Rs 1300-cr Sankhya Vahini not to be dumped: Mahaja
Tug of war over JK Corp revamp
Ircon signs counter-trade deal with Malaysia
New Economy set for a roller-coaster ride

New Delhi, April 15 
Sankhya Vahini, the controversial Rs 1,300 crore telecom project that seeks to create a high-speed data communications network across the country, will not be scrapped . However, a spat between the department of telecom services and the ministry of information technology is likely to delay the project.

�The Sankhya Vahini project was cleared by the cabinet and no minister or ministry can object to a decision by the cabinet. Neither I nor my ministry have asked for the scrapping of the project. To the best of my knowledge, the project has not been reviewed,� said minister for information technology and parliamentary affairs Pramod Mahajan.

The controversy over the project burst into the open following reports that the ministry of information technology had charged the department of telecommunications (DoT) with misleading the cabinet about the shareholding pattern of IUNet Inc, which is implementing the project. IUNet is a wholly-owned subsidiary of GUNet which, in turn, is a 100 per cent subsidiary of Carnegie Mellon University.

Media reports said the ministry has demanded competitive bidding for the selection of technologies and equipment supplies for the project.

Mahajan refused to discuss differences over the project that were aired by the allies during the cabinet meeting. �I am under an oath of secrecy. Issues debated in the cabinet cannot be made public,� said Mahajan.

The minister said the cabinet had taken into account all the aspects of the project, including security factors.

The information technology minister denied having written to the cabinet demanding either the scrapping or review of the Sankhya Vahini project.

DoT sources said, �The problem is not with the project. The problem is who will implement the project �- DTS or MIT? The agreement between DoT and IUNet Inc clearly shows that DoT will have to fund the whole project which will be managed by IUNet.�

Mahajan said the information technology Bill, which is pending before the standing committee of parliament, is likely to be passed and even notified in the first week of June.

�Even if the standing committee gives us the recommendations by April 30, we will be able to pass the bill by May 17,�� the minister said.

Mahajan hoped that the Union finance ministry would consider the software industry�s demand for a tax holiday for technology parks and the removal of double taxation on employee stock option schemes (ESOPs).

This year�s budget proposed that companies which registered under the Software Technology Parks of India (STPI) scheme after April 1, 2000 would not be eligible for a 10-year tax holiday.

The software industry has also been demanding that ESOPs be taxed only at the time of exercising the options. Currently, they are also taxed at the time the employee receives them from the company.

�I have already taken up both these issues with the finance ministry and hope for a positive response when the finance bill is passed,� Mahajan said.

Mahajan today launched a toll free anti piracy hotline � 1-600-334455 � supported by Nasscom.    

New Delhi, April 15 
The promoters of JK Corp and the financial institutions (FIs) on the company�s board, are locked in a tussle over the company�s restructuring programme.

The loss-making company�s restructuring proposal has been hanging fire for more than a year. The company had roped in Dimensions Corporate Finance Services Pvt Ltd � a city based consultancy � as negotiations and adjustments between the FIs and the promoters failed during the first round of restructuring negotiations. However, the FIs are unwilling to buy the proposal and are contemplating preparing a turnaround package themselves.

The company owes some Rs 1,151 crore of secured and unsecured loans to the FIs.

Dimensions had put forward a restructuring proposal which suggested sale of the paper business to group company Central Pulp and Paper Mills as well as merger of JK Udaipur Udyog with JK Corp making it a purely cement company.

But the FIs have been giving alternative restructuring suggestions to the promoters, particularly on the cement division, which were not acceptable to the company. At one point the FIs had even asked the company to offload about 49 per cent stake in its cement company in their favour.

Later, the FIs also suggested that the company sell off the remaining 51 per cent in the cement division to infuse more funds into the company. Sources point out if 51 per cent in the cement division is hived off, then JK Corp will be left with nothing. The loss-making polyester division has already been hived off to Reliance.

The FIs have a 35 per cent stake in the company while the promoters have a 48 per cent stake. The rest is with the public and in the form of GDRs.    

New Delhi, April 15 
State-owned Ircon International Limited and Malaysian Railways have signed a counter-trade pact under which the former will construct 31.5 km rail line in Malaysia for $ 18 million tonnes of palm oil.

The two countries are likely to sign a similar pact for petroleum products.

Minister of state for railways Bangaru Laxman was recently in Malaysia to sign the agreement for the construction of 31.5-km long railway line to link the existing KTMB (Malaysian Railway) trunk route to the new port of Tanjung Pelepas in the southern state of Johor.

Laxman also held discussions with the Malaysian transport minister Ling Liong Sik.

The Rs 527 crore project, to be completed by January 2002, will be executed on a counter-trade basis.

Under this agreement, Ircon will receive palm oil products for the entire contract value of the project. However, the products will have to be brought to India by the railways at its own cost.

Ircon has already completed and commissioned 11 major railway projects worth about Rs 750 crore.

