Sinha starts countdown to budget
Shourie hints at VSNL valuation blow
PM takes B-school down to earth
Suzuki prefers to be lone ranger in battle of bikes
RPL eyes Mukta-Panna stake

 
 
SINHA STARTS COUNTDOWN TO BUDGET 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Dec. 2: 
Offering a sneak preview into his next magnum opus, finance minister Yashwant Sinha today said liberalisation of the farm sector, complete switchover to VAT, bank reforms, formal pensions for all and more funds for elementary education will be some of the key ingredients of the forthcoming budget.

Speaking at the India Economic Summit, organised by the World Economic Forum and Confederation of Indian Industry (CII), he tried to put problems of flagging growth rates and stock scandals behind him to outlinepriorities for the February stock-taking.

Admitting that he had a fiscal crisis on hands, Sinha said the tax-to-GDP ratio would have to be increased. He indicated that “a complete migration to value-added tax (VAT) regime” was imperative for the country at a time when agreements with World Trade Organisation (WTO) would force cuts in customs duty rates. Emphasising the need for shifting enormous resources from state-sponsored dole-outs to production of public goods, he gave hints that the budget would be harsher on subsidies — to farmers, the fertiliser industry and to consumers of cooking gas and kerosene.

Talking about the rip-offs that have rattled stock investors in recent times, the minister said government has been working on ways to strengthen Sebi and introduce stiffer regulations to police markets. “We have to improve regulation to forestall instances of market misconduct and enforce laws swiftly.”

Steps will be taken to deepen the debt market and to reform a banking system groaning under a mountain of non-performing assets (NPAs). “We have to chart out a course towards safe and sound banking while minimising claims on public resources. At the same time, we have to grapple with many under-capitalised banks.”

At least three PSU banks hobbled by massive bad loans need government bailouts, while several others require equity injections to tighter capital adequacy norms.

Speaking on what the budget could do for the farm sector, Sinha indicated his government was considering flexible pricing of grains and other crops, free movement of products and greater global trade in agricultural items. Ensuring that a spot and futures market in farm products take off is also a budget priority.

Taking a cue from the universal education Bill now before Parliament, Sinha indicated that the budgetary outlay for this sector would be raised as “we still suffer from low levels of literacy and a high degree of infant mortality.”

In an announcement that would help blunt criticism that reforms are biased against the poor, the minister said a formal pension system for the old will be put in place. The Cabinet has long been toying with the idea of introducing a partially subsidised old-age pension scheme for all, based on the “Oasis Report”. Sinha’s reference is seen as a signal that this will be one of the cornerstones of his forthcoming budget.

   

 
 
SHOURIE HINTS AT VSNL VALUATION BLOW 
 
 
FROM OUR ORRESPONDENT
 
New Delhi, Dec. 2: 
Disinvestment minister Arun Shourie today admitted that the government’s decision to disinvest from VSNL by April next year, when its monopoly ends, may bring down the valuation of the company.

Speaking on the sidelines of India Economic Summit here today, he urged public sector units to utilise the opportunities given to them to enhance their portfolios at the earliest and blamed the VSNL board for not availing of the various sops offered to it by the government in lieu of advancing the date of the end of its monopoly by two years from April 2004 to 2002. Since the government is determined to go ahead with the disinvestment process, VSNL had been allowed to enter a range of new telecom services, including national long distance services.

“VSNL should have entered into the new business with the cash reserves it had when the decision on divestment was taken, which was about Rs.3, 500 crore, now it has increased to Rs 4,500 crore,” Shourie said, adding “the government cannot wait for companies to take decisions, it will have to carry on with its work.”

Further, he hinted that the government is likely to take out the cash reserve from Videsh Sanchar Nigam Ltd to avoid criticism and is likely to follow the same principle while putting other public sector units on the block.

Hinting at a possible consensus on reducing VSNL’s cash reserves, Shourie said, “It is an issue which is being discussed by the telecom, finance, industry and disinvestment ministries. There are differences on the issue but all of us understand that the government will attract criticism if we provide such a huge cash reserve for a 25 per cent stake.”

The public sector units with high cash reserves and real estate may use this to fund voluntary retirement schemes for employees or to enhance portfolio, he said.

The minister reiterated that the government will divest its stake in 13 PSUs by April this year, and the lost includes telecom major VSNL, petroleum giant IBP and Maruti Udyog Ltd.

“As soon as the valuation is complete we will come back to the finance ministry and FIs for a rights issue.”

   

 
 
PM TAKES B-SCHOOL DOWN TO EARTH 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
Hyderabad, Dec. 2: 
The Indian School of Business is as elitist as it can get. Is that why the Prime Minister spoke about taking management studies to farmers in the presence of almost the entire Indian corporate pantheon? After opening the Rs 300-crore business school, which 50 top companies have collaborated to build, Atal Bihari Vajpayee said a “prohibitive price tag” should not be allowed to shut the door on representatives of medium and small industries.

The one-year post-graduate course that has already started at the school costs Rs 10 lakh.

Many of the corporate leaders sitting in the audience had flown in on their private jets. Rahul Bajaj, Anil Ambani, Y.C. Deveshwar, Deepak Parekh, Anand Mahindra, Adi Godrej, Sunil Munjal – almost everybody who has footed the bill for the school–were there.

This B-school is going to be like no other in the country–it will turn out world leaders in business management, as the chairman of its governing board, Rajat Gupta of consultancy firm McKinsey, said. He described the school as a testimony to the “patriotism and gratitude” successful Indians feel towards their country.

