VAT debut with variable rates
Bank stakes put ICICI in dilemma
San Motors stirs up a Storm
TVS looks for new foreign ally
Chambal readies bid for Paradeep Phosphates
GM mulls rollout of Subaru models
JD Power boost for Maruti cars
Cummins helpline for highway drivers
Indian Chamber floats south Asia think-tank
Foreign Exchange, Bullion, Stock Indices

New Delhi, Jan. 17: 
States may be permitted to charge variable value-added tax (VAT) on a certain class of goods when the system kicks in. This means that the item would be priced differently in various states in the initial stages, somewhat undermining the objective of moving towards a uniform tax regime.

“We need to have a narrow band of 10-12.5 per cent, which is a tolerable range to begin with, in order to compensate states who stand to lose revenue because of the switchover to the VAT regime. The VAT rate will eventually collapse to one rate,” said Asim Dasgupta, convenor of the empowered committee on VAT, after inaugurating the 29th All India Conference of Corporate Managers and Tax Executives organised by Ficci here today.

The relaxation comes in the wake of protests made by states like Delhi, which have been apprehensive about the switchover to a VAT regime that could hurt their revenue interests. A meeting of the empowered on VAT is scheduled for January 23 to set the time-table for the regime.

The Committee has already suggested a three-tier duty structure, including one with a variable rate. The plan is to compensate states that stand to lose revenue because of the switchover through the levy of an additional service tax and central grants.

The three-tier duty structure will comprise zero duty for essential items and those goods that are unprocessed and made by the unorganised sector. The next rate of 4 per cent will apply to all necessary items, including agriculture and industrial inputs and capital goods. The remaining goods will attract a revenue-neutral rate in the band of 10-12.5 per cent, thus bringing in an element of variability to the “uniform” VAT system.

Dasgupta said 15 of the 16 major states and two of the three newly formed states are ready with their VAT draft legislation. The state-level VAT will cover around 500 broad commodity groups which have already been identified. “The two basic rates of VAT ( 4 per cent and 10-12.5 per cent) would cover 90 per cent of the 500 items,” he said. According to Dasgupta, the full revenue neutralisation for states would have raised the band rates to above 20 per cent, which is not socially compatible and hence there was a need for the Centre to provide some grants.

Dasgupta said the Centre is also exploring the possibility of including VAT in respect of imports following representations made in this regard by several states.

“We are meeting next week to thrash out the modalities regarding imposition of VAT on services and the formula for compensation of revenue loss suffered by the states once VAT-regime comes into force.”

Commenting on the details of the state-level VAT, he said all dealers with minimum threshold of turnover would have to register compulsorily with the authorities. Each dealer will be allotted a unique 10-digit number.

Terming the VAT as a much simplified form of taxation, Dasgupta said barring petro-products like motor spirit, kerosene and aviation turbine fuel, which are controlled by the Administrative Pricing Mechanism, all purchase and sales of goods will come under the VAT regime.

“We have already taken the decision to set up the Central Clearing House — the VAT council, which will be the nodal body for inter-state transfers and will deal with practical implementation of VAT.”

Ficci president R.S. Lodha said there was an urgent need to improve the competitiveness of the domestic industry and, for that, it is desirable to tax domestic consumption in such a manner as not to interfere needlessly with market forces.


Mumbai, Jan. 17: 
A question mark hangs over the fate of ICICI’s stake in Federal Bank and South Indian Bank as the financial institution (FI) gears up for conversion into a bank.

The issue has assumed significance in the light of a Reserve Bank of India (RBI) regulation that prevents a bank from acquiring equity in another. The norm does not prohibit equity funding, but requires it to be within the 5 per cent ceiling set on investments in stock.

If an exemption from the rule does not come through, ICICI would be forced to look at the possibility of divesting, or selling off its holding in the two banks.

The stakes were bought by the financial institution as a strategic investment around eight years ago, when the banks sorely needed a capital injection.

Sources say ICICI, which controls around 21 per cent in Federal Bank and 11 per cent in South Indian Bank, will be faced with two clear possibilities: either to acquire these banks, though it has not declared its intention, or sell.

If it were to divest, the question is who will buy the shares. Also, since the holding is large, it is crucial whether ICICI will offload it piecemeal to institutional investors, sell it to another bank or liquidate it on bourses.

