Cess planned for oil stockpile
Cash bailout for UTI, IDBI Act to be amended
Enron fall kills British Gas deal
War jitters pound rupee to 47.92
Hindustan Fertiliser heads for closure
Lenders tighten noose around Arvind Mills
HPL gets Rs 65-crore loan respite
Brentwood stake buy in Bharti Tele cleared
HFCL bet Rs 1,500cr on stocks
Foreign Exchange, Bullion, Stock Indices

 
 
CESS PLANNED FOR OIL STOCKPILE 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Dec. 24: 
The government plans to ask oil companies — both state-run and privately-owned — to build up petro-product stocks in various parts of the country, especially in “fragile areas”, which will be required in the event of war or other disruptions.

The government plans to pay for the creation of this inventory by earmarking a part of a cess it is planning to impose on oil products in the next budget which will help meet freight equalisation costs. The cess, which is being pegged at 2-3 per cent, will now thus pay for both freight equalisation as well as the creation of strategic reserves.

Alternatively, the government could pay this as a straight subsidy out of defence funds. Top finance ministry officials said this proposal, which had been recommended by the Narad Committee on oil sector decontrol, has been accepted and the government is going ahead with micro-level planning on it, as the tension mounts on the borders with Pakistan.

Some reserves are already maintained by various state-run oil companies. However, the new plans call on them as well as new private sector entrants to set up reserves at various strategic locations which could serve the public at large in case of internal or external disruptions in supply.

“These reserves would be needed for several reasons: if oil supplies from abroad dry up due to a war or if train or road links snap as a result of war, or because of natural calamities,” officials said.

All the players will be required to create and hold such inventories in suitable, safe locations in demarcated places so that the supplies can reach vulnerable areas during crisis situations.

New reserves would have to be built according to specificiations drawn up by the defence department which would imply making these reserve locations bomb-proof.

Officials said a list of ‘fragile areas’ has been identified which are in danger of being cut off due to natural calamities such as floods, earthquakes and cyclones. These will be given priority in location of reserves.

Officials estimate that an external crisis such as war in the region would result in a low supply of crude oil to refineries. They feel to take care of external disruptions, it is necessary to diversify sources of crude supply as well as set up strategic storage in the country just as the US does.

“This is already being done in a phased manner to diversify sources of crude supply and build up strategic crude reserves,” officials said.

Remedial actions to take care of internal disruptions may include, arranging supplies to the secondary storage locations (depots) from alternative sources and organising different modes of transportation and routes. A strategic plan for this is being separately chalked out, officials said.

   

 
 
CASH BAILOUT FOR UTI, IDBI ACT TO BE AMENDED 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, Dec. 24: 
The government today said it would amend the IDBI Act to allow the financial institution to turn into an universal bank, set up an asset reconstruction company for the perenially sick Indian Bank, and pump in funds to bridge the gap between UTI’s net asset value and the administered price of the mutual fund’s premium scheme the US-64.

After a series of meetings at North Block between financial insitution chiefs and finance ministry mandarins, economic affairs secretary C.M.Vasudev said the asset reconstruction company (ARC) would be initially be set up for the Indian Bank but would later be used to help out any of the other three weak banks.

The government plans to give the Indian Bank a bail out package of Rs 700-crore once stronger banks paid back part of their capital stock to the government, through a share buyback programme.

The government has told Uco Bank it should shut down about 200 branches and consolidate their business, to be eligible for a Rs 500 crore bailout. It is likely that both the banks will be covered by the ARC which will have a corpus of about Rs 200 crore.

The working group on ARC, comprised of officials from banking division of ministry of finance, RBI, Indian Banks Association (IBA) and select banks, had recently given a presentation to finance minister Yashwant Sinha. Other ARCs may be set up later to handle the huge quantum of non-performing assets amounting to about R s 60,000 crore with which state run banks are laden.

The decision to allow IDBI to turn into an universal bank comes months after the bank, beset with sticky loans and dud investments sought permission to re-invent itself from a long term industrial lender into a general bank.

The other financial institution — ICICI Ltd — has called an extraordinary general meeting in mid-January to seek shareholders approval to transform itself into a universal bank through a merger with as yet unnamed bank.Both ICICI and IDBI have been keen to break down the Chinese walls that have kept development banks from entering the more lucrative area of retail banking for close to 40 years. Vasudev also also made it clear that in the case of the US-64, the government would have to “meet the difference between NAV and administered price of units.”

