Sinha sees ample scope for rate cut
Bank scrips surge
Navratnas may lose edge in purchases
Petroleum stocks set ablaze
Deadline to mend power distribution
Hero plans third plant to meet demand
Finance Bill to offer more sops to SEZs
Tax holiday likely
Peer review must for audit firms
Foreign Exchange, Bullion, Stock Indices

Mumbai, April 1: 
Finance minister Yashwant Sinha today said domestic interest rates were likely to ease further and that there was room for more reductions in key reserve requirements that include cash reserve ratio (CRR) and statutory liquidity ratio (SLR).

Speaking to reporters on the sidelines of the Banking Summit 2002 organised by the Confederation of Indian Industry (CII) here today, the minister pointed out that there could be an upswing in US interest rates. “US rates are at rock bottom and they can’t fall below this. But that is not the case in India,” he noted, adding that interest rates are likely to be soft in the current fiscal.

Sinha further said that he favoured consolidation of private sector banks, which must become stronger entities instead of “functioning on a regional or communal basis”.

“Mergers are bound to happen. I want strong banks (private) to emerge instead of them working on a regional and communal basis.” However, he later added the government was not looking for such consolidation among public sector banks at the moment, but “it was watching the situation”.

He said there was more room for easing statutory reserve requirements for banks in the long term.

While the Reserve Bank of India (RBI) has brought down the bank rate by 150 basis points since February 2001, to a three-decade-low of 6.5 per cent, there are expectations that it will lower the benchmark rate by another 50 basis points in the monetary and credit policy on April 29.

There are also expectations that the RBI will bring down the CRR from the present level of 5.5 per cent to keep in tune with its earlier objective of bringing it to around 3.5 per cent over the long term.

The finance minister was also optimistic about the performance of the economy. His enthusiasm was based on the recent third quarter figures that revealed the economy was growing by 6.3 per cent due to a strong showing by the agricultural sector.

“We can look forward to better days ahead,” he told delegates attending the summit, adding that the upswing in the agricultural sector will have a positive impact on the overall economy.

Commenting on the asset reconstruction company (ARC), Sinha said that the ARC will consolidate debt which is scattered, engage in innovative corporate finance such as merger or sale of brands or plants, inject new capital, convert a distressed company into a profitable one and even take steps for an IPO.


Mumbai, April 1: 
Bank scrips sizzled today, following statements by finance minister Yashwant Sinha that the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) should be brought down.

The comments were interpreted by the markets as a sign that the Reserve Bank of India (RBI) is likely to reduce the CRR in the forthcoming monetary and credit policy. Maintenance of relatively high levels of CRR (one of the highest in the world) and SLR, both of which according to estimates account for a third of deposits, is being seen as a factor hindering banks’ growth.

It was largely the nationalised bank counters that reacted to the news, with State Bank of India (SBI) spurting by more than 9 per cent to Rs 240.45 in intra-day trades. Opening at Rs 223.30, the counter, after hitting a high of Rs 240.45, closed at Rs 234.40, a rise of Rs 14.60 over its previous close.

Similar gains were also witnessed in other counters. Corporation Bank, for instance, was up by close to 8 per cent at intra-day levels. The counter, after opening at Rs 135.50, spurted to Rs 145.50, a rise of over 8 per cent, after which it finished at Rs 142.90.

Other nationalised banks that saw sharp upward movements included Bank of Baroda (BoB) and Bank of India (BoI).

Even shares of private sector banks participated in the rally. Among them, while Karur Vysya Bank shot up by more than 9 per cent to Rs 420 during intra-day levels, Jammu & Kashmir Bank soared by close to 6 per cent to finish at Rs 77.95 after it had opened at Rs 74.20.

The celebrations resonated on the debt markets as well. The benchmark 11.50 per cent 2011 bond rose to Rs 129.40 in late noon trades as against the previous close of Rs 128.90.


