Slow-burn in a swooning economy
Growth dips to 4.4% in Q1
Maruti suffers first-ever lossof Rs 269 cr
Nirmal Bang killed in car accident
Mallya goes one up on Kishore
$ 500 m cover sought for fliers
IOC builds stockpile
Bhel bags Rs 12,500cr order in first half
Spanner in Shaw Wallace plan
Foreign Exchange, Bullion, Stock Indices

 
 
SLOW-BURN IN A SWOONING ECONOMY 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Sept. 28: 

Barren coffers & a splurge

The government’s fiscal deficit at the end of August or the first five months of this fiscal has shot up to an alarming Rs 56,079 crore or nearly half of the projected deficit for the whole financial year.

Traditionally, government expenditure picks up in the second half of the year and deficits tend to bloat during this period. But this year the early warnings seems to show the country is headed towards another jumbo fiscal deficit. Last year around this time the fiscal deficit or the gap between the government’s earnings and expenses, was just over 32 per cent of the projected deficit.

Even more alarming is the fact that revenue deficit, or current expenditure in excess of revenue collections, has shot up to Rs 43,640 crore or more than 55 per cent of the targeted revenue deficit.

And to pay for these huge deficits being run up, government’s borrowings too have been going up. The government has already sucked up over 68 per cent of its budgeted market borrowing of Rs 77,352 crore during this five month period.

An event which officials today confirmed, has forced the Reserve Bank Governor Bimal Jalan to caution the finance ministry.

The RBI is worried that if the government continues to borrow in this profligate manner, not only would its interest burden go up substantially but there would be very little left for companies to pick up for any projects they might eventually come up with.

The main culprit for the worrisome situation is not spending, which seems to be in check, but rather low tax collections. A mere Rs 31,015 crore or just 19 per cent of the budgeted taxes for the year has been collected.

At the same time last year the government had managed to collected nearly 27 per cent of the budgeted tax revenue.

“The problem is with the indirect taxes. Economic slowdown at home has ensured lower production and imports which in turn has meant low excise and customs collections,” a senior finance ministry official explained.

   

 
 
GROWTH DIPS TO 4.4% IN Q1 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Sept. 28: 
The economy has stuttered in the first quarter with the growth in the gross domestic pro duct (GDP) slowing to 4.4 per cent against 6.1 per cent in the year-ago period, largely because the dismal performance by the industry and service sectors has completely overshadowed the robust performance in the farm sector.

According to the latest GDP figures released by the government here today, growth in agriculture and allied sectors has increased to 2.3 per cent in April-June this year from 0.6 per cent in the same period last year even as most of the sectors saw their growth plunging.

One of the major sectors which witnessed a remarkable slowdown is the manufacturing sector which grew at just 2.3 per cent vis-a-vis 7.7 per cent in the first quarter last year. The latest figures of the Central Statistical Organisation (CSO) said growth in the mining and quarrying sectors declined to zero per cent during the period against 5 per cent growth last year.

Similarly, growth in the construction sector dipped four times at a mere 2.5 per cent in the first quarter compared with a healthy growth of 8.4 per cent in 2000-01, while growth in trade, hotels, transport and communication declined to 5.2 per cent in the current fiscal against 9.7 per cent last year.

The electricity sector also witnessed a decline in its growth rate to 3.3 per cent compared with 5.7 per cent during April-June 2000-01, while community, social and personal services saw a negligible growth of 6.2 per cent as against 6 per cent earlier.

The only other sector showing a minor growth was financing, insurance, real estate and business services which saw a 0.4 per cent growth at 9.9 per cent against 9.5 per cent earlier.

The quarterly GDP at factor cost at 1993-94 prices for the first quarter of this fiscal has been estimated at Rs 2,99,941 crore against Rs 2,87,168 crore during the same period previous year, a growth of 4.4 per cent, the statement said.

According to the information furnished by the Department of Agriculture and Cooperation (DAC) which has been used in compiling the GDP estimate, the production of rice, wheat, coarse cereals and pulses during the Rabi season (which ends in June) of 2000-01, has declined by 6.9 per cent, 9.4 per cent, 14 per cent and 24.4 per cent respectively over the corresponding period in previous year.

Although there have been fears expressed on a further slowdown in GDP rates due to a possible global slowdown brought about by the American attack, the recent report of International Monetary Fund (IMF) that India will be relatively insulated from the global economic slowdown is the only silver lining in the cloud at the moment.

According to IMF, the country’s economy was seen growing at 5.7 per cent in 2002, slightly above 4.5 per cent last year.

