Govt works out size of war chest
Markets on the edge
Global insurers cautious about India
Personal touch to SBI business
Essar dials for Command connection
BSE card price dips below Rs 1 crore
Six-month ban on Kayan outfit
Railways speeds up plan to run bullet trains
BSNL eyes 4 m users by 2003
Foreign Exchange, Bullion, Stock Indices

 
 
GOVT WORKS OUT SIZE OF WAR CHEST 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, May 27: 
India’s top economic czars — finance minister Yashwant Sinha and Reserve Bank governor Bimal Jalan — today went into a huddle discussing steps to be taken to protect India’s fragile economy in case war breaks out with neighbour Pakistan.

Among the measures discussed was how much money could India raise in an emergency from the market to pay for spot defence purchases. Though the government is confident that squeeze in spending elsewhere would be able to pay for most military expenses, it would need ready cash for some of its purchases, and loans for buying wares instantly.

The Centre has already borrowed over Rs 1,60,000 crore from the Reserve Bank. And, its budget deficit for the first quarter is running at a record 40 per cent over the level reported in the first quarter of last financial year.

Despite the tough situation, Sinha took comfort from an analysis that Pakistan was likely to be hit harder than India. “India is hundred times better prepared compared with Pakistan,” he said. Ministry officials said their estimates were that India would be spending about Rs 1,000 crore on every week of fighting, while Pakistan would be forking out Rs 400–500 crore.

The two top economic managers also decided that cheap credit should be provided to boost stock markets, along with a mechanism to keep close tabs on where the money was flowing.

Wars in the sub-continent have traditionally seen hoarding and profiteering by businesses, and the government is anxious not to let it happen if there is a face-off this time. If inflationary pressures ratchet up, the government intends to immediately sap out money from the system by hiking CRR and SLR, besides direct market intervention in essential commodities.

Apart from the direct cost of a conflict, the finance ministry is concerned that the indirect impact, such as civilian damage, might be high. “We have to be ready for replacement expenditure on houses, power plants and factories,” officials said. For Pakistan, the price of crossing swords with India is much higher. Its cash-strapped economy has been tottering on the brink ever since it turned into a front-line state in the US-led war against terror last October.

In November, the Afghan crisis prompted Islamabad to cut its GDP growth target for last fiscal to 3.7 per cent. Pakistan’s exports have shrunk, while other business costs have soared.

   

 
 
MARKETS ON THE EDGE 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, May 27: 
Two days after a huge rally sparked by an easing of war concerns, the stock markets turned cautious ahead of Pakistan President Pervez Musharraf’s televised address to his nation this evening.

The cautious mood prompted operators to win down their positions, sending the Bombay Stock Exchange (BSE) into a modest 12.21-point loss, and dashing hopes that Friday’s rally would carry on this week.

Nobody was willing to buy shares before Musharraf’s speech, widely believed to be holding the key to whether the war is an unavoidable eventuality. “If the Pakistan president were to make positive remarks about reining in cross-border terrorism, the markets will look better on Tuesday,” a BSE broker said.

The 30-share index was weighed down by heavyweights like Reliance Petroleum, Infosys Technologies and Ranbaxy Laboratories, but the session was redeemed somewhat by advances in shares of public sector companies.

The optimism was generated by reports about the government’s resolve to divest its stake.

National Aluminium Company (Nalco), a PSU that is the country’s second-largest aluminium maker, shot up by close to 9 per cent to end at Rs 112.25. Hindustan Organic Chemicals jumped by the maximum permissible 20 per cent, while Rashtriya Chemicals also notched up good gains. The two companies did well on news that the government would sell its stake in them.

Predictions of a normal monsoon by the meteorological department also helped boost sentiment.

   

 
 
GLOBAL INSURERS CAUTIOUS ABOUT INDIA 
 
 
FROM GARIMA SINGH
 
New Delhi, May 27: 
Re-insurance giants have started categorising India as a “cautious zone” nation for any form of cover against sabotage and terrorism.

