Is IMF behind worsening Asian crisis?
AS the East Asian crisis continues to deepen, the debate on the role of the International Monetary Fund’s policies has heated up.

Abolish it: Freidman

Deregulation to benefit big refineries
The refinery industry has been in the news following the decision to deregulate it. It is opined that deregulation will prove beneficial to the large-sized companies, whereas the small sized companies are likely to suffer from deregulation.

Is IMF behind worsening Asian crisis?
From Martin Khor

AS the East Asian crisis continues to deepen, the debate on the role of the International Monetary Fund’s policies has heated up.

The IMF’s top officials continue to defend their macroeconomic approach of squeezing the domestic economies of their client countries through high interest rates, tight monetary policies and cuts in the government budget. Their argument is that this ‘pain’ is needed to restore foreign investors’ confidence, and so strengthen the countries’ currencies.

However, some economists had already warned at the start of the IMF ‘treatment’ for Thailand, Indonesia and South Korea that this set of policies is misplaced as it would transform a financial problem that could be resolved through debt restructuring, into a full-blown economic crisis.

The prediction has come true, with a vengeance. The three countries under the IMF’s direct tutelage have slided into deep recession. Partly due to spill over effects, other countries such as Malaysia and Hong Kong have also suffered negative growth in the year’s first quarter. Even Singapore is tottering on the brink of minus growth.

For the countries afflicted with sharp currency depreciations and share market declines, the first set of problems involved: the heavy debt servicing burden of local banks and companies that had taken loans in foreign currencies; the fall in the value of shares pledged as collateral for their loans, with its resulting weakening of the financial position of banks, and inflation caused by rising import prices.

These, together with the reduction in government spending, will plunge the economy into deeper and deeper recession. And that in turn will anyway cause erosion of confidence in the currency and thus increase the risk of capital flight and depreciation. A higher interest rate regime, in other words, may not boost the currency’s level but could depress it further if it induces a deep and lengthy recession.

This is in fact what is happening. The main bright spot for Thailand, South Korea, Indonesia and Malaysia is that as recession hits their domestic economies, there has been a contraction in imports, resulting in large trade surpluses.

Unfortunately, this is being paid for through huge losses in domestic output and national income, the decimation of many of the large, medium and small firms of these countries, a dramatic increase in unemployment and poverty, and social dislocation or upheaval.

— Third World Network Features

Abolish it: Freidman

WASHINGTON, Oct 18 (PTI) — Noted economist Milton Freidman has blamed interference by the IMF and other agencies for the current global economic crisis, and said it should be abolished as it has done more harm than good. “Global economic crisis is the result of government’s intervening in the market, both internally via loans, subsidies or taxes, and externally via the IMF and other agencies,” he has said in an article in Wall Street Journal.

The IMF’s willingness to fund troubled nations has encouraged country after country to continue with unwise and unsustainable policies longer than they would have or could have, Freidman points out. However, the real beneficiaries have not been the people but the banks and financial institutions who have lent to these countries which defaulted in their repayments, he adds.

Spotlight on refineries
Deregulation to benefit big refineries
By K. Garima

The refinery industry has been in the news following the decision to deregulate it. It is opined that deregulation will prove beneficial to the large-sized companies, whereas the small sized companies are likely to suffer from deregulation and open market scenario. The three large players, Indian Oil Corporation, Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd stand to gain the most. The domestic oil sector has hitherto been almost totally regulated by the Controlling Ministry of Petroleum and Natural Gas.

Indian Oil

A leading player in the refinery industry, Indian Oil Corporation Ltd has the distinction of being the only Indian company that is listed in the Fortune 500. The company can boast of an excellent track record over the years. It operates via its facilities located at Gujarat, Haldia, Guwahati, Mathura, Digboi and Barauni. Financially, the company has been recording excellent results. The company, with a vision to grow further, plans to invest as much as Rs 33000 crore during the Ninth Five Year Plan. The funds will be utilised to set up new refineries and an LPG bottling plant. Moreover, it plans to allocate funds for enhancing its marketing structure.

