Bigger hole in India Inc pocket
Naphtha dearer
Jalan recipe for stable rates
Philosophy of the budget
ITC e-choupals fire insurance dreams
NTPC mulls public issue to raise funds
Accenture upbeat on manufacturing
NYSE waits for Mahajan to ring the bell
Blue Star plans Rs 10-cr revamp
Foreign Exchange, Bullion, Stock Indices

 
 
BIGGER HOLE IN INDIA INC POCKET 
 
 
FROM VIVEK NAIR
 
Mumbai, April 4: 

Steeled for second hike

Steel makers are gearing up for the second price hike of around Rs 500 a tonne in a move prompted partly by hardening international rates.

Moving swiftly to make the best of a recent pickup in demand, they winched up prices across the board by Rs 500-1000 per tonne last week. The revisions, coming after more than a year, cheered an industry laid low by a glut at home, and high tariff walls in overseas markets. Now, domestic prices are close to Rs 12,000 a tonne.

Sources are predicting an increase within days as companies cash in the optimism that the firm prices abroad are likely to move up further over the next few weeks.

A tonne of steel now costs around $ 220 in the global market, up from $ 185 per tonne months back, as inventories shrink amid a spike in consumer demand. “There is hope that international prices will look up further. In such an eventuality, domestic prices may be hiked again by the end of this month or early next month,” an official working for a steel major told The Telegraph.

However, there are others who are a little guarded. They point out that another increase will be dictated by two critical factors: whether the rise in international price persists, and the reaction of domestic users to the recent hike. “We will have to wait and see how the market reacts to the increase and how are they absorbing it. Domestic manufacturers, however, will have no other option but to raise prices if the international trend is firm,” a source pointed out.

He said a lingering concern is how the demand-supply equation in the country plays out. Even now, there is more than three million tonnes of flat steel products than what customers want. This excess stock in warehouses could quell any spurt in prices of the commodity. What has forced steel companies to focus at home is the wide array of restrictions slapped by many countries in the West on the amount of steel they will import.

While exports to many developed markets have taken a beating, even shipments to certain south-east Asian countries have fallen, making producers look inward. For instance, Thailand has levied anti-dumping duties of close to $ 70 per tonne on imports of steel.

   

 
 
NAPHTHA DEARER 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, April 4: 
Oil companies have raised the price of naphtha sold mainly to petrochemical complexes by nearly 12 per cent and are pressing for a 30-40 per cent hike in the prices of natural gas sold to power and fertiliser companies.

State-run oil firms, which supply naphtha to petrochemical companies like Haldia and IPCL and to fertiliser companies, are writing to their clients informing them of the revision, citing higher global prices of petro-goods.

Low Sulphur Heavy Stock (LSHS) prices have also gone up by about 7.5 per cent.

With price fetters removed from April 1, the earlier system of petroleum ministry fixing naphtha prices in consultation with other ministries and user associations has ended and the oil companies are free to set their own prices.

These companies that have been ordered to stay away from raising prices of commonly used transportation and cooking fuels like petrol, diesel, kerosene and cooking gas are trying to balance books by increasing prices charged to industrial users in line with global trends.

Officials said: “The move had to be taken as otherwise our bottomline was getting eroded. Petrochemical prices like oil prices are rising throughout the world because of the crisis in west Asia and we cannot expect India to be isolated from that.”

Fears of a current face off between Israel and Palestine might evolve into a far more wide spread conflict have pushed up oil prices.

State-run oil companies are also pushing for a 30-40 per cent hike in prices of natural gas sold mainly to power companies and to some state-of-the-art fertiliser companies.

At present, gas is priced within a band of Rs 2,150 a million cubic metres (mcm) and Rs 2,850 a mcm.

The price hike, if allowed by the government, would take gas prices to a new range of Rs 2,800 to Rs 3,600 per mcm.

However, the government, which still runs them and takes most policy decisions for them behind the scenes, is not keen on such a steep hike as it would immediately result in a rise in the prices of power generated.

A large increase in the price of power could fuel another bout of inflation which has remained low for most of the year. And this is something that the government is not very keen on.

