Rapid action to book scamsters
Phantom firms blur picture
Stage set for CBI entry
General Motors drive to push up sales
Move to tighten transfer price rules hit roadblock
Go-ahead for venture to import Bangla gas
Nabard may opt for annual check of co-op banks
Navision to invest $ 10 m in India
Learn Yankee English the NIIT way
Foreign Exchange, Bullion, Stock Indices

May 10: 

Finance ministry, Sebi on high alert

With the Home Trade tangle getting murkier by the day, the powers-that-be are finally getting a damage control exercise under way.

While the Securities and Exchange Board of India (Sebi), the capital market regulator, today said that it would investigate into the diversion of funds, if any, into the stock markets by Home Trade Ltd, the finance ministry has directed income tax authorities to investigate if the scam has any tax angle to it.

�The markets are safe and if required we may look into any diversion of funds by Home Trade,� Sebi chairman G N Bajpai said in Mumbai.

The government has, among other things, asked the tax authorities to look into the possibility of Home Trade associates indulging in tax frauds in their business dealings.

�There are possibilities they have been siphoning away earnings from gilt market operations without reporting them properly,� officials said.

Finance ministry mandarins, who met today to take stock of the situation, have also decided to press ahead with reforms in the co-operative banking sector.

The ministry has sought a report from the Reserve Bank of India on the Rs 250-crore gilt market scam which has plunged several co-operative banks into the red and wiped out a quarter of the Seamen�s Provident Fund corpus.

�Finance minister Yashwant Sinha has sought a report from the apex bank on the scam,� BJP MP Kirit Somaiya, who also heads the Investors� Grievances Forum, said.

Ministry officials said informal consultations were held at the top-level on steps to contain the fallout of the scam, in the light of the fact that Parliament was slated to discuss the scam on Monday morning.

The finance minister, who is currently in Shanghai, had apparently been in touch with officials on the issue.

Officials are apprehensive the Opposition would grill the government on the scam and turn into another major political embarrassment for the government.

Internal meetings also focused on the fallout on the co-operative banking sector.

The ministry will recommend that a suitable package be worked out by an expert committee to restructure the sector which has been hit by two capital market scams in the last 15 months.

The restructuring package will be shared in the ratio 60:40 between the Centre and states.

The money to be pumped into these banks would be garnered through bonds issued by the central and state government.

Assistance to individual co-operative banks can be worked out on the basis of accumulated losses, interest overdue for more than three years, amount of non-performing assets in the loss and doubtful category, amount debited to higher financial institution like Nabard and not accounted in balance sheets, officials said.


Calcutta, May 10: 
Home Trade may have remitted the funds, siphoned out of the cash-rich co-operative banks and provident funds abroad through illegitimate channels or used them to finance stock market transactions. Sebi and the Reserve Bank are probing these possibilities now.

Home Trade remitted the funds embezzled out of the co-operative banks to a handful of firms in Calcutta. But of the half a dozen firms in the city that have reportedly received funds from Home Trade, only one could be traced.

Even that has changed its name and claims to have no interest in gilt trading. The others do not have valid addresses, or do not bear the names mentioned in Home Trade�s records.

These companies, acting as intermediaries for Home Trade, disbursed the funds. The presence of these �dummy companies� in the chain helped conceal the final destination of the funds.

Sanjay Agarwal, the promoter of Home Trade, was born in Calcutta and started his career here as an equity trader.

He had a strong base in the city, but what is more, Calcutta has always had the infrastructure to support a network like this. This explains why most of these �dummy companies� were based in Calcutta.

�Sanjay used his confidantes in Calcutta to act as his front,� says a senior broker, who remembers the Home Trade CEO as �a smart and impressive young man�.

Brokers in Calcutta say Agarwal may have lost heavily in the stock market crash following the attack on the US in September last. A number of stocks that had the dubious distinction of being driven by badla financiers had flared up before the attacks on the US, but fell sharply afterwards.

Till about September last, badla financiers in Calcutta were active and offered funds at rates varying between 18 and 24 per cent.

The management of one of the co-operative banks defrauded by Home Trade has said it received commissions ranging between 2 and 7 per cent on investments.

The Reserve Bank of India has estimated the total loss of the co-operative banks at around Rs 400 crore. About 20 banks have been found flouting Reserve Bank�s guidelines on gilt trading. There is, however, no estimate yet of the loss sustained by the provident funds.

There is, however, little doubt that Agarwal had connived with the management of most of the co-operative banks and provident funds that have been affected.

According to RBI�s guidelines, securities bought in the physical mode must be delivered within a week.

But most of these banks raised alarm long after Home Trade failed to deliver the securities, which hints at collusion between them.


