RBI move to recast regulatory role
17% selloff in VSNL proposed
XPS ties up with SingTel for city gateway
ACC ups Mumbai prices, others likely to follow
2% bank credit for women
Hind Motors gets 7-year tax breather
Tug of war over mobile service
Foreign Exchange, Bullion, Stock Indices

Mumbai, Nov 23: 
The Reserve Bank of India has initiated an exercise designed to re-orient its regulatory and supervisory roles and ensure greater flexibility in the conduct of monetary policy.

The apex bank is planning to approach the Union government seeking amendments to the Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949 in this regard.

Although senior RBI officials admitted that they were working on proposals to amend both these Acts, they were reluctant to divulge details about the exercise.

It is, however, learnt that the apex bank is calling for the removal of all micro-issues relating to day-to-day administration of banks from its purview so that it focuses more on a macro-economic role such as monetary policy functions.

This has been one of the long-standing demands of the central bank and sources said the finance ministry was not averse to acceding to the request.

At present, the broad role of the apex bank relates to the issue of bank notes, maintenance of the country�s reserves and operating the currency and credit system.

The RBI is thus responsible for the formulation and implementation of the monetary and credit policy, regulation and supervision of banks and non-bank entities, maintenance of government accounts and the management of public debt and exchange management.

Among these functions, the central bank is now learnt to be pitching for greater operational flexibility for the conduct of monetary policy whereby it should be given a transparent mandate from the government as to which is to be achieved through the policy.

Later, the bank will be given full powers to achieve these objectives. Such a method is expected to remove any kind of conflict of interests between the government and the RBI apart from giving it the much-needed flexibility.

Sources close to the central bank say it has been buoyed by the willingness shown by finance minister Yashwant Sinha to grant greater flexibility to the RBI in the area of monetary policy.

It may be recalled that in the Union budget for 2000-01, the finance minister had said he planned to bring to parliament proposals for amending the relevant legislation. Sources, however, said it is unlikely that these amendments will be tabled in the current session of parliament.

Such a kind of plea coincides with the recommendations made by an advisory group on transparency in monetary and financial policies headed by former RBI governor M.M. Narasimham.

The committee had also called for granting greater flexibility to the RBI in the realm of monetary policy while suggesting that the government should follow a procedure of first setting out the framework of objectives before the legislature.

After approval by the legislature, the central bank will be entrusted with the task of attaining these objectives insofar as national policy is concerned.

Interestingly, the committee had also proposed a separation of the RBI�s debt management and monetary policy role for bringing about an effective monetary policy. It is, however, not know whether this significant recommendation is put forward by the central bank to the government.    

New Delhi, Nov 23: 
The department of disinvestment has penned a controversial Cabinet note proposing a 17 per cent disinvestment in Videsh Sanchar Nigam Limited (VSNL).

Of this, it says 15 per cent can be offloaded through an open bidding to a strategic partner while 2 per cent will be offered to employees at a discount.

The note has apparently been cleared by the finance ministry and the Prime Minister�s office, but has run into opposition from the communications ministry, which wants the selloff delayed until the company�s expansion plans are completed.

The sale, once it goes through, will reduce the government�s stake in the company from 52.97 per cent to 35.97 per cent. But divestment department officials argue that the control over the company will be retained despite the decline in its holding.

More important, the note says the partner which picks up the 15 per cent stake will bring in, apart from technology, its team of managers with a mandate to reform the way VSNL operates.

In effect, the new partner will share management control with the government. Many officials are chafing at this prospect, because they feel VSNL is already one of the better-managed telecom firms in Asia with a proven technology of its own.

Overseas, GDR holders hold a 30 per cent of VSNL�s equity while domestic financial institutions and small shareholders control a little over 17 per cent. The officials point out that if the new partner purchases shares and GDRs from the market, it could amass a stake higher than the government�s. This has raised fears that government nominees on the VSNL board could be outvoted at any point of time.

VSNL�s share have a high earnings per share (EPS) of 76.85, which makes it an attractive prospect for a potential ally. With gross profits high at Rs 1,948.8 crore on a turnover of Rs 7,272.2 crore in the last financial year, the country�s overseas telecom carrier could be a takeover target if its shares were floated.