   

 
 
JALAN RECIPE FOR STABLE RATES 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, April 4: 
Reserve Bank of India governor Bimal Jalan today called for linking bank interest rates with the rate of inflation in a bid to keep real interest rates stable.

Real interest rates which are calculated by deducting inflation rates from interest rates are supposed to be the benchmark for incentivising depositors to save. Jalan felt by allowing banks to float their interest rates against the rate of inflation and permitting them to change the rate every month, savings could be safeguarded.

The RBI governor was speaking at a seminar organised by the Indian Civil Accounts Organisation (ICAO) on the occasion of its silver jubilee celebrations. Interest rates have been falling over the last year and so has been the officially doled out inflation rate. But pensioners and small savers have been protesting cuts in interest on bank deposits, stating it left them poorer.

“Interest rates have to be flexible so that it is aligned to inflation,” he said. He did not, however, say whether this could be implemented in the forthcoming credit policy.

Jalan made it very clear that he did not subscribe to any policy of lowering rates to disincentivise savers. Rather, he stressed a higher savings rate was essential for future growth.

Regarding the continued fall of the rupee against the US dollar, Jalan said “we do not have any target value for the rupee.”

   

 
 
PHILOSOPHY OF THE BUDGET 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, April 4: 
The government feels that in a low interest and low tax regime, savings should come naturally as an economic decision rather than a directed action. There is a need to shift away from a directed savings regime where savings takes place largely because of tax exemptions.

C.M. Betgiri, member-legislation, Central Board of Direct Taxes, said: “In a low interest and low tax regime, savings should be an economic decision only and not prompted by tax exemption. This was the philosophy behind the budget this year.”

The government officials present at a discussion on Finance Bill also said, “The demand for the reintroduction of investment allowance and for higher depreciation as an incentive to modernise plants and machinery, is not acceptable because the Chelliah Committee report found that such allowance was not effective in generating new investment.”

The Chelliah Committee had also suggested that the provisions for charitable trusts should be relaxed and there was a need to make the law uniform for all charitable organisations irrespective of dates on which they were set up. Industry demanded that the stringent stipulations for charitable and religious trusts should be removed, but government officials felt “a massive task cannot be undertaken solely by the government. We will have to examine it on the basis of various representation received from eminent charitable institutions.”

Other countries do provide incentives to encourage people to invest in charitable and religious trusts without much restrictions. Indian companies want to follow the same route.

   

 
 
ITC E-CHOUPALS FIRE INSURANCE DREAMS 
 
 
BY ANIEK PAUL & DEVADEEP PUROHIT
 
Calcutta, April 4: 
Tobacco major ITC Ltd is planning an insurance foray leveraging its click-and-mortar e-choupal platform. The company will start with third party distribution of risk products through its choupals, but may eventually underwrite its own policies if the experiment with distribution is successful.

ITC chairman Y.C. Deveshwar said: “The e-choupal platform is not big enough yet. We are concentrating on its expansion now and while we grow, we are experimenting with a number of business propositions, one of which is distribution of insurance products. If we are successful with third party distribution, we may eventually consider underwriting our own insurance products. Not only insurance, we can, in the long run, distribute a wide range of products and services through the platform.”

Though he did not indicate whose products ITC would be distributing through its choupals, Deveshwar said the company had already made a presentation to the Life Insurance Corporation of India on the efficacy of the platform. Insurance experts feel ITC’s e-choupal network is invaluable for distribution of risk products in the rural market, and there will be no dearth of takers for its service.

E-choupal is a web-enabled network through which ITC sources agricultural products directly from farmers. The company also uses the platform to disseminate crop-specific education and other resources to increase productivity. Deveshwar said the e-choupal model has led to a 30 per cent annual growth in farm productivity in the areas covered by it.

ITC is aggressively expanding the network. “By June-July next year, we will have 2,600 choupals around the country. We have 766 choupals in 18 states now. In another five years, we intend to cover one lakh villages in the country,” Deveshwar said.

ITC’s initiative helps the farmers too, as they get better price for their crops, and some state governments have started preferring the model to conventional procurement through mandis.

Deveshwar added that ITC had recently started procuring wheat through the choupals. The platform is operational in selected commodities like soya, coffee and aqua, among others.