New Delhi, April 1: 
The Cabinet Committee on Economic Affairs (CCEA) is considering debarring navratnas from the price purchase preference treatment it gives to public sector companies in government and public sector purchases.

The proposal, which emanates from the ministry of industry, will imply that the next time a state-run company like NTPC buys power plant equipment, Bharat heavy Electricals (Bhel)—a navratna PSU—will be placed on equal footing with global giants like ABB and Siemens in the tendering process.

At present, like other PSUs, the navratnas enjoy a 10 per cent price preferential treatment. This means that the prices quoted by them are notionally discounted by 10 per cent when evaluating competing bids.

In fact, this issue flared up into a major row between the ministries of power and industry two years back, when Bhel bagged a contract to supply transformers for NTPC’s power projects at Kawas, Anta and Auriya ahead of other private sector bidders.

The new thinking, which has been opposed by several key ministries running navratna PSUs, may be debated by the CEA this week when the issue of continuing with the price preference policy comes up.

The logic for debarring navratna PSUs is that they are leaders in their field and do not require any kind of protection or assistance from the government. Many of the other PSUs are, however, sick and still require a quantum of support.

The price purchase policy itself has been strongly opposed by industry chambers who feel its continuation means the PSUs will enjoy a more than level playing field.


Mumbai, April 1: 
The final rites for the administered pricing mechanism (APM) over, petroleum companies turned new stock market darlings as investors bet on a profit surge for the gaggle of state-owned firms savouring their first taste of freedom.

Oil and Natural Gas Corporation (ONGC) led the pack of PSUs, its share price soaring 20 per cent to close at Rs 328. The oil exploration company was propelled by hopes that a volatile West Asia will drive up crude prices further — and, therefore, yield more revenues under an arrangement where the rate of its own output is tied to the price of oil in the global market.

The gains came on a day the BSE sensex ended at 3500.18, 30.83 points higher than the previous day’s (Thursday) close of 3469.35. The 30-share index opened firm at 3482.94 and later moved in a narrow range of 3519.32 to 3482.94.

Oil firms, many of them with strong financial muscle, lived through years of investor apathy, until the government decided to discard the decades-old APM. The end of the system — which essentially means oil firms will not have to sell diesel and petrol at prices set by the government — and the planned divestment in two refineries of HPCL and BPCL drove today’s rally.

Shares of Indian Oil Corporation, the country’s largest oil enterprise, vaulted 13 per cent at Rs 226.55, while Gas Authority of India shot up 9.8 per cent at Rs 83.70. Hindustan Petroleum jumped Rs 22.35 at Rs 312.95, BPCL Rs 8.70 at Rs 338.50, Chennai Petroleum Rs 6.15 at Rs 39.85 and Kochi Refinery Rs 5.05 at Rs 60.50.

The market believes giving companies the licence to charge their own prices — which will be tied to the cost of crude imports — will boost their profit margins considerably.

It is also hopeful that despite the highly polarised political climate, there will be some meeting ground between the ruling NDA coalition and the main Opposition on the issue of privatising public sector enterprises.

Mirroring the euphoria over PSU counters on bourses, the sectoral BSE-PSU index shot up 150.07 points, the second highest rise in a single session.

New Indian Oil chief

M. S. Ramachandran has taken over as the chairman of Indian Oil Corporation Ltd — the flagship national oil company. Before this, he used to be its director.

B. K. Chaturvedi has been appointed secretary in the ministry of petroleum and natural gas. “The Appointments Committee of the Cabinet has approved the appointment of Chaturvedi, a 1966 batch IAS officer,” an official release said. At present, he is secretary in the department of secondary and higher education.


New Delhi, April 1: 
State electricity boards have been directed to increase their focus on power distribution, with a heavy commercial orientation, in order to provide quality service at a reasonable price to consumers.