Exports up 2.2%

Exports during the first quarter of the current fiscal marginally by 2.2 per cent to Rs 46,605crore from Rs 45,616 crore during the same period last year notwithstanding a major dip in exports of a number of products. Export of agricultural commodities like wheat, sugar, basmati rice, coffee and vegetables has increased during the period April-June 2001-02.

   

 
 
MARUTI SUFFERS FIRST-EVER LOSSOF RS 269 CR 
 
 
OUR BUREAU
 
New Delhi, Sept 28: 
A day after the government announced that it was prepared to hand over control over Maruti Udyog to Suzuki Motor Company, the country’s largest automobile maker announced its first-ever loss of Rs 269 crore for the year ended 2000-01.

“The loss is due to a depreciation loss of Rs 342 crore from the Rs 2,000 crore investment made by the company in last three years to upgrade models and introduce newer models,” official sources said.

The announcement showed just how badly the automobile industry had hit the skids last year after demand tapered off in a recession-roiled economy. Maruti Udyog, which held its annual general meeting here today, did, however, report an operating profit of Rs 96 crore.

Jagdish Khattar, MUL’s managing director, put on a brave face when he said: “Our effort is to breakeven this fiscal. During April-August this year, we will hit the recovery trail with the launch of value-added services like used car business, car finance and corporate lease and fleet management.”

The announcement of the company’s first loss in 17 years of operation comes just two months before it is scheduled to come out with a Rs 400 crore rights issue. The government has decided to forego its share of the rights shares in favour of Suzuki Motor for which it will charge a control premium as well as a renunciation rights premium.

Divestment secretary Pradeep Baijal told The Telegraph that the three valuers for Maruti Udyog will be appointed by the month-end and the government hoped to complete the whole process in this calendar year.

Suzuki will have the first option to accept or reject the proposal to shell out Rs.400 crore to buy the government’s stake in the joint venture. The government will follow a process of advertisements and interviews before finalising the potential buyer of its equity, in case Suzuki fails to generate Rs. 400 crore in part or full.

Baijal said, “Suzuki will retain the first option to accept or reject the governments proposal. we have not finalised whether we will sell it to Suzuki or financial institutions. The option is open; but as part of the joint venture agreement, Suzuki will have the first option to accept or reject it.”

Baijal said the control premium and renunciation premium will be decided through a process of valuation and negotiation.

   

 
 
NIRMAL BANG KILLED IN CAR ACCIDENT 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Sept. 28: 
Leading stock broker Nirmal Bang died in a car accident this afternoon. In his mid-forties, Bang was killed instantly while two others were injured when his car overturned at a village near Talegaon on the Mumbai-Pune expressway.

The news of Bang’s death shocked the entire broking fraternity on key stock exchanges. Lawyers fighting his cases before the Securities and Exchange Board of India (Sebi) for alleged price rigging of shares were left aghast, and were believed to be reviewing their strategies. According to the state police control room, the driver of the car lost control after one of its tyres burst on his way to Mumbai.

Bang, a reclusive broker who preferred to be more of a back-room operator, owned five stock broking and merchant banking entities.

These have been banned by Sebi from undertaking fresh business following their alleged involvement in the stock market manipulation leading to the March 2 crash in the sensex. Going by the size of his operations, he was ranked among the top three brokers in the premier stock bourses.

It was said that in the bull phase, his broking outfits used to record a daily turnover of Rs 200 crore, which was more than several regional stock exchanges put together.

Bang’s firms, which are currently under Sebi investigation, are Vama Securities, Nirmal Bang Securities Pvt Ltd, Bang Equity Broking Pvt Ltd, Bang Securities Pvt Ltd and Nadi Finance and Investment Pvt Ltd. Bang is said to have started his career as a sub-broker in one of Anand Rathi’s broking outfits. He was also close to Manu Manek, the veteran bear operator.

and had retained his style of operations. He was said to have been a bear, unlike a few of his fellow brokers and was reputed to have tremendous resources and trading limits.

His rise has been the most spectacular with his outfits considered as one of the largest brokerages in the premier bourses.

Big market players like Shankar Sharma of First Global have said to have used Palombe Securities, a sub-broker affiliated to Bang’s main broking outfit to make proprietary trades.

In an unrelated development, Shankar Sharma and Devina Mehra, promoters of First Global who are alleged to have been dealing through Palombe Securities, were arrested on Thursday, from the Chennai airport.

   

 
 
MALLYA GOES ONE UP ON KISHORE 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Sept 28: 
Liquor baron Vijay Mallya today won another round in his bruising battle with estranged partner Kishore Chhabria over the control for Herbertsons.

