Hunt for oil-supply backup
India Inc hooked to delisting
Choppy waters force ship firms to sign freight pacts
SPS plans iron plant in Durgapur
NHPC to start work on Purulia project by Jan.
Borland eyes Bengal project
CII lays out rail revival track

 
 
HUNT FOR OIL-SUPPLY BACKUP 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, Dec. 30: 
The government has decided to look for alternative sources of oil and gas supplies as India and Pakistan play a dangerous game of brinkmanship on the border that could seriously disrupt supplies from West Asia and turn the placid Arabian Sea into a high-risk zone for tankers.

The decision, which is aimed at “strategic diversification” of India’s traditional sources of oil supplies, has been taken by petroleum minister Ram Naik in consultation with the defence and finance ministries at a series of meetings held recently.

India will now be floating more tenders for oil supplies on the Singapore market and buying up stocks from places like Indonesia, Brunei and even further afield from Vietnam.

Tenders will be floated by the state-run Indian Oil Corporation (IOC), which has already been active in the market buying up large quantities of oil ever since the September 11 attack.

In the past three weeks, IOC has contracted supplies of 4.5 million barrels of sweet and sour West Asian crudes for January and February loading. Most of the orders are for Dubai, Iraqi Basrah light, Abu Dhabi, Lower Zakum and Egyptian grades.

Indian policy makers have also decided to increase security at deep-sea oil rigs and refineries on the west coast. Anti-aircraft guns will be posted to protect strategic assets onshore while the air force bases in Maharashtra and Gujarat will provide protective air cover for the oil rigs in the Arabian Sea.

Top officials also reviewed India’s oil stocks as part of inter-ministerial efforts to oversee India’s economic security.

A request was made to the finance ministry to allocate additional funds for import of oil resources in case crude prices continue to rise, especially now that Opec is set to seal an unprecedented pact with big independent suppliers like Russia and Norway to prop up crude prices. The Opec members, who control nearly two-thirds of world oil exports, have reached a consensus to cut oil output by 1.5 million barrels per day from January 1.

Traditionally, India has been dependent on West Asia for its fuel supplies. Officials say this has always been fraught with dangers as war in the region could always result in a blockade of the sea lanes, or worse could see West Asian states adopt a hostile stance towards the country.

“During the 1965 and 1971 wars, we have seen the levels of support for Pakistan from the oil-producing West Asian states,” sources said.

The meetings also decided to go ahead with a plan to import liquefied natural gas (LNG) from Myanmar in a bid to diversify sources of gas supplies away from West Asia as well.

An existing proposal for a gas pipeline linking Bangladesh’s gas-fields in the south-east to Haldia in West Bengal, from where it is supposed to be pumped northwards via Barauni, is currently on ice because of opposition within Bangladesh to this move. Gas sales to India has always been a thorny political issue in Bangladesh with its politicians claiming it could leave local industry without fuel sources in the future.

US-gas based companies that have been prospecting for gas reserves in Bangladesh have favoured a deal with India since there is little demand there.

To overcome this problem as well as to quickly find ways of garnering supplies from a source that cannot be touched by war, the government has activated plans to import gas from Myanmar. The initial proposal is to import it as LNG through the Haldia port.

Later, the government could consider the possibility of laying pipelines through Bangladesh to link Myanmar with India.

Earlier, this week 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.

   

 
 
INDIA INC HOOKED TO DELISTING 
 
 
FROM SATISH JOHN
 
Mumbai, Dec. 30: 
The queue for delisting shares from the local bourses is suddenly getting longer, with Indian companies joining the bandwagon that till recently comprised only local subsidiaries of foreign multi-nationals.

Indian subsidiaries of multi-nationals like the consumer electronics major Philips India Ltd, Punjab Anand Lamps, leading machine tools maker Sandvik Asia, carbon black major Cabot India, and leading chocolate maker Cadbury India, have clearly indicated their intention to delist their shares from the local markets. Others that joined the delisting queue are Carrier Aircon, Otis Elevators and Foseco India. Even Nestle has over the years been seen acquiring more stake in its Indian subsidiary.

Joining the fray now are Indian companies like Manu Chhabria group firm Shaw Wallace, Mather & Platt and Hind Dorr Oliver, who have given notice of their intention to delist.

Adding to that list on Friday was Anil Agarwal’s Sterlite Industries declaring its intention to delist from the bourses if the buyback exercise was successful in buying out the public share holding, what surprised corporate circles here.

Ironically, the company was embroiled in the controversial share price rigging case investigated by the Securities and Exchange Board of India (Sebi) and later absolved of all the charges by the Securities Appellate Tribunal.