DoD officials say the opening up of overseas call market to private players and reduction in international call charges will bite into VSNL�s monopoly profits and leave it weakened. Therefore, they say it is makes better economic sense to sell the stake now, rather than risk doing it a time when its grip over the telecom sector was loosened considerably.

�The time to sell the shares is now, and the government has to realise that it really has no business in merely running telecom firms,� a top DoD official said. But then, many governments, even those in the developed world, continue to run or strictly control their key telecom majors.    

Calcutta, Nov 23: 
XPS Online, the city-based internet service provider, has tied up with Singapore Telecom for an international gateway in Calcutta. The gateway, which will require an investment of around Rs 3 crore, will be operational from January 2001.

�We will have an uplink from Singapore. We are trying to get license for both KU and C bands,� says Santosh Sarraf, CEO, Express Communication.

This will provide 12 MBPS of bandwidth to XPS users.

XPS Online is also into talks with 3COM to provide unified messaging service to users. This will facilitate subscribers to access mail from any communication device like telephones, mobile devices and even fascimille machines.

�The project will require an investment of Rs 5 crore. If the deal is finalised next week, our users will be able to avail of the services in another three months,� Sarraf said.

Though details have yet to be worked out, XPS Online is asking 3COM to share in the equity, besides providing the technology.

On the company�s next project, Sarraf said, �another important achievement would be the launch of our portal on the 25th of next month. Our vision is to have a portal like AOL, wherein there would be 65 per cent user retention. This helps both the user and the company save both money and time.�

�The portal will be launched after eight months of research and planning.� The site will cater to various age groups and serve as a one-stop shop for all requirements of the user.

XPS has also applied for a category A licence. It will expand to cities like Jamshedpur, Dhanbad, Ranchi and others in eastern India Later it will move into the north.

�We have around 1400 active subscribers. This is within four months of starting operations. Since we have the technology backing from IBM, we plan to foray into providing corporate solutions, web hosting, mailing and server colocation,� Sarraf added.    

Mumbai, Nov 23: 
In an indication that dogdays may be ending for local cement companies, Associated Cement Companies (ACC) has raised its prices by Rs 5 per bag in the city, which is the country�s largest market for the commodity. A bag cost Rs 148, but the prices went up by Rs 10 in the last two days, of which a hike of Rs 5 came into effect from Wednesday.

With ACC leading the way, industry circles said others are likely to follow suit. Gujarat Ambuja Cements (GACL), another key player in the region, is expected to increase prices on Saturday.

According to industry analysts, Mumbai, with a total consumption of 3 lakh tonnes per month, is the nation�s most accessible area with several companies slugging it out for market share.

The ramifications of the move are said to be wide ranging. �Mumbai prices have an impact on at least 20 different places in the country, including areas in Karnataka,� an analyst said. A rise in prices in other regions is expected soon.

Reports about higher prices set the ACC counter on fire, making the share one of the most actively traded on the Bombay Stock Exchange (BSE) today. A staggering 98.53 lakh shares, valued at Rs 121.79 crore, changed hands. The scrip opened at Rs 118.10, rose to an intra-day high of Rs 127.45, slipped to the day�s low at Rs 117, but closed higher at Rs 126.10.

According to analysts, the recent decision of cement manufacturers to control supplies by going in for longer plant shutdowns has given them the leeway to risk a string of price hikes.

The decision, which was taken only last week, has invited criticism from many quarters that the industry was colluding to influence prices by regulating supplies.

ACC is one of the largest cement companies in the country with an annual capacity of more than 11.4 million tonnes. With 12 plants in operation across a wide area, its capacity accounts for 11 per cent of the country�s aggregate cement output. According to market watchers, the company around 15 per cent of its production in the Mumbai region.    

New Delhi, Nov 23: 
The government today asked public sector banks to earmark at least 2 per cent of their net bank credit for women to make them self reliant.

It will gradually increased to 5 per cent of total bank credit in the next five years. This would mean that close to Rs 3000 crore would be immediately available for women to borrow.

The new measures would ensure that women have easier access to bank finance. First of all banks would have to set up specialised branches catering to the needs of women entrepreneurs. Also, they would have to ensure that each district in the country should have at least one such specialised bank.

