ED gathers ammo to reload Fera gun against ITC
SBI offers cheap money
Naik takes up cudgels for IOC
Railways to end 2-year dividend drought
FIs consider rate relief on steel loans
SCI bidders scout for foreign ally
Gail in pact with HPCL for Andhra venture
Govt to extend Rs 70cr lifeline to NTC units
Net trading in Bangalore
Foreign Exchange, Bullion, Stock Indices

 
 
ED GATHERS AMMO TO RELOAD FERA GUN AGAINST ITC 
 
 
BY SUTANUKA GHOSAL & ANIEK PAUL
 
Calcutta, Feb. 19: 
The smoking gun just won’t go away. The Enforcement Directorate (ED) is scrambling to line up ITC Ltd and a gallery of officials, both past and present, to face formal charges for Fera violations that date back over a decade and run up to over Rs 700 crore.

The directorate is racing against time to initiate prosecution proceedings against ITC and its officials. The reason: the guillotine will fall on May 31 after which no cases can be registered under the stringent and now-defunct Foreign Exchange Regulation Act (Fera) which has been replaced by the milder Foreign Exchange Management Act (Fema).

Fera was replaced by Fema last June. However, the directorate can continue to file cases till May 31 this year against companies for Fera violations that occurred before June 2001 under a ‘sunset clause’.

Fera allows the authorities to file a criminal suit against the company and its officials for violations. This will no longer be possible under Fema which treats all violations as civil suits.

“We have gathered enough evidence to initiate prosecution against ITC and its officials for wilful loss of foreign exchange and procedural lapses in dealings with companies abroad,” said K.N. Singh, deputy director of the Enforcement Directorate.

When contacted, an ITC spokesperson refused to comment on the matter. Sources in the company, however, said that material loss of foreign exchange is in no way comparable with the Rs 700-crore figure claimed by ED.

Prominent ITC officials who could be arraigned include G.K.P. Reddy, former director incharge of ITC international business division (IBD), R.K. Kutty, former director in charge of IBD, M.B. Rao, former export manager, and R.B. Ravindranathan, former vice-president. It is not known if charges will be pressed against former chairmen K.L. Chugh and J.N. Sapru and current chairman Yogi Deveshwar, all of whom were interrogated by the ED in the mid-nineties when the directorate unravelled a skein of violations that dated back several years.

Matters had reached a head in 1996 when Chugh and other were rounded up in a Black Maria in the dead of night to be questioned by ED officials. Similar action is being contemplated against Shaw Wallace & Company for violation of Fera provisions. The amount involved in Shaw Wallace’s disputed deals is small—around Rs 32 crore, Sinha said, adding that “prosecution will be initiated by March 15.”

“We have received instructions from our headquarters in Delhi to dispose of all pending cases latest by March 31 this year,” Sinha said.

The Enforcement Directorate had alleged that ITC’s International Business Division had violated Fera norms in its dealings with EST — a company owned by the Chitalias, based in the US. The ED issued a number of show-cause notices and had arrested top officials of the company in October-November 1996.

In 1996, the ED hauled up ITC and its officials for controversial deals with Suresh and Devang Chitalia. It had alleged that ITC had acquired $4 million abroad and transferred it to the Chitalias among others, without prior approval from the Reserve Bank of India.

Further, ITC’s International Business Division was alleged to have bought back rice exported by it to Sri Lanka from Vaam Impex—an associate of EST. The ED also claimed to have unearthed irregularities in invoicing, and alleged that ITC officials had committed these offences for personal gains.

Last year, the ED alleged that ITC had violated provisions of Fera by offering to pay up to $ 26 million to settle the dues of ITC Global, Singapore. ITC had said that it would seek all necessary approvals of the RBI or any other authority before paying the amount.

   

 
 
SBI OFFERS CHEAP MONEY 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 19: 
With the industry in a funk and few takers for its pile of idle cash, State Bank of India (SBI) has swivelled focus on personal loans through a flurry of rate cuts aimed at snaring customers from rivals.

The reductions, as high as 225-300 basis points in certain segments, are effective from February 1. They signal the fact that the bank is betting on personal loans to beat the blues, and using it as a strategy to minimise the risk of loans to companies souring in the slump.

Money can be borrowed against almost everything, from home mortgages, Indira Vikas Patras and LIC policies— relatively risk-free assets that serve as good hedges against NPAs. As the trend-setter in interest rates, SBI is ready to charge 11.5 per cent for floating rate and 12-12.5 per cent for fixed-rate loans — one of the lowest in the market.

In an effort to lure borrowers who are forking out more to competitors, the bank has launched its short-term housing loan scheme for those who would be able to repay in a shorter period of up to five years.

