Govt blows hot & cold on rate cuts
SAIL may sell 74% in 7 units
Sensex sheds 150 points more
Gilts crash as rate cut hopes evaporate
Moody�s holds out hope of better rating
Start-up process gathers pace at Haldia Petro
ModiLuft to again take off in June
Chambers turn on charm to get Clinton
Foreign Exchange, Bullion, Stock Indices

New Delhi, March 3 
Finance ministry mandarins scrambled to deal with a faux pas perpetrated by minister of state for finance V. Dhanajay Kumar who had told reporters earlier in the day that the Reserve Bank would bring down the Bank Rate to engineer a slide in bank lending rates in an effort to spur investments.

Ministry officials were busy over telephone and fax lines in the evening to clarify to the half a dozen newsmen who had tea with Kumar in the morning that he �had been quoted out of context.�

An official clarification said the minister had said �bank interest rates are within the domain of the Reserve Bank and commercial banks and they are free to take their own decisions.�

Kumar�s gaffe came a day after media reports quoted finance minister Yashwant Sinha as conceding that rate cuts might be tough given the huge levels of government borrowings. Kumar, who is in charge of revenue collection, also contradicted the budget document that was placed just two days ago by saying the February tax collections were now good enough for the government to hope that

the fiscal deficit would be slightly lower than the 5.6 per cent estimated for the current fiscal.

�The Reserve Bank can bring down bank rates to enable commercial banks to reduce lending rates,� Kumar told reporters. The government�s step in cutting the general and public provident funds and other small savings interest rates by one per cent had already created a conducive atmosphere for a general bank rate cut, he added.

The minister said the fiscal deficit will be 0.1 percentage point lower than the projected 5.6 per cent of GDP due to a buoyant 17 per cent revenue growth between April and February 1999-2000.

�I feel the gross fiscal deficit of 5.6 per cent will be down to 5.5 per cent as the revenue collections have touched Rs 1,38,347.01 crore till February this year. This is 17.23 per cent higher than last year�s level,� he said.

�The TDS (tax deducted at source) collections and the advance tax that is due on March 15 will enable the government to reach the revised target set earlier,� he added.

Total direct tax collections between April 1999 and February 2000 has been Rs 39,356.57. crore as against Rs 22,740.88 crore, an increase of 16.64 per cent. Of this, personal income tax collections stood at Rs 18,405.31 crore as compared with Rs 15,195.80 crore during the same period in the last fiscal. Corporation tax collections stood at Rs 20,251.29 crore as compared with Rs 17,418.45 crore during the corresponding period in 1998-99.

Excise collection till end-February was Rs 53,640.30 crore, an increase of 19.29 per cent over the same period last year. Customs collections till February amounted to Rs 42,798.25 crore, a hike of 15.98 per cent.

Kumar discounted reports that the five per cent hike in surcharge on the higher income tax brackets and the cuts in food and fertiliser subsidies would be rolled back.

��I don�t think there is any possibility of rolling back the surcharge or the cuts in subsidies,� Kumar said.

He also said the increase in prices of urea would only work out to 60 paise per kg which would not hit the marginal farmers very dearly.

The guidelines for computing the modvat and cenvat proposed in the budget would be announced soon, he said.    

New Delhi, March 3 
The Steel Authority of India Ltd (SAIL) may divest up to 74 per cent stake in the seven units it is planning to sell off.

Its board will also consider splitting up the steel behemoth into two separate entities � a flat product company and a long product firm � in the second phase of its restructuring.

SAIL chairman Arvind Pande told reporters that the company was willing to �lower its stake to up to 26 per cent. But this is a flexible arrangement and will vary from divestment of one unit to the other.�

The McKinsey prescription of splitting the company would be taken up in the second phase of restructuring he indicated, adding �The government can decide at that stage whether or not it wants to divest its stake in SAlL and to what extent.�

He said SAIL would soon appoint a merchant banker to advise it on a strategy to privatise the Burnpur-based IISCO. Once the tender for IISCO�s divestment to a strategic partner was finalised, TyazpromExport, the Russian engineering giant which has been trying to buy out the plant, would also be allowed to bid, Pande said.