A division bench of the Bombay high court ruled that Chhabria’s acquisition of a 21 per cent stake in concert with his uncle MD Chhabria through open market purchases to raise his overall stake in the company to over 50 per cent was void since it breached the regulations of the Securities and Exchange Board of India (Sebi).

In their over 400-page judgment, Chief Justice BP Singh and Justice Radhakrishnan rejected the appeal filed by Chhabria against an order of a single judge bench which had frozen the shares that were bought by four Chhabria-owned investment companies.

“My lawyers will examine the consequences of the acquisition being declared void after a copy of the judgment is received,” Vijay Mallya said in a press release.

The release said the operative part of the order had been stayed up to December 31 to enable Chhabria to approach the Supreme Court if he so desired.

“I wish to go on record that notwithstanding the legal success, I am always interested in an amicable settlement with Kishore Chhabria,” said Mallya who has a 37.88 per cent stake in Herbertsons.

Mallya has refused to register the acquired shares in the names of Kishore Chhabria’s companies and has fought off attempts to overthrow his slate of directors.

The legal victory is significant for Mallya following reports that the two estranged brother had settled their differences and were again planning to open a strong front against Mallya.

In December 1993, after Kishore had broken off with brother Manu and walked off with the Rs 121-crore BDA Distilleries which manufactured Officer’s Choice, Mallya had invited him to join forces with him to fight Manu Chhabria-owned Shaw Wallace. Mallya offered a 26 per cent stake in Herbertsons to Kishore on the understanding that Chhabria would transfer the entire shares in BDA to the UB group.

But two years later, Chhabria started mopping up Herbertsons shares from the market.

   

 
 
$ 500 M COVER SOUGHT FOR FLIERS 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Sept. 28: 
The civil aviation ministry is drafting a Cabinet note that seeks a third-party guarantee of up to $ 500 million from the government for all planes operated by Indian Airlines and Air-India. It wants the two airlines to agree to a freeze on fares, in return.

Indian Airlines is trying to convince the ministry to allow it to pass on at least $ 1.25 insurance surcharge per passenger it must pay insurers in view of greater risks following the September 11 suicide hijack attacks.

The government’s contention is that the airlines should not hike fares at a time when the threat of a war in the sub-continent will lead to fewer people flying. It has also pointed out that aviation turbine fuel prices are expected to go down, bringing down operational costs.

Any decision on fares taken by the two carriers is likely to set the trend for other domestic airlines. The ministry’s move to win support for third-party insurance for the two state-owned airlines could trigger similar demands from the private sector carriers.

The government was jolted into action after global insurance giants slapped a $ 50 million cap on insurance pay-outs per plane in the aftermath of the terror attacks on New York’s World Trade Centre and Pentagon.

Third party insurance covers passengers and other property damaged in an accident or an attack; it is in addition to the insurance purchased for an aircraft. “We have sounded out insurance companies in India who provide cover to most planes. They have said the rates for the insurance of an aircraft will be not be increased beyond the normal,” civil aviation ministry officials said.

Though the civil aviation ministry wants the Centre to fork out the higher third party insurance, it is not known how the finance ministry will react.

   

 
 
IOC BUILDS STOCKPILE 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Sept. 28: 
Indian Oil Corporation (IOC), the country’s only Fortune-500 company, has firmed up contracts for 15-18 million tonnes of crude imports in view of the volatile global situation after the terror attacks in US.

A senior IOC official said the current crude inventory is sufficient to last the country two months. “Based on our existing demand pattern, we need over 100 million tonnes of crude. In order to see that nothing is hampered even if war breaks in the central Asia, we have made this arrangement last week,” the official said.

In normal circumstances, our refineries keep an inventory of 6-10 days. But the government has asked us to beef up stocks so that there is no dearth of fuel at least in the short term, he added. The official, however, refused to disclose the price, at which the deal has been struck. “One thing I can tell you that we have made substantial savings in foreign exchange because of the decline in international oil prices,” the official said. He has noted that “the way the global diplomacy is going, we don’t feel any immediate war threat which can send the international oil price into a tizzy.

“But we have taken adequate precautions in order to avoid any kind of shortage,” he said adding “there is no need for panic stock piling which will only add to the crisis.” Asked whether the corporation has any plan for entering into further contracts given the crude price, which is hovering at $20-$22 per barrel, the official said it was not feasible owing to the lack of infrastructure.

“ the crude tankers cannot be set up overnight, so it is not possible for us to cash in on the low international crude prices,” he said. He has, however, not ruled out the possibility of a disturbance of the international supply mechanism because of the current imbroglio.

“We will not be surprised if the terrorist groups fighting in the name of Islam put up a oil blockage through their influence in the oil producing countries. It is very difficult to predict what will happen then,” he said.

