Stimulants for savings on way
ONGC crude price may go up to $ 24 a barrel
Relief plan to beat the heat
Last date for bulk filing of tax returns extended
Markets fret over dry spell
Prior Sebi seal for deals in the making
Power-packed move to set up profit centres
Delhi court deals fresh blow to Daewoo
Power funding on solid footing
Foreign Exchange, Bullion, Stock Indices

 
 
STIMULANTS FOR SAVINGS ON WAY 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, July 16: 
The government is planning to take a series of steps to boost savings through tax incentives and to discourage hoarding of gold by households.

Finance minister Jaswant Singh indicated as much while replying to questions in the Upper House today. BJP MPs who are planning to meet Jaswant Singh next week also plan to raise the issue of providing tax incentives to boost savings and intend to ask him to lift a freeze on leave travel allowance for government employees and raise interest paid to pensioners and other senior citizens.

“The fall in savings rate, particularly, public savings, is a matter of concern and government will come out with schemes to improve the tax regime and economic climate,” Singh said in answer to questions in Rajya Sabha.

The government has, in the last budget, cut down on the percentage of tax exemptions allowed for various kinds of investments including National Savings Certificates and Public Provident Fund. It had also mulled over, but not accepted, specific tax give-aways for senior citizens.

BJP MPs are known to have already voiced their ire, blaming such measures for their poor showing in Delhi’s municipal polls. Top finance ministry officials said an announcement on tax incentives for savings and tax relief for senior citizens can be expected towards the end of the current session of Parliament.

Tourism minister Jagmohan has already written to Singh seeking lifting of the freeze on leave travel assistance given to government employees as this, he feels, will encourage tourism spending. The BJP, whose main vote bank has always been the urban middle class, also wants this measure to be cleared as it feels this will go down well with its support base.

The other major issue that the new finance minister wishes to tackle is that of savings being diverted into gold holdings. Singh’s predecessors had also tried to discourage people from hoarding gold by bringing out a bank scheme offering interest on gold deposits, but it did not work. Finance ministry officials said the government was now trying to work on a simpler version of this scheme, modelled on the highly successful Portuguese model of the 1950s, which saw a large number of Goans depositing gold in banks. India remains the world’s largest importer of gold.“Unless we are able to move away from unproductive savings in gold and structure the tax regime, we cannot achieve 32 per cent of GDP investment to realise the targeted 8 per cent growth in the Tenth Plan,” Singh said.

The savings rate has slipped from 26 per cent of GDP to 22 per cent, mainly because private savings have stagnated while public savings have not gone up.

FIPB revamp

The government is considering overhauling the Foreign Investment Promotion Board (FIPB) since it feels the board has not been able to attract significant foreign investment flows.

“As far as FIPB is concerned, we are reconsidering this issue,” finance minister Jaswant Singh told Rajya Sabha members. He, however, did not spell out the exact steps planned, except hinting at de-bureaucrtisation.

   

 
 
ONGC CRUDE PRICE MAY GO UP TO $ 24 A BARREL 
 
 
FROM VIVEK NAIR
 
Mumbai, July 16: 
The Oil and Natural Gas Corporation (ONGC) may raise domestic crude prices to $ 24 per barrel from $ 22 per barrel, which it had fixed retrospectively from April 1. A decision to this effect is expected in a fortnight.

Sources close to the oil exploration giant said the price hike was part of a “rationalisation” that the corporation is undertaking vis-à-vis the average price of the Indian basket of crude which is presently ruling over $ 25 per barrel.

ONGC’s move comes at a time when domestic oil refining and marketing companies have announced that they have no intention of jacking up the prices of petrol and diesel. At a meeting on Monday, the three public sector oil refineries, Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation, which meet once a fortnight to review prices of petroleum products, decided not to revise the prices of petrol and diesel as there is stability in the global market.

Sources said while the pricing formula of domestic crude has been a bone of contention between ONGC and the public sector refineries, particularly after the dismantling of the administered pricing mechanism (APM), any hike in crude prices could hit the margins of refining cum marketing companies. “However, the standalone refineries may not be affected as they will be selling their products to the marketing companies at import parity prices,” they added.