The interest on the floating rate variety of this loan is 11.5 per cent, while it is 11.25 per cent if the rate has been fixed. The EMIs at Rs 2,174 and Rs 2,187 per lakh for five-year floating and fixed-rate loans are the lowest in the market from the bank, which charges interest on a daily/monthly reducing balance method.

SBI has stormed the car finance business as well, having scaled down the interest rate to 13 per cent from 14 per cent, besides doing away with processing fee. Loans against RBI Relief Bonds will be available at 12 per cent, while funds against shares & bonds can be borrowed at 14.5 per cent. The rate was 15 per cent earlier.

Interest on personal loans has been reduced by a whopping 150 basis points from 16 per cent per annum to 14.5 per cent annum. Money borrowed to purchase two-wheelers, for instance, will be 1 percentage point cheaper at 13 per cent — the rate charged in the case of car finance.

The reduction is steepest on term loans against mortgage of property: 200 basis points, from 16 per cent to 14 per cent per annum. Senior citizens have been offered a hefty cut of 225 basis points. Interest on loans to pensioners will be 14 per cent, down from 16.25 per cent.

Demand loans sanctioned against the security of NSCs and Kisan Vikas Patras will be cheaper by 300 basis points at 12 per cent per annum. Funds against Indira Vikas Patras will be lent at 13 per cent, down from 15 per cent.

Loans against the security of “surrender value of LIC policy” can be taken at 13 per cent compared with 15 per cent. If life insurance policies of SBI Life are pledged, the rate will drop even further, to 12.5 per cent per annum. The bank will charge 14 per cent on funds lent against the security of gold ornaments, down from 15 per cent.

   

 
 
NAIK TAKES UP CUDGELS FOR IOC 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb. 19: 
The government is under pressure to reverse its earlier decision barring Indian Oil Corporation (IOC) from bidding for state-run oil majors like Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL).

Union minister for petroleum and natural gas Ram Naik is lobbying the government to lift the bar on IOC which was announced on the day the petroleum major emerged as the winner in the race to acquire the government’s 33.58 per cent stake in IBP Ltd. “The proposal will be sent to the Cabinet,” Naik told reporters here today.

The decision to bar IOC from bidding for the two other state-run petroleum companies, which have fairly extensive petrol and diesel retailing pumps across the country, was taken to prevent the creation of a monopoly in the retail segment.

The decision, which was taken by the Cabinet Committee on Disinvestment, has not gone down with many in the government who feel the public sector giant is being denied a level playing field.

New-look IBP board

The IBP board has been reconstituted with Arun Jyoti, IOC’s executive director for the western region, taking over as IBP’s managing director.

IOC can appoint 10 full-time directors out of which it has appointed three at the moment. While IOC chairman M.A. Pathan has been made the part-time/non-functional chairman, A.K Sinha (finance) and R.S Guha (marketing) director, who was earlier petroleum director of IBP, have been retained on the board.

It is also learnt that the existing IBP chairman S.N Mathur declined to stay on as managing director.

At a function where IOC handed over a cheque of Rs 1153.68 crore for its acquisition of IBP, Naik said, “It is one of the first major and successful selloffs in the petroleum ministry.”

   

 
 
RAILWAYS TO END 2-YEAR DIVIDEND DROUGHT 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, Feb. 19: 
The railway ministry is likely to pay a dividend this year after a two-year hiatus.

Union minister for railways Nitish Kumar today hinted that the dividend would not be deferred as it has been in the past two years.

“I am not for deferment (of dividend),” Kumar said. “I was not responsible for the deferment over the past two years (former railway minister Mamata Banerjee had decided to defer dividend payments). But there will be a good news in this regard.”

The outstanding dividends that is payable by the railways to the government exchequer amounts to Rs 2500 crore.

“If the Government of India is making some investment in the railways, it should get back something in return. We do have social responsibilities but we also run the railways as a commercial organisation and it is a strategic sector. We have tried to retrieve the financial situation of the railways,” Kumar told reporters during an informal meeting today.

Kumar said there were problems in crafting the railway budget for 2002-03. Over the past few years, the railways has mobilised funds with great difficulty for various projects and the problem had been aggravated in absence of adequate budgetary support.

The budgetary support of Rs 3,540 crore in 2001-2002 was not sufficient to meet a whopping Rs 38,000 crore funding for various projects.

Kumar said he would like to give thrust to safety efforts to put on track the projects being launched in the first year of the Tenth Plan.

However, he ruled out any new project without requisite clearance from Preliminary Reconnaissance Engineering and Traffic (PRET) committee.

The Cabinet has already taken a decision that no new projects would be taken up without a requisite clearance from PRET. This committee is also examining the project worth Rs 1.25 crore for privatisation of the 10 new lines which will be offered to private companies.

Earlier, the railway ministry and the state government of Jharkhand signed a memorandum of understanding for time-bound development of railway projects in the state.

