Finance commission bounty for states
SBI third-quarter net spurts
Ranbaxy net profit up 7%
Rs 32-crore loss shock for CESC
Tatas to buy out Bell Canada stake in cellular firm
ICICI pact with Compaq
Zuari spins off cement wing
Ficci backs foreign money in tea plantations
Axe hangs on income tax sops
Foreign Exchange, Bullion, Stock Indices


New Delhi, Jan 27 
There may be some refreshing news for the states in the next Union budget if the finance ministry decides to accept an interim recommendation of the Eleventh Finance Commission.

The commission is understood to have recommended substantial increase in the share of taxes and grants to states from the next financial year.

The recommendation, contained in the commission�s interim report submitted to the government, should benefit the states by Rs 15,000 crore in 2000-2001. The final report, expected in the next three months, may improve upon this.

According to senior finance ministry officials, the increased share in taxes and grants will be reflected in the forthcoming Union budget.

The precise increase in the percentage of states� share in income tax and excise is not known. At present, states are entitled to 77.5 per cent share of income tax and 47.5 per cent of central excise.

The finance ministry is not unduly worried about this recommendation as the finance commission was expected to make certain recommendations to enhance states� share in taxes.

The Tenth Finance Commission headed by K.C. Pant had recommended a different pattern for tax-sharing�an alternative scheme of pooling all central taxes and giving away 29 per cent of that to states. The government had accepted it in principle. 

However, this scheme called for a constitutional amendment which the government failed to enact.

The alternative scheme of revenue sharing was to come into operation with effect from 1996. Its implementation would have benefited the states on an average by Rs 5000 crore a year. 

Many states are still under the impression that they would get this share of revenue with retrospective effect. Finance ministry circles, however, rule out such a possibility.

The Eleventh Finance Commission does not seem to subscribe to the idea of pooling all taxes, including customs and corporate to decide on states� share. Its present recommendation is only for a step up in share of income tax and central excise.

In the Constitution, Article 275 provides for grants to states. 

The finance commission has recommended a step up in the quantum of grants to states.

In recent years, states� share of taxes has been stagnating around 26 per cent of total receipt except in 1993-94 when it crossed 29 per cent. 

Mumbai, Jan 27 
State Bank of India (SBI) has reported a 40 per cent rise in net profit for the third quarter of 1999-2000. Net profit rose to Rs 400.50 crore from Rs 285.30 crore in the corresponding period of the previous year.

However for the nine months ending December 31, net profit fell 3.5 per cent from Rs 1143 crore to Rs 1102.95 crore, mainly on account of higher provisions for non performing assets (NPAs) and salary adjustments. 

On the Bombay Stock Exchange, the SBI scrip gained Rs 2 today, opening at Rs 228 then moving to a high of Rs 234.10 and finally closing at Rs 229 compared with Tuesday�s close of Rs 227.

The bank made provisions of Rs 1610.73 crore for the nine months compared with Rs 1169.21 crore in the previous year; provisions for non-performing assets stood at Rs 850 crore compared with Rs 556 crore in the previous year, while for salary revisions it was Rs 219.87 crore against none in the previous year. (The total provision for 1998-99 was Rs 1423 crore.) 

This was to ensure that the estimated annual provision under this head is evenly spread over each quarter and disproportionately large provision in the last quarter is avoided.

Average advances during the period were Rs 79,262 crore against 68,595 crore in the previous year, an increase of 15.55 per cent. 

However, the increase in interest on advances in India was 12.07 per cent on account of a reduction in the average yield on advances to 11.20 per cent during the nine month period from 11.55 per cent. The average PLR during this period, the bank added, was 12 per cent as against 13.6 per cent in the previous year.

Deposits, meanwhile, registered a rise of over 17 per cent at Rs 1,67,866 crore, as on the last Friday of December 1999, over Rs 1,43,298 crore in the same period of the previous year.

The operating profit for the nine months was Rs 2,713.68 crore compared with Rs 2,312.21 crore in the previous year.

Voltas profit

Voltas Ltd today reported a net profit of Rs 40 lakh during the third quarter ending December 31, against a net loss of Rs 7.7 crore during the corresponding period last year. 

Sales and other income had shown a marginal increase during this period to Rs 283 crore against Rs 273.2 crore last year. 

New Delhi, Jan 27 
The board of directors of Ranbaxy Laboratories Ltd has approved payment of an interim dividend of Rs 2.50 per share for the quarter and year ended December 31, 1999. 

For the quarter ended December 31, 1999, the company recorded a 7 per cent increase in net profit to Rs 32.1 crore, from Rs 29.9 crore in the previous corresponding quarter. 

Sales in the quarter were up 19 per cent from Rs 350.6 crore in 1998 to Rs 416.8 crore. 

For the twelve months ended December 31 1999, sales stood at Rs 1,558.2 crore while profit after tax was at Rs 201.2 crore. 

