Enron slaps arbitration notices on Reliance, ONGC
Gujarat Ambuja net leaps to Rs 428 cr
Cellular firms allowed to alter equity pattern
MTNL cellular services by Nov
Court wants more details on tax waiver for select FIIs
TEC overcomes merger hurdle
Sparks fly at Century meeting
Cos Bill changes put on hold
Foreign Exchange, Bullion, Stock Indices

New Delhi, Aug 9: 
Enron Oil and Gas Authority of India, the operators of oil and gas fields such as Panna, Mukta and Tapti, have served notices of arbitration on Reliance Industries and Oil and Natural Gas Corporation (ONGC).

The move was triggered by the alleged failure on the part of the partners to honour a cash call. Enron, Reliance and ONGC are members of the consortium developing these proven fields. ONGC holds 40 per cent, while Enron and Reliance hold 30 per cent each. However, it is Enron which has been calling the shots by virtue of being the operator.

Of late, both ONGC and Reliance began to question the cost estimates worked out by Enron. The three companies are required to contribute to the expenses proportionate to their equity stake. There were instances when these partners considered Enron�s estimates highly inflated. Their refusal to contribute on the basis of estimates worked out by Enron has prompted the US energy giant to issue a notice of arbitration.

Sources say Enron and Reliance have sharp differences over the development plan for the Tapti field. ONGC also differed with Enron ,but is now, more or less, reconciled to the plan.

The gas transportation charge is another bone of contention among partners. The offshore gas produced by the consortium is transported through a pipeline owned by ONGC. The carrying charges for the gas have not yet been worked out. As an interim arrangement, ONGC is charging 18 cents per million btu. Enron has questioned this rate, and has been asking the government to work out a mutually acceptable one. It appears that the government officials would prefer to keep the issue alive before an arbitrator so that the award would not be questioned either by the CBI or the CAG.

The point of gas delivery is also the subject of a dispute. Gas Authority of India will pay only if the gas is bought onshore. Enron argues that the point of delivery is offshore.

The Enron-Reliance consortium was awarded these fields for development by the Narasimha Rao government under a World Bank-inspired privatisation programme. These fields were discovered by ONGC. The award of these fields is still mired in controversy, and a public interest litigation is before the Supreme Court. The reserves of these fields were found to be much higher than ONGC�s estimates.    

Mumbai, Aug 9: 
Extra-ordinary income came as an unexpected bonus for cement major Gujarat Ambuja Cements Ltd (GACL), which posted a huge spurt in net profit at Rs 428.16 crore for the financial year ended June 30 2000, as compared with Rs 151 crore in the previous year.

The company explained that while it earned a profit of Rs 174.56 crore from its normal business activities, the main prop for the record performance was the extra-ordinary income of Rs 253.60 crore (net of the Rs 28 crore tax paid on the profit).

It also announced a total dividend of 40 per cent (including an interim of 25 per cent) on enlarged capital due to issuance of bonus shares (1:1) as against 70 per cent paid in the previous year.

The company said that the performance should be viewed in the light of the fact that the year under review was one of the most difficult years for the Indian cement industry.

The extraordinary profit was attributed to the sale of shares of Ambuja Eastern which netted the company Rs 249.09 crore and proceeds from the sale of Hometrust Finance which brought in Rs 33 crore.

�Though the cement industry witnessed a good growth in demand during 1999-2000 of 15 per cent, prices were down for most of the year. Cement prices reached low levels during April-June 2000 largely on account of drought conditions prevailing in many parts of the country,� the company said.

The drought conditions also affected the company in its Gujarat market.    

New Delhi, Aug 9: 
The Cabinet has allowed private telecom service providers to restructure their existing equity, permitted paging operators to migrate from licence fee regime to a revenue-sharing system and private internet service providers to sell bandwidth to infotech and telecom companies.

Radio paging firms will be free to migrate from a licence fee regime to a revenue-sharing system from August 1.

Basic fixed line service providers will now share revenues with paging companies on calls made through their network. The Telecom Regulatory Authority of India (Trai) will fix the share. The Indian Paging Services Association (IPSA) had proposed that each paging call be calculated as two calls (of three minutes each) and the revenue could be divided between them in the ratio of 50:50. The licence fee under migration package for city and state circle paging operators will be 5 per cent of their gross revenues.

