Convergence draft on Cabinet table
Layoff spectre looms on tea farms
Foreign banks grapple with buyout riddle
Spotlight on local loans
ESC heads for German fair

New Delhi, Aug. 26: 
The Cabinet will take up the controversial Convergence Bill next week. The final Cabinet note on the Bill, which was circulated among ministers on Friday, is based on a reworked version of the Fali S. Nariman draft on the Convergence Bill.

The note aims to set up a Communications Commission of India (CCI), which will be the sole authority to licence and regulate the information technology, telecom and broadcast sectors under five heads.

Licences will be granted to those who “(i) provide or own network infrastructure, (ii) provide network services, (iii) provide network application services, (iv) provide content application services, and (v) provide value-added network application services.”

However, significantly, all IT-enabled services will remain outside the scope of licensing.

The Convergence Bill has been mired in controversy ever since work on it started last year, with turf battles raging between the three affected ministries — IT, telecom and information & broadcasting — and several versions have been thrown up so far by various committees.

The final note makes it clear that these new five categories of licences will replace all existing registrations, especially of licences for providing various telecom, broadcast, maritime and aeronautical communication links, as well as those now needed to own and operate various kinds of wireless equipment. This implies that all existing licence holders in the telecom sector — both cellular and basic — will have to register afresh under the new regime. However, the new registration fee will be nominal and “shall not exceed Rs 30,000.”

The Cabinet note also makes it clear that all licences of cable television service providers will be under the new commission, notwithstanding the existing Cable TV network Act.

The new law will also empower the Commission to give right of way over any private and public lands to the service providers.

Further, as decided earlier in the run-up to Cabinet meetings, the CCI will determine tariffs and rates for all services. Thus, the Act implicitly dissolves the existing Telecom Regulatory Authority which does this job at present in the telecom sector. The new law will also supersede the Trai law, the Indian Telegraph Act and the Indian Wireless Act.

The new authority will also be the arbitrator for all disputes between service providers on spectrum interference, interconnectivity, denial of fair access as well as between service providers and consumers.

However, the CCI will not allocate spectrum frequencies, a task that will be entrusted to a separate committee. It will “play an active role in its assignment and frequency management, planning and monitoring.”

Besides, the spectrum management committee, which will continue to allocate frequencies, will now be headed by the Cabinet secretary.

The committee’s continuance is meant to appease the defence ministry which had objected to its winding up.

The note also makes it clear that there will be no separate authority to control content, as proposed by certain ministers. “Both carriage and content will be regulated only by the CCI.”

Considering the need for expertise in this area, a content bureau, comprising top professionals from the world of literature, media and the performing arts and films, will be set up under the CCI chairman.

The bureau will regulate all content meant for the public either in text, data, picture (still or moving) or audio-visual form, or signals and intelligence or any combinations of these, which can be stored, retrieved or communicated electronically.


Calcutta, Aug. 26: 
Faced with a demand recession, lower price realisation and spiralling production costs, tea estates in Cachar and Tripura have decided to layoff employees and managerial staff during the lean season beginning November 20 to March-end.

The planters have had to take recourse to such drastic action after almost 45 years. The last time the industry went through such a bad patch was in the 50’s, when the crisis, which began in 1951, raged through till 1956.

At a press conference, Dipankar Chatterjee, managing director of Luxmi Tea Company, said the planters plan to introduce a five-day week during the lean season instead of the six-day week prevalent now. No wages will be paid for the days when workers are idle. Similar wage cuts will also be applicable to the managerial staff, general and other temporary employees. Production, which dips during the lean period, is expected to fall by another 10 per cent with the lay-offs.

There are about 110 gardens in Cachar and Tripura, with a total production of about 62 million kg. The gardens employ nearly 1.2 lakh permanent labourers and about 25,000 temporary labourers.

Apart from cutting production by reducing the number of work-days, the gardens propose to pay wages proportionate to work done and not merely for attendance. Chatterjee said most labourers do not work for the entire day even though they are paid the full day’s wages.

Similarly, the planters are insiting that bonus paid should be according to the provisions of the Bonus Act. “We are forced by the unions to pay a bonus of 20 per cent every year. But the unions should understand that we are under tremendous pressure this year due to a recession in the tea industry,” they said.

The planters have formed a steering committee and plan to take up the matter with the Consultative Committee of Planters Association.

The planters have also suggested regulation of the quantity of teas to be offered at the auctions. They said the gardens are passing through a severe financial crisis due to falling prices. With production costs rising to 60 per cent, some gardens are being forced to sell tea below the cost of production. “The plantations have not seen anything like this in the last few decades,” Chatterjee said.