Banks will also have to create the necessary environment by simplifying procedural formalities in bank finance, offering updated information, guidance and other credit related services to women entrepreneurs.    

Calcutta, Nov 23: 
The West Bengal government has allowed Hindustan Motors to defer 50 per cent of its sales tax payments for seven years.

The relief came with a setback though, when bus operators in Midnapore challenged a move by the administration to issue 1,000 permits for trekkers, depriving the company of a lucrative order that would have helped it cope with a sales slump.

The state government�s assurance that it would have the permits issued, have now come to naught with a stay clamped by the district court there, and a ban imposed on the issue of fresh trekker permits by the district magistrate.

Hindustan Motors, in the throes of a financial crisis, had sought a 50 per cent deferment of tax under the 1999 incentive scheme announced by the state government. The company had applied for it on the ground that it undertook a Rs 75-crore expansion programme at its Uttarpara factory.

�We have decided to allow HM a deferment of tax. Their case has a merit. We could have given them tax relief earlier as well, but there was some confusion on what the term expansion meant. The company has sent its clarifications,� state finance minister Asim Dasgupta told The Telegraph. Its average annual sales tax payment is estimated at Rs 24 crore.

Senior vice-president of the company, Prabal Chatterjee, said both issues had been referred to the respective ministers, and it was now up to them to take some measures.

He said he had met the finance minister and requested him to consider the company�s request for deferment of taxes. �I have also urged state transport minister Subhas Chakraborty to help boost trekker sales. We manufacture 75 trekkers per month. Around 600 employees, who are engaged in it, turn idle if there are no orders,� Chatterjee explained.

Initially though, Hindustan Motors had sought tax concessions on inputs, but later decided against it. Of the company�s total procurement, 20 per cent is made from Bengal.    

New Delhi, Nov 23: 
Even after the liberalisation of the telecom sector, affordable mobile telephones may be more than just a beep away, with telecom operators still slugging it out over how �affordable� the services should be.

While both private cellular and fixed line telephone operators agree that customers should be provided low cost mobile services, both have their own versions of what �low cost� means.

Fixed line operators argue that cheap mobiles can follow only if they are allowed entry, while existing cellphone companies protest that if they are not allowed to protect their businesses the losses that will result all around will hurt customers more in the long run.

The Telecom Regulatory Authority of India (Trai) will hear out representatives of both squabbling parties, besides various consumer forums at a final open house session to be held here tomorrow to discuss policy issues relating to limited mobility by use of wireless in local loop techniques in the access network by basic service providers.

While cellular operators have opposed the move by fixed line telephone operators to offer mobile services in a limited area, basic service providers are unwilling to pay an equal revenue share to offer such a service.

In fact, Trai will have a major role to play in the war between cellular mobile operators and basic fixed line telecom operators.

The regulatory authority will have a major task in controlling the tempers of operators and consumers and also determine the service and options for consumers.

�Basic operators should be allowed wireless in local loop and the specific frequency for it has also been earmarked. Customers will have to pay only Rs 1.20 for three minutes if additional burden is not imposed on us, compared to Rs 4-8 per minute in Global System for Mobile communications (GSM) system used by cellular operators,� claimed a fixed line telecom operator in North.

�We have already sent our written reply to Trai and will seek early introduction of limited mobility at the open house,� he added.

Basic operators are also opposed to imposition of a new fee for offering limited mobile services. The Cellular Operators Association of India (COAI) had proposed that fixed line operators could offer limited mobility provided they pay all fees which are being paid by cellular operators.

�When basic and cellular operators are paying the licence fees as revenue share and also both of them pay spectrum charges, then there is no question of any other entry fee or revenue sharing. Any further entry fee or revenue percentage will detrimental to the interest of consumers,� said P K Sandell, president, Telecom Industry Services Association

�WiLL services is part of the licence issued to basic service providers. It is a technology option and not a new service. In fact cellular service providers are offering internet services, which then by same parameters determined as new service.� �We understand it is a sensitive issue and inputs of all would be taken in all seriousness before we submit our recommendations,� sources in Trai said.    


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