Says Nimesh Kampani, chairman of J M Morgan Stanley, the leading merchant banking firm on the trend of MNCs delisting from the stock bourses, “Most the MNCs prefer to list only shares of their main arm on the bourses”.

Kampani was speaking on the sidelines of a press conference for launching the public issue of a Calcutta- based company.

He should know, as his firm is the lead manager to Cadbury Schweppes’ plan to buy out the 49 per cent Indian shareholding in its local subsidiary-Cadbury India at a price of Rs 500 per share which involves a total outlay of Rs 875 crore.

Merchant banking circles here also point to several issues that has forced the hand of many MNCs to consider exiting from the company. With total control over the subsidiary, the foreign parent can consider putting in more money, brands and R&D into its Indian operations.

Says a senior merchant banking official who wished not to be quoted, “the myriad number of regulations are also a dampener to these companies.

Among Sebi’s list of norms, the one which rankles many MNCs is the stipulation of having an equal number of independent directors on the board.

   

 
 
CHOPPY WATERS FORCE SHIP FIRMS TO SIGN FREIGHT PACTS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Dec. 30: 
With world-wide freight rates coming under continuous pressure, domestic shipping companies are entering into time-charter agreements, which they are optimistic will act as a buffer against the bearish markets.

Such agreements entail shipping companies to charter various products based on a fixed rate for a period of time.

“It is much better to have such arrangements rather than depend on the spot market where prices continue to remain depressed,” said an official from Great Eastern Shipping Co. Ltd, which has taken recourse to such measures to beat the prevailing bearish trend in the industry.

The official however, added that while such arrangements do not form a large part of its overall business, the company was examining further ways to face the tide of declining freight prices.

Freight rates in the industry are plummeting following the poor economic environment globally, coupled with the aggressive expansion plans of various shipping companies, thus leading to a scenario of excess supply.

Sources said that the trend of declining prices has been witnessed across the board that includes dry bulk carriers, container cargo and even tanker rates. For instance, in the case of very large crude carriers (VLCC), charter rates are down by one-third from the peak rates they achieved in the previous year.

The downturn came as a huge shock to the industry that estimated the upswing in the previous year to continue till 2003.

Rates here have now plummeted from about $ 70,000 in the peak times to below $ 20,000. The decline is more pronounced in the case of the container segment where rates have nose-dived to over $ 500 against $ 1,300 earlier.

Further, the industry was also hit by the September 11 terrorist attacks on the US that saw insurance rates going northwards. Sources said that costs have now risen as companies have to pay additional insurance premia for entry into the West Asian and Gulf regions.

Following the attacks, around 19 areas were then identified where additional premium has been levied on entry. These include Sri Lanka, Suez Canal, West Asia passes among others.

Industry circles further point out that in the face of declining tanker rates, shipping companies have been targeting the domestic refineries who have given them “cargo preference” over others as far as transportation of crude oil is concerned.

“However, in this case too, the companies do face pricing pressures,” said S Ragnekar, director, Shipping Corporation of India Ltd.

SCI, he added, is now in the process of expanding its fleet further through the induction of four Aframaxes (crude carriers).

The company has entered into consortia arrangements by pooling resources with other shipping companies for various regions.

   

 
 
SPS PLANS IRON PLANT IN DURGAPUR 
 
 
BY A STAFF REPORTER
 
Calcutta, Dec. 30: 
The SPS Group, which has interests in steel, is setting up a sponge-iron unit at an investment of Rs 15 crore near Durgapur.

The company is a conversion agent of the Steel Authority of India Limited (SAIL) and a major buyer of billets.

It has plans to invest another Rs 100 crore in the next 2-3 years’ time in the state. The areas of investment identified by the group are food processing, schools and engineering colleges.

Managing director Bipin Kumar said: “State commerce and industry minister Nirupam Sen had asked me to set up a food-processing unit in Bengal. I am currently working on the proposal. I also submitted a proposal to the government for setting up a school at Salt Lake.”

The SPS Group has a history of taking over sick units and turning it around. The company had taken over Melcast India Limited, a sick steel ingot manufacturing company with an installed capacity of 33,000 tonnes per anuum.

   

 
 
NHPC TO START WORK ON PURULIA PROJECT BY JAN. 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Dec. 30: 
National Hydroelectric Power Corporation (NHPC) expects to begin work on the 900 MW Purulia Pumped Storage Project by January-end. The project will cater not only to West Bengal, but the entire eastern regional grid.

Speaking to The Telegraph, Yogendra Prasad, chairman and managing director of NHPC said, “Both the Union power and finance ministries have already approved the project. Only the Cabinet’s nod is awaited, which is expected within another 15 to 20 days time. After that we will start work on the project.”