Unconfirmed sources said the government, as an interim measure, is planning to put restrictions on the use of oil.

IOC, however, sees at least some positive impact if at all war breaks. According to the company, the aviation fuel sales will have a field day in that situation.

“Already our company is a market leader in aviation fuel business with a 69 per cent share. The growth in this segment is phenomenal even during the normal circumstances,” he said.

IOC’s total crude purchase stood at Rs 60,163.91 crore last year against Rs 50,632.35 crore. This year, the purchase may see a 8-10 per cent growth.

   

 
 
BHEL BAGS RS 12,500CR ORDER IN FIRST HALF 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Sept. 28: 
Bharat Heavy Electricals Ltd (BHEL) has managed to register a cumulative order book position of over Rs 12,500 crore by notching up several major contracts during the first six months of this fiscal including those for Rihand STPS Stage 2 (2X500 MW) and Ramagundam STPS Stage 3 (1X500 MW) of NTPC.

Bhel, which reported a net profit of Rs 312.60 crore in fiscal 2000-01 enabling it to pay a dividend of 30 per cent against a projected profit of Rs 296 crore, has secured orders worth Rs 5,557 crore during the year, Bhel chairman and managing director K.G. Ramachandran told shareholders at its annual general meeting held today. Major export orders secured during the year include the largest ever export order for two units of 159 MW ISO rating gas turbine power plant equipment from Iraq and the largest ever turnkey 330KV substation contract from Zambia.

“The momentum is continuing this year. Bhel has already booked physical export orders worth about Rs 300 crore,” he said.

   

 
 
SPANNER IN SHAW WALLACE PLAN 
 
 
BY A STAFF REPORTER
 
Calcutta, Sept. 28: 
The institutional shareholders of Shaw Wallace blocked a special resolution from being passed at the company’s annual general meeting here today. The institutional shareholders of the M.R. Chhabria promoted liquor major demanded poll on a number of resolutions, including the one pertaining to offering corporate guarantees as collateral security for financial assistance obtained by subsidiaries.

The institutions—Life Insurance Corporation, General Insurance Corporation and Unit Trust of India—along with the banks hold 25.38 per cent stake in the company, while the promoters hold 53.38 per cent, and the public, 21.28 per cent. In the polls held after the annual general meeting today, 71.4 per cent votes were cast in favour of passing the resolution, whereas a minimum of 76 per cent was needed to pass the resolution.

The management intended to offer corporate guarantees to three subsidiaries—SKOL Breweries, Maharashtra Distilleries and Shaw Wallace International—for an aggregate amount of Rs 32 crore.

A Shaw Wallace spokesperson said, the move would have benefited the company. The company also claimed that the shareholders’ disapproval to the resolution would not upset its plans, as the management has already worked out an alternative plan.

The poll was demanded by the financial institutions for a number of other resolutions too, including the one seeking ratification of the company’s annual accounts for the financial year 2000-01. Besides the financial institutions, a shareholder demanded poll on a resolution seeking to increase the salary of wholetime director Niranjan M. Thakur.

Earlier in his message to the shareholders, Shaw Wallace Chhabria said the company intended to invest Rs 100 crore in setting up four greenfield breweries in Kerala, Madhya Pradesh, West Bengal and Goa. He also said Shaw Wallace was expanding its capacity at four major breweries, which would lead to increase in the company’s brewing capacity by about 50 per cent. Chhabria’s message was read out by the company’s director T.S. Shettigar, who presided over the meeting.

Shaw Wallace is also going through a restructuring, for which it appointed McKinsey as consultants. In the first phase of restructuring a number of investment subsidiaries are being merged with marketing companies—Shaw Wallace Distilleries and Shaw Wallace Breweries.

In the second phase, all the manufacturing companies will be merged into two entities—Maharashtra Distilleries and SKOL Breweries.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 47.87	HK $1	Rs.  6.05*
UK £1	Rs. 70.32	SW Fr 1	Rs. 29.20*
Euro	Rs. 43.91	Sing $1	Rs. 26.75*
Yen 100	Rs. 40.29	Aus $1	Rs. 23.10*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4855	Gold Std(10 gm)	Rs. 4750
Gold 22 carat	Rs. 4585	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7625	Silver (Kg)	Rs. 7665
Silver portion	Rs. 7725	Silver portion	NA

Stock Indices

Sensex		2811.60		+ 96.10
BSE-100		1312.50		+ 41.43
S&P CNX Nifty	913.85		+ 23.85
Calcutta	  96.04		+  3.68
Skindia GDR	 405.89		-  0.65
   
 

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