It’s back to basics for new finance minister
Haldia Petro slams door on Indian Oil
JD Power pats HM, Mitsubishi
Skoda to hike Octavia price
HDFC cements Lafarge ties
Icra lowers IDBI long-term rating
Jamshedpur may be far, but not XLRI diploma
Maruti dealers turn off discounts
Maran’s Mexico agenda ready
Foreign Exchange, Bullion, Stock Indices

 
 
IT’S BACK TO BASICS FOR NEW FINANCE MINISTER 
 
 
FROM JAYANTA ROY CHOWDHURY
 
New Delhi, July 2: 
Jaswant Singh, the new finance minister, will pour over a new state-of-the-economy report tomorrow that has been prepared by the top bureaucrats in his ministry. It will highlight, among other things, the need to spend more on basics in crucial sectors — farm, roads, power and water — to prop up the tottering economy.

Not much will be talked of the much-vaunted second-generation reforms in this report, though they will certainly not be brushed under the carpet. But the focus, probably with assembly elections looming large, is slowly swinging back to the basics.

Those who were busy drafting the report said they were going to highlight the fact that the GDP cannot be expected to grow at a healthy pace unless the government makes public investments in these sectors and actually sees to it that money sanctioned is spent.

The report will point out that industrial stagnation can be expected to continue, while the inflation rate could go up. Farm sector growth, which fuelled last year’s 5.4 per cent GDP growth, is likely to take a back seat and grow by just 3 per cent.

Besides, ministry bureaucrats plan to warn Singh of the pitfalls that he may face during the course of the ongoing Joint Parliamentary Committee probe into last year’s security scam and UTI fiasco.

The man who had to face the brunt of last year’s scams and financial sector fiascos, Yashwant Sinha, was given a farewell tea and samosas by his core team of top bureaucrats at North Block. Ironically, those who were present said he told them he was “happy” that he “was leaving behind the economy in good shape.”

Singh, who had a 13-day stint as finance minister in May 1996 in the first BJP government, did not take over his new job today. Instead, he chose to remain in his old office at the external affairs ministry.

Among the many visitors who trooped into make their courtesy calls were Reserve Bank governor Bimal Jalan. Later, at 5. pm, it was the trio of three secretaries from the finance ministry — economic affairs secretary C.M. Vasudev, revenue secretary S. Narayan and expenditure secretary S.L.Rao.

While these were basically courtesy calls, company affairs secretary Vinod Dhall, who followed them, carried in a mountain of files. With a comprehensive Companies Act on the anvil and a host of investigations into various corporate scams still pending with his department, sources said this was expected.

Singh had specifically sought for the transfer of this department to him from the law ministry and is known to be a keen follower of various corporate wars. Even during his last short-lived tenure at North Block, he is known to have ordered certain probes into market dealings by a leading Mumbai-based business house.

The minister, who is also slated to meet the Prime Minister later tonight before he actually goes “on the job,” will also have to give some thought to a new team to run his ministry.

   

 
 
HALDIA PETRO SLAMS DOOR ON INDIAN OIL 
 
 
BY A STAFF REPORTER
 
Calcutta, July 2: 
Indian Oil Corporation’s (IOC) equity participation in Haldia Petrochemicals (HPL) is a dead proposition. The state government and Purnendu Chatterjee, two promoters of HPL, slammed the door on the state-owned oil major, which will be replaced with MSTC as the naphtha supplier to the project.

Talking to reporters after an hour of talks with chief minister Buudhadeb Bhattacharjee and state commerce and industry minister Nirupam Sen here today, HPL chairman Tarun Das said: “IOC recently set some new conditions for investing in HPL, which included the demand of a 50 per cent stake. This is not acceptable. Discussions have been closed. It is a closed chapter now. We will inform it formally about our decision tomorrow.”

Das said his company has decided to procure naphtha from MSTC, which will import it for HPL. “Production was affected in April due to a shortage of naphtha. That will be taken care of with the new arrangement.” IOC provided HPL a naphtha credit of Rs 300 crore per month.

The HPL chairman felt continuous naphtha supply would rev up monthly performance, helping the company achieve Rs 350 crore in sales and Rs 40-50 crore in earnings before depreciation interest and taxes (EBDIT).

An upbeat Das said at least three companies in India and two abroad are keen to invest in the project. He said the state government had authorised him to start negotiations to rope them in as a strategic partner.