Mumbai, May 10: 
The Central Bureau of Investigation (CBI) may start probing the government securities scam following a complaint filed by the Seamen�s Provident Fund (SPF) with the investigating agency against few broking houses. SPF has complained that these broking houses have not delivered securities close to Rs 93 crore against certain transactions.

In a marathon meeting of the board of trustees of the fund which lasted till late evening, SPF is also believed to have to taken stringent action against the commissioner for SPF, who will now be relieved. Reports say that the commissioner was approached by Ketan Seth and Sailesh Mehta who were believed to be acting in concert with brokerages like Home Trade for investing in government securities. While the initial transactions is believed to have begun in late 1998, it was only recently that the extent of losses came to light.

The revelations about losses suffered by SPF, with some estimates putting it close to Rs 100 crore, has added a new dimension to the government securities scam. It is learnt that D.T. Joseph, director general of shipping who is also the chairman of SPF, met officials of CBI earlly this morning apart from meeting the commissioner of the fund.

Home Trade ban extended

Sebi has extended the ban on Home Trade from dealing in securities till June 10. It may be recalled that late last month, the regulator had debarred Home Trade from undertaking any activity till today for its involvement in the government securities scam.

In a press statement issued today, Sebi said that Home Trade was granted a post-decisional hearing on May 3, which was not attended by any of its representatives, nor did they respond, leading the market regulator to extend the ban up to June 10.

�Sebi has decided to grant another post-decisional hearing to Home Trade on May 13,� the regulator added.

While referring to the government securities scam, Sebi, on April 29, said �In the circumstance, Home Trade doesn�t appear to be a fit and proper person to continue as a stock broker.�


New Delhi, May 10: 
General Motors India plans to play the volumes game by coming out with a budget car that will compete with the likes of the Palio and the Indica.

The sluggish sales of the Astra, which has been upstaged by Mitsubishi Lancer and the Honda City, has forced a rethink at GM India which is now looking at various options that include a multi-utility vehicle, a budget car and an estate car.

�The perception about GM will change in the coming year. We will have just one launch this year but next year there will be a slew of launches. We have several joint ventures all over the world and we will decide on the vehicle that is most suitable for India. MUVs, budget cars and estates are all strong contenders,� Aditya Vij, president and managing director of General Motors told The Telegraph.

Although Vij refused to indicate the models that were being considered for a launch, he said, �If one can�t get volumes from a single car, the idea should be to have a presence in segments with a huge possibility.�

GM has tieups world-wide with Suzuki, Subaru, Saab and Isuzu. It also owns the Opel brand, which offers a whole range of cars from sedans like Vectra and Zafira, to small compacts like the Agile and the MUV like Frontera. GM is slated to launch the new Vectra model later this year, but since it is talking of volumes, the Agile looks like a good bet.

If GM decides to concentrate on the MUV category, then its partnership with Isuzu will provide a range of models to choose from �Panther, Axiom, Amigo, and Trooper.

While Suzuki�s presence in India may not facilitate any launch from that platform, Subaru has the Legacy and WRX in the sedan category.

�We have started making the necessary adjustments in our Halol plant in Gujarat for a new body shop. In the long run we will have a separate assembly line.

The Rs 600-crore investment proposal cleared recently by the Foreign Investment Promotion Board (FIPB) will be brought in over a period of five years. The manufacturing facility in Halol still has a huge unused capacity as it is only working a single shift. Our line can assemble all cars. So the immediate requirement is a body shop,� Vij said.

GM had been considering the launch of the Vectra for a long time. The launch could not take place as the old Vectra was phased out in Europe before it could be launched here.

However, GM plans to persist with the Astra �a model that has already been phased out in Europe �as it is selling about 150 cars a month.

�The only dedicated Astra setup in the plant is the body shop. As that investment is already there, we will continue to produce the model as long as there is a demand for it. If demand falls to as low as 80 unit per month then we will review the situation,� Vij said.

GM is losing money at the moment and hopes to break even only in another two years.

While it looking at other avenues of revenue like exporting parts to Europe and American manufacturing bases, it is cutting costs at its Indian operations.

�We have very limited employees �so we can not cut down the workforce. We are trying to streamline production operations so that more cars are produced in a shorter time period. It is better to give a three-day holiday, rather than function every day and bear the overhead costs. The savings from structural costs will be passed on to the customers so that we can build up volumes,� he said.


New Delhi, May 10: 
The government proposes, the auditor disposes. The government�s bid to crack down on multinational companies by framing tough transfer pricing norms could come unstuck because of a guidance note issued by the Institute of Chartered Accountants of India (ICAI).

The ICAI note tells its members that they are not responsible for full-fledged auditing of international transactions and that their role should be restricted to the examination of documents maintained for this purpose by the assessee.

�The guidance note restricts the scope of liability of the chartered accountant,� said R. Devarajan, secretary of ICAI�s fiscal laws committee, who was the co-ordinator for the guidance note project.