Besides this, banks have already been asked to extend a line of credit of about Rs 3,000 crore as part of a bailout package.

The administered price of US-64 unit will be Rs 10.60 in January. It has been going up by 10 paise every month since July when it was frozen following a run on the scheme. However, the NAV is expected to be below Rs 10, the par value. The government, as the guarantor of the scheme, is duty bound to fill up any gaps between promise pay-outs and real ability of the mutual to pay investors.

   

 
 
ENRON FALL KILLS BRITISH GAS DEAL 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec. 24: 
The collapse of Enron Corp claimed another victim today when British Gas Plc hinted that it is walking away from a deal to buy the assets of Enron Oil & Gas in India in the aftermath of the burnout.

The UK-based gas and oil producer had agreed to buy US Enron’s oil and gas assets off India’s west coast for $ 388 million. Enron Oil has a 30 per cent stake in the Tapti gas field, and the Panna-Mukta oil and gas field.

The announcement by British Gas clears the way for Oil and Natural Gas Corporation (ONGC) and Reliance, the other partners in the oilfields, to acquire Enron’s stake. While a Reliance spokesperson was cagey on the issue, ONGC officials were not available for comment.

ONGC had earlier announced that it would consider bidding for Enron Corp’s upstream Indian assets if British Gas’s plan to acquire the assets falls through.

British Gas said it is talking to Enron and local partners in the oilfields to bring the agreement to an end.

“BG Group will make an announcement on the outcome in due course,” it added.

Explaining that the deal had expired following the collapse of the Houston-based US energy giant, BG said progress to conclude the deal had been slower than anticipated after Enron filed for Chapter 11 bankruptcy protection in the United States.

“The original agreement has now expired,” BG said in a statement from London. The company, however, did not explain whether it would look for working out a fresh deal.

BG had originally agreed to buy the Enron Indian unit for $338 million, and had hoped to conclude the deal by the end of this year.

   

 
 
WAR JITTERS POUND RUPEE TO 47.92 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec. 24: 
The rupee plunged to 47.92 against the dollar today as the uncertainty over the India-Pakistan hostility deepened and fears mounted of a war between the nuclear twins.

The fall was accompanied by a sharp rise in dollar premia, an indication that the markets expect the rupee to weaken further over the next few weeks of suspense.

Bidding for greenbacks by state-run banks on behalf of companies had driven the rupee to the day’s low of 47.94. This was in contrast to the trend witnessed in the recent past when the currency had shown a resistance around the 48-mark. It dipped below that threshold earlier, but, in a display of resilence, had staged a turnaround. This had largely been possible in the face of high forex reserves, plentiful supply of greenbacks from exporters, and buoyant inflows from FIIs.

The six-month premium closing at 6.64 per cent against 6.41 per cent on Friday, a rise of 23 basis points; the 12-month premium shot up to 6.31 per cent from 6.11 per cent.

Today’s fall in value of the rupee has now brought in some uneasiness in the markets, with some dealers saying the sentiment is changing too fast to make a prediction.

N Subramanian, analyst at e-Mecklai, a forex firm, said more demand for dollars cannot be ruled out as players are concerned about the course Indo-Pak relations will take in the weeks ahead.

“There is pressure building on the rupee as demand for dollars has picked up and corporates are turning nervous. It now remains to be seen how far it dips. If the rupee were to decline further to 47.95/97 levels, we could then see the currency dipping further,” he added. Much will also depend on the stance of the RBI.

   

 
 
HINDUSTAN FERTILISER HEADS FOR CLOSURE 
 
 
OUR BUREAU
 
Calcutta, Dec. 24: 
The BIFR has confirmed the winding up of the sick public-sector company, Hindustan Fertiliser Corporation, under section 20 (1) of the Sick Industrial Companies (special provision) Act, 1985.

The wind-up will affect 7,500 workers and employees across its four units in West Bengal, Bihar and Assam, in addition to its offices in New Delhi and Calcutta.

In an order dated December 12, the board stated that it would not like to delay further the process in the light of the Supreme Court orders from time to time and came to the conclusion that it should confirm its opinion for winding up as there is no rehabilitation proposal available for the sick company.

