Foreign banks on tenterhooks
Kant balm for labour
Glugfest to toast duty cut move
Revised drug price list soon

Mumbai, March 10: 
In his budget speech this year, finance minister Yashwant Sinha had announced that foreign banks, which were operating in the country as fully-owned branches, would now be allowed to set up subsidiaries.

The foreign banks operating here initially welcomed Sinha’s announcement. But after reading between the lines they have now become circumspect.

Said Sinha in his budget speech: “As recommended by the Committee on Banking Sector Reforms, it has now been decided to give an option to foreign banks to either operate as branches of their parent banks or to set up subsidiaries. A foreign bank will have to choose only one of the two options. Such subsidiaries will have to adhere to all banking regulations, including priority sector lending norms, applicable to other domestic banks.”

The relaxation has thrown up numerous questions that include the issue of opening branches in rural areas, compensation to senior management personnel and rate of taxation that would be applicable to such subsidiaries.

Though the answers to these questions are likely to be known only after the passage of the Finance Bill in Parliament, foreign banks, which initially reacted positively to Sinha’s proposal, feel that it will take quite sometime before they can take a decision on setting up subsidiaries.

Said Ramesh Sobti, executive vice-president and country representative of ABN Amro Bank: “The measures are welcome. For the first time, foreign banks have been given a choice to function as a branch or as a subsidiary in India. We can take a view only after weighing the pros and cons. We are waiting for the fine print on the same.”

According to sources, the foremost thought in the mind of foreign bankers is the issue of priority sector lending. The extant regulations lay down that foreign banks are required to set aside 32 per cent of their disposable funds for priority sector lending. This includes disbursements to small-scale industries and financing exports. For public sector banks, the priority sector lending level is pegged at 40 per cent.

“The main question is whether a foreign bank which opts for a subsidiary route would have to adhere to a 40 per cent priority sector norm and whether this would include agricultural credit and setting up of rural branches,” a banker said.

For foreign banks, which are comfortable in their existing business of corporate and retail banking — catering to high net worth individuals, the idea of setting up rural branches may act as a damper

“Such banks would not be open to the idea of setting up rural branches or venturing into agricultural credit in a significant manner,” sources said.

According to the present regulations, foreign banks have to take a licence from the Reserve Bank of India (RBI) to set up a branch.

If foreign banks take this inorganic route to enhance their presence in the country, around 25 branches could be set up. Moreover, the recent RBI relaxation, permitting up to 49 per cent foreign direct investment (FDI) in private sector banks, is likely to provide the necessary impetus to foreign bank’s to grow inorganically.

Senior officials of foreign banks, who refused to be named, said it would make more sense for them to go for local acquisitions and expand branch network than set up subsidiaries.


Calcutta, March 10: 
Even as the government blazes ahead with its controversial labour reforms, that include giving a freehand to entrepreneurs on lay-offs, Vice-President Krishan Kant today said industry, in its rush for making profits, should not sacrifice workers’ interests.

Speaking at the centenary celebrations of the Merchants’ Chamber of Commerce, Kant said, “If corporate culture and democracy are to achieve their goals of creating wealth and providing the means by which wealth can be shared equitably, a new philosophy should guide management-labour relations. Creative approaches to employment generation, compensation, job security and upward mobility of workers must be implemented.”

“It should be remembered that employees’ loyalty to the company is often a function of job security. Frequent lay-offs, restructuring and downsizing dent that sense of loyalty.” His remarks, which send ripples among the industrialists present, are significant, as they come at a time when the Centre is trying to empower industry to close down units with a workforce below 1,000 without prior permission.

Upholding the cause of labour, the Vice-President said restoring the health of sick industry by reducing employee costs through lay-offs is not economic justice. “But at the same time, managerial and proprietary remunerations are being raised several hundred-fold. In fact, the natural tendency is towards strengthening the managerial stronghold by creating oligopolies striving to become monopolies. It has produced a huge and morally indefensible transfer of wealth to the executives and stockholders, who supply capital,” he said.

He added that in this era of globalisation, the long-term profitability of a company or business organisation will depend on “people” —those comprising the larger society, their health, their economic well-being and their intellectual and moral progress. Further, pointing towards state chief minister Buddhadeb Bhattacharjee, the Vice-President said the state must encourage industry to maintain a stable work-force with improved job-security, provide adequate employee health insurance, retirement, childcare for working mothers and so on.

Continuing in a similar vein, West Bengal Governor Viren J. Shah said development is best engineered when the government, industry and society, work and contribute together to identify the challenges in the emerging scenario and find solutions to effectively meet those challenges. The Governor added the negative perceptions about the state were misplaced. “Our state has made remarkable progress in agriculture and allied sectors. Besides, there is immense potential in IT, bio-tech, agro-processing and other areas.”