Hindustan Petroleum

A public sector company, Hindustan Petroleum Corporation Ltd is a distinguished player in the industry, with a market share of 20 per cent. It has the distinction of being the second largest refinery and the second largest lubricant company in the country. The company boasts of an excellent track record. It has signed an MoU with the government for the execution of four projects, Vizag refinery expansion project, Vizag-Vijayawada pipeline project, diesel hydro de-sulphurisation projects at Vizag and Mumbai and Punjab refinery project.

Bharat Petro

A leading player in the refineries industry, Bharat Petroleum Corporation Ltd is recognised as the third largest refining company in the country, with a market share of 20 per cent. It accounts of one sixth of the total output in the country. It operates with an excellent capacity utilisation of 122 per cent. It sources nearly 85 per cent of the crude oil from the Bombay High fields. Financially, BPCL can boast of an excellent track record. The company has chalked out an extensive growth plan for the next five years incurring an investment of Rs 5500 crore.

Cochin Ref

Recognised as the largest refinery in the south, Cochin Refineries functions via an installed capacity of 7.5 mmtpa. The company operates at optimum capacity utilisation. This company has chalked out an aggressive growth plan, which includes increasing refining capacity and diversification into power. The company could benefit immensely from decontrol. However, till then it is expected to be a consistent performer.

Zee TV, Tata Tea, ACC among FICCI awardees

NEW DELHI, Oct 18 (PTI) — Zee TV and Tata Tea Ltd have won the 1997-98 FICCI awards for creativity in visual media and training and placement disabled persons respectively.

Announcing the award, FICCI, said Zee TV was chosen for its role in the proliferation of cable and satellite television in the country.

Tata Tea Ltd, Munnar (Kerala), which has been selected for the award in recognition of corporate initiatives in training and placement of persons with disability has successfully trained and employed physically and mentally handicapped persons to improve their employment chances.

Tata Steel Rural Development Society, Jamshedpur, has also been selected in recognition of institutional initiatives in rural development.

Prime Minister Atal Behari Vajpayee would give away the FICCI awards at the federation’s 71st annual session on October 24.

ACC Ltd has been selected for adopting innovative measures for pollution control, waste management and conservation of mineral resources in mines and in cement plants in Himachal Pradesh.

The FICCI cash award for individual initiatives in life sciences, including agriculture, has been jointly won by Dr Jayaraman Gowrishankar of Centre for Cellular and Molecular Biology, Hyderabad and Dr Y.P. Sharma of Malaria Research Centre, New Delhi.

Dr Anil Kakodkar has won the award for individual initiative in engineering and technology.

By J.C. Anand
No Divali lights for stock market

THIS has been a bad year for both economy and the stock market but the coming months may be worse. This year’s Divali may shoot down the market indices still further. In my previous column I had started that the post-Divali weeks were likely to register further decline in the market but even the Divali trading may be listless. Apart from the impact of the global economic and currency crisis and the US sanctions against India, the domestic conditions are not conductive to the revival of the market. There is distinct market slump in some vital sectors of industry and there is little hope of early revival. The UTI 64 scare has added to our difficulties.

According to a survey conducted by the CII, business confidence has plunged to a two-year low with majority of the industry. The ranks of the pessimists, as the CII survey indicates, has swelled from 19 per cent (as in the previous survey) to 47 per cent. The general expectation is that the second half results of the corporate sector for the financial year 1998-99 would be relatively poor.

The market sentiments is so low that even excellent results reported by some companies like NIIT (which proposed a bonus issue in the ratio of one share for two held, with an EPS of Rs 42.06 for the year ending September 30), Infosys Technologies (which had reported a net profit of Rs 52.07 crore, that is, 126 per cent higher than that of the corresponding period, for the first six months of the current accounting year) and Satyam Computer Services (with a net profit of 113 per cent higher than that of the corresponding period last quarter) have not attracted investors and their market prices have remained more or less around the previous levels.