Re-insurance is the risk cover that insurance companies take from larger companies against the possibility of having to actually pay up huge amounts as claims to clients. Though India’s national re-insurer is the General Insurance Company, a large chunk of re-insurance, especially for the private sector insurance companies, is done by foreign re-insurers like Swiss Re.

Sanjeev Misra of Heritage India Pvt Ltd, a re-insurance brokerage firm said “Given the escalation in cross-border terrorism here, re-insurance companies are now very careful and guarded towards providing terrorism coverage.”

Added another brokerage “No matter how credible our case is, the foreign re-insurance companies are now very cautious towards providing any cover for terrorism or earthquake in the Indian sub-continent.”

Since the terror attacks in the US on September 11, globally re-insurance costs have gone up. To give only one instance, costs for re-insuring property has gone up by 30-300 per cent, depending on factors like nature of risk of the product and credibility of the client. This is not unique to any country. What makes India’s case tough is that most re-insurance companies are thinking twice on cases from this country.

According to an industry analyst, “Swiss Reinsurance and Munich Reinsurance are the only two re-insurance companies who are relatively supportive of the Indian market.” The other well-known re-insurance companies, including Zurich Reinsurance, AIG Reinsurance, Scor Reinsurance, Axa Reinsurance and Lloyds Syndicates, do not seem to be very enthusiastic about India.

A re-insurance brokerage analyst said “The effect of increasing attritional and catastrophic losses coupled with poor stock market returns, low interest rates and poor bond yields has caused re-insurers to rethink their strategies.”

“The events of September 11 has led the re-insurance companies to reconsider the coverage they are willing to provide this year and in the future. Reinsurers are now trying to mitigate against any recurrence while trying to ascertain what the next ‘unforeseen’ loss may be,” they added.

Hardening of the re-insurance market has two sides:one, the re-insurers reduce their capacity for providing risk coverage and secondly, they hike their premium rates.

   

 
 
PERSONAL TOUCH TO SBI BUSINESS 
 
 
FROM VIVEK NAIR
 
Mumbai, May 27: 
State Bank of India (SBI) is counting on a personal touch to boost its business of lending.

Having given housing finance companies in the private sector a run for their money, the country’s largest bank is hungry for a larger slice of the pie. It intends to lend at least Rs 25,000 crore for retail needs this year, of which housing loans will account for Rs 13,000 crore.

The personal banking blitz, led by a team under T. S. Bhattacharya, will be driven by existing strengths and a series of innovative features that have been designed to tap the large potential in the area of retail finance.

Home loan packages will be tailored to suit individual requirements, loyal consumers will be rewarded and borrowers regular in repayments will get more benefits.

Senior officials said one of the most attractive features introduced is the tailor-made housing loan scheme. This has been launched in five centres already, and is likely to be extended to other parts of the country.

“Under the scheme, a person taking a loan can tailor his repayments based on his family needs. Our objective behind devising such a product is to modify schemes to suit customer needs,” the official explained.

The home loan target for the current year represents an increase of 60 per cent over the previous year, when the bank reportedly disbursed over Rs 8,000 crore; total retail advances in 2001-02 were close to Rs 18,000 crore.

Officials attribute the growth in housing loans, which grew from a modest figure of over Rs 816 crore in 1999, as a reflection of the customers’ confidence in SBI. According to them, one of the big draws in its loans has been the facility of daily reducing balance that brings down the equated monthly installment (EMI).

“Some private companies have an annual reducing balance due to which the EMI paid is more. This is one feature that has helped us draw a good response,” an SBI official said.

Apart from its massive branch network, SBI is also relying on its personal banking branches to offer not only personalised services but faster disbursements, which in some cases can be done in a span of 48 hours. There are 73 such branches operating in the country at present, and plans are afoot to increase the number to 125.

All the features mentioned above are part of an aggressive plan to enlarge its housing loan portfolio, but State Bank is also trying to wean away customers from rivals. One of the ways in which it is doing so is to dispense with the practice of asking for additional security from clients of other housing finance companies.

