Pullout rush after payout gush
In pursuit of the culprit
Shackles off petrol, diesel marketing
Auto policy leaves car makers at crossroads
Ministerial differences stall fertiliser price policy
Novel financing plan for highway projects
Internet telephony caught in a jam
Always-on connection
Decks cleared to delink GIC from its arms
Foreign Exchange, Bullion, Stock Indices

Mumbai, March 8: 
Days after announcing huge tax-free interim dividends for their shareholders to beat the March 31 deadline following which the budget proposals take effect, red-faced companies were in “withdrawal mode,” blinking first in their stand-off with the Securities and Exchange Board of India (Sebi).

While the Reliance group set the trend on Thursday with its four group companies revoking interim dividend announcements, today it was the turn of the Tata group and the AV Birla group to follow suit.

Tata Power, Tata Tea, Tata Chemicals, Tata Infotech, Tata Elxsi, Tisco, Indian Hotels, Trent Ltd and Tata Honeywell were the Tata group companies to backtrack on their decision.

So did the Aditya Birla group flagships Hindalco and Grasim, which revoked their earlier decision of paying an interim dividend of Rs 12 per share and Rs 8 per share respectively.

HCL Infosystems, Kesoram Industries, Rolta and Mahindra & Mahindra also informed the BSE that their boards have decided against declaring interim dividends. In fact, the BSE notice board saw a rush of companies giving notice of either revocation of dividend payment or of board meetings convened to consider the interim payout. Among them were Ashok Leyland, Britannia, Marico, MRF, GE Shipping, Siemens and Wockhardt.

While Nicholas Piramal India Ltd announced it would seek its board’s permission to revoke the decision to pay an interim divided, CMC cancelled its board meeting which was to be held to declare a dividend.

With India Inc in pullout mode, the stock markets sulked. The BSE sensex closed 0.91 per cent lower at 3,656.77 points. Shares ended weaker on Friday led by heavyweights Hindustan Lever and Reliance Industries, but tech stocks recouped early losses on hopes that a US recovery will lead to more business for local software firms. Losers, however, overwhelmed gainers 654 to 629, and volumes rose to more than 89 million shares from Thursday’s 82.6 million.

In a major surprise, despite the fact that it had just about met the deadline of a mandatory one-month notice period for the record date, Hero Honda—one of the first to announce a dividend immediately after the budget—decided not to go ahead with the interim dividend.

So did arch rival Bajaj Auto, whose board in its meeting today revoked its earlier decision to pay interim dividend, in the larger interests of the company and its shareholders.

Interestingly, Hinduja TMT, a diversified company with interests in the media, telecommunications and financial sectors, today announced that it plans to pay a 50 per cent dividend for the 2001-02 year “subject to the stock exchanges accepting the record date of March 26, 2002.”


Mumbai, March 8: 
The spate of interim dividend announcements by companies and the sudden backtracking on the issue may have caught India Inc on the wrong foot, but the blame game has just begun. This was surely the first time that the big names of industry were compelled to eat humble pie, informing the stock markets that they were going back on their decision to pay interim dividends.

The question is, was it the finance ministry that was responsible for forcing the market regulator’s hand, or is India Inc itself responsible for the imbroglio, hitting upon the masterstroke of declaring interim dividends simply to avoid dividend tax, or was it the stock exchanges that caused the confusion.

Bajaj Auto Ltd, which had declared Rs 14 per share as interim dividend—inclusive of a special one-time dividend of Rs 2 per share—explained the reversal of its stand thus: “The board in its meeting held on March 8, has decided in the larger interests of the company and its shareholders to revoke the decision to pay interim dividend”.

Sebi, which acted firmly, informing the stock exchanges to strictly adhere to the notice periods stipulated in the listing agreement, has privately attributed its move to “national interests that override all interests”.

“When the market regulator decides there are no two ways about it,” said a BSE official. “We will have to follow their instructions in letter and spirit,” he added.

Market observers say it was the failure of the bourses to implement the norms in the listing agreement on the minimum notice period that led to the entire episode.


New Delhi, March 8: 
The government today opened up marketing rights for all transport fuels—motor spirits or petrol, air turbine or jet fuel and diesel—to the private sector.

In a statement in Parliament, petroleum minister Ram Naik announced that all companies, who have invested up to Rs 2,000 crore in the petroleum sector, could pick up the rights immediately, while those who planned to make the investments in future could start off from April 1 this year, when the administered pricing mechanism will be abolished.

This opens up the market for new players like Reliance, Essar Oil, Cairn Energy of UK, ONGC, GAIL and Mangalore Refineries Ltd.

