Consensus on treatment, suspense on pill
Bhusan Ind to invest Rs 400 cr in Bengal
ONGC eyes tieups to cross borders
CII balks at valuation norms

Mumbai, Oct. 21: 
Few know what�s on the menu, but most agree cheap money is one of the items on Bimal Jalan�s plate when he unveils a monetary policy that is expected to pull a sputtering economy out of the funk.

The Reserve Bank governor is no iconoclast � he will not do something the government isn�t happy with, but he will take that decisive step forward to show that he is doing everything to induce rate-sensitive investments and to crank up the growth machine.

The policy, coming amid a world-wide slump deepened by the September 11 hijack attacks on the US and the American retaliation in the neighbourhood, will reduce borrowing costs, but it isn�t clear how that will done.

The overwhelming body of opinion in the financial services industry points towards a 50 basis point cut in the reserve ratios, typically the cash-reserve ratio (CRR) of 7.5 per cent.

This represents the money parked by banks with the Reserve Bank at low rates. The bank rate � a signalling device to influence the course of rates in the economy � might be left unchanged.

A key element of the policy is the central bank�s prognosis, which reflects the way it gazes at the crystal ball of growth. That is expected to change in a big way from how the money managers saw things in April.

There are indications that the forecast for growth rate in gross domestic product (GDP) this year will be scaled down to 5.5 per cent from 6-6.5 per cent six months ago.

Smearing the rosy numbers are an array of factors � poor industrial growth, sagging exports and a contraction in the service sector, the economy�s flywheel.

The economy�s woes, the string of rate cuts abroad and a benign rate of inflation at home have led to optimism that Jalan would help shovel growth-inducing funds by making loans easier and cheaper for borrowers. However, there is also a feeling among many that the governor will not be swayed by gestures of monetary magnanimity by foreign central banks.

Analysts argue that it is the government that must do its bit by stepping up stimulus spending on core projects.

Another factor that could dissuade the Reserve Bank from bringing down the bank rate is the government�s stance of not revising yields on its own savings schemes. Finance minister Yashwant Sinha has ruled out further cuts in rates on small saving plans for the moment.

�Though problems in the economy do warrant a cut in the bank rate, the governor will do so only if it is preceded by clear policy signals, such as a reduction in small savings rates,� a senior official with a foreign bank.

He cited the decision earlier this year, when the apex bank followed the government�s decision to lower small saving rates by cutting the benchmark rate.

�The Reserve Bank has always said its monetary stance is aimed at ensuring easy liquidity. The credit policy is likely to see a fall in the cash reserve ratio,� said ICICI vice-president N Balasubramanian.

Some bankers expect the governor to lower the repo rate, an instrument used to suck out liquidity from the market, and is an effective floor for short-term interest rates.

The buzz in the money market is that the repo rate will be slashed by 50 basis points to 6 per cent. Some also expect the gap between the repo and reverse repo rates to be further brought down from the present level of 2 per cent (reverse repo rates are at 8.5 per cent).

The central bank could lower refinance rates against loans to exporters by half a percentage point to offset the impact of cheaper export loans announced in September. Provisioning norms for banks may be tightened to international standards and companies may be allowed to issue seven-day commercial paper in the market.

The market expects Jalan to improve trading practices and unveil a time-table for the introduction of complex instruments, like separate trading of registered interest and principal securities (STRIPS).

Financial institutions keen on universal banking wish the governor announced relaxation in reserve norms to overcome difficulties of conversion.


Calcutta, Oct. 21: 
The Chandigarh-based Bhusan Industries Ltd proposes to invest Rs 400 crore in the state to set up a sponge iron and steel-making unit and to expand its cold rolling mill at Serampore, Hooghly.

The company has already set up a Rs 290-crore unit with cold rolling facilities of 150,000 tonne per annum (tpa) and galvanising facilities of 1,20,000 tpa at Bangihatti in Serampore.

Promoted by the Singals, Bhusan Industries, which has plants at Punjab, Chandigarh and Delhi, with a turnover of Rs 600 crore, procured land in Bengal in February 1999 and started commercial production in April last year.

The project has been partly financed by IDBI, IFCI, ICICI, Exim Bank and Punjab National Bank. The company plans to export 40 per cent of the output to countries like Nepal, Bhutan, Bangladesh, Myanmar and South Africa.