It plans to offer additional benefits to existing customers who making regular repayments. While details of what and how the plan will play out are not clear, sources said one such privilege could be that the processing charge would be paid back to such customers.

   

 
 
ESSAR DIALS FOR COMMAND CONNECTION 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, May 27: 
The Essar group is in talks with Hutchison to pick up a stake in the latter’s operations in Calcutta and Mumbai.

Sources said the Ruias, promoters of the Essar group, have decided to acquire up to 30 per cent in Hutchison’s networks in Mumbai and Calcutta. Essar and Hutchison have already arrived at an “in-principle” decision to this effect.

Hutchison’s Calcutta and Mumbai operations have been valued at over $ 300 million. The valuation, if accepted, will mean that the Essar group has to fork out over Rs 500 crore to pick up the stake.

“Essar is keen to strengthen its position in the cellular industry in the country through an association with Hutchison which is a global major in this field. The two groups already have an alliance in the southern circle and in Delhi. Essar intends to extend this partnership to other Hutchison circles that include Mumbai and Calcutta,” they added.

The Ruias are believed to have been in talks with Kotak Mahindra, which holds a substantial stake through several associates in Hutchison’s Mumbai and Calcutta networks.

“We intend to acquire the stakes in a phased manner in the two metros. The acquisition will give the company a presence in all the four metros with Hutchison, which is a formidable player in the cellular industry. This will help us consolidate our position to a large extent,” Essar sources said.

The well-diversified Essar group, however, is currently looking at the equity pattern in Usha Martin Telekom in Calcutta, which provides cellular services under the Command brand. The group is also examining the holding pattern in Hutchison Max, which provides services under the Orange brand in Mumbai.

“There are various issues to be worked out before the investment is made. But what is certain is that the two will together to provide the most efficient cellular service in the country,” sources added.

Meanwhile, Hutchison, which is the fourth licensee for the southern region, has launched a new cellular brand—’Hutch’.

Asim Ghosh, chief of the Hutchison’s Indian operations said the company plans to go in for a uniform branding in the country.

He, however, refused to give a deadline by when the company intends to have a unified brand in all its circles.

“Our first intention is to have this brand in Andhra Pradesh, Karnataka and Chennai in the southern region and in Delhi. Later we will extend it to other regions where we are operating,” Ghosh said.

Hutchison, which, along with its affiliates, has a subscriber base of over 1.4 million, will, however keep the Orange brand in Mumbai, while the Command brand in Calcutta is likely to be replaced by ‘Hutch’.

Command, which is the market leader in Calcutta, is one of the fastest growing cellular service providers in the country with over 1.5 lakh subscribers.

   

 
 
BSE CARD PRICE DIPS BELOW RS 1 CRORE 
 
 
BY ANIEK PAUL
 
Calcutta, May 27: 
A year-long depression preceded by a market crash has left stockbrokers high and dry; many of whom—mostly members of the Bombay Stock Exchange—now want to sell their membership. With very few takers around, the price of a BSE card has crashed to sub-Rs 1 crore levels.

No less than 40 members of the exchange are willing to sell their memberships, and even a “clean card”—or one without any liabilities—is on the block for less than Rs 1 crore. “A BSE card in better days cost more than Rs 3 crore, and that was not long ago. Even the last auction of new cards by the exchange some months back, fetched over Rs 1 crore,” said a senior broker.

Another reason for the shakeout is the market regulator’s decision to collect turnover tax dues from the brokers. Sebi has levied a tax on the turnover of stockbrokers. It is a financial burden that very few brokers can bear. Brokers said those who are unable to pay were leaving the business and selling their cards.

One could buy such a card for even Rs 50-60 lakh. There are some 10 BSE cards that brokers in Calcutta are hawking for their associates in Mumbai.

Most of them have turnover tax liabilities, and hence very few takers.