The project is a joint venture between NHPC and the West Bengal State Electricity Board (WBSEB). Both parties had signed a memorandum of understanding in April early this year.

The cost of the project, the NHPC chairman said, is Rs 3,188 crore. “Out of the Rs 3,188 crore, 20 per cent will come in the form of equity and the rest will be in the form of loans.” The equity of the project is around Rs 1,200 crore. NHPC will contribute about Rs 800 crore towards the equity and the rest will be borne by WBSEB.

“Once the Cabinet okays the project, NHPC will start work on implementing the project,” Prasad said.

Power department officials said, “Both West Bengal and the eastern region have a predominantly thermal power generation system with an insignificant hydro power capacity. Against a minimum desired level of 40:60 hydro-thermal mix, West Bengal has only a 3:97 ratio. In the eastern region also, the ratio is less than 10:90. As a result there is an acute problem of surplus power during off-peak and deficit in peak-hour with a wide variation of frequency. The proposed project, with an installed capacity of 900 MW, will offer a pragmatic solution for meeting peak demand by utilising off-peak generation from thermal power stations, resulting in a better peak demand.

   

 
 
BORLAND EYES BENGAL PROJECT 
 
 
BY ALOKANANDA GHOSH
 
Calcutta, Dec. 30: 
Borland India, a subsidiary of the US-based $ 191.1-million Borland Software Corporation, is in talks with the West Bengal government to participate in the implementation of the state’s e-governance project.

Borland offers technology solutions for e-business platforms and focuses on three main areas— web-based services, Java and Linux. The Indian subsidiary formally commenced operations in February this year.

The state government recently inaugurated the WBSWAN (West Bengal State Wide Area Network) project to link all district headquarters with Calcutta, via a 2mbps optic fibre network. The network will enable people all over the state to access facilities relating to health, education and information, besides being of immense use in emergencies.

Borland India is also holding talks with five other states on the same lines. Country head, Ajay Mohan, said discussions are expected to materialise in the first quarter of 2002. He said initiatives in the various states are two-pronged — providing software for training to schools and colleges and participation in state projects.

“We are considering giving 1,000 licensed copies at subsidised rates, which the state governments will distribute at their discretion.”

The company will also distribute software to 150 universities in the country for a limited period, to help them inculcate it in their curriculum.

   

 
 
CII LAYS OUT RAIL REVIVAL TRACK 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Dec. 30: 
The Confederation of Indian Industry (CII) has outlined a six-point revival package for the railways in its pre-budget recommendations to the ministry of railways.

Emphasis has been laid on phasing out massive subsidisation of passenger fares and stop overcharging certain categories of freight traffic that leads to diversion of traffic to road.

“Cross-subsidisation in the Indian Railways results in the present revenue mix of 30:70 from passengers and freight business respectively. This is leading to losses and hence cross subsidisation should be done away with,” the CII recommendation says.

The industry forum has also recommended correction of the distortion in the Railways’ pricing policy.

The freight rates should reflect the cost of the operation-plus-profit margin and the decision for increase of freight should be based on sound costing principles rather than on socio-political considerations, it said.

The CII has also urged the government that subsidies on transportation of essential commodities, passenger services and investment in uneconomic branches must be defined and reduced as far as possible.

Aggressive marketing strategies to re-capture lost market share are also necessary, along with the launch of scheduled freight trains providing guaranteed transit time, the CII said.

The CII recommended multi-modal transportation as customers look at convenience, safety and cost of the total logistics. Use of non-traditional sources to improve finance and ‘right sizing’ of employee strength to maximise transportation output per person is the need of the hour.

The chamber feels that restructuring is necessary to improve efficiency, thereby increasing the productivity of the Indian Railways. The target set by the ministry to bring down the staff costs to about 35 per cent of the gross traffic receipts within the next 10 years must be realised, it added.

The CII has reiterated that the use of IT particularly in the areas of rack and terminal management, information system on freight movement, reservation system and streamlining operations, would improve the effectiveness and efficiency of the railways.

The chamber also pointed out that the scope for public private partnership is enormous in railways, ranging from commercial exploitation of air space to private investments in its infrastructure and rolling stocks.

The Indian Railways, the world’s second largest railway system under a single management, carries 1.25 million tonnes of freight traffic and 12.53 million passengers daily.

However, in the last couple of years, the Railways’ distinction of being the lifeline of the nation is gradually fading due to constant loss of market share to road transport, declining budgetary support from the central government, slow modernisation and upgradation, and the unabated rise in its expenditure.

   
 

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