IDBI prefers reverse merger to fulfil universal dream
US, Europe target India on canalisation policy
Promoters tighten grip on EIH
Bengal move to enliven tea industry
Bharti to launch SMS phones next year
Spanner in FCI plan

Mumbai, Oct. 27: 
The Industrial Development Bank of India (IDBI) has zeroed in upon the option of reverse merger with either a public or private sector bank to convert itself into a universal bank.

This option—which could even be its subsidiary IDBI Bank—has been preferred over other choices that include direct conversion into a universal bank and a deferred merger.

A proposal specifying its plan for transition into a universal bank will be placed with the Reserve Bank of India (RBI) before October 31.

The IDBI board which met here today agreed in principle to “the proposal for organisational/business restructuring of IDBI into a universal bank”.

Later talking to reporters, IDBI chairman P.P. Vora said that during its interaction with RBI, the institutions is not going to spell out the “name” of the intended organisation with whom a reverse merger will be sought.

Vora revealed that the institution will finalise the particular bank within six weeks.

In the event of a reverse merger option being pursued, the IDBI Act will have to be extensively amended or repealed for which a separate proposal to the Union government would be placed.

The IDBI chief said that among the various options, direct conversion into a universal bank was “least preferred” as the institution would require a strong retail approach that encompasses a good branch network and also a large deposit base.

“We examined all the options and thought that direct conversion is the least preferred option,” he said.

Explaining the deferred merger route which could take around three years, he said the institution will have to first take a stake in a bank and within two to three years transfer some or all of its non-performing assets (NPAs) to a special purpose vehicle or an asset reconstruction company. After the entire process is over, the merger could be consummated.

Vora said preference will be given to that model which will “minimise the regulatory concessions and government funding requirement and ensure that there is least transititional pain in transformation from DFI to a universal bank.”

When asked about the timing aspect, Vora pointed out that it could be March 31 next year at the earliest.

Incidentally, the “preferred” option of reverse merger comes only few days after the IDBI chief had ruled out the possibility of merger with IDBI Bank. Vora however, parried questions on this issue.


New Delhi, Oct. 27: 
India’s policy to canalise mass consumption goods and its threat to use tariff and non-tariff barriers against 300 others whom it monitors strictly have made it a target of the US and many European states.

The US has already made clear that it will take up the agenda of curbing use of export restrictions such as canalisation. It also plans to take action in favour of curbing the monopoly of state run trading enterprises in importing certain products.

India’s canalisation policy imposes restrictions on import of mass consumption foodgrain such as rice and wheat, most petro-products and bullion—both gold and silver. The policy allows only the State Trading Corporation to import these products. Western nations such as Australia, the US and Canada, which are large wheat exporters, would like the market for this vital farm product to be opened up further.

In fact both President George Bush and US Trade Representative Robert B. Zoellick have made it clear that the primary objective of the US would be to open up new markets for US farmers and ranchers.

But India has no desire to allow this as it could hit wheat farmers in northern India badly, something which could hurt the BJP government politically

India has also set up a ‘war room’ to monitor the import of some 300 price-sensitive products with the threat that it would impose tariff and non-tariff barriers if the import of any of these products threatened local producers. This policy too is under attack as many feel that it could threaten their exports in the future.

The US also wants to bring down global tariff levels on farm goods to near its own average level of 12 per cent. However, this is unlikely to happen in the near future as European nations are strongly opposing it.

But India is already facing a tough time with the US—International Trade Commission has ruled that exports of carbon and alloy flat steel products from India have hurt local producers in the US.

The US-ITC has unanimously dubbed imports of slabs, cut to length plates, hot and cold-rolled sheets and strips and corrosion resistant and other coated sheets and strips from India as injurious to US steel companies.

The US body has not specified the reasons for its decision and will let know details of their findings only on December 19. They will also notify action to be taken on the basis of their findings at the same time. These may include tariff hikes, quotas, tariff rate quotas or even export restraint pacts with India.

In fact officials say ever since the September 11 terrorist attacks, the US has been more jingoistic about its trade agenda and less receptive to compromise. “It seems like they are trying to hit us on as many fronts as possible so as to get us to agree to go along with their main proposal— going in for another open ended new multilateral round,” commerce ministry officials here feel.


Calcutta, Oct. 27: 
The promoters of EIH, the company that manages the Oberoi chain of hotels, have begun increasing their stake through the creeping acquisition route. The Oberois have increased their shareholding by close to 1 per cent in the quarter ended September to over 40 per cent.

In the last financial year, the Oberois raised their stake by over 3 per cent through the creeping acquisition route to 39.15 per cent. As of September 30, the promoters held 40.07 per cent, after having increased their stake by close to 1 per cent during the July-September quarter.

According to analysts, the management buying and the interest in the stock among other corporate investors helped the EIH share hold out at over Rs 220, while other hotel stocks tanked on fears that the industry would suffer from the attack on the United States and its retaliation.

P.R.S. Oberoi, EIH vice-chairman and managing director, had earlier said the company’s management was concerned with the developments in the US, and all non-essential capital expenditure was put on ice. “We are reviewing the situation on a weekly basis,” Oberoi had said.

The management buying in EIH gains significance from the fact that ITC, the tobacco-to-hotels major, had built up a substantial holding in EIH through its investment wings, Peninsular, Newdeal and Megatop.

EIH officials had said that the investment companies of ITC had acquired 10.4 per cent in the company through open market operations. ITC officials, however, had then said that the combined holding of the three investment companies was less than 6 per cent.

