FIs try to sew up steel alliances
Asian rating cabal takes shape
Limited mobility stays for now
ICICI Bank seeks nod to float safety bonds
Bengal eager to rope in Pepsi
Drug companies divided on Patents Bill
US links investment to market access
WBIDC to spruce up loan act
All villages to be lit up by 2012
Foreign Exchange, Bullion, Stock Indices

Calcutta, May 7: 
Financial institutions have set up a taskforce to look into the financial status and business strategies of the eight loss-making steel companies belonging to the Ispat, Essar, Jindal and Lloyd groups. It will consider, among other things, whether a marketing alliance can be forged among them.

The move comes after loans and interests due from these steel companies increased to an enormous amount — calling for a consolidation. Companies on the list include Ispat Industries, Ispat Metallics, Lloyd Steel, Lloyd Metals, Jindal Iron and Steel Company (JISCO), Jindal Vijaynagar Steel Ltd (JVSL) and Essar Steel.

Sources said more than 10 per cent of the FIs’ sticky assets have arisen due to the non-payment of interest by these companies. The FIs are considering, among other things, merger options, in addition to combined marketing strategies for these companies so that they can come out of the red and compete in the globalised milieu.

The financial institutions had last April discussed the possibility of amalgamation of these eight companies in order to streamline management and marketing strategies. The discussions were initiated by the Unit Trust of India in a meeting with five other financial institutions including IDBI, ICICI, LIC, GIC and IFCI.

The UTI proposal noted that the companies belonging to these groups could be merged into a massive professionally managed company, which will have several operational advantages over other competitors.

For instance, only centralised purchases could add to the savings by over Rs 200 crore, the institutions felt.

But the discussions remained inconclusive because the merger appeared to be a task which had several legal as well as operational difficulties, sources said, adding the situation has now come to such a pass that the consolidation is urgently needed even at the cost of some hard measures.

“While the merger option is not accepted by the promoters of these four groups, the task force has been asked to delve into the possibility of working out a combined marketing strategy for these companies so that there is no internecine battle among them for space,” sources attached to the institutions said.

For instance, Essar sells to Uttam Steel, which is closed to Ispat. Similarly Jindal Vijaynagar sells its products to JISCO which is next to Ispat. Ispat sells its products to the south although JVSL is based in that region. The institutions’ argument is that if a combined marketing strategy is evolved, these companies can save a lot on transport costs and can also command better prices for its products. There are also proposals to induct a professional management to streamline operations as well as marketing of the products.

Another important proposal being considered is whether a few of these units can be given on lease for better management to a profit making company like Tata Steel, sources said.

Tisco chief B. Muthuraman said the company is open to the idea of managing other companies, if the offer comes, on a lease basis, since “We are better managers”. However, he refused to make any comment on whether the company has received any specific offer so far.

The institutions, however, agree on one point—they are not interested in working out any further financial recast or interest rescheduling for these loss-making units since “these are not viable propositions.”

Prices up

Tisco and Steel Authority of India Ltd have increased the prices of flat steel products following firming up of international prices. While the prices of HR coils and sheets have increased by Rs 700-1,000 depending on grade and quality, prices of long products have gone up by Rs 500-1,000, said Union steel minister B K Tripathy.


Mumbai, May 7: 
The Association of Credit Rating Agencies in Asia (ACRAA), a forum of credit agencies in the continent, is gearing up to challenge the hegemony of the rating bodies from the western countries.

Sovereign ratings, that are currently the preserve of the top three rating agencies world-wide, may be one of the areas that the organisation may undertake in the future, an industry who was unwilling to go on record said.

The association has won support from two powerful quarters — the Manila-based Asian Development Bank (ADB) and the Tokyo-based Japan Credit Rating Agency (JCRA), one of the larger agencies in that country. Set up last year, the association has 14 members from 10 Asian countries. It is shaping up to be “ultimate front” against leading global heavyweights like the Standard & Poor’s and Moody’s Investor Services.

The embarrassment the international rating agencies went through when they were caught off guard by the fast-unfolding events at the Houston-based energy giant Enron has forced them to adopt stiffer sovereign ratings for firms in countries like Japan — provoking criticism from the Japanese finance minister.

While co-ordination and co-operation between regional rating agencies is common place, it is said the unwritten objective is to take on global heavyweights and create a third force in the rating world, currently straddled by the three majors — S&P, Moody’s and Fitch.

Not surprisingly, JCRA, the leading credit agency in Japan, has been keen on setting up the association, which plans to share information with other agencies in Asia.

“It is still at a embryonic stage,” the industry source said. It is believed that three leading rating bodies in India — Crisil, Icra and Care — have signed up for membership with the association. Interestingly, Icra and Crisil are affiliated to Moody’s and S&P respectively. However, sources said they are viewed as Indian rating agencies at the end of the day, despite foreign links.