But these good results pertain to the software sector, and there were not unexpected by the market. In other sectors, however, the results are expected to be very poor and disappointing. It is not much of a surprise that many blue-chip equities of the Tata group and of the A.V.Birla group have slumped in the market. Telco is quoting around Rs 104 and Tisco around Rs 77 per share. Both these companies are expected to report heavy losses. Tata Chemicals is expected to show relatively better results, though with a lower net profit, is moving around Rs 81 per share. Grasim and Indian Rayon of the A.V. Birla group, are being quoted around Rs 144 and Rs 100 per share respectively.

A number of shares, and these had been recommended in this column earlier, such as Novarties, Wyeth Lederdate, Parke-Davis (Multinational pharma shares), Clariant, Ciba Speciality (speciality chemicals shares) Essel Packaging have not only maintained their market prices but even improved upon the market rate substantially during the last six months or so.

In case, long-term investors decide to invest in some blue-chip equities for substantial returns in the form of good dividends and price appreciation some two years later, they should wait for another two months or so. At present the watch-word should be “wait and watch”.

A number of queries have come to me from investors regarding UTI 64 scheme. Those who have invested in the scheme are naturally perturbed and worried. Many of them wanted to know whether their investments would still be safe when the Net Asset Value of the scheme is much lower than the sale and purchase price fixed by the UTI.

I have not the latest doubt that the scheme is very safe even now. The announcements made by the Finance Minister and the Chairman of the UTI as well as by the chairman of the State Bank of India should assure them of its continued safety and liquidity. No government at the Centre can afford to let down the UGS 64 scheme investors. The collapse of the scheme would mean the collapse of the UTI and a disaster for the stock market as well as for the corporate sector.

The UGS-64 scheme has many advantages for investors: easy and ample liquidity, good return in the form of interest of a little over 14 per cent and relatively better service facilities than offered by other mutual funds. There are reports that the Government of India is considering a proposal seriously to exempt UGS 64 interest returns from Income Tax.

The UTI, however, is expected to improve the NAV of this scheme during the next two years. In case the Stock market improves, the NAV of UGS scheme will also move up substantially.

By K.R. Wadhwaney
A-318 to replace aging fleet

AIRBUS Industries’ two-member team , in a detailed briefing, endeavoured to impress upon mediapersons that the new aircraft, A-318 100 seater, was best suited to fly on the Indian domestic routes.

Highlighting its potential the President, Airbus Industries (India), Dr Kiran Rao, kept emphasising that the aircraft was an ideal replacement for Alliance Air’s aging fleet. His thrust was that the new aircraft would be economical and reliable. “The maintenance cost will also be much lower than the expanses incurred on the aging aircraft”, reiterated Dr Rao.

Dr Rao said it was the fourth member of the A-320 family and thereby easy to handle. “A commander flying on one type of aircraft can switch over to another without any problem because technically there is not much difference between different seaters”, said Dr Rao, adding that “flexibility is the hallmark of the family”.

The new version, A-318, has a common cabin and flight deck as of other members of the family.

Regarding of the volume of traffic growth, Indian Airlines is particular needs additional fleet to augment its operations. The airline officialdom is aware of it but unfortunately expansion has not been possible because of political and bureaucratic hindrances.

While Dr Rao dwelt upon short version aircraft, this colleague Mr David Velupillai, Regional Manager (Press relations) dealt with Jambo version of 500 seater. The new long-haul aircraft, A3XX, will be able to fly non-stop between India and the USA.

New website

British Airways, always innovative, has launched a new website for passengers and Internet surfers in India and South Asia providing a comprehensive source of travel information and opportunities to win a free trip to London.