Other regional bourses like Calcutta are worse off. “It is impossible to determine the price of a Calcutta Stock Exchange card as there would not be any takers at all,” said brokers. The turnover of the regional exchanges has been steadily declining, and looks like most of them are headed for extinction.

   

 
 
SIX-MONTH BAN ON KAYAN OUTFIT 
 
 
BY A STAFF REPORTER
 
Calcutta, May 27: 
The Securities and Exchange Board of India (Sebi) has dealt a body blow to Calcutta-based broker Ajay Kayan by barring his firm, C. Mackertich Ltd, from trading in securities for six months for various offences, including concealment of off-market transactions and unauthorised carry-forward deals—or badla in the market parlance.

The market regulator’s order, passed today, said the leading corporate member of the Calcutta Stock Exchange was being suspended for “acting as a sub-broker without obtaining registration from it, not maintaining a clear segregation between clients’ funds and its own money, not reporting off-the-floor transactions to stock exchange and indulging in unauthorised carry-forward transactions”.

Reacting to the market regulator’s order, Kayan said: “I have not been dealing on the Calcutta Stock Exchange for quite some time, and this order makes hardly any difference to me. It is irrelevant to me whether or not I can trade on the Calcutta Stock Exchange.” He said the charges brought against C. Mackertich are six years old.

Kayan has often been facing the market regulator’s wrath. The special court trying cases related to the multi-crore securities scam of 1992, recently attached his properties, his father and C. Mackertich Ltd for alleged involvement. This implies that the court may liquidate assets in possession of these entities for recovery of ill-gotten money, if the charges against them are established.

Kayan, who appears to be in no mood to challenge Sebi’s order, had moved the Calcutta high court disputing the validity of the special court’s order. He had even obtained an injunction on the operation of the special court’s order, but the court later withdrew it.

He and his firms were probed last year by the market regulator for suspected involvement in the bear hammering that led to a sharp fall in stock prices in March last year. However, Sebi did not take any penal action against his firms, and Kayan claimed that the regulator had given him a clean chit.

   

 
 
RAILWAYS SPEEDS UP PLAN TO RUN BULLET TRAINS 
 
 
FROM M RAJENDRAN
 
New Delhi, May 27: 
The Indian Railways is again exploring the possibility of introducing high-speed trains. The move comes two years after minister of state for railways Digvijay Singh announced that a high-speed bullet train between Delhi and Calcutta, running at 350 km per hour on specially constructed elevated tracks, will be introduced.

While the Rakesh Mohan committee report came in for a lot of criticism from both Singh and the Railway Board, both have taken up one suggestion—introduction of trains that run at a speed of 250 to 300 kms per hour on separated dedicated corridors, connecting important city centres, or across a string of cities.

RITES recently conducted a preliminary study in association with the Dutch Railways on the feasibility of running a 300 kmph train between Mumbai and Ahmedabad. The study on high-speed ground transport (HSGT) links between the two cities estimated that the project would have an economic rate of return of about 19-20 per cent.

“It is just a preliminary study. This is an area which will take much more time since we are lagging 40 years behind the European countries and Japan who have the necessary infrastructure needed to run such high-speed trains,” said a senior railway official working on the project.

“A Delhi-Calcutta track alone would cost Rs 70,000 crore. A huge investment would be needed to lay tracks to run high-speed trains in India. This is essential to construct the dedicated lines and other safety measures as per the guidelines of the International Union of Railways,” sources added.

Based on international experience, the Rakesh Mohan committee has estimated the cost of HSGT operations at about Rs 50 crore per km, which is inclusive of cost of land and the corresponding rolling stock. It also suggests that routes linking important cities could be covered over the next 15 years, which would form part of a modern high-speed rail network in the country.

“Typically, in each sector, the time saved would be at least 50 per cent of the present transit time by rail, and in several cases it could be as much as two-thirds,” states the report.

In Europe, high-speed trains run on a special dedicated track and other trains are not allowed to run on that track. They also use a special signalling system called cab control system that displays the signals to the driver on a panel inside his cabin. The coaches and locomotives are also specially built to meet the speed and weather conditions.

