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The decree against the leading broking outfit, drafted in a document dated June 13, was made public today. It is, perhaps, the first time the market regulator has come out so strongly against a foreign broking outfit.
In a release issued here today, Sebi explained its strong stand against the FII brokerage: �There was excessive volatility in BSE and the NSE benchmark indices, apart from the unusually volatile market behaviour during mid February 2001 to mid-March 2001. Attempts were made by certain entities, including CSFB, to distort the true price discovery and manipulate the securities markets,� the market watchdog said.
CSFB was being investigated for the past year for alleged price rigging and circular trading in select stocks. The Indian subsidiary of CSFB, headquartered in Hong Kong, was among the most active broking outfits on key bourses until the lid was blown off the March 2001 scam.
CSFB said in a statement from Hong Kong: �We have strenuously defended our position during the Sebi inquiry. The firm is reviewing the terms of the ruling carefully and shall consider all recourse available to it. CSFB is very disappointed with the judgement. However, CSFB respects and will abide by the ultimate outcome of the Indian regulatory and legal process, as it does with all regulatory and legal processes globally.�
The order was passed by Sebi chairman G. N. Bajpai, after taking into consideration the inquiry report, the reply sent by CSFB and submissions made during hearing.
The regulator had launched an investigation into the transactions during the period January 2001-March 2001.
In an interim order dated April 18, 2001, passed under sections of 11, 11B of the Sebi Act, CSFB was restrained from taking on fresh business as a stock broker till the completion of investigation/inquiry proceedings. That order, issued on April 18, 2001, was confirmed through another fiat passed on June 4, 2001.
The regulator had appointed an inquiry officer through an order dated 4.6.2001 to probe just whether and how CSFB had violated the Sebi (Prohibition of Fraudulent and Unfair Trade Practices related to the Securities market) Regulations, 1995 and Sebi (Stock Broker and sub broker) Regulations, 1992.
An investigation held by Sebi (Stock Broker and Sub-roker) Regulations, 1992 found CSFB guilty of breaching Regulation 4(b), (c), (d) of the Sebi (Prohibition of Fraudulent and Unfair Trade Practices related to the Securities market Regulations, 1995 and Regulation 7 of the SEBI (Stock Broker and sub broker) Regulations, 1992 in a report dated April 19, 2002. A two-year suspension was recommended as punishment.
The inquiry officer also recommended that in calculating the two-year period, the date from when it was restrained from carrying on fresh business � April 18, 2001 � should be taken as the cut-off time.
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A study by the Federation of Indian Chambers of Commerce and Industry (Ficci) says the biggest encouraging sign has been the clawback in the prices of manufactured goods. Prices have risen by 0.3 per cent in the third week of April and further by 0.6 per cent in the fourth week of April.
The trend continued in May with prices of manufactured goods rising by 1 per cent in the third week of May.
These numbers have been buttressed by a couple of other interesting developments: the growth rate in the six infrastructure industries�electricity, coal, crude oil, cement, petroleum refinery, cement and finished steel�has surged to 5.9 per cent in April, the highest level in the past 12 months.
Moreover, non-food credit by the scheduled commercial banks has leapt by Rs 51,548 crore this fiscal till May 17 as against a Rs 920-crore increase in the same period of the previous year. Some of that credit growth may be attributed to larger borrowings by oil firms whose cash flows were affected by the price freeze over a long period. However, the Ficci study says some of that credit has certainly percolated down to other sectors of the economy as well.
Performance of the consumer goods segment is encouraging, with growth rates hovering in the 5-9 per cent range over a major part of the year. Even then, the growth of the consumer goods sector was only 5.8 per cent in 2001-02 as against 8 per cent in the previous year.
The study says that one needs to wait for the industrial growth numbers for April. But there is one factor that could spoil the party. The study says the fall in investment demand may weigh down long-term prospects of a significant recovery.
This, it says, is best highlighted by the continued slowdown in the domestic production of capital goods where the growth rate has fallen from 12.6 per cent in 1998-99 to 7 per cent in 1999-2000 and further to 1.7 per cent in 2000-01.
The latest figures for 2001-02 show that capital goods� output has declined by as much as 4 per cent. Although monthly output figures in the capital goods segment show some signs of revival, the trends do not indicate any significant improvement in investment demand.
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�The promoters of HPL met us today to discuss the company�s debt restructuring proposal. The account will become a non-performing asset (NPA) on June 30 if the company fails to repay the interest. However, we will first have to talk to IOC since it has shown interest in participating in the project, before taking a final decision,� senior IDBI officials said from Mumbai.