Industry analysts estimate that if ONGC were to go ahead with this hike, the corporation’s bottomline could swell by as much as Rs 600 crore for the year. “Its operating profit could alone go up by Rs 900 crore. Considering the tax outflow, the additional net profit will be in the region of Rs 600 crore,” an analyst with a foreign brokerage said.

With the dismantling of APM from April 1 this year, ONGC has been charging a provisional ad-hoc price of $ 22 per barrel for its crude oil sales to domestic refineries. This was based on the Oil Co-ordination Committee’s calculation of the March 2002 price of landed crude. In the APM era, the corporation received a cap price of close to $ 16 a barrel. It also used to charge an average price for the crude to all the refining companies without any differentiation of quality supplied from its oilfields.

However, ONGC has been pitching for a new sales agreement with the refineries that matches the price of imported crude, cost of transport, freight and insurance, a proposal not accepted by its local public sector consumers, on fear that their input costs could go up.

   

 
 
RELIEF PLAN TO BEAT THE HEAT 
 
 
FROM OUR SPECIAL CORRESPONDENT
 
New Delhi, July 16: 
The Centre has drawn up a contingency plan in case the monsoon fails to arrive in the Punjab-Haryana-northern Uttar Pradesh area, considered the bread basket of India, or in the other central and western states of Madhya Pradesh and Rajasthan.

“The government is keeping its fingers crossed hoping that the monsoon will come early next week as forecast by the Meteorological Department. But if it doesn’t, we will not be caught napping,” said Union agriculture minister Ajit Singh.

After meeting meteorologists, the minister said a cell was being set up that would co-ordinate relief for farmers. Madhya Pradesh and Rajasthan have been the worst affected and, even if monsoon arrives now, it will be late for them to sow soyabean and bajra crops that form the staple for many farms in those states.

The Centre has already advised these states to plan alternate crops that can be planted late or which need less water. “Our push for oilseeds and coarse grains has suffered. Even if monsoon arrives now, crops like soya and millet are bound to be affected,” Singh added.

If a state declares a particular district drought affected, the payment of dues by its farmers such as bank loan interests, power and water charges can be put on hold.

At the same time, the department of water resources has been asked to help out by providing for deep bore wells. “However, Met officials told me that a low-pressure area is building up in the coastal areas that will result in rains here in five days. We are hoping for the best but are also prepared for any eventuality,” Singh said.

PTI adds: The Orissa government has started preparing its own contingency plan to combat the drought-like situation emerging in the state following monsoon failure, revenue minister Biswabhushan Harichandan said in Bhubaneswar today.

Almost all the 30 districts barring Koraput were affected by the phenomenon this year and if it did not rain within a week’s time, it would affect agriculture very badly, said Harichandan after reviewing the situation at a high-level meeting.

Against the state’s annual average rainfall of 1482 mm, the precipitation recorded till July 10 last was only 189.7 mm (against the normal 564 mm by this time of the year).

   

 
 
LAST DATE FOR BULK FILING OF TAX RETURNS EXTENDED 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 16: 
The government today extended till August 31 the last date for bulk filing of income tax returns by companies on behalf of their salaried employees.

A notification to this effect will be issued shortly. The government announced the scheme for bulk filing of the returns of salaried employees for the year 2002 on June 24 under section 139(1a) of the Income Tax Act.

Individual taxpayers will still have to file their tax returns by July 31.

The Central Board of Direct Taxes (CBDT) decided to extend the date from July 31 to August 31 for the bulk filing of IT returns because the scheme was notified late.

“Eligible employers can now file bulk returns in electronic format together with the paper returns of their willing and eligible employees with the designated assessing officers latest by August 31, 2002,” said a CBDT release here today.

CBDT has said that adequate time is not available to enable eligible employees to take full advantage of the new scheme. The decision to extend the last date comes in the wake of government’s commitment to simplify tax filing procedures and mop up more revenues from direct taxes.

Earlier, the CBDT came up with special schemes to encourage potential tax payers to file return through the simplified Saral form and expedite the process of allotting permanent account numbers (PAN).