This implies TPE�s last bid to buy out IISCO too has been finally rejected after being kept on the backburner for several years.

The Cabinet had cleared plans for SAIL to disinvest in the Durgapur-based Alloy Steels Plant (ASP), Salem Steel Plant, Visvesvaraya Iron and IISCO. The public sector steel major�s divestment plans in captive power plants at Bokaro, Durgapur and Rourkela, the second oxygen plant at Bhilai, besides a fertiliser plant at Rourkela, have also received the green signal.

SAIL expects to earn about Rs 3,000-3,500 crore from the selloff, which it wants to use in retiring its huge Rs 15,000 crore debt burden. SAIL had a debt-equity ratio of 4.2:1 with loans totalling Rs 20,680 crore. It has since retired Rs 500 crore in old debt by borrowing fresh money, besides which the government wrote off a loan amounting to Rs 5,454 crore.

Pande said the steel-maker planned to shortly borrow another Rs 1,000 crore for which the government had extended a counter guarantee. This too would be used to retire off costly old debt.

Another Rs 1,500 crore too will be borrowed to fund a scheme to voluntarily retire 60,000 out of SAIL�s 1.6 lakh workers over a period of three to five years.

SAIL which was a profitable company till 1997, reported a loss of Rs 1,574 crore in 1998-99. It is expected to notch up a total loss of Rs 5,000 crore by 2002-2003.    

Mumbai, March 3 
The Bombay Stock Exchange (BSE) sensex plunged 150.04 points to 5378.27 in the second straight day of losses as new-economy stocks like infotech surged at the expense of old-economy shares like pharmaceuticals.

Cyclicals went into a free fall while companies like Himachal Futuristic and Global Telesystems hit their eight per cent price caps. Analysts say the decline in the 30-scrip index could have been sharper had the BSE not closed early to accommodate badla trading. The trading hours were reduced because banks will be closed on Saturday on account of Maha Shivaratri.

The losses were deeper on the National Stock Exchange (NSE), where trading continued even after the BSE had closed for the day. Ranbaxy and other pharmaceutical stocks were among those which plumbed their lower-end lower end price bands. Ranbaxy plunged from its over Rs 1,000 valuation to Rs 692.50.

�Every decline is a good buying opportunity. Bargain hunting in value stocks will start next week. If not the FIIs, local institutions will start buying in firms with strong fundamentals. These look very attractive at their current prices,� a dealer with an institution said. Also, there are expectations shares will be warehoused by big brokers on behalf of FIIs.

Earlier in the day, stocks like HDFC, Satyam Computers saw a fair bit of �front running� by brokers who expect the two companies to announce an increase in their FII holdings. Even stock market laggards like IDBI gained as operators impressed by their infotech initiatives picked up its shares. The scrip closed at Rs 55.30, up from Thursday�s Rs 51.25.

However, cement major ACC, embroiled in controversies ever since Gujarat Ambuja acquired a stake in the company, was listless and closed the day at Rs 136.55.    

Mumbai, March 3 
The prices of government securities crashed today following the finance minister Yashwant Sinha�s statement that burgeoning government borrowings may prevent interest rate cuts by the Reserve Bank of India (RBI). With market expectations of a Bank Rate cut evaporating, dealers said the crash in prices of key government securities may continue. The prices of most securities fell by a whopping Rs 1.50-Rs 2. For instance, the 11.83 per cent 2014 paper fell to an intra-day low of Rs 104.85 compared with Rs 108.10 on Thursday. However, gilts recovered a part of their early losses towards the fag end of the session. As a result, the 2014 paper finally closed at Rs 106.10/15.

A dealing room official said the market was disappointed by the finance minister�s statement which belied market expectations � built up by the budget � that there would be a reduction in the Bank Rate. �For a long time, we were looking forward to a cut in interest rates. But that has not happened,� the official added.

