Three HFC units face closure
Global Tele weighs buyout of group firm
Uco revises recast plan at govt behest
Expenditure panel mum on proposed food subsidy cut
Max picks up 71% in HealthScribe
Gramophone net up 53% at Rs 6 crore
States� revenue hopes dashed
Foreign Exchange, Bullion, Stock Indices

New Delhi, July 10 
The Cabinet will take up for discussion tomorrow the closure of Hindustan Fertiliser�s (HFC) plants at Durgapur, Haldia and Barauni in spite of stiff opposition from railway minister Mamata Banerjee.

Mamata has, over the past week, voiced her displeasure to her colleagues in the Cabinet and is expected to renew her opposition to the closure at Tuesday�s meeting. The railway minister has shot off a letter to the Prime Minister giving vent to her views on the issue. The letter has been forwarded to finance minister Yashwant Sinha.

The Trinamool supremo is peeved because the Cabinet has not revoked an earlier order to close six sick state-owned companies in West Bengal, and will pit herself strongly against this one.

Mamata knows more closures of public sector units in West Bengal will cost her political support and help her rival, the Left Front, to score brownie points ahead of next year�s assembly elections.

Mamata expects her Cabinet colleagues from Bihar, especially communications minister Ram Vilas Paswan, to rally behind her in opposing the move as one of Hind Fertiliser�s plants identified for closure is in Barauni, in North Bihar.

To sugar-coat the bitter pill, the Cabinet will also try to clear a demand made by PSU employees that their wage revisions be taken up every five years, instead of ten. The move actually helps the government as the five-year revision will not neutralise the inflation-linked dearness allowance totally � something the 10-year pay hikes used to do.

The Cabinet, however, is determined to stand up to Bengal�s stormy petrel. �There is no question of backing down on this. These units are loss making. What�s more, naphtha, the raw material used by these plants, is turning dearer,� top finance ministry officials working on the decision said.

Besides, Prime Minister Atal Behari Vajpayee also needs to show that he is in command and can resist the pressure of his allies in taking tough decisions. Unfortunately, this has not been seen often. His inability to stand firm was exposed before his Cabinet colleagues when he bowed down to a demand from Telegu Desam leader Chandrababu Naidu last week that the national water policy be scrapped.

The new national water policy, which was supposed to have been unveiled last week, would have stripped states of the powers over planning, utilisation and dispute resolution of inter-state water resources, and handed these to the Centre. Naidu, however, made it clear that this was something his state would never agree to, forcing the Prime Minister to backtrack on his own decision. The policy went into limbo when he announced in his opening remarks before an inter-state meet on the issue that it would be referred to a sub-committee.

The government will have to write off Rs 1,423 crore to shut down HFCL�s Haldia plant, Rs 111 crore to close down the Durgapur factory and Rs 239 crore to wind up the Barauni unit.

What is galling for Mamata, is the Cabinet�s inclination to clear the revival of the company�s Namrup fertiliser plant in Assam. This is expected to be done on the ground that the closure of a company in the insurgency-ridden state would send the wrong political signals.    

Mumbai, July 10 
Global Telesytems (GTL) will hold a board meeting on July 18 to consider a plan to either acquire or merge group company Global Electronic Commerce Services (GECS) with itself.

In a notice sent to stock exchanges today, the company said its board will also consider the appointment of independent valuers, advisors to deal with regulatory issues and investment bankers to tender advice on strategic issues.

The move to either acquire or merge GECS � a company which provides e-commerce solutions � with GTL comes after a series of moves to transfer the latter�s stake (GTL held around 13 per cent stake in GECS earlier) to a group holding company.

In December last year, GTL had announced that it would sell the stake to a consortium of investors and the Rs 180-250 crore that was expected to be raised in the process would be utilised to retire GTL�s debts estimated at Rs 160 crore.

Of GECS� Rs 160-crore paid-up equity, GTL held 13 per cent, the promoters controlled 40 per cent while the remaining 47 per cent was owned by an overseas investor.