Jharkhand chief minister Babu Lal Marandi today also gave Rs 40 crore to the railways as an advance payment for building railway overbridges in the state.

The MoU provides for a financial co-operation from the state government to implement rail projects in Jharkhand, covering six rail projects at an estimated cost of Rs 2000 crore.

The state government will bear two-thirds of the final completion cost whereas the railway ministry will meet one third of the cost.

The project will cover Ranchi-Hazaribagh Koderma new line, Ranchi-Lohardagha gauge conversion with extension to Tori, Koderma Girdih new line, Deoghar-Dumka new line, Dumka-Rampurhat new line and Koderma-Tilaiya new line. The projects are scheduled to be completed over a five-year period.

   

 
 
FIS CONSIDER RATE RELIEF ON STEEL LOANS 
 
 
FROM VIVEK NAIR
 
Mumbai, Feb. 19: 
Financial institutions (FIs) led by Industrial Development Bank of India (IDBI) are looking at the possibility of giving relief to slump-scarred steel companies by way of lower interest rates and more time for repayment of loans disbursed to them.

The possible relaxation is intended to help ease the burden of these firms, which have been struggling to stay afloat amid poor demand and fierce competition.

Senior FI officials confirmed they were chewing on the idea, but insisted that a final decision on the issue would have to wait till the budget, perhaps the end of the current financial year.

According to sources, the bulk of the loans that could qualify for concessions were extended in the 90s at fixed rates of 18-19 per cent for a period of eight years.

Much has changed since. The steel industry has had its back to the wall, and interest rates have plunged. This has led to the thinking that companies saddled with the high-cost borrowings should be provided relief through lower interest rates and more time to repay loans.

“The funds were disbursed at high rates. With interest rates coming down and the industry passing through a bad phase, we are looking at how we can restructure the loans,” the IDBI official told The Telegraph.

According to sources within the financial institution, the lenders are even willing to suffer some losses that may arise because of a cut in interest rates in the initial phases, provided the money lost is recovered when the companies start turning the corner. They however, did not disclose how sharp the reductions would be, or the extra time that could be granted for repayment.

Steel firms have been looking for a longer period of repayment of 12 years, and reduction in interest rates closer to the current prime lending rate (around 12.5 per cent).

The industry has suggested that the financial institutions adopt a “ballooning interest rate structure”, formulated on the basis of the industry’s demand-supply equation.

“The immediate problem relates to demand and supply. We feel that the mismatch will continue for three years. There should be a flexible interest rate structure in the light of such a condition,” sources said.

Steel companies have proposed that institutions charge them 12.5 per cent.

Due to the difficult conditions seen over three years, they have suggested that FIs lend at 5 per cent for three years, following which they could set higher interest rates of even 14 per cent to compensate for the lower rates levied earlier.

“By doing so, institutions will not only help us withstand the current crisis, but also effectively get 12.5 per cent over time,” a senior official of a steel company said.

Steel prices are hovering around Rs 12,000 per tonne against the Rs 14,500 at this time in the previous year. This, combined with the high interest outgo, estimated at Rs 500-600 crore in some cases, has hurt earnings.

   

 
 
SCI BIDDERS SCOUT FOR FOREIGN ALLY 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, Feb. 19: 
Domestic shipping majors Great Eastern Shipping Co and Essar Shipping are scouting for foreign partners to acquire a controlling stake in the government-owned Shipping Corporation of India (SCI).

The government, which has an 80 per cent stake in SCI, has decided to off-load 51 per cent, for which it has already obtained expressions of interest (EoIs) from six companies.

Sources said GE Shipping is in talks with Teekay Shipping of Canada and Malaysian International Shipping Corp, to form a consortium.

A GE Shipping spokesman, while refusing to elaborate on the probable foreign partners the company may rope in, confirmed it is getting ready to make a final bid through a consortium. “Although we have submitted an LoI independently, we are exploring options to rope in a strategic partner and make the final bid through a consortium,” he said.

Essar Shipping too confirmed that the company is considering “all opportunities” to submit the final bid through a consortium.

“No formal discussion has been started so far, but we have kept our options open to form a consortium for the final bid,” an Essar spokesman said.

Foreign shipping lines, according to the norms, cannot acquire more than 25 per cent in SCI. Hence, for effective control, they have to enter into collaboration with a domestic company. The format of the EoI provides the flexibility to add or delete consortium partners at a later stage of the disinvestment process. Sources said both Essar and GE Shipping will ultimately go for a 26 per cent stake in the company while their respective partners will acquire the rest, subject to the bid price.

All bidders, including GE and Essar, are now waiting for the government’s nod to study details of SCI’s asset base as well as its clientele and business profile. Monday was the deadline for potential bidders to submit their EoIs and the government plans to complete the disinvestment process by June.

The EoIs will be evaluated by SBI Capital Markets-Lazard, sources said.