FMCG push

Deveshwar hinted at a click-and-mortar distribution channel for fast moving consumer goods, saying “a lot of action on the FMCG front” would be seen in the next few months. However, he did not reveal details.

The ITC chairman today said the consumer goods distribution channel would be eventually connected with the e-choupal network to create the one-of-its-kind click-and-mortar platform across the country. This is part of ITC’s strategy of diversifying its operations leveraging its core competencies.

Deveshwar had said on several occasions that ITC could create a web-enabled platform for distribution of consumer goods, leveraging its expertise in the distribution of cigarettes, and the channel could be used by other consumer good firms to hawk their products.

The company’s food and lifestyle retailing businesses are also being expanded. Its processed food division is trying to export canned food products to the UK, Australia and the Far East.

So far, ITC has been a major exporter of agri-products. ITC’s agricultural exports grew 12 per cent to Rs 362 crore in 2000-2001.

   

 
 
NTPC MULLS PUBLIC ISSUE TO RAISE FUNDS 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, April 4: 
National Thermal Power Corporation Ltd (NTPC) plans to float an initial public offer to generate resources for its new projects.

The public sector power major has decided to go in for an IPO anticipating its efforts to generate capital through its internal resources may be strained by the tariff policy to be announced by the government later this year. NTPC needs an investment of about Rs 80,000 crore over the next 10 years to add a generation capacity of 20,000 MW. It has tied up Rs 6,289 crore from domestic financial institutions and banks to fund part of its projects.

“We had sought an equity support of Rs 13,000 crore from government for our Tenth Plan proposal. The matter was raised at the Planning Commission but finally the finance ministry approved only Rs 5,000 crore. We have target to generate 20,000 megawatt by 2012,” said C. P Jain, chairman and managing director NTPC.

“If the proposed tariff policy is structured in a way that it expects us to take on the burden and pass on very little to the customer then it adds to the pressure on our ability to generate capital through internal resources. We are exploring various methods to raise the resources and issue of equity is also being actively considered,” he added.

NTPC also plans to pre-pay the Rs 1,500 crore loan it has taken from the government and will take fresh loans from the FIs to finance its projects.

“Currently, we pay interest at a rate of 14-17 per cent for loans from institutions like IBRD, JVIC and KFW. But now we can get money from domestic FIs for as low as 8-10 per cent over an eight-year period,” a senior NTPC official said.

NTPC has also decided to source about 5.00 metric tonnes of liquefied natural gas (LNG) through international competitive bidding. An expression of interest has already been sought from companies to regassify LNG for its expansion programmes at Anta, Auraiya, Kawas, Gandhar and Kayankulam gas-based power projects.

“We are in discussions with Reliance Petroleum, TotalFina, Shell, British Gas and Abu Dhabi Gas. Once the negotiations are completed we will finalise the deal with one of them,” said Jain.

Meanwhile, despite being saddled with huge outstandings from state electricity boards, NTPC’s realisations improved to 76.6 per cent in 2001-02, up from 76.2 per cent in the previous year.

According to the provisional figures, NTPC had supplied power to SEBs amounting to Rs 20,868 crore, while realisations stood at Rs 15,979 crore. “With the securitisation of outstandings of Rs 22,636 crore as on March 31, our realisation can increase by more than 90 per cent,” said P Narasimharamulu, director (finance) NTPC.

   

 
 
ACCENTURE UPBEAT ON MANUFACTURING 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 4: 
India’s manufacturing industry has the potential to grow at twice the rate it clocks now, and a promise to add Rs 1,50,000 crore more in value.

The findings are part of an Accenture study, titled Making Indian Manufacturing Globally Competitive, that was released today with projections that the annual growth rate can double from 6 to 11 per cent by 2006. Value addition from manufacturing should increase over the next five years by Rs 1,50,000 crore from the current level of Rs 2,10,000 crore, the study said.

According to the global management consultant, toplines can go up by 10-20 per cent or more and marketing spends can fall 10-15 per cent. While there are steps that the government must take, the private sector and individual organisations can improve efficiency by realigning internal operations to boost business value.