The FIs led by IDBI are keen to rope in IOC as the fourth equity partner in HPL. �They have the expertise to run the petrochemicals business,� IDBI officials said. Both the Bengal government and The Chatterjee Group (TCG), have put IOC�s proposal for providing additional naphtha credit to HPL, before the leading financial institutions, they added.
IOC has said that they can provide an additional naphtha credit against product in-lien. This means that HPL will first pay IOC once its products are sold. �We will have the first right of payment. At present, IOC provides a Rs 300-crore naphtha credit to HPL, which in any case is high. According to our proposal of participation in HPL we have said that we will provide a naphtha credit of Rs 500 crore,� the IOC officials said.
At today�s meeting, HPL�s promoters asked the FIs to infuse a short-term loan for retiring the high-cost borrowings. The FIs and banks have an exposure of Rs 4,200 crore in HPL.
The promoters have also sought rescheduling of loans. During the financial closure of HPL, the banks and FIs had extended loans at an average interest rate of 16 per cent.
The HPL promoters also discussed a proposal to change a portion of the FI loan into equity.
�We are considering the matter, but no final decision has been taken yet,� IDBI officials said.
The Bengal government has already informed IOC that it will get back to the petroleum major following the meeting with the FIs. �We expect to hear from the state government by this week. Once we get a clearer picture we can fine tune our proposal,� the IOC officials said.
In its earlier proposal, IOC had sought management control with a 26 per cent stake. They had offered to infuse Rs 468 crore in the project and provide a naphtha credit of Rs 500 crore.
IOC�s offer for participation in HPL remains open till June 30. �If we find that the state government is serious about our participation in the company we may consider extending the proposal,� IOC officials added.
But IOC officials pointed out that the state government has not yet spelt out at what price HPL�s shares had been transferred to Purnendu Chatterjee. The state government had entered into an agreement with Chatterjee on January 12 for handing over a 51 per cent stake in HPL to him. However, the actual transfer of shares is yet to take place since no further equity infusion has been made by Chatterjee.
Haldia�s present paid-up equity is Rs 1,260 crore, in which TCG and the state government hold 43 per cent each. The Tatas hold 14 per cent in the company.
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The authority is drawing up a new list of drugs that will face the rigours of government-mandated price controls. At present, there are 74 drugs on the DPCO list but the authority plans to trim it to around 35. The court has stayed the announcement of the new list until it hears the case.
�We have already sent in the final DPCO list to the chemicals and fertiliser ministry,� NPPA chairman P. K. Mishra told The Telegraph. �Now the matter is sub-judice and I cannot comment on the time it will take for the new DPCO list to come out.�
He said the authority was preparing its reply in consultation with the ministry of chemicals and fertilisers.
The public interest litigation (PIL) filed in the high court at Bangalore has charged that the revision of the DPCO will lead to a situation where several life-saving drugs will go out of price controls, which will lead to a jump in healthcare costs.
�We intend to explain our stand to the high court in our reply,� Mishra said. It is learnt that the ministry of chemicals and fertilisers is likely to take the help of the law ministry in filing an affidavit in the Bangalore high court.
The court case has delayed the long-awaited revision of the DPCO. Earlier, NPPA was hoping to come out with the new list by early July.
Sources in the pharmaceutical industry say it will now take a few more months before the new DPCO list can see the light of the day.
Several pharmaceutical companies have been lobbying to keep their drugs off price controls. However, some of the smaller pharmaceutical companies were keen to come under price controls in order to avail of certain government subsidies.
The process of winnowing the DPCO list is based on criteria which has been spelt out in the pharmaceutical policy of 2002.
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Bucking global trends of either fresh bans on transgenic seed imports or prolonged trials before entry, the policy plans to allow transgenic seeds after trials for just two seasons conducted by the ICAR and clearance by the Genetic Engineering Approval Committee.
India has recently allowed trial production of the transgenic cotton variety. However, it was hit by news soon after that Chinese environment scientists have found Bt Cotton, a genetically modified cotton variety, damaging the environment, destroying the population of the bollworm�s parasitic natural enemies despite its success in controlling the pest. Scientists also verified with lab tests and field monitoring that cotton bollworm will develop resistance to the GM cotton and concluded that Bt cotton will not resist bollworm after being planted for eight to 10 years continuously.
