Fertiliser majors in a spot
Govt errs, US firm gains
Delhi meet on Dabhol fate
Infotech stocks fuel bull rally on bourses
Fiscal deficit fine, if it spurs growth: Sinha
BOC India in talks to buy gas plants
Broker boycott threat clouds CSE meet
Lever to pass on seeds business to Paras
Leather next in line
Foreign Exchange, Bullion, Stock Indices

New Delhi, Dec. 5: 
An unprecedented decision of the Central government, asking fertiliser companies to pay back Rs 975 crore in excess subsidies has provoked an outcry from the industry, which has threatened plant closures and marshalled an army of lobbyists to force a government retreat.

The government move is going to affect some 13 companies. Among the firms which have been slapped with the claim is the G.P. Goenka-run Duncans Industries, which has been asked to fork out Rs 200 crore by December 20. The shell-shocked company has threatened to shut down its Panki fertiliser unit near Kanpur, which it had bought from ICI a few years back. The Chennai-based Spic, which owes Rs 150 crore, and the K.K. Birla-controlled Zuari Agro, which owes Rs 110 crore, are the other prominent names to have been affected.

The industry, led by Fertiliser Association of India president Ajai Shriram, appears to have closed ranks on the issue, badgering the government to relent. It is also trying get Uttar Pradesh chief minister Rajnath Singh to press its case before Prime Minister Atal Bihari Vajpayee.

�Duncans has written to the UP government about its intention to close the Panki unit. We are asking the government to do it prospectively, not retrospectively. That is to say, don�t ask us to repay doles handed out in the past,� Shriram said, adding the move would cripple winter supplies of urea to farmers.

A meeting with fertiliser minister S.S. Dhindsa did not break the impasse and he made it clear that the government would not budge from its demands in the face of threats. The minister, otherwise known for his pro-industry stance, ticked off the companies for refusing to pay up after reaping large profits during a period when consumption norms have not been revised.

The government fixed new pricing norms recently with retrospective effect from April 1, 2000. The calculations are largely based on the cost of feedstock, though prices of other inputs are also taken into account.

However, this time round, the government decided to get tough with the industry and ask for refund of excess amounts paid to it in the past. It warned fertiliser units which fail to cough up the money that the amounts would be deducted from their future subsidy entitlements.

The perception is that the government took a tough stand because the Opposition, led mainly by the Left members of Parliament, tried to use the issue as a handle to beat the BJP-led coalition. Its foes accused the Vajpayee regime of allowing fertiliser majors to pocket huge pay-outs even as it cut corners on pro-poor projects.


New Delhi, Dec. 5: 
In an apparent goof-up by babudom, the Foreign Investment Promotion Board (FIPB) has cleared Western Union Financial Services� proposal to set up a wholly-owned subsidiary for domestic money transfer services, though it violates Reserve Bank of India�s norms for foreign non-banking financial companies.

Western Union, which received the nod for setting up the subsidiary at the FIPB meet held on November 22, had been trying to get its proposal cleared for the last three months, but without success. The US company, a fully-owned subsidiary of First Data Corporation, already has a tieup with the postal department for providing inbound money-transfer services.

In its application, Western Union had sought to set up a wholly-owned subsidiary to undertake domestic money transfer services.

This would have included setting up the infrastructure and network to provide services for transfer of money both within India and abroad. However, the FIPB, while accepting the proposal for the subsidiary, has not granted the permission to undertake outward money transfer activities.

In a letter dated November 15, the department of economic affairs had, in fact, supported the proposal, but put the condition that domestic money transfer activities would attract the minimum capitalisation norms applicable to fund-based activities under the NBFC guidelines for foreign direct investment and also that the company will not undertake outward money transfer activities.

The company had applied for setting up the subsidiary with an investment of $ 0.5 million (Rs 2.35 crore). However, foreign NBFCs require an initial capitalisation of at least $ 50 million in foreign exchange, which translates into Rs 235 crore.

Strangely, the FIPB did not defer the proposal on grounds of inadequate capitalisation and instead cleared the proposal despite Western Union stating that it wanted to invest only Rs 2.35 crore. In fact there was no mention of this point in the meeting and this fact was totally overlooked.

The FIPB nod for the project was formally announced by commerce minister Murasoli Maran. But the question now is who will pay the balance of Rs 232.65 crore, as Western Union has got the required approval to set up shop with an investment of just Rs 2.35 crore.


New Delhi, Dec. 5: 
Domestic lenders, led by Industrial Development Bank of India (IDBI), today began discussions with the Central government to resolve the Dabhol power project crisis.

IDBI chairman P.P.Vora held a closed-door meeting with economic affairs secretary C.M. Vasudev here today to take stock of the situation. �The process is still on. We will get back to you as soon as the issue is resolved,� Vora said after meeting economic affairs secretary C.M. Vasudev here.