He added that it is the duty of the organisation being assessed to maintain documents that verify that the principle of arm�s length pricing has been adhered to.

To minimise their global tax payouts, MNCs adopt creative transfer pricing approaches between their associated enterprises for flow of goods, services and funds. Different tax rates and rules in different countries allow the MNCs to manipulate their transfer prices in order to show lower profits in countries with higher tax rates and vice versa.

Recognising the need to plug this loophole, the new Finance Act has brought in a set of �special provisions relating to avoidance of tax� to monitor transfer prices for goods and services to determine that they confirm to the arm�s length price principle.

The Finance Act has introduced section 92 to 92 F in the Income-Tax Act 1961, with effect from the assessment year 2002-03.

Arms length pricing ensures that market forces determine commercial transactions between two entities belonging to the same worldwide group. Put simply, it means fixing a price for a transaction at the same level as would have been done if they had been unrelated parties. This ensures that no one is selling at a special price to another entity in an attempt to undermine the overall tax implications on their business.

In its guidance note which has a chapter on various methods of computation of arm�s length pricing, the ICAI has said though the chartered accountant is required to make specific enquiries, he is not responsible to ensure completeness of international transactions entered into by the assessee.

The note advises the accountants to take a representation from the management stating that all international transactions, whether specifically stated in the Form No. 3 CEB or not, have been disclosed to the accountant.

Stating that the guidance note is recommendatory in nature, the ICAI says a member should ordinarily follow them relating to an auditing matter, except when he is satisfied that in the circumstances of the case it may not be necessary to do so.


New Delhi, May 10: 
The government has approved the formation of a consortium of three state-owned oil companies to import natural gas from Bangladesh. Indian Oil Corporation will hold a 48 per cent stake in the venture, while Oil and Natural Gas Corporation and Gas Authority of India Ltd will hold 26 per cent each.

�Bangladesh is likely to take a final decision on export of natural gas to India and, in this connection, agencies have been appointed to evaluate the economic feasibility of an offshore route for LNG,� minister of petroleum and natural gas Ram Naik said.

He also outlined a four-pronged strategy to attain self-sufficiency in crude oil. �We are looking at enhancing domestic production, acquire equity oil from abroad, secure long term crude purchase agreements and explore for non-conventional sources of hydrocarbons.�

The minister, who was addressing a seminar organised by Assocham, said as against an investment of about Rs 6,000 crore in the Ninth Plan Period, participation of private companies in India�s upstream sector could be of the order of Rs 13,500 crore in the Tenth Plan Period.

Petro retailing

Earlier in the day, Naik told members of his ministry�s consultative committee that the government had decided that new companies entering the field of retailing petro-goods would have to set up about 11 per cent of their total outlets in remote and low service areas.

Naik said the government had taken this decision to create a level playing field between state-run oil marketers like IOC and HPCL who were bound by the government�s diktat to set up outlets in remote and unprofitable areas. Ministry officials revealed new entrants would have to set up 5 per cent of their total retail outlets in remote and hilly areas and another 5.5 per cent in low service areas.

All four new companies�Reliance Petroleum, Essar Oil, ONGC and Numaligarh Refineries�which plan to enter the fray to sell petro-products will have to adhere to this criteria. Officials pointed out that this was nothing new and similar responsibilities have been imposed in the airline and insurance sectors.

Sources said the private players had worked out their plans believing this obligation would be limited to just 5 per cent. However, the government�s decision to increase it to a level which is almost at par with that of IOC had upset their calculations.

Both Reliance and Essar will be affected by the new criteria as both of them had planned to set up between 5-6 per cent of their outlets in remote and low service areas. Reliance for instance, had planned a network of 5,849 retail outlets, out of which only 322 (5.6 per cent) are in remote and low services areas.


Calcutta, May 10: 
In the wake of the gilt scam in co-operative banks, the National Bank for Agricultural and Rural Development (Nabard) may consider an annual inspection of the banks to check fraud.

At present, Nabard carries out inspections of co-operative banks once in two years. It has to inspect 360 central co-operative banks and 29 state co-operative banks.

Y. C. Nanda, chairman of Nabard said, �We have not yet taken any decision on an annual inspection of the co-operative banks. But one thing is clear, the co-operative banks should comply with the Reserve Bank of India�s (RBI) guidelines.�

Commenting on the recent events at Nagpur District Central Co-operative Bank (NDCCB), he said that it was a case of fraud. �There is little that can be done if anyone indulges in fraud. In this case, transactions were not conducted through the subsidiary general ledger (SGL) account. That is the fault of the bank,� Nanda said. Regarding Nabard�s business plan in the current financial year, he said that the bank has requested RBI to provide it with a working capital of Rs 7,500 crore. Last year Nabard provided a working capital of Rs 6,800 crore to the farm and the non-farm sectors.