The policy comes despite demands by independent collectives of scientists like the New-Delhi-based Forum for Biotechnology & Food Security, which have urged the Prime Minister to institute a high-level enquiry into the what they term as �dubious role� of Department of Biotechnology �in supporting, promoting and hastily pushing the controversial genetically modified crops onto gullible Indian farmers.� The policy will also allow �free and faster imports� �with adequate quarantine checks� to allow Indian farmers access to �best quality seeds and planting material.�
India has been notoriously conservative in allowing seed imports ever since it was hit by various environmental problems associated with import of wheat from the US in the 1960s. It allows import of 25 kilos of any kind of seed in the first go for testing by Indian laboratories to see its impact on the Indian environment.
Only success in these tests will allow import for a period of two years. It will, however, protect the rights of farmers to save, use, exchange, share and sell farm produce. Although farmers will not be allowed to sell branded seeds of any variety under that brand name.
The policy will seek to set up a new National Seeds Board to implement it and to take over the functioning of two bodies currently in existence�central seeds committee and central seeds certification board.
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But it�s only now that the cellular industry is waking up to the menace. The Cellular Operators Association of India, the apex forum for the industry, is planning to come out with a short guide on Mobile Manners � where you should use the cellphone and where not.
With more than 7 million subscribers in India, the impropriety of mobile use is assuming alarming proportions and cellphone operators are concerned.
�Yes, we are aware of this problem. Many of the cellular service providers have taken initiative independently to educate their customers about the place where cellphones should be used and where not,� said, T.V Ramachandran, director general of COAI. �The association has not undertaken an initiative in this regard yet, but we will soon come out with a do�s and don�ts for cellphone subscribers.�
Most mobilephobes have their gripes over the insensitivity of cellphone users in public places�but that isn�t the only situation where this crops up.
According to a recent study, the growing number of cellphones worldwide has led to the production of three kinds of major disturbances.
The first is social disturbances: for example in parliaments, military bases, boardrooms, courtrooms, banks, churches, cinemas, theatres, libraries, universities, and schools.
The second type of disturbance affects electronic devices like medical equipment, hospitals, electronic systems in motion vehicles, aircraft navigation systems, computer networks and data storage systems.
Imagine a situation where a doctor is performing an ultrasound or eco-cardiography and the mobile in the doctor�s pocket or person accompanying the patient rings. Result: the reading on the equipment goes haywire and leads to an altered result.
The technical experts call this electromagnetic interference or air wave disturbance where sound waves changed into electronic mode and then into air waves and travel in air between one cell phone to another. The not-so-technically inclined call it �disturbance�.
The third type of disturbance disrupts or compromises public, industrial and corporate security in places like banks, cash transfer vehicles, embassies, company meeting rooms, courts, corporate and industrial espionage, examination rooms, prisons, and administration buildings.
Although never proven, but it is believed that there have been at least a few air crashes which have been attributed to cellphone use in mid-air that interfered with the computer systems on board the plane. There are innumerable cases that go unreported about the disturbances caused by the use cell phones in places with highly sensitive equipment.
Many countries are now considering tools to jam cell phone signals in public places. However, this may not be the right answer to deal with the problem as cell phones are a handy tool to communicate from places like hospitals outside in case of an emergency. It is estimated that more than 200,000 emergency calls are made in India each day from cell phones.
In much advanced countries like the US, where the cell phones usage is high, FCC regulations have banned use of jamming devices.
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The committee, which consists of the chairman of the Central Electricity Authority, power secretary and chairman of the Credit Rating Information Services Ltd (Crisil), is currently evaluating the tariff proposals deliberated with various state governments.
As part of the evaluation, the committee is scheduled to hold another round of discussions with the Central Electricity Regulatory Commission (CERC).
�The aim is to finalise the new power tariff policy by September and the draft tariff rates are currently under evaluation. Before it is finalised, we will discuss with a consultant. We are in talks with DSP Merrill Lynch to vet the policy once it is completed by the committee,� said power ministry sources.
�We expect this independent consultant will be able to analyse the needs of all the parties and achieve concurrence �from the generator of power to the final consumer at home and industry. This will ensure that interests of all stakeholders are taken into consideration,� sources added.
The new tariff policy will not only help regulators in the states to fix the tariffs but also the state electricity boards to devise strategies to rationalise power distribution. It will also remove the problem of multiple tariffs in various states.
The consultations with the CERC are likely to begin early next month. �The regulator has received comments from all concerned parties and we also have collected our data and the tariff policy is expected to be worked out soon,� sources said.