Domestic sales recorded a 7 per cent growth at Rs 208.1 crore from Rs 195.2 crore in 1998, while exports registered a 34 per cent growth from Rs 155.4 crore in 1998 to Rs 208.7 crore till December 31 1999. 

A company press release stated that the Indian pharmaceutical market had slowed down to record a single digit growth. The antibiotic/anti-bacterial segment, where the company has a major presence, was particularly sluggish. 

Jan 27 
Blaming delayed tariff revisions for much of its financial woes, CESC slipped back into the red with a Rs 32-crore loss in the third quarter ended December 31. At the same time in 1998-99, it had reported a profit of Rs 4 crore.

The city�s power utility said the current set of tariffs, authorised in October 1998, was not enough to cover the increase in operational expenses and additional interest charges arising from the commissioning of its second unit at Budge Budge.

The poor third-quarter show, and the fact that the 24 per cent tariff hike proposal is hanging fire, has raised fears that the financial problems will spill over to the fourth quarter. 

The West Bengal Power Regulatory Commission, set up in March 99, is yet to empowered. Therefore, it is not clear when and how the tariff-revision demand will be taken up in the immediate future. 

CESC has charged an additional interest of Rs 18 crore on account of commissioning of Budge Budge unit II, raising total interest charges to Rs 102 crore in the third-quarter of 1999-2000 compared with Rs 70 crore in the same period last year.

Net sales stood at Rs 404 crore, down from Rs 432 crore in Oct-Dec 1998-99. Other income, however, jumped to Rs 27 crore from Rs 20 crore last year while total expenditure declined to Rs 431 crore from Rs 452 crore.

Grasim net surges

Grasim Industries has posted a 104 per cent spurt in third-quarter net profit at Rs 51 crore compared with Rs 25 crore in the same period last year. 

Turnover in the quarter rose 13 per cent to Rs 1059 crore as against Rs 936 crore. Grasim said its VSF business had registered a rise of 18 per cent in production and 24 per cent in sales volumes. Realisations, it said, had improved due stronger demand and an upturn in the textile industry.

Sterlite sparkles

Sterlite Industries reported a handsome 65 per cent increase in net profit at Rs 68.54 crore for the second-quarter ended December 31. First-half turnover vaulted 49 per cent to Rs 1,362.08 crore while net profit in the same period surged 66 per cent to Rs 117.91 crore on the back of buoyant sales volumes. 

The company said it has appointed Arthur Andersen restructuring to chart a restructuring plan, fuelling speculation that its copper and cables businesses may be spun off. The scrip closed Rs 623 after touching a high of Rs 645.25 in volatile trading. 

Mumbai, Jan 27 
The Tatas have reached an agreement with Bell Canada for acquiring the latter�s 39 per cent stake in Tata Cellular, a company which has a licence to operate in Andhra Pradesh.

As a result of this agreement, the Tatas will control 90 per cent of the cellular company through Tata Industries, its holding company for high-tech ventures. Before the pact, the Tatas held 51 per cent while Bell Canada controlled 39 per cent. The balance 10 per cent rested with AIG, an insurance major with sizeable investments in telecom ventures.

A Tata spokesperson confirmed the development but gave no indication of how much the Canadian major would be paid for its stake. �The valuation exercise is still under way,� the spokesperson said. 

Corporate observers say the announcement signals the Tatas� commitment to the telecom sector. Bell Canada had invested $ 48 million, or around Rs 210 crore, in the venture. Officials expect the Canadian telecom major will bargain for a sizeable premium, given its large initial investment. 

Tata Cellular has the largest subscriber base in Andhra Pradesh.

Bharti Telecom recently acquired Jasmine Telecom�s cellular operations in Andhra Pradesh and Karnataka. 

Mumbai, Jan 27 
ICICI Ltd as part of its thrust on e-commerce, has joined hands with a Compaq-led consortium, for setting up a payment gateway to facilitate secured on-line business-to-consumer (B2C) and business-to-business (B2B) transactions.

The payment gateway will be owned by an ICICI subsidiary and will be implemented by Compaq India and QSI Payment Technologies, Australia. 

Mumbai, Jan 27 
Zuari Industries, the K K Birla flagship company, has spun off its 1.7-million tonne cement division into a separate company. 

Corporate observers see the move as a precursor to the company�s exit from the cement business, or a signal that the company could rope in a partner to run an increasingly competitive industry now in the throes of unprecedented mergers and acquisitions. Their perception is that the company will eventually concentrate on fertilisers, its core business.

�At the meeting held on January 25, the board of directors has approved the proposal to incorporate a new company that will assume Zuari Industries� cement division, subject to the approval of shareholders and regulators,� the company told the National Stock Exchange in a written communication. 