�The 5 per cent revenue share for paging companies in city circles has been finalised. However, the 5 per cent revenue share for paging companies in state circles is an interim arrangement. The final share will be recommended by the Telecom Regulatory Authority of India,� parliamentary affairs minister Pramod Mahajan said here today.

Private telecom companies can change their equity structures by acquiring foreign stake or switching partners. Under the guidelines cleared, Indian companies have been allowed to acquire the shareholding of their foreign partners in telecom ventures. They can also replace their existing foreign partner with another one, with equal experience and standing. However, this will have to be approved by the department of telecommunications (DoT), Mahajan said.

Further, transfer of equity between existing Indian promoters has been be allowed, but there is a condition that the Indian partner must hold the existing shareholding for not less than 5 years from the date of the licence agreement.    

New Delhi, Aug 9: 
The communications ministry today decided to allow MTNL to kick off its cellular service by November and the department of telecom operations to launch its pilot cellular phone project in West Bengal and Bihar within the next two months.

The decision was taken by communication minister Ram Vilas Paswan at a meeting held with top telecom officials. At a separate meet, the minister also decided to hike the rebate given to telephone subscribers using their own instruments and to replace about 2 lakh kms of old telephone cables using paper cores with jelly filled or optical fibre cables within a span of three years.    

New Delhi, Aug 9: 
Not satisfied with the information provided by the Central Board of Direct Taxes (CBDT) on the tax exemption granted to foreign institutional investors (FIIs) registered in Mauritius, the Delhi high court today asked the income tax department to furnish more details on the issue.

The CBDT was asked to file another affidavit by a division bench comprising Chief Justice Arijit Passayat and Justice D. K. Jain following a counter-affidavit filed by Azadi Bachao Andolan, an NGO. It had challenged the CBDT circular issued in May which had restrained the income tax department from taking action against some foreign funds.

Azadi Bachao Andolan (ABA) has claimed that the income tax department had come to the conclusion that some FIIs had registered themselves in Mauritius to evade taxes under the Double Taxation Avoidance Convention.

�These conduit companies are registered as overseas subsidiaries in Mauritius,� the NGO said. It added that the income tax department had held that such FIIs could neither acquire any property in that country nor could raise funds, or conduct any transactions with the residents there.

The CBDT, in its affidavit, had said its circular was issued to clear confusion on the tax treaty with Mauritius. This happened because the income tax assessing officers had �erroneously� invoked Article 4.3 of the treaty.

The brouhaha over the way Mauritius-based FIIs would be treated had caused a collapse in the stock markets early this year. The CBDT had then clarified that the capital gains by FIIs who hold a certificate of residence from the Mauritius government, would be taxed only in that country.

The government also said the determination of tax liability on dividend income, the residential status of an investor from Mauritius would be accepted on the basis of the certificate of residence issued by the Mauritius government.    

Mumbai, Aug 9: 
The merger of the three Tata Electric Companies is expected to sail through despite a section of the minority shareholders voicing their misgivings on the merger ratio, which they claimed was skewed in favour of Tata Power Company Ltd.

The merger resolution is expected to be passed as local institutional shareholders threw their weight behind the management. A large number of the disgruntled minority shareholders were from Tata Hydro and Andhra Valley, who are slated to get four shares of Tata Power for every five shares held. These shareholders were asking for a ratio of 1:1.

The triple extra-ordinary general meetings (EGM) of the three Tata Electric Companies, namely Tata Power, Tata Hydro and Andhra Electric, were conducted back-to-back on the directions of the Mumbai high court.

TEC chairman Ratan Tata took pains to explain to shareholders the fairness of the valuation.

�Majority of the business assets are with Tata Power,� he said, adding, �Individually the companies will be weak and vulnerable to a take-over.� �The methodology and weightage are as per the Supreme Court ruling,� he reiterated at the three meetings.

Later, as shareholders continued to vent their ire over the merger ratio, Tata requested Y H Malegam, who headed the independent valuation team to explain the finer points of the valuation exercise.

Ratan Tata said the Tatas will hold around 25 per cent of the merged entity while local institutions will hold a 27 per cent stake in the new entity. �Our endeavour always has been to reach the threshold level of a 26 per cent stake in all our companies. We will increase our stake through the creeping acquisition depending on the situation.�

Talking about future plans, Tata said while Tata Power will grow in the power sector it will also engage itself in the new economy sector by creating optic fibre networks, getting into long distance telephony and providing bandwidth.    