The BIFR informed 37 parties concerned of the order which further stated that the board would have considered any comprehensive proposal for rehabilitation had the company or promoters submitted such draft rehabilitation proposal even at the time of hearing of objections/suggestions on November 16.

Trade unions, including Citu and Intuc, had demanded that the case should now be referred to the Appellate Authority for Industrial and Financial Reconstruction.

The decision enraged union leaders, who asked the government to set its priorities right before allowing closure of basic national facilities.

“It seems that closing down public sector units has become the business of the government. They have appointed a minister to facilitate such closure,” said West Bengal Citu general secretary Chittabrata Majumdar.

He said several proposals were sent by trade unions to rejuvenate HFCL’s Haldia unit and revival of other fertiliser plants in the eastern region and the lone unit at Namrup in Assam.

“The BIFR decision was deliberate because the government had even refused to submit a reconstruction package’’, Majumdar said.

   

 
 
LENDERS TIGHTEN NOOSE AROUND ARVIND MILLS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec. 24: 
Two promoter-directors have resigned from the board of Arvind Mills after the financial institutions tightened the grip over the company.

Niranjan N. Lalbhai, and Samveg A. Lalbhai, managing director and directors, quit as part of a sweeping restructuring drive foisted by the lenders on the debt-bloated firm.

This leaves only Arvind Lalbhai, CMD, and Sanjay Lalbhai, the managing director, on the board.

Though the exit of the two Lalbhais took place under a debt-restructuring agreement that the Ahmedabad-based denim maker reached with FIs a few months ago, industry circles say there is more to it than meets the eye.

The deal came after lenders who were not repaid decided to restructure a company reeling under a Rs 2500-crore debt. The Lalbhais agreed four independent directors would be nominated by lenders if loans were not cleared.

The FIs’ representatives will choose another four directors from a list of three names provided by Arvind Mills for each position. An independent auditor was also to be appointed to monitor cash flows.

The plan, aimed at reducing the company’s burgeoning debt burden and improving its financial health, is one of the first in the private sector where lenders were given three choices: debt buyback, lower interest rates on debt remaining after the buyback is executed and sharing of gains in case the company did well.

While FIs deny a change of guard is taking place at Arvind Mills, it is apparent that they have tightened their grip over the company. This is clear from the fact that FI representatives have set up a monitoring and control mechanism. The company has over 60 lenders and except for a few , most of the lenders have supported the debt recast.

   

 
 
HPL GETS RS 65-CRORE LOAN RESPITE 
 
 
BY A STAFF REPORTER
 
Calcutta, Dec. 24: 
The board of the cash-strapped Haldia Petrochemicals Ltd (HPL) today decided to issue Rs 65-crore non-convertible debentures (NCDs) to West Bengal State Co-operative Bank to raise funds that would help it pay interest for the quarter ending December 31.

Sources said the coupon rate and the tenure of the NCDs will be decided later. Today’s meeting did not discuss the prickly issue of equity participation by Indian Oil Corporation (IOC).

Sources in the oil major said they have not heard from the government about its future course of action. “Our offer remains open till December 31 and the state government should give a suggestion by that time.”

HPL chairman Tarun Das was not present at the meeting, which was chaired by G. Goswami, the IDBI nominee on the company board. No Tata representative was present either.

   

 
 
BRENTWOOD STAKE BUY IN BHARTI TELE CLEARED 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Dec. 24: 
Brentwood Investments BV of the Netherlands and nine other foreign investors have been allowed to invest Rs 452 crore in Mittal-owned Bharti Televentures.

The government today cleared the investment proposal along with a batch of 57 others for an aggregate foreign direct investment of Rs 815 crore. According to the official release, Brentwood’s investment will be used for “infusion of additional funds through an initial public offer (IPO) and increase in Bharti’s paid-up capital”.

The FDI proposals were approved by the commerce and industry minister Murasoli Maran based on recommendations of the Foreign Investment Promotion Board (FIPB). Other proposals cleared include a Rs 110.40 crore proposal of New Zealand-based Fonterra Co-operative group for acquiring 49 per cent equity stake in dairy major Britannia Industries.

Toyota Motor Corporation’s application to manufacture 10 seater passenger vehicles, which does not involve any fresh inflow of funds, was also approved.

