SEZs to be test cases for hire & fire policy
Bharti IPO leaves markets thirsty
Jaitley campaign for labour reforms
Flurry of activity at Sahara group

New Delhi, Feb. 2: 
The government is getting ready to bite the bullet with highly controversial labour reforms, testing water with a hire-and-fire policy to be introduced in the country’s four special economic zones (SEZs).

The government is preparing to frame legislation that will enable investors in the SEZs to sack surplus staff at short notice. The pink-slip provision will cover both contract labour and those with regular jobs.

The move is designed to attract foreign investment in the SEZs — duty free enclaves that are “deemed to be foreign territory for the purpose of trade operations and duties and tariffs”.

Besides the four existing SEZs at Santa Cruz (Maharashtra), Kochi (Kerala), and Kandla and Surat (Gujarat), the government has permitted the formation of 11 other private EPZs, including Kulpi in West Bengal, Gopalpur in Orissa, and Positra in Gujarat.

“The country needs overseas investment. We require appropriate labour laws in order to attract foreign investors. The laws will lay down rules relating to the facilities to be provided to employees. But at the same time, the employers should be assured that during a recession they will be able to fire unwanted staff. The laws will only be made applicable to the SEZs, at least for now,” H.A.C. Prasad, economic advisor to the commerce minister, said.

The concept of SEZs was introduced in the Exim Policy 2000 with the objective of providing an internationally competitive and hassle-free environment for export production. It was laced with several sweeteners like a corporate tax holiday till 2010, 100 per cent foreign investment in the manufacturing sector (except for very few items covered by the system of automatic approvals), waiver of industrial licensing for items reserved for the small-scale sector in the domestic tariff area (DTA) and duty free imports/domestic procurement of raw material, intermediate and capital goods.

The medium-term export strategy, presented by Union commerce minister Murasoli Maran on Wednesday, will serve as a basis for the exim policy and the forthcoming Union budget. The main focus will be rationalising taxes in order to maximise exports. The ministry has set a 12 per cent export growth target for the year 2002-03.

“Customs duty at the lowest slab should be levied on imports meant for export production. The eight-digit nomenclature under the harmonised system of tariff classification will help the government identify different goods. For instance, coal imported for domestic use can bear a higher duty while coal used for production of cement can remain duty free. We are suggesting that imports meant for hardware exports be brought down to the 0-5 per cent slab,” Prasad said.

“Most automobile manufacturers who have come to India have introduced export clauses in their documents specifying the countries and areas they are interested in. This is WTO incompatible now. Although we have not formulated any approach to this problem, it will be taken up shortly,” he added.

Prasad observed that most export schemes have to be reworked because the customs duties are abnormally high.

“If they are rationalised, then most of these schemes will lose their importance.”

He added this would not lead to a fall in overall revenues as the volumes will increase manifold. “The lowering of duties across more tariff lines will give us a strong bargaining chip in the WTO negotiations,” he said.

The fall in the real effective exchange rate automatically acts as a boost to exports as they become cheaper. “Imports also become costly. So we can cut the duty by that amount and make them cheaper while the effective duty remains same. This will protect the domestic industry while, at the same time, the foreign exporters will not see it as a barrier. As the rupee rate cannot be changed arbitrarily, we are seeking guidance from the Reserve Bank and the finance ministry,” he said.


Feb. 2: 
The initial public offer (IPO) of Bharti Tele-Ventures which closed today, was oversubscribed by two-and-half times, attracting bids for 468.09 million shares at the floor price of Rs 45. The telecom company has put 185.3 million shares on offer with a 10 per cent greenshoe option.

What was more heartening for the lead managers of the issue was that at the strike price of Rs 47, it attracted bids for 250.19 million shares, indicating that if the issue managers and the company wish, they can set the cut-off price at Rs 47.

The two book-running lead managers to the Bharti IPO were J M Morgan Stanley and DSP Merrill Lynch.

Bharti Tele-Ventures’ offer of 185.3 million shares through the 100 per cent book building route, represented a 10 per cent stake of the company. A minimum of 60 per cent of this offer had to be subscribed by qualified institutional buyers (QIBs).

“The issue has been oversubscribed three times. Till evening, the indicative price had crossed Rs 47 per share. The offers are still being counted and we hope to improve on that price,” company sources said.

Bharti executives were bullish about the issue and feel the IPO will set a benchmark for other telecom IPOs scheduled later this year. “We had more than twice examined each word of our IPO before we went to the market.”