   

 
 
MARKETS FRET OVER DRY SPELL 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 16: 
Investors fretting over a truant monsoon sent stocks skidding, their anxieties deepened by plunging share indices abroad and border blues.

Dalal Street, where many have found the wait for rains too agonising, saw the Bombay Stock Exchange (BSE) sensex shed 50 points to close at 3229.18 a selloff by operators who saw no indication that things would get better. Even hard-nosed institutional investors scampered out.

“While a firm view on the monsoons and its impact on growth can be made only at the end of September, the recent trends are a bit disconcerting,” said the chief economist of Citibank as investors dumped stocks like Hindustan Lever. The firm, one of those whose fortunes are closely tied to the munificence of rain gods, was one of the biggest losers at Jeejebhoy Towers.

Among the other pivotals clobbered by worries of too less rain were Wipro, Reliance Industries, Infosys and Reliance Petroleum. Some said the selling in these stocks could also be on account of sales by UTI — the country’s largest mutual faced with mounting redemption calls. Bucking the trend were stocks of new private sector banks like IDBI Bank, IndusInd Bank, J&K Bank and HDFC Bank, all of which closed higher.

The 30-share index opened marginally higher at 3279.50 but later reacted negatively and moved southwards to its intra-day low of 3224.35 before ending at 3229.18 against Monday’s finish of 3278.71, a net loss of 49.53 points, or 1.51 per cent.

“Reports suggest that the economy could have a deficient rainfall this fiscal. This could have a negative impact on rural income and spending power,” said Parag Parikh, an analyst at a city broking outfit.

“Charts released by the Indian Meteorological Dept (IMD) on Monday indicate that rains are 15 per cent less than from normal at this time of the year. What is also of concern is that the water level in the reservoirs has dropped 13.2 per cent from last year,” Citibank said.

However, the bank said their in-house meteorologists have seen some signs the rains may pick up next week. The key point is that the monsoon needs to become more active in order to increase soil moisture and lower temperatures across the corn, soyabean, cotton and groundnut belts. The bank is maintaining its forecast of a 5.5 per cent GDP growth rate in 2002-03, driven by growth rates of 3 per cent in agriculture, 4.8 per cent in industry and 7.1 per cent in services.

However, Crisil executive director Roopa Kudwa felt it was too early to come to a conclusion. “If at all, the agricultural sector will feel the impact first and only then would it spill over to the industrial sector,” she said.

Shaken by negative developments, investors reacted to the plunge in global markets by selling off shares. London stocks tumbled after opening firm this afternoon, while markets in south-east Asian countries also lost ground, in line with a weak Wall Street.

In the BSE’s specified group, 118 shares, including 23 from the index, suffered sharp to moderate losses, while 44 closed with modest gains. Among losers, Reliance fell by Rs 8.85 at Rs 257.10, Lever by Rs 4.10 to Rs 187.70 and HPCL by Rs 7.85 at 290.25.

   

 
 
PRIOR SEBI SEAL FOR DEALS IN THE MAKING 
 
 
FROM SATISH JOHN
 
Mumbai, July 16: 
The Securities and Exchange Board of India (Sebi) is exploring the concept of advance rulings — a system where companies and intermediaries get prior approval for a move affecting investors.

Sebi chairman G. N. Bajpai told The Telegraph that his office is preparing a concept paper, and that the idea itself should take shape in about two months. He is keen on introducing the system over the next two months.

What has egged him on in this quest is the phenomenal success of this system in developed markets.

Advance rulings help clear grey areas and remove confusion among companies and other market players. If the plan is accepted and implemented in India, a transaction that does not have Sebi’s advance consent would not be executed at all.

It would be a pre-emptive tool that would enable companies or merchant bankers to stand on a stronger legal ground should the move be challenged in court or be disputed by others later.

Legal eagles say advance rulings could be sought for buyback proposals and open offers. Getting Sebi’s clarification before the dye is cast would help firms deal with problems that crop up when their decisions are contested. Better still, the deal will not run the risk of being spiked.

However, senior Sebi officials said the concept paper is still being prepared, and that it is too early to say which areas will be covered by advance rulings.

What is also not known is the composition of the committee that will hear and pass judgements. It could either be a single-member body, or have a few members, or could be headed by the Sebi chairman himself.