Global Telesystems had said it would be divesting 4.6 to 5.5 per cent of GECS� paid-up equity and that the base price for the divestment would be fixed around Rs 200 per share. GECS, according to some estimates, had been valued at Rs 5,000 crore.

Later, Morgan Stanley Mutual Fund and India Magnum Fund picked up 1.3 per cent in GECS.    

Calcutta, July 10 
The city-based Uco Bank has sent a revised restructuring plan to the Union finance ministry for its approval.

During a recent meeting with the bank management to discuss the medium-term restructuring plan (2000-03) of the bank, the ministry had asked the Uco brass to finetune the proposals, envisaging lower non-performing assets and a higher deposit growth.

Talking to The Telegraph, V.P. Shetty executive director of Uco Bank said, �The banking division of the finance ministry has asked for certain changes in our three-year restructuring plan. We have sent the revised restructuring plan to the ministry today with the necessary changes.�

Shetty said, �The ministry is expected to give a go-ahead to the revised plan soon.�

During the stock-taking, the finance ministry agreed to provide Uco with a recapitalisation fund of Rs 250 crore for the 2000-01 fiscal. The ministry has also agreed to the bank�s plan to recruit 1,500 new people.

The bank has set a target of lowering the NPA level to five per cent by 2003. �The ministry has said that the NPAs should be reduced to four per cent of the net advances.�

The gross NPAs of the bank now stand at Rs 1650 crore while net NPAs are at a little below Rs 700 crore. According to the bank�s mid-term plan, gross NPAs will come down to Rs 1352 crore by 2003, while net NPAs will be at Rs 629 crore.

The bank introduced the revised NPA management policy during the last financial year and held 914 recovery camps. The total NPAs recovered amounted to Rs 192 crore in 1999-2000, as against Rs 149 crore in the previous year. Net NPAs to net advances has come down to 8.75 per cent as against 10.83 per cent in the previous year. The absolute level of NPAs has been reduced by Rs 64.77 crore.

Further, according to the restructuring plan, net advances of the bank should be Rs 13,254 crore by the end of 2003.

The ministry has also asked the bank to achieve a deposit growth of 16 per cent by the end of 2003. At present, the bank has a deposit growth of 13 per cent.

The bank, which registered a net profit of Rs 37 crore for the year ending March 31, 2000, has submitted a five-pronged restructuring plan to the government.    

New Delhi, July 10 
The Expenditure Reforms Commission today submitted its first report on rationalisation and maximisation of food subsidy to Union finance minister Yashwant Sinha.

Food subsidy accounts for over one per cent of the gross domestic product. Chairman of the Expenditure Reforms Commission K. P. Geethakrishnan, however, refused to give details of how much cut has been recommended in the subsidy bill. The details will be made public in the next 10-15 days after the government has seen it.

The government has increased the ration prices of foodgrains to bring down the subsidy bill.

Speaking to reporters after presenting the report, Geethakrishnan said the next report would deal with fertiliser subsidy and roadmap for downsizing about three to four government departments and ministry. This would be submitted to the finance ministry by the month-end.

Geethikrashnan declined to comment whether downsizing of the information and broadcasting ministry would be contained in the next report. �All I can say is, it will deal with fertiliser subsidy and downsizing three or five ministries.�

Fertiliser subsidy accounts for 1 per cent of the gross domestic product and both merit and non-merit subsidies together account for nearly 14 per cent of gross domestic product resulting in a drain on government resources.

He, however, said that the first report did not deal with downsizing of the government. In all, the commission has been mandated to study the possibility of downsizing 15 to 20 ministries. �We are interacting with the various ministries to study this aspect,� he said.

Geethakrishnan said the first report would also be put on the commission�s website for public debate. The Expenditure Reforms Commission was constituted in February to find a solution to the process of downsizing of government in a systematic way.

He said though the commission is required to submit its final report within a period of one year to facilitate quick decision making, it has been directed to send recommendations to the government on a quarterly basis.

Setting up of the Expenditure Reforms Commission was part of this year�s Union budget announcement.    

Calcutta, July 10 
Max India Ltd today acquired 71.4 per cent of HealthScribe India Pvt Ltd, a subsidiary of the leading medical transcription company HealthScribe Inc. Max India will invest $ 8.5 million for the equity stake.