Market circles expect gilt prices to decline further when the market opens on Monday. This fear exists despite indications from the minister of state for finance, V Dhananjay Kumar, that the apex bank will bring down the Bank Rate to enable commercial banks cut lending rates, and increase investment.

�Everyone in the market is by now used to hearing about a cut in the Bank Rate. That is not enough. We want that to actually happen,� a senior analyst with a private bank said. The finance minister hiked the government�s borrowing programme for the next fiscal to Rs 1,20,000 crore in the 2000-01 Budget. In the current financial year, Sinha had pegged the borrowing target at Rs 84,000 crore but the actual figure is pegged at more than Rs 1,00,000 crore. The borrowings have increased manifold in spite of reminders from the RBI that the Centre�s ratio of interest payment to revenue receipts has been growing.    

Mumbai, March 3 
Moody�s Investors Service today hinted it may review the positive rating assigned in October 1999 to India, in 12 to 18 months, if the policies pursued by the government are in accordance with its expectations.

Speaking to The Telegraph here today, Moody�s president John Rutherfurd said the recent Union budget was consistent with the positive rating and contained several positive features such as reduction of the government�s stake in nationalised banks, an exit policy in public sector units and increased independence of the Reserve Bank of India (RBI).

Rutherfurd also averred that the present fiscal situation of the country was not that serious and it was in tune with the expectations of the rating agency.

Not denying the possibility of either an upgrade or reaffirmation of the current rating, Rutherfurd said that apart from a general progress in the economy, �overall, the approach of the budget has been realistic and objective and this will find a positive reflection in the rating review in about 12 to 18 months time.�

However, he added that in the coming months, the rating agency will keep a close watch on the progress of the measures announced by the finance minister.

When asked for the rating agency�s views in the event of a rollback of some of the measures, Rutherfurd said, �If the government turns away from these policies, that might cause a reassessment of our views. But we do not expect that to happen.�

On increasing Moody�s stake in Investment Information and Credit Rating Agency (Icra), Rutherfurd said the agency was inclined to increase its stake provided the other investors in Icra divested in its favour or there was a preference issue.

�We will be discussing with our partners on a range of issues at a future date,� Rutherfurd said.

Regarding the rating of Indian banks, Julia D Turner, managing director Asia Pacific at Moody�s, said a review will be undertaken after banks announce their annual results.    

Calcutta, March 3 
The process of commissioning Haldia Petrochemicals (HPL) picked up pace today when the first block of naphtha was fed into a key cracker unit to charge the plant.

�The unit was supposed to be charged on March 2. But, it was delayed because we wanted to stabilise the supply of power and steam. Things are under control now, and expect to charge the plant today. We would like to do it as early as possible because a day�s delay in starting production costs us Rs 3 crore,� senior Haldia Petro officials said. Later, an official spokesperson confirmed the move and said it was part of the commissioning process that started on February 21.

Officials say pyrolysis gasolene will be produced within the next 24 hours, and propylene in 48 hours, both of which will be stored in tanks. ABB Lummus Global Inc. has provided the necessary technology for the naphtha cracker plant.

The fifth day will see the production of ethylene. In the subsequent days, Haldia Petro will make HDPE and LLDPE. If things go well, the project should start commercial production in 10-15 days. The entire management is now in Haldia to monitor the operation.

The technical hiccups � something HPL officials called teething problems � have slowed the process of commissioning but officials these are not unusual for a plant of this capacity.

The Haldia Petro project includes a 116-MW combined cycle, a naphtha-based captive power plant and a anitrogen unit to meet the requirement of steam, power and nitrogen. These plants have been set up on a build-own-operate basis. L&T and Praxair are the EPC contractors for the power plant and nitrogen unit respectively. While Montell/Tecnimont of Italy has provided the technology for LLDPE, Mitsui/Tecnimont have done so for HDPE; the technology for the pyrolysis gasolene hydrogenation has been provided by IFP of France.    