The investment credit for last year stood at Rs 6,700 crore. This year the bank has earmarked an investment credit of Rs 8,000 crore, out of which Rs 1,500 crore will go to the non-farm sector, Rs 500 crore to the rural housing sector and the rest will go to the farm sector. Nabard has been able to sanction Rs 25,000 crore under the rural infrastructure development fund (RIDF) till date. The disbursement is in the region of Rs 13,000 crore.

Nanda was in the city to attend the first meeting of the expert committee on rural credit.

V. S. Vyas, chairman of the committee along with B. Samal, chairman and managing director of Allahabad Bank and Madhukar, chairman and managing director of United Bank of India, met the representatives of the eastern states to discuss about the credit flow in the rural sector.

Vyas said certain points have emerged from the meeting which need to be addressed. These include the need for augmenting credit to agriculture, diversification in agricultural products, emphasis on marketing of products, setting up of a regional technical pool and enhancing co-ordination between commercial banks, co-operative societies and state governments for better credit flow to the rural sector.


Calcutta, May 10: 
Navision Software India plans to invest $ 10 million in the country by the year-end.

Speaking about the company�s business plans in India, managing director Yash Nagpal said, �We have already invested $ 2 million in our projects in the country and expect to generate sales worth $ 20 million by December 2004.�

The Indian subsidiary of the $ 200-million Denmark-based Navision a/s currently has 52 partners in the country. The business solutions provider expects to have around 100 partners by 2002-end. Globally, the company has maintained a 20 per cent growth every quarter since June 2001. The company�s accounting year is from July-June.

�Our main focus is on the small and medium enterprises (SME),� says Nagpal. According to IDC reports, the ERP (enterprise resource planning) market is estimated at Rs 500 crore. Nagpal says that the SME market is at least 10 times larger and hence there is a huge potential for business.

The company operates through solutions centres, which are managed by partners. Nagpal said that it operates on a 35 to 50 per cent revenue sharing with its partners depending on the volume of business generated.

Nagpal said that the Danish parent has received an offer from Microsoft to acquire the company for $ 1.33 billion. While the founder members hold 60 per cent of the company, the remaining is with the public.


New Delhi, May 10: 
First they taught you computer languages; now they want to teach you Yankee English. It�s what the computer training industry is coming to�ever on the look out for a business opportunity to deal with the sharp fall in enrolments since the IT bubble burst two years ago when dotcom dreams were ground to dust.

NIIT, the pioneer in IT training in India since 1981 and predominantly an IT education company, is offering courses to teach the art of speaking American English.

The programme, which will be run on a Rs 50 crore budget, is targeted at the IT-enabled services (ITES) sector�read call centres, which is the hottest growing IT business this year.

But it certainly isn�t being restricted to call centre entrants. �Initially, we will be focusing on companies which have huge US markets. We may explore the opportunity as and when they arise of offer specialised training for the European market,� said NIIT chairman Rajendra S. Pawar while launching Planetworkz, the new initiative.

�It is just not the accent; our courses will give you an understanding of the culture and the society of the customers you are dealing with. If a customer uses a baseball term, the message he or she wants to convey should be understood,� said Suren Singh Rasaily, head of Planetworkz. It offers a 30-day program certificate course on customer service, which prepares a candidate for an ITES career.

The new initiative was launched by Pawar here today along with Nasscom chairman Arun Kumar and president Kiran Karnik.

Key ITES industry leaders from American Express, Daksh, iSEVA and Spectramind were present to pick the prospective employees from the first batch of students from the course. Planetworkz expects to contribute a major demand of the ITEs sector and add to the existing pool of 107,000 ITES manpower in India.

According to a recent study by Nasscom, the ITES sector will grow to be Rs 81,000 crore industry in India and generate over 1.1 million jobs by 2008. The Indian ITES industry has grown at 73 per cent in 2001-02 to record revenues of Rs 7100 crore.

�Like any other service industry, manpower development is critical for the success of the fast growing ITES industry. The creation of well-trained manpower based on industry collaboration will add to the long-term global competitiveness of the Indian ITES industry,� said Nasscom chairman Arun Kumar.

�Ultimately, this is a people business. The quality of individuals employed by the ITES industry will make the difference between success and failure,� said Sanjay Rishi, VP of American Express.

NIIT Planetworkz curriculum will be offered at all major NIIT centres and not through the franchisees. The course through franchisees will be offered at a latter stage. NIIT�s other training programs includes Futurz�a series of programs of varying duration leading to an iGNIIT title. CATS�Curriculum for Advanced Technologies Studies�offers training on advanced technology. SWIFT�Short Work Programs in Information Technology�caters to the literacy needs of people keen to learn computers.



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