In the case of companies planning to invest in the future such as Reliance, Essar and Cairn Energy, a bank guarantee of Rs 500 crore would have to be furnished to the oil market regulator. Investments promised would have to materialise within a 10-year time span, including a five-year time span given for financial closure of projects.

Officials said Reliance has already written to the Directorate General of Civil Aviation seeking permission to start selling jet fuel.

The Mumbai-based group has also asked the Airports Authority of India (AAI) to allot it land in 14 major airports.

Investors like Reliance or Cairn will have to pump in money to set up greenfield refineries, expansion of existing ones, exploration and production of hydrocarbons, including coal-bed methane and facilities like crude oil or gas pipelines, processing plants and terminals. Money invested in setting up retail outlets would not qualify for this floor investment limit.

Naik later told reporters that new petroleum marketers would have to meet obligations by way of servicing remote and uneconomic areas too. This was being done to keep the playing field level as state-run oil companies which currently enjoy a monopoly have been asked to continue with similar obligations.

The minister said the planned regulatory board would lay down the obligation terms, including the percentage of retail outlets which should be located in remote and uneconomic areas.

“The government/regulatory board shall have the power to cancel the marketing authorisation if the eligible company fails to set up retail outlets in remote and lower service areas as directed by the government or the regulatory board while issuing authorisation,” Naik said.

The minister said till the Bill, which is to be introduced in the current session, is cleared by Parliament, the government would function as the regulator.

The government has also stipulated that marketing licences would not be transferable and oil companies would not be allowed to encroach on each other’s existing retail networks.


New Delhi, March 8: 
The wraps are off the auto policy, but industry is still groping in the dark for specifics, especially on issues like tax breaks for small cars and utility vehicles.

While the government has declared that it intends to provide tax breaks for cars that are up to 3.8 metres in length, no one knows when those tax breaks will be announced.

The tax sops for small cars are expected to benefit Hyundai’s Santro, Daewoo’s Matiz, the Tata Indica, Maruti 800, Alto and Zen. And if carmakers pass on these benefits, buyers can expect some price cuts in the popular small car category.

While both Santro and Matiz measure 3.4 metres in length, Indica is 3.6 meters from nose to back. All three entry-level B-segment models in Maruti’s stable also feature in this category. The government feels that the move will bring down congestion on the roads.

This is not the first time that the government will be forking out excise benefits. Back in the early 1980s, it had singled out the Maruti 800 for special excise benefits, which helped the car establish its supremacy overnight in the Indian car market, hitherto dominated by the Ambassadors and Premier Padminis.

B.K. Chaturvedi, president and executive director of Hindustan Motors Limited said, “We were hoping for a constructive fuel policy in the auto policy, so that the future models can be developed on these lines, but we have turned out to be losers.”

The sports utility vehicles, multi-utility vehicles and all-terrain vehicles are also supposed to get tax benefits. Sources at Toyota Kirloskar said, “We are planning to introduce the Prado, which is an SUV. If these policies are announced on time, then we can set up production facilities here rather than importing it as completely built units (CBUs).”

Maruti faces a similar dilemma with its plans to introduce the Grand Vitara, an MUV. “We are not sure if the government will increase import duties and give fiscal sops to produce these vehicles here. We could start planning for the Vitara but the situation is unclear,” sources said.

The auto policy has failed to evoke a positive response from Mercedes Benz or BMW who are relying on CBU imports, who feel the government has given short shrift to large cars.

While industry has been cynical, the Society of Indian Automobile Manufacturers said, “It is a reference document for future policies and at least some directions are given in the policy.”


New Delhi, March 8: 
Differences between the fertiliser and finance ministries today stalled a new fertiliser pricing policy which was to be cleared by the Cabinet Committee on Economic Affairs (CCEA). It was instead referred to a Group of Ministers headed by Planning Commission deputy chairman K. C. Pant.

The Cabinet note on the new fertiliser pricing policy— the Seventh and Eighth Period Pricing Policy—had sought to change capacity norms for fertiliser firms with prospective effect and not retrospective effect, as earlier demanded by certain quarters, including the Central Board for Direct Taxes (CBDT). This, and input costing norms saw the two sides divided over the policy in a meeting that stretched for over two hours.

The CCEA cleared a scheme to help states start export infrastructure development activities. The commerce ministry will set aside Rs 49 crore for the schemes, which will be centrally-funded but implemented by the states.

The states will be allotted 40 per cent of the funds on the basis of their export performance and another 40 per cent on the basis of incremental exports. The remaining 20 per cent will be retained at the Central level. Several existing schemes such as critical infrastructure balance, export promotion zone, and others will merged into the new scheme. Ten per cent of the funds will be reserved for the north-eastern states and Sikkim.