State-run financial institutions have sunk huge funds in the power project and are anxious to see the crisis blowing over quickly.

The high-level meeting between the government and financial institutions comes within two days of Enron filing bankruptcy proceedings before the US authorities.

Interestingly, DPC is not among the multinational energy trader�s 14 affiliated entities that have sought bankruptcy protection under Chapter 11.

The $ 2.9 billion DPC, which stopped producing electricity in June following a payment dispute with its sole customer Maharashtra State Electricity Board (MSEB), is up for sale with an asking price of $ 1.2 billion for the offshore equity.

Besides Enron, Bechtel and General Electric hold 10 per cent stake each in DPC.

While Mumbai-based BSES and Tata Power have envisaged interest in acquiring the offshore equity of 85 per cent in DPC, the IDBI-led financial institutions�with a total debt exposure of over Rs 6,200 crore in the project�are exploring the possibilities for reviving the project.

Meanwhile, the power ministry has sought law ministry�s opinion over the impact of Enron crisis on DPC.


Mumbai, Dec. 5: 
Institutional and retail investors flocked back to the bourses in droves sending tech scrips on a roll, with the bull rally gathering steam today.

A spurt in the south-east Asian markets also boosted market sentiments. The Nikkei gained 261.16 points, the Hang Seng 251.16 points and the Singapore Straits Times index rose 55.16 points.

Responding to the upbeat mood prevailing in the world markets, the BSE-30 share sensitive index opened on a strong footing at 3334.64 and shot up to a high of 3413.06 before closing at a four-and-a-half month high of 3409.64, a steep gain of 89.36 points, or 2.69 per cent. The BSE-100 index also jumped 52.64 points to 1640.49, from its previous close of 1587.85.

What set the bourses further ablaze was news of tieups by infotech majors, such as reports of Sun America�s alliance with Infosys, Wipro bagging a contract to power Iqara and British Gas� broadband telecom foray.

Further, second-rung TMT�technology, media and telecommunications�stocks were back in fashion as reports trickled in from the US that the two-year old tech slowdown worldwide was not as alarming as previously made out to be. In fact, the tech-laden Nasdaq composite index made a sharp rebound of 58 points on Tuesday. The Dow Jones industrial average also recovered nearly 130 points.

Software bellwether and heavyweight, Infosys was the star performer, notching handsome gains that helped other IT shares to follow suit. Among other old economy stocks in the limelight were FMCG major HLL and cement giant Grasim, dealers said. FIIs made their presence felt, the Government of Singapore being the most active.


New Delhi, Dec. 5: 
The government can accept a spike in fiscal deficit provided it spurs infrastructure growth, finance minister Yashwant Sinha said here today.

�We realise the importance of infrastructure, but there was a time when people felt the government, not seen as the best and most efficient spender, need not provide it. The present crisis is a result of that mindset,� he said while speaking at the 74th annual session of the Federation of Indian Chamber of Commerce and Industry (Ficci).

According to Sinha, the government set aside nearly Rs 60,000 crore for infrastructure in the last budget, and it was a challenge to spend that amount.

�I have told my colleagues in the government that I am prepared to ignore fiscal deficit if it is spent on infrastructure. If the expenditure is productive, I will make money available,� he said.

Inviting greater private participation, the minister said infrastructure was not only a key driver of growth but also an essential ingredient of economic revival. �We have to pump-prime if we want to resuscitate our economy.�

Terming the current slowdown as a �temporary� phenomenon, Sinha said the country must attain external stability in the long run. �Stability in the external sector, which we have to ensure, is the most important condition for economic security,� Sinha said.

The gains achieved at the Doha WTO talks have been possible due to a strong performance on the external front. �The external sector has the potential to destabilise the economy like no other factor. Had our country been in the position that it was immediately after the Pokhran blast, we would not achieve the bargains we managed to win at Doha,� he said.

Outgoing Ficci president Chirayu Amin said the industry was plagued by high costs of power, inflexible labour market, infrastructure bottlenecks, expensive credit and high tax rates.

The chamber spelt out its wish-list, which included pump-priming the economy to generate jobs and multiply income.


Calcutta, Dec. 5: 
BOC India Ltd is in talks with a steel company based in the east to take over its gas plants. Revealing this BOC managing director Sanjeev Lamba said: �We are discussing various models for the transfer like �operation and maintenance� and total control, but the deal has not been finalised as yet.�

Speaking to the media here today, Lamba also said that the company�s contract division was doing well and had bagged contracts from Oil and Natural Gas Corporation (ONGC) and Indo Gulf Corporation, among others. �We are also in the process of being appointed by Indian Oil for setting up a 250 tonne per day plant at its Baroda refinery,� Lamba added.