According to Sebi officials, the concept of advance rulings is already in vogue in other quasi-government agencies, like the Customs & Excise and the Income Tax.

For Sebi though, introducing the new concept would require a board approval and an amendment to the Sebi Act. The system of advance rulings is provided for in the Customs and Excise Act and the Income Tax Act. Since there is no such provision for Sebi in the Securities Contract Regulations Act, it might be some time before the capital market watchdog translates this idea into a working arrangement.

Companies, merchant bankers and brokers would approach the regulator for approval before they go ahead with something that impinges investors’ interest. However, those who want advance rulings would have to pay a fee before Sebi decides to hear their cases. This is in line with the trends prevailing abroad.

Sources say Sebi, swamped with a cases, must be empowered to pass advance rulings. In many instances, it is largely the conflicting interpretations of grey areas in the statute book that lead to proposals from market intermediaries and companies being challenged by the regulator. Advance rulings would head off such a possibility.

   

 
 
POWER-PACKED MOVE TO SET UP PROFIT CENTRES 
 
 
FROM M RAJENDRAN
 
New Delhi, July 16: 
Union power minister Suresh Prabhu today directed the PowerGrid Corporation of India and National Thermal Power Corporation to prepare a detailed project report to transform the power distribution systems in all towns and districts into individual profit centres under the Accelerated Power Development Reforms Programme (APDRP).

A high-level meeting chaired by Prabhu decided to focus on towns and villages simultaneously under the reform process. The meeting was attended by NTPC chairman C. P. Jain, PGCIL chairman and managing director R. P. Singh, Power Finance Corporation and power secretary R. V. Shahi and senior officials of the Planning Commission.

Under the APDRP, PowerGrid is responsible for developing 30 profit centres while NTPC will develop 33 others. These were pilot projects and the minister now wants to widen the exercise to cover all towns and districts in the country.

The government has already decided to invest Rs 50-100 crore in setting up infrastructure for power distribution in each of the 63 districts that it has identified as profit centres. It has allocated Rs 3,500 crore for the project in the 2002-03 budget.

Prabhu today ruled against the proposal made by power secretary R. V. Shahi to take up towns as a priority under the project and has asked NTPC and PGCIL to cover all the villages.

The two PSUs will collect district-wise data of distribution feeders and the network to prepare a national level information system about distribution with support from the department of information technology.

Delhi, Goa, Pondicherry and Chandigarh have been chosen as model states and distribution circles in each district of these states would be turned into profit centres. The model would then be replicated in other states.

Sources who attended the meeting said Prabhu reiterated that the power sector loses about Rs 20,000 crore annually due to power theft. “If this is ploughed back into the sector, over a 20-year period we would have about Rs 400,000 crore which can create an additional capacity of one lakh megawatts of power,” said sources.

“The problem is mainly in distribution and the solution lies in converting the districts all over the country into profit centres,” said Prabhu during the meeting.

   

 
 
DELHI COURT DEALS FRESH BLOW TO DAEWOO 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, July 16: 
Daewoo Motor India’s troubles continue to mount. The ailing automaker, which is offering its inventoried cars for a steal and at the same time battling its creditors, has now received another blow in the form of a Delhi High Court ruling, rejecting its plea against the government’s decision to invoke bank guarantees worth Rs 27 crore against five export licences that have since been cancelled.

A few months back, the government rejected Daewoo’s five export licences and invoked its bank guarantees. Daewoo moved the court against the order saying that it was illegal to rescind the permitted licences.

However, a bench comprising Justice Devinder Gupta and Justice S. Mukherjee said the orders were perfectly legal and rejected Daewoo’s plea.

When contacted, N. Lakhanpal, the Director General of Foreign Trade, told The Telegraph, “While allowing Daewoo to set up production facilities here, we had given them a lot of tax breaks and duty concessions. When the parent company of Daewoo filed for bankruptcy in Korea, we also got a letter. When the company is failing, we have to protect our interest and have thus encashed the bank guarantees and also cancelled the export licenses.”

The court today observed that, “The government departments had acted within their jurisdiction while passing such orders.”