A high-powered committee under the chairmanship of Ashok Basu—who retired as power secretary on Sunday and has become the chairman of Central Electricity Regulatory Commission (CERC)—has set a target of two to three years for SEBs to achieve commercial viability in power distribution.

Recognising the critical importance of reforms in the electricity distribution sector, the power ministry had constituted a committee to study issues related to the distribution sector, including privatisation of distribution.

The committee, which submitted its report last week, has said that while important suggestions have been made in the past for improvements in the distribution sector, the implementation of those suggestions has been uneven across the country.

Since power distribution reforms are primarily the prerogative of the state, the committee has emphasised the need for states to delineate and crystallise the strategy to be followed for reforms in distribution.

Although the states are likely to take different views on the strategy for reforms, it has been suggested that the focus of the entire exercise should be to bring about commercial orientation within the sector and provide quality service at a reasonable price to all consumers.

“The success of this strategy would depend on the insulation of the sector from the dysfunctional compulsions of the political process, which, considering the past, would be a strong challenge. However, the bottom line would be that the sector must achieve commercial viability in two to three years,” says the report.

The committee has proposed a time-bound action plan for reforms in distribution. It has suggested improvement in efficiency of operations and increased accountability of the state utilities.


New Delhi, April 1: 
Hero Honda plans to set up a third plant to make the new two-wheeler models that it plans to introduce this year. The company, whose two existing plants in Haryana’s Gurgaon and Dharuhera can at best produce 8 lakh vehicles each to satisfy excess demand, sold a total of 14,25,302 motorcycles in 2001-02.

Chairman and managing director B. M. Munjal said, “We will be coming out with a city motorcycle within the 125cc range and a bike with a higher engine capacity. While the second motorcycle may generate huge excitement, but it will not be much value for money unless we have the roads for them.”

“We will start production of these two motorcycles at our existing plants, but we are already utilising our capacities to the brim. Hence, a third plant will be necessary.” Though Munjal did not disclose the total investment in the plant, official sources said it would entail an investment of Rs 250 crore.

“We have a lot to offer from the Honda stable once the demand really increases for these high-end motorcycles. But unless the golden quadrilateral (the highways project that will connect the four metros in the country), is completed, my belief is that these bikes will not be able to provide value for money. The hype for good motorcycles may be there, but we want to give our buyers the best. So we have consciously decided to stick to the city model,” Munjal said.

Auto sales

General Motors India has reported a 70 per cent increase in sales in March at 1,367 units, over the 802 units sold in the month of February. The company sold 940 Corsas, 152 Swings and 275 Astras, a growth of 30 per cent compared with the March 2001 sales of 1,055 units.

TVS Motor Co sold 87,523 units during March. Overall sales rose by 6 per cent compared with the same period last year.

Motorcycle sales showed a strong performance, rising by 69 per cent (54,675 units) in March, compared with the same month last year (32,427 units).

Fiat India Pvt Ltd sold 4,003 units last month, as against 631 units in March 2001. Of these, Palio accounted for 3577 units, the Siena/Siena Weekend for 305 units and the remaining 121 units were the Fiat Uno.


New Delhi, April 1: 
The government plans to unveil a fresh set of concessions for the special economic zones (SEZs) in Parliament during the debate on the Finance Bill which will comprise tax breaks and long-term concessions for investments to develop these enclaves.

Addressing industrialists at a seminar organised here today by the Federation of Indian Chambers of Commerce and Industry, Union commerce minister Murasoli Maran said: “The finance minister will announce these concessions in Parliament. I think it will address all the concerns and misgivings that have been expressed here. I hope it will satisfy everybody who plans to invest in the special economic zones.”

Maran said: “These SEZs are our best hope. These will generate competition among the state governments. The Union government will only deal with the concessions and guidelines. The subjects to be dealt with while setting up these zones belong to all the three lists—state, concurrent and central. So, we will leave them to the states and private entrepreneurs.”

Maran also referred to the scepticism about the implementation of policies that have been enunciated in the five-year exim policy.