The new BA website is the first by a foreign carrier on the internet. Announcing the launch the airline’s General Manager (South Asia) said: “BA’ global website is already a huge source of travel information. It is tailored to meet the needs of our customers in India and South Asia.

Jet Airways

Jet Airways has introduced two next generation Boeing 737-800 aircraft to fly on busy routes. These aircraft replace two of its existing 737-400 aircraft.

The private airline provides to its passengers arriving in Mumbai a facility to rent cellular phones or SIM cards at a nominal rate. The service will contain till November 30.

Jet Airways offers a fleet of 18 new generation Boeing 737 aircraft. It is said to have flown 10.9 million passengers during the first five years of operation until September 1998.

Association

Many far reaching decisions were taken at the two-day meeting of the Airlines Association for Human Resources Management (AAHRM) held at Mumbai.

Bench marking, information exchange, training, research and publications, international conferences were some of the subjects discussed by the AAHRM, which was founded in 1983. The theme was to bring representatives from airlines, airports and regulatory agencies, safety and HRD experts together on one platform. To achieve global perspective was the main aim of the conference which ended successfully.

By A.K. Sachdeva

Q: We are registered as a dealer under the Punjab General Sales Tax Act, 1948 and the Central Sales Tax Act, 1956. A company based in Chandigarh despatched recently a consignment of medicines and all relevant documents such as bill of sale and goods receipt were duly issued showing the details relating to the goods. Tax payable under the Central Sales Tax Act, 1956 on this transaction was also realised in the bill of sale issued by the consignor. As a matter of fact, these goods have been sent following the instructions given by the medical representative while we have had placed no such order for the supply of the material.

While the goods were lying with the transporter, these have intercepted and subsequently seized by an Excise and Taxation Officer under sub-section (6) of section 14-B of the Punjab General Sales Tax Act, 1948. The plea put forward by the Company before the checking officer is that the medical representative has wrongly advised the Company to send the goods simply with a view to increasing the sales. The question is whether the Officer is competent to levy penalty under sub-section (7) of section 14-B. Kindly advise.

— Adesh Agnihotri, Tarn Taran

Ans: It is a fact on record that the goods sent by the company are found supported by the statutorily prescribed documents wherein all relevant details have been duly furnished. It is a different matter that no order was placed by the consignee and it was only on a wrong advice sent by the medical representatives that the goods were sent from Chandigarh. But this does not constitute a valid ground for holding the documents produced at the time of checking to be ingenuine. If the contention of the Company that wrong advice by the representatives resulted in despatch of the goods is really true, no case for detention or imposition of penalty within the meaning of section 14-B of the Punjab General Sales Tax Act, 1948 has been made out.

Q: Ours is a private Limited Company which is engaged in the business of manufacture and sale of packing material in Haryana. The assessing authority discovered some incriminating material from extraneous source which suggests unaccounted transactions in respect of the month of April, 1996. Now during the course of the assessment proceedings for the assessment year 1996-97, the assessing authority has pointed out that the books of account maintained by us are unreliable in view of the adverse material on record.

A notice has been issued to us to the effect that the suppressed sales found in relation to April, 1996 will be made the basis for best judgement assessment for whole of the year. Our submission is that since no material adverse to us has been found by the assessing authority for the remaining eleven months it is not open to him to multiply this turnover for whole of the year for the purpose of assessment. This plea has not found favour with the assessing authority. Kindly advise.

— A.N. Singh, Bhiwani

Ans: It is a well established principle of law that once the assessing authority comes across some adverse material that remains incontroverted by the assesses, he has every right to reject the books of account and the returns furnished under the statutory rules. When the books of account are found unreliable, the assessing authority can take recourse to best judgement assessment. On similar facts it was held by Hon’ble the Supreme Court of India in the case that came to be known as Commissioner of Sales Tax, Madhya Pradesh v. H.M. Esufali H.M. Abdulali, (1973) 32 STC 77 once it is admitted that the assessee had dealings outside his accounts during a particular period, it becomes open to the sales tax authority to infer that the assessee had large scale dealing outside his books. In such a situation, it was not possible for the sales tax authority to find out precisely the turnover suppressed. He could only make an estimate of the suppressed turnover on the basis of the material before him. So long as the estimate made by him is not arbitrary and has nexus with the facts discovered, the same cannot be questioned. In the very nature of the things the estimate made may be an over-estimate or an under-estimate. But that is no ground for interfering with his “best judgement assessment”.