The company has a collaboration with Sumitomo Metal Industries. It will focus on making galvanised plain/corrugated sheets, primarily for product applications such as roofing and construction activities.

The state government has also received a few other investment proposals following the incentive scheme announced in the current financial year.

The Shyam Group has proposed to set up a Rs 200-crore steel making unit at Durgapur. The company is already has a presence in the state through its ferro-alloys unit at Durgapur and an ingot casting unit at Burdwan.

Hindusthan Seals Ltd proposes to set up an aluminium casting project for manufacturing packaging materials at Haldia for Rs 100 crore. The company is already setting up a unit at Barjora, Bankura for manufacturing coated and treated metal sheets, lacquers and varnishes.

Further, D.P.S. Ltd, a company promoted by Dipankar Purakayastha, a non-resident Indian, has decided to invest Rs 230 crore for setting up a shoe manufacturing unit at Burdwan. The project has received FDI clearance.

The government has also received two other proposals � one from B. D. Castings for setting up a Rs 15 crore packaging material unit at Howrah and the other by Bunge, a Brazil-based food and agrochemicals company for setting up a Rs 30 crore soyabean/rapeseed oil manufacturing unit.

Commerce and industry ministry officials said the appointment of international consultant McKinsey & Co to attract new investments in the food and agro-processing as well as information technology and knowledge-based sectors will boost investment in these sectors.

Due to stiff resistance from certain quarters of the state cabinet, the government has appointed McKinsey for only a year, against its earlier plans of appointing the consultant for a longer period.


Calcutta, Oct. 21: 
Oil & Natural Gas Corporation (ONGC) is gearing up to compete with international petroleum giants through its subsidiary ONGC Videsh, for exploration and production (E&P) contracts abroad.

A senior ONGC official said the company is working on joint venture possibilities with several major multinational oil companies for strategic tieups as well as joint ventures.

�ONGC has been a domestic E&P company since its inception. Hence, its technical strengths backed by highly skilled staff are not very well known globally. We therefore need to work very hard for global recognition,� he said.

ONGC is eyeing international contracts in view of the deregulation of the oil sector in April 2002.

Moreover, the existing oil and gas reserves can only meet a very little portion of the demand in India.

Hence, it is not possible for the company to compete with foreign majors in the international oil sector. In the post-APM (administered price mechanism) scenario, ONGC plans to market its products to refineries both in India and abroad, besides being an oil producing company, he said.

The board of directors has already taken a decision to prepare a direct marketing plan in order to tap global opportunities.

The financial authorities of ONGC Videsh have also been jacked up recently so that it does not have to look to the parent company for every investment decision it makes to get E&P contracts.

In fact, ONGC Videsh, which has staged a turnaround only in 1998-99, has set an ambitious target of increasing production to the level of its parent company in the next 10 years.

�There are various opportunities abroad which we are trying to tap in collaboration with several top global companies, like BP-Amoco and Statoil of Norway,� the official said.

ONGC Videsh�s managing director, Atul Chandra said the company has drawn up a three-pronged strategy to strengthen its presence in global oil fields, which includes quick response to acquisition opportunities, strengthening necessary skills and competence.

�We would be prepared to accept a more competitive rate of return on our investment than existing players since the company is not very well known in the global circuit, Chandra said.

ONGC Videsh already has already signed agreements in Vietnam, Indonesia, Iraq, Iran, the CIS countries, Yemen, Tanzania, Tunisia and Egypt.

ONGC, which is a very cash-rich company, expects to register a strong presence on the international oil scene by the end of 2005.

�We have the three most important things required for a successful venture � funds, technology and human resources. What we need is more operational autonomy so that for every investment proposal we don�t have to look to the government,� a senior ONGC official said.


New Delhi, Oct. 21: 
The recent changes effected in valuation norms have not gone down well with industry. Voicing concern on the new norms, the Confederation of Indian Industry (CII) said the number of valuation disputes may go up following the amendment.

Customs authorities at ports will now have the right to question the value quoted in the invoice resulting in unnecessary delays in clearance of goods.

The amendment to the Customs Valuation Rules (Determination of Price of Imported Goods), 1988 vide Notification No. 41/2001-N.T. Customs dated September 7, 2001, stipulates that transaction value will be accepted if it is under fully competitive conditions and does not involve any special or abnormal discount.

It is a common practice in several industries to offer different prices to original equipment manufacturers (OEM) and traders, with prices quoted to OEMs always being lower.


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