He said, “The overseas banking units (OBUs) in special economic zones, allowed to be set up under the new exim policy, will not be tax havens and any suggestion to that effect is totally wrong and completely baseless.”

Referring to the policy which encompasses agricultural products, village artisans, cottage industries, small scale industries and electronic hi-tech items of software, Maran said, “This will spur the effective demand from rural India thus giving a boost to the industries.”


New Delhi, April 1: 
Investors in the special economic zones (SEZs) may finally get a tax holiday, but the government is yet to decide how long the tax break would be. Potential investors in the SEZs are clamouring for a tax holiday until such time that they start making profits.

“Industry has requested the government to remove the limiting year for tax holidays till 2010. They suggest that the time limit should be made flexible and tax holiday be given till they start making profits. The decision lies with the finance minister, which will be explained in the finance Bill,” Director General for Foreign Trade (DGFT) N. L. Lakhanpal said.

Lakhanpal said the SEZs may not even start functioning by 2010. Even proposed units might not commence exports by that time.

“It makes sense for the exporters to demand this and we have also made the recommendations to the finance minister. Now only the time limit remains to be decided.”

The SEZs will also serve as a laboratory to test controversial labour reforms, which include a hire-and-fire policy, and the 60-day notice period for a strike by employees.

“If we are aiming to make India an export market, the first thing that we should keep in mind is its international reputation.”


New Delhi, April 1: 
Peer review will become mandatory for audit firms from April next year to prevent the sort of situation that has arisen at Enron Corp in the US because of audit lapses by Arthur Andersen.

Union minister for law, justice and company affairs Arun Jaitley today released a statement on the peer review accounting system that has been evolved by the council of the Institute of Chartered Accountants of India. The first phase of implementation will begin on April 1 next year. Peer review will be mandatory for all firms. However, the implementation will be in three stages with different types of audit firms being covered at each stage.

The institute has set up a peer review board consisting of 11 members, six of whom will be from ICAI. The other members will be from the department of company affairs, the Securities and Exchange Board of India (Sebi) and other regulatory authorities. There will also be some prominent individuals from public walks of life. The board will be independent and have its independent secretariat. The actual conduct of a peer review will be done by a reviewer, who will be a practising chartered accountant appointed by the board drawn from a panel.

When it receives the reviewer’s final report, the board will decide whether or not to issue a certificate of peer review. In cases where adequate standards have not been met, the board will advise appropriately. Later, these certificates will become a pre-requisite for the empanelment of audit firms, said ICAI.

In the first phase, selection will be on a random basis from among the firms that include central statutory auditors of public and private sector banks, foreign banks, financial institutions, central and state PSUs, central co-operative societies, insurance companies and from firms which are conducting audit of companies having paid up capital of over Rs 5 crore and an annual turnover of over Rs 50 crore.

The second phase will start from April 1, 2004 and will be selected from units including branches of public, private sector and foreign banks, NBFCs, regional rural banks and companies having paid up capital of Rs 5 crore or less. The third phase will start from April 1, 2005 and will include all other practice units.



Foreign Exchange

US $1	Closed	HK $1	Closed
UK £1	Closed	SW Fr 1	Closed
Euro	Closed	Sing $1	Closed
Yen 100	Closed	Aus $1	Closed
*SBI TC buying rates; others are forex market closing rates


Calcutta		Bombay

Gold Std (10gm)	Closed	Gold Std (10 gm)Rs. 5005
Gold 22 carat	Closed	Gold 22 carat	   NA
Silver bar (Kg)	Closed	Silver (Kg)	Rs. 7900
Silver portion	Closed	Silver portion	   NA

Stock Indices

Sensex		3500.18		+30.83
BSE-100		1737.48		+21.20
S&P CNX Nifty	1138.95		+ 9.40
Calcutta	 118.39		+ 1.17
Skindia GDR	   NA		   —

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