The need for a new tariff policy was felt after a series of meeting with the chief ministers on power rates. During the last power ministers� meeting, Prime Minister Atal Bihari Vajpayee had pointed out the need for an appropriate pricing policy in the power sector.
�The inability of implementing the principle of �he who uses electricity pays for it� has allowed many other categories of users to get electricity either free or at highly subsidised rates in the name of agriculture,� Vajpayee said, adding, �The subsidies in deserving cases should be provided for explicitly through budgetary support. They cannot be sustained by irrational cross-subsidisation or at the expense of the financial viability of the SEBs.� Sources said the committee is likely to address this issue.
�The new tariff policy will also take into account the various types of power generation and the investment needed for it. Hydel power, for example, costs much more to generate than thermal power and the break even also takes much more. Such issues have been discussed and the tariff component will reflect this,� sources said.
Recently, the power tariff announced by the Central Electricity Regulatory Commission (CERC) based on the availability-based tariff (ABT) norms had run into rough weather with major power public sector companies like National Thermal Power Corporation (NTPC) opposing it.
In addition to the new tariff policy, the committee is also examining an amendment in the Electricity Bill to create a special legal framework to resolve matters in power sector.
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It will also endeavour to complete the Asian highway project linking India with Thailand and the rest of south east Asia. This proposed road will link the highway that India has built, joining the north-eastern state of Manipur and Myanmar.
At a meeting arranged by the Confederation of Indian Industry, Bandhit Sotipalalit, the Thai Ambassador to India said, �To facilitate trade between the two countries, our Prime Ministers have agreed to study the possibilities of establishing a bilateral free trade area. We are in the first stages of studying this initiative in detail. As this will enable both countries to exchange goods at a lower cost, it will strengthen economic relations.�
Commenting on the links between the two countries, he said, �We are working closely with Myanmar to complete the gap between the highway built by India and our country.�
Information technology, educational institutions, tourism, textile, automobile and ancillaries, gems and jewellery are the possible areas of co-operation between the two countries. India can also invest in agricultural products, mineral and ceramics, textiles, electrical and electronic products, chemicals and paper and services in Thailand.
Thailand is looking at India for bilateral ties that will make it easy for the Thais to visit the Buddhist Monasteries and other places without any hassle. Sotipalalit said, �61 per cent of our population are Buddhists. India will be able to attract 10-15 million tourists if they can supply the proper infrastructure.�
At present, trade between the two leading Asian economies has gone up significantly. While India�s exports to Thailand went up from $ 424 million in 1998 to $ 671 million in 2001, imports from Thailand rose from $ 284 million in 1998 to $ 483 million in 2001.
V. K. Mathur, chairman and managing director, Inapex Ltd said, �The mutual integration within the Asian market will help us be on a stronger footing when the time comes to bargain with the Western countries. Through Thailand we can have access to south-east Asian countries. We can form a common strategy to develop the Asean market, as now growth will only come from these countries.�
�These trade relations can help us later during WTO negotiations. That will increase our bargaining power and we will not have to surrender market access to the West,� he added.
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The Dutch bank already has a 75 per cent holding in its Indian subsidiary � Rabobank India Finance. Rana Kapoor, managing director of Rabobank India Finance said, the parent company would increase its stake to 100 per cent within the next two to three months.
Rabobank provides advisory services ranging from merger and acquisitions to equity transactions, besides lending arrangements and structured financing.
�The private bank will be a 49:51 joint venture between Rabobank International and three private investors,� says Kapoor. �The bank will have an initial paid-up capital of around Rs 300 crore.�
Rana Kapoor, Ashok Kapur, former chief executive officer of ABN Amro and the former CEO of Deutsche Bank will jointly hold the 51 per cent stake in the joint venture. The private bank will offer commercial and retail banking services.
Speaking on the strategy to be adopted by the private bank to position itself as a bank with a difference, Kapoor says, �The aim is to provide specialised banking services, skill sets and credit practices in the food and agriculture sectors. We are already a market leader in the Netherlands in these sectors.�
The bank will also provide customised banking solutions to cater to its focus segment. �There has been a huge shift in tech-applications in banking, which have helped in higher penetration and enhanced networking,� adds Kapoor.
The 102-year-old Dutch bank is a co-operative with 370 member banks, which offers location and client-specific solutions according to requirements of a certain area. These, according to Kapoor, would be the important drivers in evolving the banking platforms.
Kapoor said that the bank would also consider an IPO or a private placement later. The name of the new bank is still under consideration.
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