The PM pushed them to go a little farther. “We need our farmers to be trained on better management of resources. We need to train workers of municipal bodies and to upgrade management practices in power and transport.” He gave back industry the advice it always offers to government. Institutes like this B-school should be kept free of the influence of the government and industrial houses, he said.

His visit coincided with the school’s governing body meeting where it was decided to complete the infrastructure in 6 months and inject another $50 million.

   

 
 
SUZUKI PREFERS TO BE LONE RANGER IN BATTLE OF BIKES 
 
 
FROM SATISH JOHN
 
Mumbai, Dec. 2: 
Suzuki Motor Corporation (SMC) may go it alone in the fast-growing Indian two-wheeler market, instead of aligning with a local player.

Industry circles say the Japanese auto major is likely to set up an independent manufacturing base in the country to tap the Indian auto industry’s fastest growing segment.

Analysts aver that Suzuki is likely to venture on its own, even though reports had earlier suggested that they were considering an alliance with the Pune-based Bajaj Auto Ltd. These rumours have subsequently been dismissed by Bajaj Auto.

Sanjiv Bajaj, general manager (corporate finance) at Bajaj Auto Ltd, told The Telegraph that his company has not been approached by the Japanese auto major. “Neither have they sounded us nor have we approached them,” he said.

Reports had earlier suggested that after its split with the TVS group, Suzuki may probably align with BAL for making scooters. But analysts say that for the Bajaj group, which already has a sound working relationship with Kawasaki for motorcycles, Suzuki’s scooter technology does not hold appeal.

Industry circles had also speculated that the TVS-Suzuki divorce was primarily influenced by overseas developments. They had then pointed out to the developments in Japan, where Kawasaki and Suzuki are reportedly in talks to combine production strengths in an attempt to get their act together against Honda, the world leader in the two-wheeler segment.

Analysts now say Suzuki’s strategy will be on the same lines as its arch rival Honda, which recently set up a base for manufacturing scooters in India, in addition to its tieup with the Hero group for motorcycles.

The only difference will be the fact that Suzuki will make motorcycles instead of scooters, in view of the booming motorcycle segment in the country.

Analysts say the very price at which Suzuki sold their stake to the TVS group showed their desperation to exit from the joint venture.

Suzuki sold its shares to Sundaram-Clayton Ltd, the flagship company of the TVS group, amounting to 60 lakh equity shares of TVS-Suzuki Ltd at the rate of Rs. 15 per share. The total cost of acquisition came to a measly amount of Rs 9 crore, which was a whopping discount of 82 per cent from the closing price at the BSE on that day. The price was considered as a “real steal” by market analysts.

Another highlight of the divorce between the duo was that the present licensing arrangements will continue for 30 months. The comfort period is considered sufficient for TVS to take stock and regroup its strategy, say analysts. TVS will continue to pay royalty to Suzuki on case-to-case basis, say analysts. This would enable TVS-Suzuki to produce the licensed products during the said period under the Suzuki brand name.

Rival Honda, however, tied by the agreement with the Munjals of Hero Honda, cannot make motorcycles in the country till 2004.

   

 
 
RPL EYES MUKTA-PANNA STAKE 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Dec. 2: 
Reliance Petroleum is weighing options to bid for Enron’s 30 per ent stake in the Mukta-Panna and Tapti fuel reserves if the US energy giant invites moreoffers. Last month, British Gas offered to pick up Enron’s entire stake at $ 388 million.

But the deal could not be materialised so far as the other two partners in the project, Oil & Natural Gas Corporation (ONGC) and Reliance, did not agree to the automatic transfer of operating rights from Enron to British Gas. Sources said British Gas might pull out from the deal altogether if it fails to obtain the operating rights, to which ONGC has the first right of refusal.

“It is not easy for ONGC to pick up Enron’s stake in a fresh round of bidding because of the existing government norms for investment in domestic joint ventures by public sector undertakings. The Reliance group, however, stands better chance under the circumstances,” they added. Reliance now holds 30 per cent which will go up to 60 per cent if it acquires the Enron stake.

But Reliance is not looking at merely hiking its stake in the venture. It is interested the operating rights which will give it ultimate control over the project, sources said.

ONGC, too, is interested in any fresh bidding. But it has to obtain the government’s approval, which is a long-drawn proposition.

Since ONGC has the first right of refusal as far as the operating right is concerned in a changed joint venture set up, it is on a very strong footing for now. Reliance will have to compensate ONGC adequately in order to gain operating rights in the project. According to an ONGC official, the public sector giant is actively weighing at least a couple of offers, one each from British Gas and Reliance.

“We are interested in hiking our stake in the project through a straight buy-out of Enron’s stake. But that is possible only after Enron takes a decision on a second round of bidding,” the official said. The Mukta-Panna Tapti energy reserves have already shown very good prospects. Currently, production of gas from the reserve stands at around 8 million cubic meters per day while the figure for crude is 30,000 barrels.

Dabhol stake

Reliance Industries Ltd is showing keen interest in the acquisition of Enron subsidiary Dabhol Power Co through BSES, in which it is the largest stakeholder, adds PTI. Though not directly involved in the bidding process, Reliance Power vice-president J.P. Chalsani, along with BSES chairman and managing director R.V. Shahi, participated in the crucial three-day meeting held in Singapore last month by Indian FIs for the proposed “distress sale of the power project”.

with the DPC management, senior FI sources said.

   
 

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