With this investment, Max will enter the infotech-enabled services sector which forms an integral part of the company�s information technology growth strategy.

Announcing the partnership with HealthScribe, Max India managing director Vivek Jetley said, �We are entering into this sector (infotech-enabled services) with the acquisition of a majority interest in HealthScribe India. Our partnership with HealthScribe Inc will enable us to leverage their global leadership and expand the Indian medical transcription business.�

David E Ehrhardt, chief financial officer, HealthScribe Inc, said, �HealthScribe Inc will increase the marketing of these services (medical transcription) in America to further expand its business worldwide in conjunction with its new partnership with Max India.�

HealthScribe Inc has guaranteed business to the Indian joint venture till 2004. Currently HealthScribe has 500 medical transcriptionists and the new joint venture plans to employ and train 5000 medical transcriptionists by 2004.

The joint venture will also have unrestricted use of HealthScribe Inc�s proprietary software technology for medical transcription. HealthScribe Inc will be responsible for the marketing of the joint venture�s services and customer-related activities in the USA.

Apart from this, Max has firmed up plans to invest $ 11 million in two American companies, AltaCast and MindCrossing.    

Calcutta, July 10 
The Gramophone Company of India Ltd (GCIL) has posted a 53 per cent growth in its net profit to Rs 6.01 crore in 1999-2000 from Rs 4.23 crore in the previous year.

The company�s turnover in the fiscal stood at Rs 146.09 crore, a rise of 19 per cent over the previous year�s Rs 123.08 crore.

The board of directors of the company which met here today to finalise the accounts, has recommended a 10 per cent final dividend in addition to its interim dividend of 20 per cent.

Saregama plc, the UK-based subsidiary of GCIL, registered a turnover of � 3.04 million. The company has also set up a subsidiary in Mauritius � RPG Global Music � to handle its international business in the eastern hemisphere while Saregama will look after the business in the western hemisphere.

GCIL has also finalised its first quarter results, registering a growth of 50 per cent in turnover to Rs 40.39 crore from Rs 26.81 crore during the previous corresponding period.

The profit before tax stood at Rs 4.02 crore as against Rs 30 lakh during the same period last year. A company release mentioned that cassette sales have grown by 69 per cent during the first quarter while CD sales registered a growth of 68 per cent.    

New Delhi, July 10 
Most states will not get arrears under the alternate tax-devolution scheme which has come into force with effect from April 1996.

The exceptions are Maharashtra, Gujarat, Punjab and Tamil Nadu. Maharashtra is scheduled to get Rs 345.10 crore for the four-year period beginning 1996-97 while Punjab should receive Rs 120 crore.

According to finance ministry sources, all states have to pay back the central government Rs 1,354.03 crore as they have already drawn more than their entitlements.

States have been expecting a significant amount of funds from the Centre by way of arrears as a result of the implementation of the alternate tax-devolution scheme recommended by the Tenth Finance Commission.

Under the scheme, states would get 29 per cent of all taxes pooled. However, the proposal could be implemented only after a constitutional amendment, which was pushed through this year.

Under the normal scheme which was in operation, states were entitled to a share of 77.5 per cent in income taxes and 47.5 per cent in central excise collections. The new devolution package scheme is considered better for states since they would get a marginally higher share.

The Centre has now decided that the Rs 7,500 crore transferred to states as their share in the Voluntary Disclosure of Income Scheme (VDIS) of 1996 should be adjusted against the arrears. The revenue collections during 1997-98 and 1998-99 were far below the budget estimates. But states received their share � on a monthly basis � based on budget estimates.

Bihar tops the list with negative arrears of Rs 426.34 crore followed by Uttar Pradesh with Rs 352.01 crore. However, West Bengal has negative arrears of only Rs 17.81 crore.

The finance ministry is not expecting the Eleventh Finance Commission to make any fresh recommendations other than those which have been proposed in its interim report.

The most important aspect of the interim report�s recommendations were a revenue-gap grant of Rs 11,000 crore. The commission, however, suggested that the grants would taper off in the coming years.    

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