Using the occasion to present a report card on industrialisation in the state, chief minister Buddhadeb Bhattacharjee said average investment during 1999-2001 stood at Rs 1,700 crore, excluding that in the Haldia Petrochemicals and Mitsubishi Chemicals projects. The tourism sector had attracted Rs 1,600 crore.


New Delhi, March 10: 
The reduction in customs duty for liquor has uncorked the plans of foreign liquor companies, who want to take this advantage and bring in more of the imported spirit in the country.

Moreover, those who were selling so far through the duty free shops and hotels, see it as a signal to go retail. And yes, the imported stuff is to cost less by a range of about 12-18 per cent, for some of the booze.

Cutty Sark International, which brings in about 5000 cases of Cutty Sark scotch to sell in duty free shops and premium outlets, wants to import 25,000 cases of Cutty Sark in the next 18 months to sell in the retail outlets, in states for which the government permits sell of Bottled in Origin (BIO) products.

Allied Domecq CEO, Srikant Illuri said the customs duty cut will lead the company to bring in International brands from its portfolio in the Indian retail segment. It intends to bring in brands like Ballantine’s scotch whisky, Mumm champagne, Courvoisier cognac, Sauza (tequila) and Harvey’s Bristol cream (sherry).

At present, Allied Domecq sell these brands in the duty free sector and ITDC hotels only. Illuri said, it is difficult to estimate volumes to be imported. “Though basic customs duties have come down, but counter-veiling duty (CVD) still remains and the end pricing to consumers will continue to be high for imported products,” he said. Total import duty, he said, has come down from 465 to 365 per cent. A Ballantine’s scotch still costs about Rs 1,700, he said. Compare this with Allied Domecq’s Bottled in India Scotch brand Teacher’s which is about Rs 500 less. Of course, people pay a premium for imported stuff, he adds.

In the budget, customs duty on imported liquors has been reduced from 210 per cent to 182 per cent, down by 28 per cent. The government has also rationalised the rates of CVD applicable to liquors and wines to 75 per cent for value up to $ 25 per case and 50 per cent for others. Earlier there were three slabs for CVD.

Allied Domecq wants to expand its retail presence but since only 15 of the states have BIO regulations, it cannot expand in states like, Delhi, Rajasthan, Haryana, West Bengal which still does not have BIO regulations in place, said Illuri.

Moet and Chandon, which entered India last year with its champagne and cognac brands, now intends to start importing wine too. Moet Hennesey India’s managing director Ashwin Deo said the plans are to expand to other states apart from Maharashtra and Karnataka where it is present, depending on state policies. Highland Distiller’s Limited, which is present in three states, with its scotch whisky the Famous grouse, wants to expand its retail presence to metro cities, all over India, subject to state policies.

Australian McPhersson and Galle Wines from California are also keen to get into the Indian market. Besides, existing players like United Distillers want to expand to more states in retail.

Price cuts benefits are also on the anvil for the consumers of imported liquor. There will be a 10-15 per cent price cut for the consumer, said Highland Distiller’s managing director, Dinesh Jain. A 750 ml bottle of Highland Distiller’s costs Rs 2,200 in Chandigarh. UDV’s Johny Walker Black Label, which costs Rs 4,189 for a 750 ml bottle, will cost Rs 3,378 after duty cut. For Johny Walker Red Label, also the price is coming down. However, a company spokesperson said the problem is that in grey market, a Black label is available for Rs 1,300.

In terms of price, Moet Hennessy said there will be a 12 per cent reduction to consumers for its champagne brands of Moet & Chandon and Dom Perignon and 18 per cent for its Hennessy Cognac (it costs Rs 2,250 now, will come down by about Rs 200). A Moet & Chandon Champagne that cost about Rs 3,330 for a 750 ml will come to about Rs 3,000 the company said.


New Delhi, March 10: 
The revised list of drugs to be brought under the Drug Price Control Order will be ready in three months, chairman of the National Pharmaceutical Pricing Authority (NPPA), B. S. Baswan said.

Last month, while approving the Pharmaceutical Policy 2002, the government stated it would halve the list of 67 drugs currently under price controls.

Baswan said the revised DPCO will have to be promulgated within four months from the approval to the Pharmaceutical Policy 2002, according to the time limit set by the government. The four-month period was decided keeping in view the long time taken to notify certain policy changes, he added.

The list of drugs to be sold at government-mandated prices will be winnowed (though some additions to the list are likely) on the basis of two criteria: mass consumption and market share of the drug. The Pharmaceutical Policy 2002 has spelt out that bulk drugs will be kept under price controls if the moving annual total value of any particular bulk drug is more than Rs 25 crore and the percentage share of any of the formulators is 50 per cent or more.


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