug 9: 
Lever is on the warpath — hold your breath — against Lever itself, in what is turning out to be a bizarre case of Lever versus Lever. Concerned by the steep increase in illegal imports of Unilever products, particularly from the south-east Asian countries, Hindustan Lever has made representations to the commissioners of customs in Calcutta, Delhi, Mumbai and Chennai, requesting them to check the trend.

Confirming the move, HLL general manager (legal) Ashok Gupta said the company “has formally made a representation to the commissioners of customs, bringing to their notice that these imports, which violate licence conditions, should be declared illegal and confiscated.”

The authorities have promised to take action, he said, adding action will be taken against distributors as well, with the help of the police, the weights & measures and revenue authorities.

“The company has already warned retailers found stocking and selling these products. These notices will be followed up by individual warnings and eventually court action,” he noted.

Admitting that “of late, illegal imports of Unilever products have increased ,” Gupta said the company has “successfully taken legal action against importers of such products, and stocks have been confiscated for violating HLL’s trademark rights.”

Sources said products from PT Unilever Indonesia are flooding the Indian market ever since the devaluation of the rupiah. Products from other Unilever subsidiaries also find their way to India, they added. HLL, the Indian subsidiary of the UK-based Unilever, is either the proprietor or licencee of all trademarks it markets and the proprietor of copyrights in label graphics and bottle designs.

“Therefore HLL can take action against the import of products bearing the Unilever trademark either by virtue of its own ownership or pursuant to the licence agreement. HLL plans to accelerate the pace of such actions with the help of law enforcement agencies,” Gupta said.

The company, which registered a meagre 1.5 per cent growth in turnover during the first half of the current fiscal ending June, is also concerned over the spurious Lever products flooding the market. Gupta pointed out the government loses around Rs 1000-1500 crore annually owing to the fakes.

“Action has been stepped up, which has yielded good results in Delhi and Calcutta. In the last three months alone, we have conducted about 10 raids in Calcutta and seized packaging materials used for manufacturing fake products like shampoos and skin applications. Likewise, in Delhi we have conducted approximately 20 raids and seized goods worth over Rs 2 crore,” he said.

Besides approaching the Brand Protection Committee of the Federation of Indian Chambers of Commerce and Industry (Ficci), HLL has also decided to reward persons providing information on spurious manufacturers or distributors.

   

 
 
UB GROUP UNCORKS BREWCO DEMERGER 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Aug. 9: 
The board of directors of United Breweries Limited (UBL) today approved the scheme to demerge its brewery business into a dedicated entity (BrewCo), which will be a focused brewery company.

The scheme would get retrospective effect from August 1. The board recommended four new equity shares in BrewCo for every 10 shares held by UBL with a corresponding reduction in the share capital of UBL. A company statement said BrewCo would carry out all the brewery business of the UB Group. In 2000-01, the group had brewery sales of 25.3 million dozens aggregating approximately Rs 460 crore.

The board had initiated restructuring measures aimed at enhancing shareholder value through the creation of a focused brewery company and inviting strategic partner in this regard. The restructuring process is expected to be completed by year-end.

BrewCo is currently a 100 per cent subsidiary of UBL that holds the brewery-related investments of UBL. It has an equity capital of Rs 2.8 crore comprising 28 lakh equity shares of Rs 10 each.

Consequent to the demerger, the equity capital will stand expanded to Rs 18.37 crore comprising 18.37 million shares of Rs 10 each and the share capital of UBL will stand reduced to Rs 22.41 crore.

The company said demerger was expected to enhance shareholder value, as it would create a focused brewery company (largest in India), with no non-brewery related demands on its capital.

It would have a level of debt that would be serviceable by its cash flows. It would provide investors with an opportunity and a vehicle to hold their investment separately in UB’s brewery business, which was earlier not available.

According to a statement, United Breweries will continue to hold the valuable assets which include the controlling stake in India’s largest spirits business and other liquid investments. Work on the development of the company’s prime real estate in Bangalore is expected to commence in the next fiscal year, arelease issued by the company said.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 47.13	HK $1	Rs.  5.95*
UK £1	Rs. 66.97	SW Fr 1	Rs. 27.25*
Euro	Rs. 41.75	Sing $1	Rs. 26.20*
Yen 100	Rs. 38.23	Aus $1	Rs. 24.00*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4460	Gold Std(10 gm)	Rs.4400
Gold 22 carat	Rs. 4210	Gold 22 carat	N.A.
Silver bar (Kg)	Rs. 7025	Silver (Kg)	Rs.7115
Silver portion	Rs. 7125	Silver portion	N.A.

Stock Indices

Sensex		3319.61		+ 17.29
BSE-100		1560.28		-  1.08
S&P CNX Nifty	1070.65		+  2.65
Calcutta	 115.18		-  4.51
Skindia GDR	  N.A.		    -
   
 

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