The government has appointed Luthura & Luthura as legal advisors for the sale of a 51 per cent stake in the profit-making SCI.

The government will bring down its stake in SCI from 80 per cent to 26 per cent while offering 51 per cent to a strategic partner, with the remaining 3 per cent going to employees.

   

 
 
GAIL IN PACT WITH HPCL FOR ANDHRA VENTURE 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
Hyderabad, Feb. 19: 
The Gas Authority of India Ltd (Gail) today entered into an agreement with Hindustan Petroleum Corporation (HPCL) to set up a Rs 700-1000 crore joint venture. The proposed venture will distribute natural and piped gas in Andhra Pradesh.

According to the memorandum of understanding signed today, the two public sector undertakings would hold 22.5 per cent each in the proposed joint venture while 5 per cent would be offered to the state government. The balance equity would be offered to financial institutions and public.

The company would distribute natural gas for use in residential, commercial and auto sectors in the state.

It would lay down pipelines and develop the necessary infrastructure.While Gail would lend its technical expertise to establish the distribution system, HPCL would assist in working out a strategy for distributing liquefied petroleum gas (LPG).

The project is expected to involve an investment of Rs 700-1000 crore in the next seven to eight years.

Speaking on the occasion, Gail chairman Proshanto Banerjee said “Agreement marks a further extension of co-operation between the two companies.”

Gail is already transporting 3 lakh tonnes of LPG per annum for HPCL through Jamnagar-Loni pipeline and is also building a 600-km pipeline from Vizag to Secunderabad for the same.

   

 
 
GOVT TO EXTEND RS 70CR LIFELINE TO NTC UNITS 
 
 
BY A STAFF REPORTER
 
Calcutta, Feb. 19: 
The Centre is expected to shell out a Rs 70-crore budgetary support to revive six National Textile Corporation mills in the eastern region in the current fiscal, that is by March 31.

The total package for the revival of the six mills in the region works out to around Rs 251 crore.

In a way, the government will have to shoulder a considerably lighter burden for the revival of the six mills, as NTC is expected to chip in nearly Rs 190 crore by selling land and other assets, including plant and machinery of nine mills, six of which are in Bengal.

The Board for Industrial and Financial Reconstruction (BIFR) has approved the rehabilitation package for 11 NTC-owned units.

The revival package will cover six mills of NTC’s eastern subsidiary, two each from Uttar Pradesh and Madhya Pradesh, and one from Gujarat. Of the six mills to be revived in the eastern region, three are located in Bengal and one each in Orissa, Assam and Bihar.

The Bengal-based mills on the modernisation list are Arati Cotton Mills at Dasnagar, Howrah, Sodepur Cotton Mills and Laxmi Narayan Cotton Mills, Rishra.

Other mills to be revived in the eastern region include Orissa Cotton in Cuttak, Bihar Cooperative Weavers Mill in Mokamah and Associated Industries in Assam. All these mills make various grades of cotton yarn with a total spindle capacity of 1.7 lakh.

Giving the break-up for the package, chairman and managing director of NTC’s eastern regional subsidiary, B. Mahapatra, said the golden handshake scheme would cost Rs 81 crore, Rs 24 crore will have to be paid to banks and financial institutions, statutory dues to the provident fund and other government organisations are at Rs 35 crore, Rs 16 crore will have to be paid to suppliers and other creditors, and modernisation of machinery will cost Rs 27 crore.

According to Mahapatra, a major portion of budgetary support from the Centre will be spent as wages and working capital for the next two years. he said three mills in Bengal—Bengal Laxmi Cotton, Rampuria Textile and Bengal Fine (unit 1)—which are currently functioning as jobbing units for private trade, would maintain their status quo.

   

 
 
NET TRADING IN BANGALORE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Feb. 19: 
DotEx International, a subsidiary of the National Stock Exchange (NSE), has signed up with BgSE Financials Ltd, a subsidiary of Bangalore Stock Exchange (BgSE), to provide internet trading facility to over 100 BgSE members.

Internet trading by BgSE members will be launched tomorrow.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.64	HK $1	Rs.  6.15*
UK £1	Rs. 69.23	SW Fr 1	Rs. 28.20*
Euro	Rs. 42.20	Sing $1	Rs. 26.25*
Yen 100	Rs. 36.38	Aus $1	Rs. 24.85*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5020	Gold Std (10 gm)  NA
Gold 22 carat	Rs. 4740	Gold 22 carat	 NA
Silver bar (Kg)	Rs. 7725	Silver (Kg)	 NA
Silver portion	Rs. 7825	Silver portion	 NA

Stock Indices

Sensex		3597.61		-36.32
BSE-100		1740.86		-20.96
S&P CNX Nifty	1158.90		-13.95
Calcutta	 123.37		- 0.60
Skindia GDR	 563.40		+10.90
   
 

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