Daewoo was given enough time to furnish fresh bank guarantees if it wanted to keep the export licences alive. The company failed to comply with the order dated May 21. No Daewoo officials were however available to comment on the issue.

The export licences were given under the old policy where automobile makers had to balance their imports with exports. This policy was challenged by the United States before the World Trade Organisation and India was forced to change the policy after an adverse ruling by the trade organisation’s dispute settlement body.

However, the present dispute relates to the export obligations prior to the change in the automobile policy.

Documents showed that Daewoo had challenged the government orders on the ground that the period of performance of the export obligation had not yet expired and it had a recommendation by the Export Promotion Credit Guarantee (EPCG) in its favour.

The government departments had initiated action against the company after an assessment report by their officials that its plants were not functioning. The cancelled export licences were valid up to next year. Sources said, “The government took action because the company itself requested them not to ask the banks to pay the bank guarantee sum.”

The creditors of Daewoo Motor India —ICICI, IDBI and Exim Bank of India —have extended loans worth Rs 900 crore. They have demanded greater representation on the board of the company so that they can keep closer tabs on the day-to-day running of the company.

However, the creditors are not unduly worried as Daewoo India has assets worth Rs 3,000 crore in India. Daewoo has been stalling the creditors’ demand for convening a board meeting to discuss these issues.

   

 
 
POWER FUNDING ON SOLID FOOTING 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, July 16: 
The Union power ministry is considering a permanent accelerated power development reform programme (APDRP) to be managed by an independent entity. Money from the fund will bankroll transmission and distribution reforms.

The move is line with the recommendations of Deepak Parekh committee, which said the government should commit the level of funding to be provided in future, and transfer the money into an APDRP fund that does not lapse. This, it said, is necessary to make the programme more comprehensive and credible in nature.

Power ministry sources said such an arrangement would yield several benefits. “States and utilities will appreciate that APDRP is not an ad-hoc facility and that performance on their part will enable them to access a large quantum of funds. The state electricity boards (SEBs) did not deploy funds of accelerated power development programme in a gainful manner.” APDP has been re-christened APDRP in the budget for 2002-03.

If the ideas are accepted, a more comprehensive programme of reforms can be supported, instead of current portfolio of limited circle-level investments. Doing so will also send a clear signal of the government’s financial commitment to power reforms over the long term — similar to its dedication to road projects.

“Future cash flows from this fund could be leveraged by public and private utilities that can convince the capital markets of their ability to achieve performance targets in future,” power ministry sources said.

The Parekh committee has suggested that until approvals for a non-lapsable APDRP fund are secured, allocations should be spelt out clearly and responsibility for sanctions, disbursals and monitoring utilisation should be vested in a small empowered committee. The panel can be strengthened with independent professionals who have financial and technical skills.

Although Rs 1,042 crore was released under APDP for transmission and distribution projects in 2000-01 and 2001-02, only Rs 407 crore (about 39 per cent) was received by utilities. The utilisation of funds by agencies was only Rs 245 crore (24 per cent of the funds released). This is based on information provided by the power ministry.

   

 
 
FOREIGN EXCHANGE, BULLION, STOCK INDICES 
 
 
 
 

Foreign Exchange

US $1	Rs. 48.81	HK $1	Rs.  6.20*
UK £1	Rs. 76.76	SW Fr 1	Rs. 33.05*
Euro	Rs. 49.47	Sing $1	Rs. 27.75*
Yen 100	Rs. 42.23	Aus $1	Rs. 27.15*
*SBI TC buying rates; others are forex market closing rates

Bullion

Calcutta				Bombay

Gold Std (10gm)	Rs. 5345		Gold Std(10 gm)	Rs. 5270
Gold 22 carat	Rs. 5045		Gold 22 carat	NA
Silver bar (Kg)	Rs. 8575		Silver (Kg)	Rs. 8605
Silver portion	Rs. 8675		Silver portion	NA

Stock Indices

Sensex		3229.18		- 49.53
BSE-100		1625.29		- 23.68
S&P CNX Nifty	1035.95		- 12.05
Calcutta	 	 117.57		-  1.22
Skindia GDR	 509.55		-  3.70
   
 

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