The Zuari share price fell today to Rs 57.95 from Tuesday�s Rs 60.05, although marketmen were not sure whether operators knew about the development. On the other hand, the market was rife with rumours that global cement giant Cemex SA De CV Mexico, the third largest cement company in the world, was leading the list of suitors. Analysts are of the view that the deal could be worth more than Rs 750 crore. Apart from Cemex, which has a capacity of 65 million tonnes, other cement giants like Lafarge and Holderbank are also believed to be in the race, observers tracking the industry say.

The three global majors; Lafarge, Holderbank and Cemex have long been scouting around for the right buys. 

However, so far, only Lafarge met with success, when it acquired Tata Steel�s cement unit.

Zuari Industries recently completed a Rs 357-crore exercise aimed at expanding the capacity of its cement unit from 5 lakh tonnes per annum to around 1.7 million tonnes. The plant is located in Andhra Pradesh.

Meanwhile, Zuari�s core business remains fertilisers. It has promoted Chambal Fertilisers, which is a profit-making company. 

The company made a foray into cement by taking over the cement division of its group company, Texmaco. The transfer price that Texmaco, an engineering company, received was reported to be in the region of Rs 135 crore. 


New Delhi, Jan 27 
The Federation of Indian Chambers of Commerce and Industry (Ficci) will soon prepare a report arguing in favour of foreign direct investments (FDI) in tea plantations following the rejection by the finance ministry of Unilever�s proposal to buy out Rossell Industries due to lack of FDI policy in agriculture.

Ficci president G.P. Goenka, who heads the Duncan group, said: �FDI in tea plantations should be permitted but it should not be permitted in agriculture on the whole. �Owners of tea plantations can compete with foreign players but the poor farmers engaged in agriculture cannot compete with even the Indian industry. How can they withstand foreign competition with their latest technology and knowhow. We are firming up our policy on FDI in the agriculture sector in a study to be presented to the government shortly,�� Goenka added. 

Ficci had openly lobbied against 100 per cent foreign direct investment in cigarettes and bulk drugs but have taken a diametrically opposite view regarding foreign flow of funds in the tea plantations. 

The speculation over Unilever�s proposal to buy out Rossell Industries, promoted by Y.K. Modi, has seen share prices of Rossell shoot up almost three times within two months from Rs 57 to Rs 153. Unilever has already bought some 37 per cent stake in the tea company. The government has kept Unilever�s proposal in abeyance because there is no clear cut FDI policy in this sector. Unilever had made an application to Foreign Investment Promotion Board to acquire Rossell Industries for Rs 175 crore. 

New Delhi, Jan 27 
The government may bring down the number of exemptions in the Income Tax Act in the forthcoming budget though it is on course to meet its direct tax targets for the fiscal.

�We will meet the direct tax collection targets during this fiscal,�� chairman of the Central Board of Direct Taxes (CBDT) Ravi Kant told reporters after the 27th All India Tax Conference of corporate managers and tax executives organised by the Federation of Indian Chambers of Commerce and Industry (Ficci),

For the nine months ending December 31, the government has mopped up Rs 1,14,000 crore in direct and indirect taxes which is 17 per cent higher compared with the corresponding period of the previous year.

The government would look into the issue of corporates earning bumper profits getting away with tax exemptions even while bringing in people in small-time business under the tax net, he indicated.

�We feel that there should be a level-playing field and we would like to see this anomaly addressed,�� Kant said

Divestment target

The government may fail to meet its disinvestment target of Rs 10,000 crore this fiscal, finance minister Yashwant Sinha said at the Ficci conference.

Sinha could not even put an estimate on the amount that will be collected this time. �We are trying to do our best,�� he said.

The finance minister also said the disinvestment in Indian Airlines (IA) and Modern Foods is unlikely to take place this week.

Inaugurating the tax conference, Sinha hinted at a tough budget and said the falling ratio between tax and gross domestic product (GDP) was a matter of concern.

He said the tax-GDP ratio has fallen despite higher tax collections over the years, adversely affecting the confidence of people in economic reforms. 

To reverse this trend, the finance minister suggested a convergence among industry, tax administration, and individual assessees. 

He said economic reforms must address the concern of the poor to avoid facing a backlash from the underprivileged. �We discuss issues on trade and industry. It would appear to the masses that we are concerned only about the elites.��

Sinha suggested a sustained growth rate of eight per cent to resolve the problems of poverty and unemployment. He complimented state governments on implementing uniform floor rates for sales tax

Shareholder vote via Net

The government is considering allowing shareholders of companies to cast their votes through electronic mode for specific purposes, Department of Company Affairs secretary T.S. Krishnamurthy said here today.

�Companies Bill (second amendment) 1999 had proposed postal ballot system. Looking at the change in technology, we can consider voting through electronic mode (ie through internet/e-mail),�� Krishnamurthy said at the Ficci conference. However, he said these changes would be for some specific matters and not for all corporate matters. 

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