For instance, the sources said the rating agency in Pakistan was also affiliated to a foreign major, but still became a member of ACRAA. The association now has rating bodies as members from Bangladesh, Pakistan, Thailand, Indonesia, Philippines, Japan, Malaysia and Taiwan.

According to the mandate before the association, it should develop and maintaining a level of co-operation that promotes interaction and exchange of ideas, experiences, information, knowledge, skills among credit rating agencies to enhance the capabilities and their role of disseminating reliable market information.

The association also hopes to undertake activities aimed at promoting the development of Asia’s bond markets and cross-border investment throughout the region.

The association is headquartered at Manila which is also the headquarters of Asian Development Bank. The association will organise a workshop on securitisation early next month.


New Delhi, May 7: 
The Supreme Court today declined to grant an interim stay on a petition filed by Cellular Operators Association of India (COAI) challenging the government’s decision to allow fixed line phone service providers to offer limited mobile services.

A division bench comprising Justices R.P. Sethi and K.G.Balakrishnan fixed July 19 for further hearing.

In accordance with a recommendation made by Trai, the government changed its policy to allow private companies like Tata Teleservices, Reliance, Bharti Televentures, BSNL and others to provide limited mobility using wireless-in-local-loop technology. This will enable fixed-line telephone users to carry their handsets with them and receive calls within a radius of 250 kms.

The COAI has contested the decision to allow fixed-line operators to offer this facility as it amounts to a violation of their rights under the licence agreement they signed with the government which permitted them to provide “mobile” services. The new policy change and the decision to allow other private operators into the ‘mobile world’ would be unconstitutional.

The Telecom Disputes Settlement Appellate Tribunal had upheld the government’s decision and the COAI has approached the Supreme Court in appeal. The COAI and others including RPG Cellular Services and Usha Martin Telecom also petitioned the apex court which clubbed them together and fixed July 19 for further hearings.

In its petition, COAI contended that the consumers will have to deposit an amount of Rs. 10,000 as security for the handsets or buy a handset on their own from the open market. Besides depositing Rs. 10,000, the subscriber will also be charged Rs. 80 per month as handset rentals. A monthly rental of Rs. 450 is also charged from subscribers.


Mumbai, May 7: 
ICICI Bank has approached the Securities and Exchange Board of India (Sebi) for clarifications on whether it can raise funds by floating safety bonds — something it used to do as a financial institution. The clarifications sought by the bank, sources said, are primarily on the methods that need to be followed in raising long-term debt through tax-free bonds on a regular basis.

“Earlier, these bond issues were raised by ICICI, a development financial institution. However, after the merger, we are awaiting some clarifications from the market regulator on the process that needs to be followed, now that we have become a bank,” a senior official said.

While a few rounds of discussions are believed to have been held with Sebi officials, sources said ICICI Bank would be the first such bank to have the flexibility of raising resources through public bond issues apart from retail deposits, if it is permitted to do so.

ICICI Bank had indicated that it would like to continue with such bond issues, considering its huge lending requirements. Though there are doubts on whether the bank will be allowed to raise resources through public bond issues — given that banks are not permitted to raise resources in such a way — sources were confident that such a flexibility would be accorded.

Following the reverse merger between ICICI Bank and ICICI earlier this month, the bank has now identified retail banking as a major growth area. It has over 5 million customer accounts that translate into retail deposits of Rs 1,500 crore every month. To consolidate its position in the segment, the bank plans to leverage its comprehensive suite of products and services, brand identity and technology in the days ahead.

ICICI Bank recently said it was among the leading providers of housing loans in the country, which grew at over 200 per cent in the last financial year. In other categories too, the growth was more than 100 per cent. Its advances in the retail segment are close to Rs 8,000 crore.

Sources here point out that in addition to strengthening its position within the country, ICICI Bank is now looking at expanding even in the international markets. Towards this, it has established a representative office in New York and a second such office is planned to be set up in London shortly. The bank is also understood to have approached the Reserve Bank of India seeking its permission to establish a full fledged branch in New York among few other countries. Informed circles close to the bank here reveal that ICICI Bank is likely to establish its first international branch within the next two years.


Calcutta, May 7: 
In a bid to attract investments in contract farming and in the agro-processing sectors, Bengal has decided to make a formal presentation to Pepsico India chairman Rajeev Bakshi shortly.

McKinsey & Co, which has been appointed by the state government to work out strategies for attracting investment in the food and agro-processing sectors, has already sounded out Pepsico India.