According to the study, over 85 per cent of India’s factories have less than Rs 1 crore invested in plant and machinery, Sudarshan Sampathkumar, an Accenture partner, said. On the other hand, surplus staff in several organisations is as high as 30-50 per cent.

India has a working population of approximately 600 million, 75 per cent of which does not reach the secondary stage. It would take a focus on labour intensive manufacturing sectors to generate employment in adequate numbers for this army of job-seekers.

“India’s demographic profile highlights the stark reality that nearly 75 per cent of its working population is educated below middle school level,” the report says.

The cost of inputs, says the report, should be competitive, and initiatives launched to overcome problems faced by manufacturing firms due to poor quality of transport, high cost of power, rising interest rates.

Accenture’s report focuses on similar economies in South Asia, particularly China, a country where it has helped Indian companies, like Essel Packaging, set up manufacturing bases.

Now, there are machine tool companies keen to get their wares, targeted at the Indian market, made in the world’s most populous nation.

   

 
 
NYSE WAITS FOR MAHAJAN TO RING THE BELL 
 
 
FROM M RAJENDRAN
 
New Delhi, April 4: 
Pramod Mahajan will have the rare honour of being India’s first minister to ring the famous Opening Bell at the New York Stock Exchange tomorrow.

There are only eight Indians who have rung the famous NYSE bell—all chairmen of the seven listed firms on the NYSE, including Wipro’s Azim Premji, Ramlinga Raju of Satyam Computer Services and K.V. Kamath of ICICI.

Mahajan is leading a delegation of top Indian IT firms to strengthen Nasscom’s on-going program to build the Indian IT brand overseas. The industry body is organising a two-day roadshow for Indian IT companies in New York.

Nasscom today organised a networking meet with Nasdaq and will organise a one-day seminar—India Technology Forum — in association with NYSE tomorrow at New York. The one-day seminar is aimed to serve as a platform to highlight the cost-effective and quality advantage of IT outsourcing to India. Mahajan will ring the bell at NYSE which signifies opening of trading at the market.

The honour of ringing the NYSE opening and closing bell is a privilege usually reserved for member firms or listed firms celebrating an event. A company that is listing with the exchange for the first time often is invited to ring the bell, as are visiting dignitaries and retiring members. Recently a leading US daily had reported that, “that most bell-ringing requests cannot be accommodated, since the schedule is filled with commitments to listed companies.”

   

 
 
BLUE STAR PLANS RS 10-CR REVAMP 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, April 4: 
Blue Star will invest Rs 10 crore to revamp its image and re-position itself in the air-conditioner and refrigeration market.

The company, which makes cooling equipment, will promote itself as a ‘one-stop solution for cooling arrangements’ for the corporate sector.’

Blue Star today introducing three products to revamp its product range—visi-coolers, euctic deep freezers and water dispenser-cum-refrigerator. The company’s existing product range includes room ACs, split ACs, deep freezers, water coolers, water dispensers, apart from large central AC plants and cold storage equipment.

The company plans to expand its business in West Asia in the near future. At present, it sells a large number of water coolers to West Asian countries, cold storage units to Sri Lanka and has joint ventures in Malaysia for manufacturing air-conditioners.

Executive vice-president Neeraj Seth said: “The sluggish domestic market for ACs will pick up this year due to the demand from the software, fast-food restaurant and telecommunications sectors. Demand from the ice-cream and sea-food industries are also likely to boost the refrigeration market.”

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.87	HK $1	Rs.  6.20*
UK £1	Rs. 70.20	SW Fr 1	Rs. 29.05*
Euro	Rs. 43.10	Sing $1	Rs. 26.20*
Yen 100	Rs. 36.94	Aus $1	Rs. 25.55*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5135	Gold Std (10 gm)Rs. 5030
Gold 22 carat	Rs. 4850	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 8000	Silver (Kg)	Rs. 7920
Silver portion	Rs. 8100	Silver portion	   NA

Stock Indices

Sensex		3512.55		+49.56
BSE-100		1748.31		+30.77
S&P CNX Nifty	1145.90		+22.40
Calcutta	 118.66		+ 1.79
Skindia GDR	 557.48 	- 3.99
   
 

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