Mumbai, Aug 9: 
Angry shareholders of Century Textiles and Industries today forced a poll on eight of the 11 resolutions, one of which was related to re-appointment of the Birla triumvirate in key slots � B K Birla as the chairman, and S K Birla and C K Birla as directors.

The shareholders, not strong in number but obstreperous enough to turn today�s annual general meeting into a stormy affair, wanted the company to come out with a buyback offer to contain the decline in market capitalisation.

Despite repeated assurances from S K Birla, who was chairing the meeting, that he would put the buyback proposal before the board, the shareholders were not satisfied. They pointed out the fact that a market cap of Rs 300 crore for a company with assets of Rs 2,500 crore was a cause for concern.

�It will be considered by the board and the point will be discussed and examined in all its dimensions,� Birla assured them.

The shareholders want Century Textiles to use the money raised from the sale of its Manikgarh cement plant for the share buyback They demanded that the company buy back shares at Rs 90 per share, a price they argued would serve as a floor for the company�s scrip in the stock market.

The other resolutions on which a voting was forced related to the adoption of audited balance sheet, dividend payments and the appointment of auditors.

The poll will be held tomorrow. However, the crucial resolution seeking approval for the sale of the company�s Manikgarh cement plant was passed.

Birla initially said proceeds from the sale of the unit will be used to repay the Rs 1,400-crore debt the company owes the financial institutions, but later agreed that the board will decide whether it should be used for buyback of shares.

Another shareholder questioned Century Textiles� rationale in retaining its cement business, and asked the company to follow the example of Tisco and Raymond Synthetics, which had sold off their cement units to French cement giant Lafarge.

Earlier, referring to the good results for 1999-2000, Birla said his company was engaged in a rebuilding exercise trying to bounce back into the black. He added that while the pulp and paper, denim divisions were fully stabilised, Century was only facing difficulties in the rayon business, where international prices had declined in the recent past.

Birla hinted that Century may pull out of shipping, but made it clear that no decision on the issue had been taken till now. The company, he said, was already following a policy of selling old ships and had, till date, sold around 8 ships.

Therefore, the core areas for the company will include textiles, cement, rayon, pulp and paper. Birla also denied that Century was in discussions with the A V Birla group to sell one of its cement companies. There were no plans to sell the other unit in Maihar, and Century Cements, he said.    

New Delhi, Aug 9: 
The Cabinet yesterday put off its decision to clear a range of proposed amendments to the Companies� Bill, following differences over the appointment of one director per thousand small shareholders.

Sources said the matter would be discussed with opposition parties before a decision is taken on the issue. Certain Cabinet ministers felt that directors on company boards must be selected by the majority of shareholders and not by groups. Moreover, this could lead to a situation where rival companies would be able to sneak their people on to the board and be privy to company secrets. �After all today, information is money,� said sources.

They added that the government would not be able to introduce amendments to the Companies� Bill in the current session of Parliament and it is likely to come up in the next session only.

The Cabinet decided to do away with sales tax on aviation turbine fuel (ATF) sold to foreign airlines and bring a Bill in Parliament to exclude this from the purview of states.

�The Cabinet approved the introduction of the Aircraft (Exemption from tax and duties on fuel and lubricants) Bill 2000 under which the ATF sold to foreign airlines would not come under the purview of sales tax,� said Parliamentary affairs minister Pramod Mahajan.

He said that foreign airlines would be charged the internationally accepted ATF price. Currently the sales tax on ATF sold to foreign airlines is being paid by the oil companies since the airlines refused to pay it. The sales tax dues of oil companies have consequently mounted to about Rs 500 crore in the last five years, he said.

The Cabinet also approved the winding up of Wagon India Ltd (WIL) a joint sector company which procured and distributed wagons, with Bharat Bhari Udyog Nigam Ltd taking its place.

Wagon India saw its role as a wagon maker drastically reduced after the Railways opted for an open tender system. The company currently has nine employees, of which two are on deputation. A voluntary retirement scheme would be given to these seven employees and the remaining would be sent back, said Mahajan.

It also approved a Bill to repeal the Industrial Disputes (Banking Companies) Decision Act, 1955, which had modified the recommendations of the Banking Award Commission in relation to companies incorporated in Travancore and Cochin.    


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