Stronger ‘Tigers’ to emerge out of crisis

SINGAPORE (AFP): Asia will enter the 21st century with sustainable economic growth rates, greater transparency and improved corporate governance after weathering the current financial crisis, experts have told a regional conference here.

With greater information disclosure by governments and businesses, tighter regulation of financial institutions and better management of capital flows, Asia would regain its lustre, predicted Sir Charles Powell, Director of British conglomerate Jardine Matheson.

But the task of rebuilding the region from the rubble of the worst crisis in decades will be painstaking because currencies have plummeted, corporate debt has skyrocketed, credit has dried up, production has sagged and growth stagnated.

The experts pictured the regional scenario in the new millennium at the just-concluded East Asian conference of the Swiss-based World Economic Forum, based on the theme “Shaping the new economic landscape in Asia.”

Japan’s banks

Tokyo: Japan has taken a big step towards reviving its economy with approval of a 43 trillion yen ($ 365 billion) fund to strengthen the nation’s ailing banking sector. The move will come as a relief to international policymakers, who see stability in Japan, the world’s second largest economy, as crucial in easing global financial turmoil.

Finance minister Kiichi Miyazawa said the government will set aside 18 trillion yen to take over banks on the brink of failure and 25 trillion yen to strengthen banks that are weak, but viable.

The plan will allow the government temporarily to nationalise the weakest big banks through a purchase of common shares. Their bad loans would then be disposed of by a new body similar to the US Resolution and Trust Corporation, which helped to clear up the savings and loan crisis in the 1980s. The Guardian

Yen impact

BEIJING (PTI): With the Japanese yen gaining against the US dollar in recent weeks, the enormous pressure on China to devalue its currency yuan has diminished.

“Talk of possible devaluation of China’s currency has dwindled as confidence in the Renminbi has grown...,” according to China Daily Business Weekly.

Supported by China’s crackdown on illegal foreign exchange transactions and a rebounding Japanese yen, the Renminbi has reached record high in the past two weeks.

HK exports

HONG KONG (AFP): Hong Kong’s exports will continue to face pricing pressure in the coming year because of increased competition from countries whose currencies have devalued during the Asian financial crisis, a trade report has said.

The quasi-official Trade Development Council (TDC) also said in its latest report that Hong Kong companies should be aware of the undercurrent of regionalism and restrictive trade measures triggered by the crisis.

Malaysian economy

KUALA LUMPUR (Reuters): Malaysian Prime Minister Mahathir Mohamad has said that the economy is expected to shrink by 4.8 per cent this year but will show a 1 per cent growth in 1999.

Mahathir told reporters the government would introduce new tax measures in the 1999 budget but said these would not pose a burden to taxpayers.

“The main point is we believe our economy will grow by 1 per cent (in 1999), although for this year we estimate our economy to contract by 4.8 per cent,” he told reporters after a meeting of his national front coalition.

Apollo Tyres plans new radials

NEW DELIH, Oct 18 (UNI) — Targeting the new entrants in the automobile arena, the Apollo Tyres Limited (ATL) is planning to launch a complete range of ‘new generation’ car radials for the replacement market. Besides, it is also working towards relaunching the ‘Amazer’ brand steel radials in the country close on the heels of its ‘Street Cat’, company sources told UNI here. “The new products are being launched in view of the roll out of a host of new generation cars by automobile giants like Telco, Daewoo and Hyundai.