Ircon International�s managing director Aruna Prasada said, �Currently we have a fleet of 25 locomotives in Malaysia working for KTM Berhad. This has been extended to Malaysian Railway on a wet lease basis.

The contract which expired last month is expected to be extended by another two years. Another eight locomotives are expected to be soon hired by KTMB management.�

At present, Ircon is engaged in the installation of track and supply of associated ancillary of track materials, including testing, commissioning and maintenance, for the Kuala Lumpur railway station and related infrastructure works.

�We bagged the project in March 1999 and the project is expected to be completed by the year end,� Prasada said.    

Bill Emmott is a man of several parts: he is a writer of three serious books on Japan and its considerable influence on the world, a die-hard cricket enthusiast (though deeply prejudiced against one-day cricket; �Cronje was such an idiot�), an indefatigable traveller, and a man with �a lot of country pursuits�. He is also the Editor-in-chief of The Economist.

In Calcutta earlier this week to share his thoughts with a group of young industrialists about the direction that the New Economy would take, it seemed to be the most obvious question to pop: which way is it headed?

�I think it is headed for quite a roller-coaster ride. The nature of this technology-driven investment is that it is going to be a boom-bust cycle,� says Emmott whose stamping ground has ranged from Brussels to Tokyo � 20 years of witnessing and writing about events that have shaped the world, but never taking a byline because that�s the editorial policy of The Economist.

�A lot of people make the mistake of thinking that because we�ve got a wave of technological innovation in the world that must mean it will be smooth sailing for the future. But history tells us that every technological wave of innovation � railways or electricity in the nineteenth century, or the motor car in the twentieth century � has always been a volatile period,� says Emmott, who studied politics, philosophy and economics at Magdalen College, Oxford before straying into journalism.

The blowout in Nasdaq-listed techie stocks that began at the start of this month knocked some of the stuffing out of the hubris. Emmott agrees with Securities and Exchange Commission chief Arthur Levitt�s recent comment that there�s a �casino mentality� driving the market. �People are trying to invest in hopes and dreams and wishes and some of them are going to be disappointed.... I think you can have a portfolio approach where you invest in a very wide range of dot.coms. Then probably it�s okay. Because then your three or four huge winners will pay for your 97 big losers. If you are a small investor, or somebody who is really trying to place their bets in a more focused way, you�re bound to lose your shirt. You may be lucky for a little while, but then you�re going to be cleaned out,� he says.

The talk then turns to the problem with making a proper evaluation of a stock. Contrary to popular perception, Emmott still believes its a P/E (price-earnings) game. �However, if you have a short time perspective, then you can�t use fundamental price-earnings type of valuation methods. Then you�re basically making a guess on momentum, a guess on the euphoria and the optimism of the market and then it�s not really a valuation thing; it�s a psychological game,� says Emmott

In the early days of a technological innovation, investors start to look for proxy indicators of future profit: in the era, they have started keeping watch on the number of eyeballs that a site gets every day or, perhaps, the costs of acquiring a customer. �They hope that those indicators will then tell you about how they are going to turn these customers into sources of profit,� says Emmott.

If you�re an investor, the B2B (business-to-business) part of the rat-pack is the place to look when cherry-picking stocks for your portfolio. That�s because they are much more conventional businesses in a way. �The start-up costs should not be so high and the business model should grow faster,� says Emmott.

�But it seems to me that in the case of e-commerce sites, you�re really talking about seven years � which after all is magazine payoff time. In the magazine business, after launch, you don�t hope to be in profit for five years at the very least. So that�s quite conventional,� he adds.

What about the traditional brick-and-mortar companies? Emmott sees the distinctions between the New Economy and Old Economy companies blurring � certainly five years down the road � as more and more of them metamorphose into click-and-mortar outfits. Some sectors like banking and insurance may move totally on to the internet, but much of that will be shaped by consumer preferences on how they want to do their transactions.

He�s got a dire forecast for publishing businesses: �There�s no future for a company that is only in print. We all have to exploit the power of electronic distribution.� The Economist has a circulation of 750,000 worldwide and 800,000 registered users on the Net (�that�s 1.6 million eyeballs,� says Emmott with a chuckle) which translates into a weekly circulation equivalent of a little less than 100,000. His big ambition is to ratchet up The Economist�s circulation to 1 million each on both sides of the divide � print and electronic circulation � in five to 10 years� time.

Emmott reckons he�ll continue to be a writer of books after he�s through with his stint as editor of The Economist. He�s got a book due out in the autumn of next year which will be a fleshed-out version of a 30-page article he wrote for the magazine last September. It�s tentatively called 2021 vision: 20th century lessons for the 21st century.

Any thoughts about Calcutta which he�s visiting for the second time? There�s a pregnant pause � but he doesn�t pull his punches: �I think Calcutta is a city with a lot of frustrated potential. It could be a more vibrant and prosperous city than it is. It has a lot of potential waiting to be unleashed � which has been somewhat throttled by Marxist party rule over the past two decades.�    


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