The EIH management has always maintained that there were no takeover threats to the promoters. The Deveshwar-led management of ITC had also denied any intention of wresting control of the country’s leading hotel company. Oberoi had said at the company’s annual general meeting on August 21 that the promoters held 44.5 per cent voting right and around 39 per cent stake in the company. Voting rights of the company’s Global Depository Receipts (GDRs) are understood to have been endorsed in favour of the promoters.

During the July-September quarter, the mutual funds, including Unit Trust of India, have pared down their holding in the company by over 2 per cent to 9.28 per cent. The combined stake of the financial institutions, banks and insurance companies remained unchanged at 16.6 per cent during the quarter.


Calcutta, Oct. 27: 
In a bid to promote traditional industries in the state, the Bengal government has decided to set up a ‘tea cell’ that will deal exclusively with the tea industry.

Writers’ Buildings sources said the cell will comprise representatives from areas like land, agriculture, labour, power and industry, who will deal with new proposals as well as problems of existing tea gardens.

Several members of the state Cabinet, such as industry minister Nirupam Sen, finance minister Asim Dasgupta and labour minister Mohammad Amin have publicly voiced their support for developing the state’s traditional industries, like jute and tea.

“Setting up of the tea cell is a step in this direction and will help the tea industry, which is one of the major revenue earners for the state,” state government sources said.

Welcoming the move, senior tea industry officials said it will facilitate investment. “We feel the tea cell will look into the long-standing issue of high salami payment (one-time payment made to the government) which is impeding restructuring in industry through sale/mergers of weak tea units,” they said.

This is mostly needed for the Darjeeling gardens, which are passing through a bad patch. “Weak gardens in Darjeeling ought to be merged, but the high salami is preventing the process,” tea industry officials said.

Most gardens in Darjeeling are single-owner gardens. With a paltry production of 9 million kgs and high cost of production, Darjeeling tea needs a breather from the government.

Commerce and industry department officials said the issue of salami has already been taken up by the land reforms department. “The tea-cell will also deal with it,” they said.

Tea industry officials said with the impending introduction of the value-added tax regime at the state level, the government has been asked to place tea in the lowest slab, with the status of an essential commodity.

“This would help lower retail prices and boost demand,” industry officials said.

The tea cell will also deal with the issue of high electricity charges, amongst the highest in tea producing countries.

“Lowering electricity charges will reduce the cost of production and help the tea industry, which is currently passing through a low price realisation phase,” they further added.


Calcutta, Oct. 27: 
Bharti Teletech, which makes the Beetel brand of phones, plans to launch SMS and e-mail phones in India in the first quarter of 2002-03. The company is working with the Hong Kong-based Rockway and the British SunCorp to develop these phones.

“We want to make phones with value-added and high-end features available at affordable rates. Before introducing the new sets, we will hold discussions with various service operators and decide on the marketing strategy,” V.J. Prakash, executive director and chief executive officer of Bharti Teletech said.

The phones will cost around Rs 10,000, with prices varying according to features.

The Rs 142-crore company sold 3.6 million phones last fiscal and has set a sales target of 4.5 million phones for this year.

The company’s Gurgaon manufacturing unit has a capacity of 5 million phones. The company also has a tieup with Rockway to manufacture telephone sets in China through a joint venture with a local partner.

Asked about the company’s plans to manufacture mobile handsets in the country, Prakash said the sales volumes of mobile handsets do not justify their manufacture.

“The annual demand for mobile handsets has to be close to 2 million to allow domestic manufacturers to compete with international brands. Also, when the venture takes shape, we will first start with GSM phones,” he added.


Calcutta, Oct. 27: 
The Union government has barred Food Corporation of India (FCI) from importing jute sacks.

In order to save cost, the corporation, under the chairmanship of Bhure Lal, had planned to import jute sackings to package the ensuing rabi crop. Accordingly, it floated a global tender for procuring two lakh bales of jute sackings in late September.

The government was of the opinion that the FCI move could face legal hassle and hurt the domestic the jute industry.

The use of imported packaging materials is banned under the Jute Packaging Order, 1987.

By importing two lakh bales of jute sackings, FCI sought to save as much as Rs 2,000 per tonne on its packaging cost.

During a recent meeting of the co-ordination committee of various ministries, the textile ministry and representatives of the jute industry had vehemently opposed the FCI move, citing the ban on such import.

The West Bengal government also wrote to the Union government opposing such a move by a government agency.

Feeling the pressure, Union food secretary R.D. Kapur finally disallowed the corporation to go ahead with its import plan because of the “legalities” involved on packing foodgrains with imported sacking and also in the interest of the domestic jute industry.

Though Bhure Lal stayed away from the meeting, other FCI representatives were present.

Under a formula worked out by the Bureau of Industrial Costs and Prices (BICP), government agencies have been paying an average price of Rs 24,000 per tonne of sacking. The open market price for domestic sacking is being quoted around Rs 26,000 per tonne and the imported varieties are available at around Rs 22,000 per tonne.

The issue of global tender by the FCI caught the food and textile departments and also the jute industry by surprise.

The West Bengal government had also written to the Union government to scuttle the FCI move in the interest of the jute industry which has a high concentration in the state.

The jute industry on its part made a forceful plea with the government against the FCI move at the co-ordination committee meeting. The meeting was called to assess the sacking requirement for the ensuing rabi harvest season.

The various state agencies, cooperative bodies and FCI had estimated a total sacking requirement of 9.66 lakh bales. FCI alone put its requirement at two lakh bales.


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