Another Dutch major, Koninklijke Phillips Electronics, has been allowed to bring in a total of Rs 105.50 crore to convert two of its companies in India into wholly owned subsidiaries.

The approval involves enhancing equity in the consumer appliances arm from 74 per cent to 100 per cent. In the lighting company the equity stake will increase from 76.4 per cent to 100 per cent respectively.

FDI inflow up

FDI witnessed a record growth of 40 per cent during the first nine months of the calendar year touching $ 3.6 billion compared with $ 2.6 billion in the same period last year.

As per the latest data available, FDI inflows during January-September amounted to $ 3.623 billion as against $ 2.584 billion for the corresponding period last year, an official release said here.

   

 
 
HFCL BET RS 1,500CR ON STOCKS 
 
 
BY A STAFF REPORTER
 
Calcutta, Dec. 24: 
Himachal Futuristic Communications Ltd (HFCL) had deployed close to Rs 1,500 crore for strategic investments through its subsidiary, HFCL Trade Invest Ltd, in the year ended March 31.

A substantial part of this amount was given to various firms owned by stockbroker Ketan Parekh for market operations.

The preliminary report of the Securities and Exchange Board of India (Sebi) to the Joint Parliamentary Committee (JPC) on the scam earlier this year said “around Rs 425 crore” was given to Parekh’s firms in March this year.

According to HFCL’s annual report for the 2000-01, Rs 1,457.38 crore was invested in or given as advance to HFCL Trade Invest Ltd — the special purpose vehicle for strategic investments.

The auditors have expressed doubt about the recoverability of some of the investments as the intermediaries (read the Parekh firms that brokered the deals) are now facing various legal suits or the instruments in which the money was invested have yet to be issued. The sticky investments of the company is estimated to be at least Rs 600 crore.

The company had invested Rs 150 crore to acquire the shares of Digital Super Highway Private Ltd — a company belonging to the Zee Telefilms stable. But the shares of the company were not allotted to the HFCL group, and the money passed on Panther Fincap & Management Services Ltd — a Parekh group entity — according to the Securities and Exchange Board of India’s report to the JPC.

Besides this, auditors have raised questions about the recoverability of the Rs 448.29 crore given to Classic Credit Ltd — yet another Parekh group firm.

The amount was given to Parekh’s firm to acquire shares of AB Corp, Shonkh Technologies and Global Electronic Communication Services Ltd — a firm that has since merged with Global Telesystems Ltd.

Indicating a nexus between promoters and brokers, Sebi in its report to the JPC has said: “Substantial funds have come to brokers from promoters. These funds appear to have been used for taking delivery of stocks or for sustaining positions through vyaj-badla (the carry-forward mechanism).” Part of the funds might have also been used to pay for the losses incurred by the brokers when the stock market crashed, Sebi said in the report.

While it was actively trying to grow by way of acquisition and mergers, HFCL’s borrowings shot up from Rs 21.06 crore to Rs 594.89 crore during the year.

The promoters of the firm now hold 25.15 per cent, which is set to go up to 33.58 per cent through a preferential issue of 1 crore convertible warrants.

At the forthcoming annual general meeting, the company also intends to seek shareholders’ approval for issuance equity abroad to raise up to $ 100 million (close to Rs 500 crore).

Kerry Packer’s Consolidated Press Holdings, which had acquired 9.09 per cent through its nominee Ecom.Com Ltd has liquidated its holding in the company.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 47.92	HK $1	Rs.  6.05*
UK £1	Rs. 68.69	SW Fr 1	Rs. 28.60*
Euro	Rs. 42.52	Sing $1	Rs. 25.70*
Yen 100	Rs. 36.96	Aus $1	Rs. 24.00*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 4680	Gold Std(10 gm)	Rs. 4610
Gold 22 carat	Rs. 4420	Gold 22 carat	NA
Silver bar (Kg)	Rs. 7600	Silver (Kg)	Rs. 7670
Silver portion	Rs. 7700	Silver portion	NA

Stock Indices

Sensex		3232.97		-  2.52
BSE-100		1551.35		+  2.77
S&P CNX Nifty	1048.50		-  2.35
Calcutta	 107.68		-  0.18
Skindia GDR	 514.72		+  1.84
   
 

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