“HPL is seen as a good investment opportunity by all of them.” He did not reveal their names, but Reliance, the Hindujas, Gas Authority of India Limited and Shell are being talked about as the possible partners.

No negotiations were held with other companies so far since IOC’s proposal had not arrived. “We had not negotiated with anybody. We will now start talking to others. The promoters will also get in touch. Parallel discussions will be held with all interested parties,” Das said, adding the talks would take two to three months.

Asked whether HPL has been declared a non-performing asset (NPA). Das said: “Everything will be sorted out. We have serviced the debt and paid Rs 1,450 crore in interest so far. It is true that there is a shortage of funds, but we are trying to solve the problem through an equity infusion by a strategic partner.”

Das cited record sales of Rs 304 crore in March and an EBDIT of Rs 30 crore as proof HPL’s excellent potential.

   

 
 
JD POWER PATS HM, MITSUBISHI 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 2: 
JD Power and Associates, the globally renowned independent analysts of consumer attitudes in the automobile industry, have, in a study, placed Hindustan Motors/Mitsubishi at the top of their Asia-Pacific 2002 India sales satisfaction index.

The study, now in its third year, determines customer satisfaction with new-vehicle sales and delivery process in India, based on six factors in order of importance—sales experience, explanation at delivery, price evaluation, delivery timing, salesperson knowledge and post-delivery contact.

“Compared with the 2001 study, the majority of makes covered in the 2002 study record a decline in sales experience, which is the factor providing the greatest contribution to overall sales satisfaction,” said Rajeev Lochan, country manager at JD Power Asia Pacific. “HM/Mitsubishi’s top ranking is due primarily to its ability to maintain performance on this crucial factor. They also recorded significant improvement in four out of the remaining five factors.”

Ford and Toyota follow HM/Mitsubishi in the rankings, with both recording consistent improvement on most factors that comprise satisfaction.

Toyota Kirloskar had made the most rapid strides, posting a gain of seven index points over its 2001 results. “Toyota’s quick turnaround in sales satisfaction is impressive given its marginal performance in our 2000 SSI study, which was when the Qualis was launched in India,” Lochan said.

Fiat sales leap 605%

Riding high on the Palio, Fiat India today announced that it has crossed the 4,000-mark in sales for June, registering a whopping 605 per cent growth in sales over last June.

Sales for June 2002 stood at 4,020 units, as against 570 units in June 2001 and 3,525 units in May this year. Of these 4,020 cars sold, the Palio accounted for a lion’s share of 3,357 units, the Siena 519 units, the Palio Adventure 64 units and Uno for the remaining 80 units.

The company’s overall performance for April-June quarter has been extremely encouraging, having registered a 20 per cent increase over the earlier quarter (January to March 2002).

   

 
 
SKODA TO HIKE OCTAVIA PRICE 
 
 
FROM SHASHWATI GHOSH
 
New Delhi, July 2: 
Skoda Auto India Pvt Ltd is planning to raise the prices of the Octavia by Rs 30,000-35,000.

The Octavia, which is Skoda’s only model in the market, currently retails at Rs 10.63 lakh (ex-showroom Delhi).

The price hike has become necessary because the euro has hardened against the rupee. The euro-rupee exchange rate has been fluctuating between Rs 42.50 to Rs 47 per euro; when the car’s price was fixed, the exchange rate was between Rs 38-40 per euro.

“The company has been bearing the cost of the exchange rate fluctuation. But it is no longer possible to do so. According to our calculations, an increase in the range of Rs 30,000-35,000 will take care of this increasing costs,” said Bipin Datar, head, sales and marketing.

The Octavia is arguably the most interesting model in the car market: Siam’s new classification rules put it in the executive segment; feature-wise it aims to match the Hyundai Sonata which is classified in the premium segment; price-wise, it competes with top mid-size cars like the Mitsubishi Lancer. So, the Octavia fights for customers in all three segments.

“We are on target of selling 6,000 units by the year-end. From only nine dealers at the start of the year, we have added 12. By July, 17 exclusive Skoda dealers will be operational across the country,” said Datar.

Skoda, a Volkswagen subsidiary, intends to launch two high-end versions of the Octavia —Elegance and Lauren-Klement. It also aims to launch Superb as a completely built unit.