Officials also reiterated that the aim behind going public was to build an image and not just to raise the money. “We have enough resources to meet our current commitments and the capital issue will certainly help for our future projects.”

An official announcement on the cut-off price and whether the company intends to retain a part of the over-subscription will be made on Sunday.

The price was seen as attractive for institutional investors who may bite the bait, but retail investors may need more persuasion in view of the long-term nature of the investment.

At Rs 45 per share, Bharti would raise a minimum of Rs 834 crore, to be used to bankroll expansion of its cellphone and fixed-line services, and start domestic long-distance and international phone services.

Analysts expect a cut-off price below Rs 47. It is also believed that the company would prefer to accommodate as many retail investors and therefore might pare the cut-off price.

For primary market observers, what is more interesting would be the response of the retail segment to the IPO. It will indicate whether the issue has breathed life into the dormant domestic primary market.

Bharti Tele-Ventures, the holding company for most of the Bharti Group’s telecom service operations, is the country’s largest cellphone service provider.

The floor price set last week was certainly below the Rs 52 per share paid by a clutch of private equity investors in May last year.

Bharti raised $ 481 million then through a private placement of shares to Singapore Telecom, private equity fund E.M. Warburg Pincus, International Finance Corp and New York Life Insurance Co.


New Delhi, Feb. 2: 
Labour reforms need to be introduced as it has become imperative to pare high wage bills and downsize establishments while inducting new technologies, Union minister for law, justice and company affairs Arun Jaitley said here today.

Jaitley, who was addressing the 52nd annual function of the Institute of Chartered Accountants (ICAI) here, said reforms and privatisation were necessary to jump-start growth in the torpid industrial sector which has been buffeted by the worldwide recession and a slowdown.

He said the privatisation in the telecom sector had already started paying dividends in the form of better services and lower tariffs. This should now be extended to other sectors like power. Reforms in this sector needs to be streamlined where a metering drive needs to be aggressively introduced to stop the revenue leaks that have proved to be the bane for the sector.

“If the consumer does not pay the country, then it suffers because ultimately it is either paid by the exchequer or the industry itself,” Jaitley said.

He said more than Rs 45,000 crore has been spent on the national security excluding the military spending.


Lucknow, Feb. 2: 
The Sahara group plans to launch 37 regional channels and English, Hindi and Urdu weeklies.

The group also plans to beef up its airline by inducting a dozen jet aircraft and start a new Rs 900 crore tourism project covering some 36,000 square kilometres of water area in the Sunderbans.

Sahara chief Subroto Roy said marine parks, water sports facilities and beaches would be developed in the area and floatels—both luxury and budget floating hotels—set up.

“This entire project would cost about Rs 900 crore,” he said.

The Sunderban project, which has already been given environment and other clearances by the West Bengal government, will be marketed by the Sahara group globally through tieups with various airlines and tourism companies.

Roy said the 37-city channel will be set up covering Uttar Pradesh, Madhya Pradesh, Chattisgarh, Rajasthan, Bihar, Delhi and Mumbai. While these channels will also be linked to Sahara’s national news setup, they will focus on local news, events, talents and festivals.

He has plans to launch a weekly broadsheet Hindi magazine Sahara Samay and an English one named Sahara Time. The Hindi magazine will be simultaneously published from 32 towns, including Delhi, Lucknow, Varanasi, Agra, Bhopal, Gwalior, Jaipur, Udaipur, Patna, Ranchi, Bhagalpur, Jamshedpur and Mumbai.

Sahara also planned to expand its Urdu daily—Urdu Rozana—by bringing out five new editions.

The Sahara group chairman, who was speaking on the occasion of his group’s twenty-fifth anniversary, said he wanted to augment the Sahara Airlines fleet by a dozen jets from the current strength of nine Boeing aircraft. The 12 aircraft, which are to be inducted within this year. will be a mix of Boeing 737s and smaller 50-seater jets. “We have already brought in some three of these 737s, the rest will follow,” Roy said, adding that this move should give the airline a 20 per cent market share.

He also said Sahara planned an e-commerce venture selling financial services, consumer products, gold and silver accumulation plans, e-education, money transfer, video conferencing, debit cards and internet services. This service would would have some 1635 branches in the first place. In the second phase, it will quadruple itself into a 6,000 branch network, making it the fourth largest in the world and the largest in Asia.

Sahara also plans to set up housing development projects in 50-60 cities at a cost of Rs 6,000 crore on some 2000 acres. These projects will set up 1.5 lakh houses.


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