A senior railway official said tracks in India would have to be fenced on both sides, so that the animals and people do not wander around the tracks. If the train has to pass through villages and towns, the tracks will have to be elevated and sharp curves and turns avoided to maintain speed.

In her budget for 2000-01, then rail minister Mamata Banerjee had said that the Indian Railways was committed to introduce high-speed trains. But, it will have to generate the necessary resources for the purpose, as “resources of the magnitude required do not seem within sight for setting up such infrastructure,” said a Railway Board member.

A McKinsey study estimates that the railways will need a massive investment of about $77 billion for new coaches, track, communication and safety equipment by 2010 to maintain an annual growth of 87 per cent on the key high-density routes that link Delhi, Mumbai, Chennai and Calcutta.

   

 
 
BSNL EYES 4 M USERS BY 2003 
 
 
BY ALOKANANDA GHOSH
 
Calcutta, May 27: 
Bharat Sanchar Nigam Limited (BSNL) has set an ambitious target of reaching a cellular subscriber base of four million by mid-2003. In the first phase, BSNL expects to be able to provide services to around 2.4 million subscribers by March next year. Phase two will see the company bring the remaining 1.6 million subscribers under the BSNL umbrella.

The service provider is all set to formally launch its GSM-based cellular service in August this year. Currently, BSNL operates its pilot services in Patna and Calcutta and has merely 22,000 subscribers.

“We will launch our cell services in 1,000 cities across the country with a network switching capacity of four million,” said official sources at BSNL. “Within the next three to four years, BSNL will spread its services to almost 3,500 cities across the entire country.” It is also in the process of setting up its cellular network infrastructure at a cost of Rs 2,000 crore.

Initially, BSNL had planned to commence its services in the south and west then move on to the north and east. Now, however, the company’s strategy is to introduce cellular services in the state capitals in August. The remaining cities would be covered during September-November.

Sources said results from the pilot projects in Calcutta and Patna have been encouraging, though service quality is lower than its rivals. The August launch is, however, expected to change things, with BSNL offering a world class network for its services. The service provider has tied-up with majors Lucent, Ericsson and Motorola for providing the infrastructure.

The company also expects the wireless-in-local-loop (WiLL) services to generate a base of around 10 lakh subscribers by March 2003. Presently, BSNL has around 2 lakh WiLL subscribers.

BSNL plans to launch an aggressive marketing blitz and has set aside a sum of Rs 200 crore for marketing and promotional activities during the current financial year.

Sources said the company will float a tender next week to employ a PR agency for its marketing activities and will finalise its marketing strategy within the next two weeks.

The company has also set its sights on providing broadband services for the cable industry and private operators. It has applied for a licence for international long distance telephony (ILDO) services and is awaiting approval from the Telecom Regulatory Authority of India (Trai).

BSNL has therefore decided to project itself as the one-stop point for a gamut of telecom services from basic to cellular and from broadband to Internet telephony.

The company is the third largest telecom service provider in Asia and the seventh largest in the world. With its marketing strategy in place, BSNL will see one of the biggest image makeover exercises to get across the message that it means serious business.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.97	HK $1	 Rs. 6.20*
UK £1	Rs. 71.25	SW Fr 1	Rs. 30.55*
Euro	Rs. 45.09	Sing $1	Rs. 26.85*
Yen 100	Rs. 39.21	Aus $1	Rs. 26.90*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5470	Gold Std (10 gm)Rs. 5330
Gold 22 carat	Rs. 5165	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 8325	Silver (Kg)	Rs. 8200
Silver portion	Rs. 8425	Silver portion	   NA

Stock Indices

Sensex		3243.41		-12.21
BSE-100		1647.60		- 0.56
S&P CNX Nifty	1062.70		- 4.30
Calcutta	 114.90		+ 0.32
Skindia GDR	 525.30		+10.51
   
 

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