“We want to bridge the gap between Rs 10-20 lakh with cars at all feasible price points. The Elegance will cost around Rs 12-13 lakh, while Lauren-Klement will come for Rs 16 lakh,” he said.

   

 
 
HDFC CEMENTS LAFARGE TIES 
 
 
BY ANIEK PAUL
 
Calcutta, July 2: 
Housing Development Finance Corporation (HDFC) has increased its stake in Lafarge India—a subsidiary of French cement major Lafarge Ciments—by 3.2 per cent, at an investment of Rs 40 crore.

During the last financial year, HDFC had acquired 1.33 crore shares in Lafarge India at Rs 30 apiece. HDFC held one crore shares at the beginning of the year, which it had earlier acquired at face value.

HDFC now holds 2.33 crore shares of Lafarge, which, according to the housing finance major, represents 5.61 per cent of Lafarge India’s equity base of Rs 416 crore. Officials of the cement major refused to comment.

In 2000-01, HDFC had sold one crore shares, while retaining as many shares of Lafarge India. Explaining the apparent reversal of outlook, an HDFC spokesperson said: “We see Lafarge India as a good investment. The decision to offload one crore shares in 2000-01 was a trading call.”

While HDFC is likely to have sold the shares at a premium, the HDFC spokesperson, however, did not reveal the amount at which they were sold. HDFC’s total investment in shares of Lafarge India stands at Rs 50 crore.

Analysts are bullish on the cement industry and expect it to post a robust growth in the years ahead if the government goes ahead with its planned investment in building roads across the country. Consumption for housing too is expected to pick up with house-building loans becoming cheaper.

Besides shares, HDFC also holds debt instruments issued by Lafarge India worth Rs 25 crore. The instrument carries a coupon rate of 13 per cent. In 2000-01, HDFC had reduced its exposure in Lafarge India’s bonds as well, cutting its investments by Rs 20 crore by selling 2,000 bonds of Rs 1 lakh each.

Lafarge, the world’s largest cement manufacturer with operations in 46 countries, holds 73.13 per cent in its Indian subsidiary. Lafarge India is not listed on the stock exchanges. HDFC is understood to have acquired the 1.33 crore shares from some financial institution or insurance company. The HDFC spokesperson could not confirm the identity of the seller.

Lafarge India has an annual production capacity of 5 million tonnes. The company, which entered the Indian market in 1999 by acquiring the cement division of Tata Steel, sold 3.5 million tonnes of cement during 2001. In January 2001, it acquired the cement business of Raymond Ltd as well.

   

 
 
ICRA LOWERS IDBI LONG-TERM RATING 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 2: 
Leading credit rating agency Icra Ltd today lowered the rating assigned to the long-term borrowing programme of the Industrial Development Bank of India (IDBI) to LAA from LAA+ on concerns of the institution’s asset quality and pressure on profitability.

The revised long-term rating also indicates high safety albeit at a lower level, Icra pointed out. However, the rating agency reaffirmed its medium-term and short-term ratings assigned to IDBI at MAA+ and A1+ respectively.

IDBI, it said, has reduced its net non performing assets (NPAs) to Rs. 6,500 crore as on March 31, 2002, from Rs 8,371 crore a year ago, by making accelerated provisioning/write-offs of Rs 2,500 crore, by writing down its reserves. However, some concerns on the potential of further slippage in its assets quality continue.

It noted some signs of improvement in certain commodity sectors like steel, cement and paper, but added that these improvements have to be sustained for a longer term to allay its concerns on IDBI’s asset quality. Icra also noted positively IDBI’s focus on improving its NPA recovery rate through one-time settlements and arresting further slippage by restructuring stressed accounts.

“Icra views the promulgation of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance 2002 as a favourable development, as the new ordinance is likely to facilitate recovery from non-performing loans. However, in Icra’s opinion, achieving significant success in increasing recoveries and arresting further slippage in assets quality will be a challenging task,” a press statement issued by the rating agency today said.

The rating also factors in concerns on IDBI’s profitability. IDBI’s total income declined by 9.96 per cent to Rs 7,948 crore in 2001-02 from Rs 8,828 crore in 2000-01 due to a decline in net interest income and income from capital gains. The net interest margin declined to 1.23 per cent in 2001-02 from 1.43 per cent in 2000-01 and non-interest income declined to 0.80 per cent in 2001-02 from 1.24 per cent in 2000-01.