Confirming the move, managing director of West Bengal Industrial Development Corporation (WBIDC) Gopal Krishna said, “We are preparing a total package to attract Pepsico. McKinsey is helping us in the exercise. It will be ready within a week’s time. The formal presentation to the chairman will be made within this month.”

When contacted, the official spokesperson of Pepsico India said, “McKinsey has been in touch with us on behalf of the Bengal government. They have sought our expertise on contract farming. We are also keen to help the state government in whatever way we can.”

Pepsico has ushered in a revolution by growing tomatoes through contract farming at Punjab. It also plans to experiment with growing basmati, pulses, garlic, groundnut, potato and oilseeds.

Industry watchers said the key to the success of contract farming is technology transfer. Only when yields are high and enough is grown from the same field, can profits be shared between the farmer and industry. The other key to the success is planning for the entire season, ensuring steady supply of the commodity at a pre-determined price on the pre-determined day and hour.

“Bengal is rich in fruits and vegetables. Contract farming is a very useful proposition for the state,” senior officials of the commerce and industry department said. Pepsi, which considers eastern India a major market for the company, has set up a factory near Sonarpur for producing cold drinks and juice drinks.

Pepsico has already started launching lichi and orange juice drink under its umbrella brand Slice. In addition to its existing mango juice drink, Pepsi will also be launching a guava flavour of Slice. The company is sourcing lichis from Muzaffarpur, guavas from Karnataka and Allahabad and mangoes from Ratnagiri.

Fruit cocktails

Pepsi has geared up to launch fruit cocktails for the Indian market. The cocktails will be available from June-end.

Subroto Chattopadhyay, functional beverages director, Pepsico India Holdings said the fruit cocktails will be a mix of peach, orange, strawberry and pineapple and will be available under the brand name Slice. The whole range will be offered in tetrapacks with a price tag of Rs 10.

The company is also chalking out a plan for exporting fruit pulp and packaged entities to other Pepsi arms in south east Asia and West Asian countries. “They have already evinced interest and we are also keen to promote Indian fruits,” he said.


New Delhi, May 7: 
The pharmaceutical industry is sharply divided over the Patents (Second Amendment) Bill to be tabled in Parliament soon.

The multinational pharmaceutical firms feel that provisions for compulsory licensing unfairly discriminates against manufacturers not based in India.

The new clause on compulsory licensing gives the government powers to allow domestic firms to make patented drugs in case of national emergencies. The new legislation will pave the way for a product patent regime from 2005.

The MNC firms fear this could be used as a weapon to dilute their patent rights. The domestic pharmaceutical manufacturers however feel this clause should be broadened and used to allow them produce essential medicines needed by the general public even in normal times.

The Bill, the government has claimed, aligns the patent laws with requirements of the TRIPS agreement.

At a seminar organised by Assocham to discuss the proposed Bill, it became apparent that the MNCs feel that the tilt towards compulsory licensing could weaken the rights of patent holders.

This viewpoint emerged from Organisation of Pharmaceutical Producers of India (OPPI), which has 68 members, including all the drug MNCs and some of the big domestic majors.

On the other hand, Indian Drug Manufacturers Association (IDMA), which is an association of Indian and relatively smaller pharmaceutical companies, want to avail more from the flexibility in the Doha declaration.

A spokesperson from Eli Lilly said, “Today, the dice is loaded against the MNCs.” He went on to add that “The Bill should not be ambiguous. Terms like national emergency should be well defined”.

G. Wakankar, executive director of IDMA, said the Bill is insufficient to take care of all situations. He said though it may hold good for situations like anthrax, plague and bomb scares.

Hundreds of diseases like diabetes and hepatitis do not fall under it, though they are widespread and menacing enough.

Domestic pharmaceutical industry expressed its apprehension not only on higher prices resulting from effective patent protection, but also of cheaper imports from China which it said would badly affect lower rung domestic players.

The Pharmaceutical Research & Manufacturers of America (Pharma) tried to allay the fears of the domestic industry by arguing that more than 90 per cent of the drugs are off patent and even a number of patented ones have to compete with a number of patent expired products.

They also claim that all essential medicines will be continued to be available in India at affordable prices because of patent expired therapeutic equivalents.

Meanwhile, the Indian Pharmaceutical Alliance (IPA), which is an association of 11 domestic pharmaceutical majors including Ranbaxy and Dr Reddy’s Laboratories, has suggested that the amendment Bill should specifically mention public health as a ground for compulsory licensing.

Pfizer drug trials

Pharmaceutical major Pfizer Inc

today said it was considering undertaking further Phase-III clinical trials in India for its drugs, while expressing concern over the proposed amendments to the patent regime.