Calcutta, March 3 
ModiLuft Ltd will hit the skies again by June 2000. The private airline promoted by S. K. Modi, which was grounded some years back, will resume air transport services in the domestic sector after acquiring the relevant clearances. It has chalked out a revival plan which envisages a funding requirement of $ 35 million for the induction of 12 to 18 aircraft over a period of two years.

Modiluft will import Boeing 737-400 aircraft for domestic services. After receiving the government�s permission, the company has already initiated the process of identifying and inducting suitable aircraft.

The company has also received a renewal of the no-objection certificate from the ministry of civil aviation, to operate scheduled air transport services in the domestic sector.

Modiluft is being jointly advised by Khandwala Securities and Millennium Capital Management in the restructuring and execution of the revival plan and the syndication of financing.    

New Delhi, March 3 
When President Bill Clinton comes calling this month, India�s top trade bodies will be racing against each other under flash-bulbs and whirring cameras to decide who wins a place in the mind of the world�s most powerful man.

To make sure that they get a few minutes from the US President, apex chambers have already started intensive lobbying, and there are growing indications the man who sways global business like no other politician in the world, may oblige.

According to a tentative programme, Ficci is likely to lunch with Clinton in Mumbai while the Confederation of Indian Industry (CII) will team up with laptop Chandrababu Naidu to host another lunch for him in silicon-crusted Hyderabad.

�CII�s rendezvous with Clinton is almost certain in Hydrabad. We will host the President in partnership with the Andhra Pradesh government. The meeting will focus on the energy sector and setting up of a green business centre,� a CII official said.

Ficci, on the other hand, will have Clinton wax eloquent on the hottest theme in India Inc � e-commerce and information technology. The chamber will ink with the US-India Business Council (USIBC) an understanding on the protocol for knowledge-based products and services in the President�s presence.

The agreement will be signed between Ficci president G P Goenka and USIBC president Dean O� Hare, who is also the CEO of Chubb Corporation. Sources say the MoU will contain a 12-month schedule on co-operation between the two countries.

Not to be left behind in the PR offensive, Assocham secretary general Jayant Bhuyan will meet Ficci secretary general, Amit Mitra early next week. Assocham is part of the joint business council.

The mood in Ficci is optimistic. Hectic lobbying is on to organise the mega event. Industry sources say Mitra has already made a preliminary trip to Mumbai.

The chamber, with a desi hue, was initially apprehensive that it may be overlooked to the benefit of CII which has an impressive infrastructure in place.

For instance, it has a highly networked office in Washington with a high-profile representative, Kiran Pasricha, who is well wired with all those who matter in the US.

As a precursor to Clinton�s visit, CII had recently hosted Larry Summers, the US treasury secretary, in Mumbai while he was on his way to the G-8 finance ministers� summit in Japan. Many say the chamber put up a splendid show given that it had only a week to prepare for it. Proof of this lies in the fact that it got around top 100 CEOs of India to lend their ears to Summers.

But, for Ficci, a friendly government at Centre means it will get adequate exposure and mileage while Clinton is around. Sources say the US President is scheduled to address two business meetings in India.

However, none of it will be in Delhi, where he will spend most of his time in political dialogues and customary visits to Rajghat and Shantivan.    

Foreign Exchange
US $1	Rs 43.58	HK $1	Rs. 5.55*
UK �1	Rs 68.85	SW Fr 1	Rs. 25.80
Euro	Rs 42.13	Sing $1	Rs. 25.00
Yen 100	Rs 40.52	Aus $1	Rs. 26.20*
*SBI TC buying rates; others are forex market closing rates


Calcutta		Bombay
Gold Std (10gm)	Rs 4630	Gold Std (10 gm)	Rs 4580
Gold 22 carat	Rs 4370	Gold 22 carat	Rs 4235
Silver bar (Kg)	Rs 7900	Silver (Kg)	Rs 8020
Silver portion	Rs 8000	Silver portion	Rs 8025

Stock Indices

Sensex	5378.27	-150.04
BSE-100	3313.18	-137.04
S&P CNX Nifty	1656.00	-40.55
Calcutta	127.90	-6.43
Skindia GDR	NA	NA

Maintained by Web Development Company