Even as it explores how best to pull out of the two banks, the financial institution also faces the prospect of having to prune its equity in a few companies in tune with the norms prescribed by the central bank.

This is because in a few cases, its stake is above the company-wise cap on the amount it can invest in a single group or firm. Much of it happened when debts were swapped for equity.

Under Reserve Bank regulations, effective till March, banks will have to cap their exposure to individual borrowers at 15 per cent of their capital. Exposure to a group has been limited to 40 per cent, which can go up 10 per cent in case of infrastructure projects.

ICICI’s application for conversion into a universal bank is with the Reserve Bank, and a final clearance is expected soon.

There are indications, though, it would be ready to abide by central bank’s decision on the issue of its stake in Federal Bank and South Indian Bank.

If the merger goes ahead, the combined entity would be the second largest bank in India, with an asset base of over Rs 1 trillion.

It would have the advantages of large capital base, complete product portfolio, extensive customer relationships and a strong brand franchise, apart from low operating costs.


New Delhi, Jan. 17: 
This is a question aimed at all you speed fiends fuming in the slow lane because the family crock simply won’t top 40 kmph: how would you like the experience of Corvette from Chevrolet, Elise from Lotus and Sport Spyder from Renault in an Indian car?

Hands up all those who are ready to stump up Rs 5 lakh for a two+two sports coupe?

San Motors of Goa is trying to stir a Storm with its brand new model that sports a Renault D7F 1149 cc engine with a fuel injected motor equipped with a microprocessor based engine system that cranks up 60 horsepower.

San Motors was established in 1969 and used to produce locomotives and engineering equipment like axle drives, gears and pinions, cardan shafts and gear boxes until its present promoter director Milind S. Thakkar felt that Indians needed something young and joyous and affordable. The project resulted in Storm—which was launched in Goa two months ago. The company has already sold over 50 cars.

“The design of the car is done by Le Mans design group from France. I think India lacks an affordable sports coupe. Moreover, I want to give the young people a chance to feel the sun and wind on their face while driving. I cannot fight the big names in the business but I have a gut feeling that this product will be well-received,” says Thakkar.

Thakkar feels there is 4-5 per cent market for these type of cars in India and Storm will fill the gap for economically priced sports car.

San Motors is a single product company at the moment. But it aims to introduce the Streak—a two door convertible and a sports recreation vehicle called San Dune. The cars will have a 30-35 per cent import content.

“We have already established dealerships in Maharashtra, Gujarat, Goa, Karnataka and Tamil Nadu. The auto expo provided a platform for us to come to north India. We are opening our dealership in Delhi next week. The servicing and after sales services will be provided by the dealers themselves,” said Thakkar.

San Motors is a single product company at the moment. But it aims to introduce the Streak—a two door convertible and a sports recreation vehicle called San Dune. The cars will have a 30-35 per cent import content.

“The Storm is aimed at the young. The vehicle will be launched nationwide by March. As the demand for these cars are not great, our Bangalore factory can handle the production for a while. We can churn out around 50 cars a month. But if it really catches on we are ready to invest,” said Thakkar.


New Delhi, Jan. 17: 
TVS Motor Company, which recently broke off its troubled alliance with Suzuki Motor Corporation of Japan, is looking for a foreign partner to open a manufacturing base in south-east Asia.

“We want to go as a majority stake partner and start production around 2004,” said Venu Srinivasan, managing director of the two-wheeler maker.

“We are looking at three major markets—Indonesia, Vietnam and Thailand,” said C.P. Raman, president of the company.

“The major market there is for the step-throughs but we will offer our whole range there. We have bold plans for future but first we have to prove our capability in this market.”

Early this month, TVS announced that it would press for the annulment of the alliance from May 1 this year—one year ahead of schedule.

TVS plans to reduce the imported parts content in the Fier by 5-6 per cent and the Samurai by 2-3 per cent by the end of April.

“That will decrease the import price and thus production cost will go down by 2 per cent. We have already cut down the cost of the two-stroke models in an anticipation of this cost reduction. This has kept the volume constant for us,” said Raman.

TVS plans to invest Rs 80-100 crore every year for independent product development and research. It has drawn up plans for a 4-stroke Scooty and moped to create excitement in an otherwise stagnant segment. Although the 4-stroke scooter Spectra is not doing that well in the market, they are researching on a variomatic scooter at present.