   

 
 
JAMSHEDPUR MAY BE FAR, BUT NOT XLRI DIPLOMA 
 
 
FROM M RAJENDRAN
 
New Delhi, July 2: 
Get your post-graduate diploma course in business management from XLRI without ever going to Jamshedpur.

Sounds like a dream? Making it come true are distance learning and the march of technology. Hughes Escorts Communications Limited (HECL), the satellite services operator, has tied up with XLRI Jamshedpur to offer this course through satellite-based DirecWay Global Education platform across nine cities—Delhi, Mumbai, Bangalore, Calcutta, Chennai, Hyderabad, Pune, Chandigarh and Kozhikode.

The XLRI off-campus course is a 15-month programme and has the same profile as the residential course. It is targeted at working professionals who want to enhance their skill sets. XLRI will decide on the modules to be taught in this course and the course fees by mid-July.

“Currently, we are offering short duration programmes through this medium to test the technology, its effectiveness and market acceptability. On the basis of our experience from these programs, we will decide on launching the long duration program,” said Ashis K. Pani, associate professor and chairman, information technology and operations management area, XLRI.

Students pursuing a course through the interactive system can choose a guide, as in a traditional course.

The project will have to be submitted to the institute at the end of the course. The viva will also be held at the institute.

“Our aim is to initially help working professionals who cannot spare time to pursue higher studies or courses, add qualifications which could be helpful in their career. The education and training market for corporate professionals is growing in India,” said Amit Tripathi, vice-president, DirecWay Global Education of HECL.

“Later, we hope to rope in universities which offer long distance education to provide courses using interactive learning platforms. Technically, we can offer courses at the student’s house using the direct-to-home (DTH) facility once the guidelines for it are spelt out,” he added.

Hughes DirecWay Global Education interactive learning platform interface enables a large number of geographically scattered participants (who sit in their respective city classrooms) to have a highly interactive “one-to-one” exchange with the central instructor (who sits in a centrally located studio).

The system incorporates a live broadcast video, two-way audio and data interactivity to enable participants watch and interact with the instructor live on their PCs.

The Indian Institute of Management, Kozhikode, will also offer an interactive post-graduate certificate program in management and has tied up with HECL. The fee for the IIMK program is Rs 1.05 lakh as against Rs 2.5 lakh for on-campus course.

HECL plans to capture a 60 per cent market share in this burgeoning market for such satellite-based interactive education programmes. Analysts say that this could be a Rs 350-crore market by 2005 with major management schools opting to offer their degrees in a long distance electronic environment.

Currently, DirecWay Global Education has one studio (in Gurgaon) and 14 classrooms spread across nine cities. “Our target is to have 16 centres and 35-40 classrooms by October this year and a few more studios,” said Tripathi.

   

 
 
MARUTI DEALERS TURN OFF DISCOUNTS 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, July 2: 
Calcutta’s Maruti dealers have decided not to give cash discounts even as competition intensifies and the company piles pressure to drive up sales volume.

The move has been prompted by the fact that the selling of most Maruti models with a cash discount has become a loss-making proposition, according to the dealers. “We are losing anything between Rs 3,500 and Rs 5,000 on every Maruti car sold since the margin is dismal, while the cash discount is very significant,” dealers said.

Cash discounts create a lot of confusion among customers, and pits dealers against each other in a race to grab a slice of the market — a melee where everybody loses. Dealers point out that sales have dropped by more than 20 per cent over the past two years.

“While the passenger car market is in the throes of a vicious downturn over the last couple of years, the competition has also become stiffer and several car makers have pitched in for a share of the market,” a dealer said.

Calcutta has four Maruti dealers, each of whom has invested over Rs 15-20 crore to enter the business. “If you carry on entirely with your own money, only then can you avoid losses. But, if you have borrowed to keep the venture going, you are in a bind,” said a dealer.

Banks charge 13 per cent on loans, while the average margin earned on vehicles is a paltry 2.5 per cent. “How can you survive with a measly margin if you face an operating cost that is much higher?” he added.

Dealers intend to make a presentation to the company, which has recently been taken over by Suzuki, to raise margins.

The have argued that most Maruti dealers in the country are bleeding because of the low margin and high expenditure incurred on providing service. A couple of dealers in Delhi have already closed shop. Many others across the country, including those in Mumbai, are looking for ways to come out of the business.