Fertiliser and Chemicals Travancore Ltd was also extended a Rs 226.88 crore interest write-off and a moratorium on loan repayment till March 31 next year, in a bid to help out the ailing fertiliser unit.


New Delhi, March 8: 
The National Highway Authority of India (NHAI) today said it is talking to Infrastructure Development and Finance Corporation (IDFC), banks and financial institutions (FIs) to launch a mutual fund for funding highway projects.

“We have spoken to IDFC and a couple of banks and FIs to create a NHAI-sponsored mutual fund to finance highway projects,” said Hardeepak Singh, NHAI member (finance).

Stating that the proposed mutual fund would be outside the government, Singh said “What we are talking about is a guaranteed 12-15 per cent assured return on seed capital contributed by the financial institutions.”

These funds would be leveraged in a flexible manner to fund highway projects in the form of equity as well as debt, he said. However, he declined to give the size or the names of the banks.

NHAI chairman Deepak Dasgupta said the authority, which is implementing the Rs 58,000-crore National Highway Development Project (NHDP) connecting the four corners of the country with four to six lane highways, would raise Rs 6,200 crore through market borrowings next fiscal.

During the current year, NHAI has raised about Rs 1,300 crore through market borrowings out of the Rs 3,600 crore target, he said adding another Rs 2,100 crore is expected from annuity projects.

Minister of state for road transport and highways B.C. Khanduri said, “NHDP is a major initiative towards qualitative and quantitative enhancement of national highways involving about 13,150 km of roads at a cost of more than Rs 54,000 crore.”

After a review of the progress made by NHAI, Khanduri said the projects would be completed by December 2003 and some parts of it are likely to be completed this year.


New Delhi, March 8: 
The much-hyped opening up of internet telephony from April 1 and a policy for allowing operators to offer this service seems to have been put on the backburner.

Following the recommendations of the Telecom Regulatory Authority of India (Trai) on opening up of internet telephony in February, communications minister Pramod Mahajan had announced that the government will announce its plans within a week. However, Mahajan was not satisfied with the Trai suggestions and pasted the same on the website of the department of telecommunications (DoT) for public comments.

Mahajan’s deputy Tapan Sikdar on Tuesday said Trai is not clear whether phone-to-phone over the internet (using what in telecom parlance is called internet protocol telephony) can be allowed and hence the delay.

Speaking on the sidelines after inaugurating Direcway—a broadband services—here today, Shyamal Ghosh, DoT secretary, said: “Internet telephony is to be opened up on April 1. There is still some time and an announcement would be made soon.”

He said the government is examining the issue and is also holding consultations with Trai on this aspect and matters relating to carrier access code for national long distance service provider. A policy announcement would be made once that is completed.

Last month Trai had specified that the internet telephony service connections can be made in the following ways: i) PC to PC (both within country as well as abroad), (ii) PC to Phone (PC in India, Phone abroad) and (iii) IP-based H.323/ SIP terminals in India to similar terminals both in India and abroad (for the fixed line, cellular and national long distance service providers).

ILD licence

Communications ministry may give international long distance licence to Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd. When asked whether the government was inclined to reconsider its decision to not give ILD licence to the two public sector telecom firms if they apply again, Ghosh said “We will consider the proposal for valuation.”

Commenting on the issue of a sectoral cap for FIIs in addition to the existing cap of 49 per cent on foreign direct investment in telecom sector, he said, “The matter is being discussed with the finance ministry and a final decision would be taken by the Cabinet.” In his budget speech, finance minister Yashwant Sinha had announced that in a few sectors the portfolio investment would be kept out of the 49 per cent sectoral cap.    

New Delhi, March 8: 
Netizens will no longer have to pray while downloading a high performance software or high resolution picture of their favourite actress—Direcway will offer a peak download of 500 kilo bits per second, through its always-on internet connection.

Hughes Escorts Communications Ltd today launched Direcway, the first satellite-based broadband service. For the always-on connection, a subscriber will have to pay Rs 700 per month. The company claims that this will be a cheaper option for internet subscribers who pays Rs 2,600 for using telephone lines to get connected to internet on an average of three hours per day. It also claimed that the problem of congestion due to more number of subscribers has also been taken care of through a broadband manager.


New Delhi, March 8: 
The standing committee on finance today paved the way for further development of insurance sector with the clearance of legislations to delink General Insurance Corporation (GIC) from its subsidiaries and allow entry of brokers, co-operatives and alternate payment system.

The committee headed by N Janardhana Reddy which went into the amendments of General Insurance Business Nationalisation Act (Gibna) of 1972 and the Insurance (amendment) Act approved them without modifications.

The committee, which submitted two separate reports to Parliament, criticised the Centre for opening up the insurance sector to private players before amending Gibna.

It said that the government should have anticipated the need to amend Gibna well in advance.



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