“We are considering conducting further Phase III trials in the country,” managing director Hocine Sidi said here.Sidi said Pfizer was encouraged to undertake the trials on account of the level of skills and innovation in the country, adding that intellectual property regime was an area of concern for it. He, however, declined to give details.

On the proposed changes to the patent regime, he said the loose wording of the compulsory licensing norms would protect the interests of a small group of entrepreneurs. He added that the definition of national emergency could mean that even hypertension be included for this purpose. However, he agreed that a country is expected to exercise these provisions when faced with a health crisis.


New Delhi, May 7: 
A US commerce department delegation today held out the lollipop of more investment flows if the Indian government increased market access to American companies and speeded up the reforms process.

William H Lash III, US assistant secretary of commerce for market access and compliance, told a gathering of business leaders here at Ficci, “I have assured Indian commerce secretary Deepak Chatterjee of US investment in India, provided India improves the investment climate fast. This can only place India in a better situation than where it is currently.”

Lash said India is subsidising its chemical industry to the extent of $ 1 billion and at the same time losing a good trading partner in US which has slapped a countervailing duty because of India’s protectionist strategy.

Lash, however, urged the business community in both the countries to continue a parallel dialogue to set the tone for reforms and increase its pace saying, “Indian corporates spend 60 per cent of their time dealing with the government which constricts their economic freedom and limits their productivity.”

Stating that he expects India to be more transparent, more credible in its policies and give greater importance to protection of Intellectual Property Rights (IPRs), he said, “Given India’s extremely talented human resources and abundant natural resources, it is expected that India will take the lead in the international trade arena. In order to achieve its true excellence in global trade, India needs to contest the United States in trade in the same manner it competes globally with the cricket playing nations.”


Calcutta, May 7: 
The West Bengal Industrial Development Corporation (WBIDC) is stepping up its financing of industrial ventures with a slew of changes being planned to be made to the system of funding.

“From now on, the agency will directly compete with commercial banks. Besides broadening the customer base, we are also looking forward to increase annual loan disbursements to around Rs 100 crore in the next two years,” said Gopal Krishna, managing director, WBIDC.

For the past three years, average annual disbursements by the agency have hovered around Rs 40 crore and till date, the agency has financed 431 organisations by coughing up Rs 385 crore.

From agro-processing and jute at one end to hardcore manufacturing like iron and steel and even IT services —the state government’s nodal industry agency has exposure in an entire gamut of industries.

To increase the number of borrowers from the existing level of 281, the agency has decided to offer competitive rates by slashing the interest rate from the existing level of 14.75 per cent.

“We are planning to link our lending rates with the prime lending rate of State Bank of India and have decided to offer credit facilities purely on commercial considerations,” said Krishna.

On the other hand, WBIDC would also do away with administrative rigidities in a phased manner and relax some of the existing norms to facilitate credit off-take.

“We are working on creating a customer friendly system that will minimise processing time on loan applications and speed up the disbursal. Besides, the ceiling of Rs. 1.5 crore on loan amount and Rs. 5 crore on project cost would also be scaled up,” he added.

While WBIDC is working on restructuring its financial services operations, it’s also ready with a comprehensive relationship management package to induce the borrowers in timely repayment of their dues.

“It’s sad but true that the agency’s NPAs 9non performing assets) are much higher than what they should be. As a financing institution, we must get returns which could be ploughed back to help and finance more business ventures,” observed Krishna.

To ensure a better bonding with the customers and tackle the problem of NPAs, which is around 30 per cent of the credit disbursements, the agency will offer a number of incentives to its borrowers.

These include holiday packages, link up facilities for accessing loan account from remote places and other such schemes. WBIDC will also chip in with regular tips to the borrowers to help them in running business successfully.

“Relationship with customers is very important and hence we have decided to organise regular meets with our borrowers. We would also bring out a monthly newsletter to keep them abreast of the latest developments in business and industry,” he said.


New Delhi, May 7: 
The ministry of non-conventional energy sources aims to electrify 18,000 villages in remote areas in the country through decentralised energy supply and grid quality power generation. The ministry aims to provide power to all rural households by 2012, with a capacity addition of 10,000 mw.

“There is an urgent need to carefully re-assess and suitably modify our policies. There is a need for a formal policy and legislative framework to develop renewable energy,” minister of state for non-conventional energy sources, M. Kannappan said today.

Inaugurating a two-day conference on Implementation strategies for renewable energy programmes during the Tenth Plan, Kannapan said, “Our approach will be to provide budgetary support, accelerate and promote private investments through fiscal and promotional policy support and to mobilise internal and external resources. This is essential to achieve tasks of offering basic energy needs of cooking, lighting and electricity of the rural masses.”

He urged all state government departments and agencies associated with the implementation of non-conventional energy programmes to strengthen the implementing machinery in states.



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