Bharti Telenet may break even

NEW DELHI, Oct 18 (PTI) — Bharti Telenet is likely to break even in its basic telephony project in Madhya Pradesh by the third year of operations with a targeted 2.5 lakh connections. “The company has 5,000 customers in Indore and on an average 100 new connections are being added everyday. As per our projections, we should break even by the end of the third year of operations,” the company’s Managing Director Rajan Bharti Mittal told PTI. The company had launched its services in Bhopal on October 9 and has a booking of 2,000 lines so far.

Premier Elect may shut units

NEW DELHI, Oct 18 (UNI) — Premier Auto Electric Limited, is looking at closing down its loss-making and non-viable distribution units in the North-East and Punjab as part of a restructuring exercise. Besides, the company is also working towards consolidating its operations and adding several new products to its existing range, Chairman Arvind R. Doshi told UNI here. The company, which is part of the Vinod Doshi-led Premier Automobile group and engaged in trading and distribution of auto components and spare parts, has initiated steps to cut costs as part of its overall gameplan to improve viability.

Modipon strike continues

MODINAGAR, Oct 18 (PTI) — The strike by workers at Modipon Ltd, entered the 10th day today hampering the company’s production. The workers staged a “dharna” inside the factory demanding a higher bonus than that announced by the management headed by Modipon chief M.K. Modi. The management has suspended 21 workers in the past week and charged them with negligence of duty.

DCM

I was allotted 10 redeemable non-convertible debentures (NCDs) of Rs 1000 each of DCM Limited under LF no. 201833 dated February 20,1997 (distinctive no. 181699 to 181708). The redemption was due on 7.8.1998 , but inspite of repeated reminders, to DCM Ltd , New Delhi has not made the payment till date.

Gyan Madan
Panchkula

II

I hold 10 NCDs of Rs 1,000 each of series A for 17 months 25 days of DCM Ltd. These were due for redemption on 14.8.98. Despite sending the debentures certificates duly discharged on 20.7.98, the said company has not redeemed NCDs sofar. Even repeated reminders to the company have brought no response for refund of my due amount.

Swarn Kapoor
Chandigarh

Videocon Narmada

I had sent share certificate Nos 1696928, 1351312, 1665736, 2083253 and 1522577 of M/s Videocon Narmada Electronic Ltd to M/s Videocon Service Ltd Santa Cruz, Mumbai on May 2,1998 for exchange into M/s Videocon International. Despite three reminders thereafter I have not heard from the company.

Manmohan Singh
Chandigarh

McDowell Krest

I had submitted my FD No. NCO 39632 of McDowell Krest Finance Ltd but have not received my encashment so far. I have written to the company repeatedly but have not received any reply.

Pushpa Mankotia
Chandigarh

Unit US-64

I have 100 units of US-64 with certificate No. 46911300141. For the year ended June 1998, I have not received dividend from UTI office, Gulab Bhawan, New Delhi, despite many reminders.

C.L. Grover
Chandigarh

SBI gold sale
CHANDIGARH, Oct 18 (TNS) — After the retail sale of ten tola gold bars, the SBI has now introduced the sale of gold in small denominations. The scheme has been introduced on the persistent demand of small investors, said Mr S.K. Jain Deputy General Manager, SBI, Sector 17 branch. The daily rate of gold will be available on telephone numbers 702023 and 702009.

DSE muhurat
NEW DELHI, Oct 18 (UNI) — The special Divali muhurat trading session at the Delhi Stock Exchange (DSE) will take place tomorrow from 5.20 p.m. to 7.30 p.m. marking the beginning of Samvat 2055. The exchange will also remain open on October 20. In lieu of this, DSE will remain closed on October 22.

De Beers
NEW DELHI, Oct 18 (TNS) — De Beers, the diamond mining major, has introduced a new range of diamond rings for women. Called the “Sampatti Collection”, these rings are priced at Rs 15,000 and above.