“Our strongholds are Gujarat, Uttar Pradesh and Tamil Nadu. We have missed out on the cities because we didn’t have a 4-stroke model. We expect to raise out market share from 12 per cent to 20 per cent in Delhi with the launch of the new models,” Srinivasan said. TVS has no plans to phase out the two-stroke models as long as they meet the fuel emission norms.


Calcutta, Jan.17: 
Chambal Fertiliser and Chemicals Ltd (CFCL) is eyeing the government-owned Paradeep Phosphates (PPL), which was put on the fast track to selloff on Wednesday.

Sources said the K. K. Birla group flagship is ready to table financial and technical bids, likely to be invited next week. Buying out the government’s 74 per cent stake in the PSU will make the company one of the biggest players in the chemical fertiliser industry. The Chambal top-brass was not be available for comment.

Sources said Chambal Fertilisers, which draws the bulk of its revenues from sale of nitrogenous fertilisers produced at its 4,500 tpa Gadepan plant in Rajasthan, is keen on PPL’s “modern” unit in Orissa to raise its market share in the eastern and southern regions.

The state-owned company has a Rs 630-crore integrated fertiliser project, comprising a DAP fertiliser plant, a raw materials handling unit, sulphuric acid and phosphoric acid installations and two captive power units with a capacity of 16 MW each.

The annual capacity of the DAP fertiliser plant is 7,20,000 tonnes; the sulphuric and phosphoric acid units can produce 660,000 tonnes and 225,000 tonnes respectively.

The fact that PPL has just over 1,100 employees makes it an even more attractive proposition for Chambal, which would like a recast to precede a buyout.

The government has decided to convert PPL’s preference share capital of 117.65 crore and a Rs 85-crore loan given to it earlier, into equity. The company’s paid-up capital is Rs 332 crore, but its net-worth has been eroded by accumulated losses of over Rs 430 crore.

Sources said a heavy interest burden and high depreciation provisions have deepened the cash crunch, even though there is good demand for the company’s products. Restructuring the company’s equity pattern will put it on a strong footing before it is sold off.

A problem Paradeep Phosphate faces is its heavy dependence on imports of raw materials, leaving the company highly vulnerable to global price fluctuations. The entire ammonia requirement, 75 per cent of the phosphoric acid and a substantial portion of rock phosphates needed as inputs, are purchased abroad.


New Delhi, Jan. 17: 
General Motors India is likely to introduce a few Subaru models in the country. GM owns a 20 per cent stake in Fuji Heavy Industries which is the owner of Subaru, the Japanese car maker. It has a range of high-performance niche vehicles and multi utility vehicles (MUVs).

GM, which has launched Astra and Corsa models from its Opel stable, is weighing the possibility of launching a few other Opel models.

GMIL has rationalised the price of Corsa models and added enhanced accessories to forge ahead of its competitors in the segment. The company will soon import Opel models based on the demand and will explore the market for MUVs and other vehicles from Subaru.

Launching the new Astra GSI, Aditya Vij, president and managing director of GMI, said, “I am not making an announcement, but we are constantly looking at vehicles from our alliance partners like Subaru. A wide range of vehicles are available and, depending on the demand, we can look at importing them. We want to be responsible importers.” GM also has alliance with Suzuki Motor, Saab and Fiat.

The company today launched enhanced versions of Astra, Corsa and Swing. GMI has enhanced the engine management system to meet the emission standards in its Corsa and Swing models. The Astra GSi and GLi models have also been pepped up and prices rationalised to provide the real value for money to the buyers. The new Astra GLi will come with a set of alloy wheels while Astra Advantage model will get a tachometer but will be available for exclusive sales to fleet buyers against orders.

In the Corsa and Swing models, GMI has added dual horn, improved the rear seat, tachometer and provided new wheel covers for select models in addition to an upgraded engine.

GM has achieved an indigenisation level of 72 per cent for Astra and 60 per cent for its Corsa models. The parts which are not indigenised include the engine, transmission and skin.

Rajeev C., GMI’s general manager marketing, said, “The price rationalisation will lead to either a price increase or decrease subject to previously prevailing prices in the respective dealer and location.”

Despite sluggish market conditions, GMI plans to sell 10,000 units during the calendar 2002 as against 8,012 units sold last year. The company also plans to capture a market share of 30 per cent in the mid-size segment with its range of models.