Mumbai, Aug. 26: 
Foreign banks are trying to figure out how a government order that relaxed foreign investment rules in banking can help — or hinder — acquisitions. The cap on foreign investment in banking was raised to 49 per cent in May, but most players who could have benefited from the move are scratching their heads to see if the law does, or does not, allow them from picking up shares in local private sector banks.

A country representative of a European bank keen on acquisitions in India says the measure is positive, but it has left more questions in its wake. “The government has not said whether a foreign bank’s parent, or only those who have operations here, can buy a stake,” he said.

Foreign banks with branches in the country cannot pick up shares in local banks under existing laws. “We are not clear whether they can buy up to 49 per cent. The government should explain this nuance,” he added.

However, months after the permission was given, foreign banks with an eye on stakes in Indian banks have lost some of the enthusiasm. They point out that the government has not clarified several issues. For instance, whether it is the parent which wraps up the deal, or is it only for those who already have branches here.

There is also some confusion on the vehicle a foreign bank can use. Sources here said the government should make it clear whether a parent is eligible to buy out the stake directly, or through its subsidiary. Senior bank officials said while informal discussions on the issue have been held at various levels, a formal representation to the government will be made shortly.

HSBC, ABN Amro, Citibank and Standard Chartered Grindlays are among the big banks — all of which have set up shop here — with an appetite for growth acquisitions. ABN has spoken of growth through selective acquisitions, including private sector banks.

There are others who feel that the government should permit foreign banks to purchase licences of PSU banks’ branches as well, saying it would send strong signals on India’s commitment to reforms. “Rather than the physical transfer of these branches, the authorities must allow us to buy licences of various PSU bank branches,” an official from a leading bank said.

The government had allowed foreign direct investment (FDI) up to 49 per cent in banks; earlier, the cap was 40 per cent on NRI investment, and 20 per cent on FDI.

Bank analysts point out that the move would have a positive impact on private sector banks, many of which have said they are open to foreign investment.

Allowing foreigners the majority stake would have been the best way to boost the flow of overseas capital, but officials say global financial majors could still be content with buying small slices in the widely held local banks

Even in PSU banks, the government’s decision to bring down its stake to 33 per cent was seen as another positive feature.


Mumbai, Aug. 26: 
The string of recent downgrades by international credit rating agencies is expected to push companies into borrowing more at home at interest rates that have been softened by ample liquidity.

Market circles say local companies are likely to see costs on loans raised abroad going up by at least 50 basis points as a result of the downgrades. On the other hand, funds in the domestic market are likely to be available at competitive rates for firms with high ratings. One of the reasons is the slowing credit offtake from banks at a time when they are flush with funds.

“Raising money from the domestic markets was always attractive for companies, but it has become a better proposition after the flurry of rating rebukes,” said N Balasubramanian, general manager of ICICI Ltd. The interest rate on a five-year forex loan, for instance, is now more than 12 per cent — that includes a Libor of 5.40 per cent, cost of borrowing and the exchange risk.

Against this, companies can borrow at rates between 9.10 per cent and 9.50 per cent from the domestic bond market. But, with interest rates showing signs of softening in recent months, analysts point out that borrowing costs may drop further in the days ahead.

According to debt market sources, the A V Birla flagship, Grasim Industries, recently raised funds for seven years — with a call and put option at the end of five years — at 9.15 per cent. This represents a sharp 80 basis-point fall from the 9.95 per cent over a month back. Sources say many more blue-chips are likely to tap the market. Many will do so as part of their plan to restructure their debt portfolio by swapping expensive loans for cheaper ones.

Hindalco, Reliance Industries, Reliance Petroleum, Indal, HPCL, BPCL, NTPC are among the large companies which have borrowed in recent weeks.

There is also a strong feeling that private placements will pick up over the next few months in view of the slump in the domestic capital markets. Market circles say a few firms which had tied up plans to tap the international markets may have second thoughts.

With few projects in the works and mutual funds not finding too many takers, sources point out that household savings are now flowing heavily into banks.


New Delhi, Aug. 26: 
An Indian delegation, sponsored by the Electronics and Computer Software Export Promotion Council (ESC), will be participating in Interkama, the world fair for instrumentation and automation, to be held at Dusseldorf in Germany in the last week of September, to gauge the market for embedded software.

ESC will set up an exclusive IndiaSoft pavilion at Interkama to showcase the capabilities of the Indian IT sector in embedded software. D.K. Sareen, executive director of ESC, said about 1,350 exhibitors from 30 countries will participate in the event.


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