“If we had invested Rs 100 on every car sold five years back, it would not be less than Rs 500 now. On the other hand, the volume has shrunk by over 20 per cent from what we had five years back,” another dealer said.

“The company has been asking us to invest more to help increase volumes. It is also pressurising us to upgrade our quality of service. But if the earnings continue to be so low, how can we survive?,” a dealer lamented.

The company, however, remains unmoved by dealer’s woes. “Even if we consider there’s been a loss on every Maruti brand sold, what about the business from servicing? We have the largest number of cars plying on the roads for the last 15 years or so. One can easily imagine what kind of business the servicing centres are generating,” a senior company official said.

Moreover, he added, the businesses from spares and other products like insurance and finance, which are currently routed through the dealers, can easily compensate whatever losses a dealer makes out of selling a car. “The market is very bad. But, good dealers, who are managing their business well, are still making money.”

The official has also admitted that Maruti has suffered a 20 per cent slide in sales during the first quarter of the current financial year. He, however, ruled out an increase in the level of margin paid to dealers.

   

 
 
MARAN’S MEXICO AGENDA READY 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 2: 
At the Mexico round of trade talks, India will be stressing on increased market access for the movement of natural persons in the services sector in order to realise its potential for services.

“India and other developing countries have comparative advantages over the developed world as far as this mode of trade in services is concerned. Efforts should be made to develop new markets and increase its share significantly from a mere 1.5 per cent of the total trade in services,” said commerce minister Murasoli Maran at a seminar organised by Confederation of Indian Industry (CII) here today.

Maran said 80 per cent of the world’s trade in services occurs through only two modes like cross border supply of services (Mode 1) and establishment of commercial presence (Mode 3) out of the four modes of supply of services.

“We need to put this ratio right and is yet to be given the market access. There are innumerable ways to stop a person from moving to another countries and we have to break the barriers,” Maran said.

The other two modes of export of services are consumption abroad like tourism and movement of natural persons. The developed world stops the flow of natural persons under the pretext of regulations such as economic needs test, residency requirements, processing of visa applications, social security contribution and a host of other measures. India will be addressing these issues at WTO.

Stronger ties with China

India should work faster at building up bilateral ties with China in order to strengthen its stand in the coming Mexico round of trade talks.

CII president Ashok Soota said, “China, though a new member to WTO (World Trade Organisation), have impressed upon the developed countries about their commitments. The trip to Washington, Chicago and New York showed that these offices are well disposed more towards China than India.”

“India and China have the same type of economy, so there are places of commonality. We should be working on them to present an united front in the trade talks and cash on the favourable impression they have already made,” he added.

Soota advised the commerce ministry to look into newer modes of expansion like e-commerce instead of insisting on having a brick-and-mortar presence in all countries. However he also cautioned that the reliability of Indian IT sector may take a hit, as a fallout of the controversy over travel advisories issued by several developed countries.

“The investors are questioning the long-term investment decisions that were directed for India and thinking of other destinations due to this controversy. They are also questioning the feasibility of business continuity and the back up facility in case of trouble. Steps should be taken immediately to clear up these ideas,” said Soota.

He also said there are some problems in understanding the demands by India in relation to Intellectual Property Rights.

“The main problem was regarding the Patents Act concerning drugs and pharmaceutical firms. According to their definition, we are protecting the industry instead of opening up due to the clause of compulsory licensing. It took a lot of discussion to clear up this misconception. We think, clause-to-clause discussion on every subject should be held before the Mexico round.”

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.84	HK $1	Rs.  6.20*
UK £1	Rs. 74.58	SW Fr 1	Rs. 32.35*
Euro	Rs. 47.98	Sing $1	Rs. 27.25*
Yen 100	Rs. 40.53	Aus $1	Rs. 27.00*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta			Bombay

Gold Std (10gm)	Rs. 5325	Gold Std (10 gm)Rs. 5220
Gold 22 carat	Rs. 5030	Gold 22 carat	   NA
Silver bar (Kg)	Rs. 8250	Silver (Kg)	Rs. 8250
Silver portion	Rs. 8350	Silver portion	   NA

Stock Indices

Sensex		3285.04		-3.67
BSE-100		1667.95		-3.82
S&P CNX Nifty	1068.05		-0.90
Calcutta	 118.61		+0.20
Skindia GDR	 503.17		+2.88
   
 

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