Commenting on the business potential Vij said, “The market remains sluggish and the slowdown is expected to prevail for some more time. But with the changing social equations and the increase in the upper middle class segment, the market holds great promise.


New Delhi, Jan. 17: 
For the third time in a row, Maruti Udyog Ltd has bagged the JD Power award for topping the customer satisfaction index (CSI) with an overall score of 119 points. This is the fifth year that the CSI survey is being conducted in the country by JD Power Asia Pacific.

The study has been conducted over a sample size of 3,067 units produced by 12 automobile manufacturers. Honda, Hyundai and Hindustan Motors were the other companies that finished above the industry average of 113 points. For the second year running, Hyundai’s Santro scored over the field in the small car category by bagging the award for the vehicle that gives the least trouble.

Ford’s Ikon toppled Maruti’s Esteem for the same honour in the mid-size category. Honda City bagged the prize for the best premium mid-size car, displacing Mitsubishi Lancer. The Santro was also picked as the car with the best appeal in the automotive performance execution and layout study. However, in the mid-size category, Ikon was displaced by Hyundai Accent.


New Delhi, Jan. 17: 
Cummins India Ltd (CIL) today launched a fully-owned subsidiary Cummins Auto Services Ltd (CASL) to provide service solutions for commercial vehicles plying across Indian highways.

“Starting from the Delhi-Mumbai corridor of National Highway 8, CASL will aim to cover almost 12,000 km of highways as part of its national rollout,” said Jim Rugg, chairman CASL.

Elaborating on the service solutions, CASL CEO Alok Singh said, “We are planning to set up a 3-acre ‘Suraksha’ service station every 350 km on all major national highways.”

Singh said that five Suraksha stations will be operational by February. These will be owned by the company for which it has pumped in Rs 10 crore from internal accruals. The company wants to have 51 such stations in the first 18 months which will be company-owned. At the same time, it aims to have 250 franchisee outlets during this time.

Apart from the usual range of services, including re-alignment and overhauling of engines, the Suraksha service stations will have adequate parking facilities as also dhabas, rest rooms and medical facilities for drivers, said Jim R. Rugg. The Suraksha fleet management solution is a web enabled service support. A ‘smart card’ issued to customers allows them access to CASL’s nationwide facilities giving them cashless transactions.

CASL plans to have tie-ups with other service providers for every 100 kms and also plans to launch its quick service mobile vans. It is also set to provide annual maintenance contracts to fleet owners.

Under CASL, the company is also launching GAP-super markets across the country for genuine automotive spares. Starting with 70 GAP at present, the company wants to take the number to 200 in 18 months, said Singh.


Calcutta, Jan. 17: 
Indian Chamber of Commerce (ICC) has decided to set up a South Asia Business Forum (SABF) along with apex chambers of Bangladesh, Nepal and Bhutan to promote trade and investment in the region.

The move is a part of ICC’s effort to restructure itself to meet the challenges of a changed international, national and regional economic environment.

The SABF secretariat, to be run jointly by Ficci and ICC, will also participate in the annual meetings of the Asian Development Bank (ADB). “This would enable us to showcase the strengths of the region to international investors, which would go a long way in accelerating growth prospects,” ICC president A.V. Lodha.

The forum will help meet the objective of enlarging ICC’s role in promoting sub-regional economic co-operation between Bangladesh, Nepal, Bhutan and India.

“The market dynamics of the region can change significantly if the neighbouring nations work towards creating a larger market for trade and investment.”

ADB and its member countries, he said, have recognised ICC’s efforts, having made it the nodal point for an initiative called SASEC – South Asian Sub-Regional Economic Co-operation. The governments and ministries of commerce in these countries would improve conditions for a boost in trade and investment.

The second pillar of ICC’s restructuring process would be to spread its activities wider in the east.

“We plan to open six offices in the north-east in a phased manner — in Assam and the other north-eastern states. We intend to do the same in Orissa and Jharkhand by March.

These regional chapters will offer policy interaction to the states on ways to speed up growth. We will organise training programmes and offer several opportunities for businesses to network with themselves and with governments,” the ICC president said.

Apart from this, each office will offer the full range of services that the ICC currently provides to its members ranging from commercial arbitration, environment management, energy efficiency, certificate of origin, foreign trade and investment facilitation.



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