BOC�s contract division is also set to receive sub-contracts from its principal BOC plc of the United Kingdom. �BOC plc is in the process of being appointed for the construction of a number of major plants and pipelines in south-east and west Asia. Our parent is expected to give us the sub-contract for part of the projects,� Lamba said.

The company has identified medical gas business as its other thrust area. �Medical gas business contributes about 25 per cent to our profits now, which we are aiming to double by 2004,� Lamba said. The business contributes about 18-20 per cent to the company�s turnover.

The company is launching a bouquet of new products like an improvised version of the oxygen concentrator � a device that can be used by asthma patients for instant supply of oxygen.


Calcutta, Dec. 5: 
Calcutta Stock Exchange (CSE) brokers are considering a complete boycott of the bourse�s annual general meeting (AGM) on December 29, turning their stand-off with the Sebi-appointed management sub-committee into a full-blown crisis.

The brokers are shareholders of the exchange, and under CSE statutes, its elected president is supposed to convene and preside over the AGM.

If the brokers stay away, the meeting will have to be adjourned, stalling the process of ratifying and finalising the annual accounts.

The brokers are also likely to abstain from the annual elections since their role as elected members of the CSE board has not been defined yet.

The Sebi board will meet on December 14 to discuss demutualisation of exchanges, and the role brokers would retain in the management of corporatised bourses.

If the regulator decides to keep brokers out of the board of exchanges, or the CSE brokers decide against filing a nomination, Lyons Range would go without elections.

The CSE brokers feel the management top-guns do not have enough experience to run the beleaguered exchange, and lack initiative.

�It should have introduced trading in stock futures to increase the depth of the cash segment,� a former CSE president said.

CSE executive director N. Dasgupta said recently it would take at least 3 to 4 months to start the derivative segment. �The search for a new executive director is on, and until the next incumbent takes charge, we will not introduce derivatives,� he added.

In the bourse�s annual report, chairman Dipankar Basu has remarked the management committee was trying to determine whether CSE could continue to stand independently.

The observation has annoyed a section of brokers, who are unwilling to accept the loss of CSE�s independent status. There is another quarter, which is in favour of merging the bourse with a larger exchanges like the National or Bombay Stock Exchange.

Another issue that has not been received well by the brokers is the tightening of the surveillance mechanism.

The CSE has adopted a policy of treating each broker on the basis of the individual track record for better risk management.

For instance, the exposure limit of brokers now varies in accordance with their track record.

Whereas one broker can leverage a margin deposit to the extent of 15 times, another may only be allowed up to 5 times, if he has defaulted in the past.


Mumbai, Dec. 5: 
Hindustan Lever Ltd is considering a proposal to hive off its seeds business to its subsidiary. This follows a pattern set by the FMCG major in the recent past to hive off businesses like animal feeds, fragrances and fertilisers, which are not central to its portfolio. The board is scheduled to meet on December 12, to consider the proposal to transfer its seeds business to subsidiary Paras Extra Growth Seeds Ltd, formerly known as Grand Food and Catering Consultants Ltd.

In a notice to the Bombay Stock Exchange, the company said: �The meeting will consider the transfer at such consideration and with effect from such date as the board of directors of the company may determine�.

�If approved, the company will take steps to seek approval from members through a postal ballot to give effect to the proposal,� it added. HLL�s seeds business which has an annual estimated turnover of Rs 95 crore, is engaged in production, marketing and distribution of a variety of hybrid seeds of cotton, maize, jowar and vegetables.

Explaining its move, HLL said in the new globalised environment, the seeds business requires a continuous infusion of contemporary international technology and know-how. Since its Anglo-Dutch parent Unilever is no longer into seeds research, HLL�s seeds business has no access to latest international developments in areas like biotechnology, the company argued.

The company said to secure the long-term future of the seeds business, it is necessary to ensure the uninterrupted flow of technology and know-how from a partner under a technology collaboration or joint venture agreement.


Calcutta, Dec. 5: 
Hindustan Lever Ltd is looking at a proposal to pull out of leather business as it does not form part of its core competence.

�The company has to depend on international players for access to technology which is vital for staying afloat amidst the stiff competition. This is a major irritant for HLL which is a market leader in various fields,� sources said.

The business may either be hived off into a separate joint venture or be sold off as an ongoing operation, they added. Official confirmation to this effect, however, could not be available despite several attempts made by The Telegraph.

The leather division is 100 per cent export-oriented and the company sells over 1.8 million pairs of shoes and uppers annually. Sources said the total turnover of the division is well over Rs 100 crore. It has renowned global brands like Hush Puppies, Clarks, Gabor and Salamandar, besides two premier brands�Axxents and Le Baron�which are popular in over a dozen countries in Europe and the US.

Hindustan Lever�s leather division has three manufacturing plants, two in Pondicherry and one in Tindivanam. �The first factory came up only 10 years ago and the other two have come much later than that. All the three factories have been built with German technology,� sources said.



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