Wednesday, October 20, 1999
spotlighttoday's calendar
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B U S I N E S S | Wednesday, October 20, 1999 |
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GM willing to take over
South Korea's
FICCI’s
12-point agenda to RBI |
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Okara group asked to pay
compensation Bank moves tribunal against Lloyds
Steel Focus on future food needs: UNFPA Has India failed to attract FDI
for development? IOC plans to upgrade power units
at Panipat Critical sectors to become Y2K
compliant in time Kumaramangalam to lead economic
team |
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GM willing to take over South Korea’s auto units SEOUL, Oct 19 (AFP) — US auto giant General Motors Corp. (GM) is willing to take over South Korea’s two embattled auto firms — Daewoo Motors Co. and Samsung Motors Inc., a daily reported here today. “GM Vice-President Hughes expressed his willingness that Samsung Motors as well as Daewoo Motors can be a subject to the takeover during his visits to the authorities concerned here,” the Kyung Hyang Shinmun daily reported, quoting a government source. Daewoo and GM officials were not immediately available for comment on the issue. The report followed last week’s visit by a 20-member GM delegation, including Vice-President Louis Hughes, to review the debt-ridden Daewoo Motors’ financial status. In South Korea, the GM delegation met with officials of the powerful Financial Supervisory Commission (FSC) and the Ministry of Industry and Energy which have been at the vanguard of Seoul’s corporate restructuring. “The negotiations with Daewoo Motors will get into a full-fledged stage after a creditors’ review of its financial status ends and its workout plan is fixed,” the Government source told the paper quoting GM officals. “At an early date, GM will meet with Samsung Motors’ officials and creditor banks to start the negotiation,” the paper further quoted the official. But GM President Wagoner
said yesterday in Tokyo that it would be difficult for
his firm to complete the talks with even Daewoo Motors. |
FICCI’s 12-point agenda to RBI NEW DELHI, Oct 19 (PTI) — Federation of Indian Chambers of Commerce and Industry (FICCI) has suggested a 12-point plan to the RBI including reduction in Cash Reserve Ratio (CRR) and cut in interest rates on government securities. In a letter to the apex bank before its busy season credit policy scheduled for October 28, the chamber called for drastic steps to contain the bad debts of banking sector, extension of credit facility to distribution and trade sector, besides allowing banks to underwrite commercial papers. The 12-point agenda by the chamber also asked RBI to allow banks to fund mergers and acquisitions and streamline credit delivery mechanisms. Stating that the present CRR requirement at 10 per cent was much higher than the international standards of 3 per cent, FICCI said it should be brought down by two per cent in two phases. “By bringing down the CRR, the profitability of the banks will also increase by enabling it to release more funds to the commercial sector,” a FICCI statement said here. Regarding the prime lending rate (PLR), the chamber said many banks still continue to have a lending rate as high as 14 per cent while the deposit rates have been reduced quite promptly as a response to a reduction in bank rate. “RBI must take
measures in ensuring that the lending rates are also
brought down in phases to commensurate with the decline
in the PLR,” it said. |
Boeing offers 717 ‘baby’ to airlines MUMBAI, Oct 19 (PTI) — The Boeing company has offered its newest “baby”, Boeing 717, to Indian Airlines (IA) and the private Sahara Airlines for operation on feeder routes. The 100-seater with rear-mounted BR715 engines, developed by BMW/Rolls Royce, is being offered to IA (for its subsidiary Alliance Air) as a replacement for its ageing Boeing 737-200s and to Sahara for operation on regional routes. Dr Dinesh Keskar, President of Boeing India, told reporters on a demonstration flight here today that the 717 at cruise had upto 8 per cent better fuel consumption over the pre-flight test estimates. It carries a price tag of $ 31 million and has a range of over 1,500 nautical miles. Describing it as the quietest plane in its class, he said airlines could operate the 717 at least six to 10 flights per day on low density routes with short airfields and very little ground support. Demonstration flights
would be held in Delhi tomorrow for airline officials, he
added. |
Okara
group
asked to pay compensation NEW DELHI, Oct 19 — The Okara Group of Industries have been asked by a consumer court in Delhi to pay around Rs 2 crore as compensation to over 250 investors. Holding the Okara Agro Industries and Okara Leasing and Investments guilty, the Consumer Disputes Redressal Forum-I, said the company failed to pay the investors their assured amounts on maturity. The Forum President, Mr P.K. Jain and the two members, Mr Santosh Khanna and Mr G.R. Gupta, held the Okara group guilty of deficiency of service and ordered that the compensation be paid to the investors within two months. The court also disposed of 253 complaints filed by the investors. They had invested Rs 5,000 to Rs 2 lakh in these two companies. The consumer court directed Okara group to pay the assured sum to the investors with an interest of 18 per cent per annum from the date of maturity till the date of the payment. The company was also directed to pay Rs 1000 each as cost of litigation to the investors. The investors moved the
consumer court after the post-dated cheques of the
assured sum issued by the Okara Group of Industries were
not honoured. |
Bank moves tribunal against Lloyds Steel MUMBAI, Oct 19 (PTI) — The Debt Recovery Tribunal for Maharashtra and Goa has appointed Commissioner of the Court to take inventory of the properties belonging to Lloyds Steel Industries for the company’s alleged failure to repay credit facilities amounting to Rs 46.85 crore to State Bank of Travancore (SBT). The presiding officer of
the Tribunal, V.D. Deshmukh, yesterday appointed Ketan
Chetan as the Commissioner of the Court to visit the
company premises at Murbad, near here, for taking stock
of all the goods hypotheticated or mortgaged with the
bank. He has been directed to file a report on October
29. |
Focus on future food needs: UNFPA NEW DELHI, Oct 19 (PTI) — With growing population and unsustainable agricultural practices, India may face declining food productivity in the future, the UN Population Fund (UNFPA) has warned, advocating a more pro-active plan to meet its needs. “India must plan more pro-actively for the country’s future resource availability, looking at both how to raise food supply and how to lower the growth in demand for food”, said a UNFPA study released here to commemorate a week-long observance of World Food Day (October 16). Commenting on the study, UNFPA representative Michael Vlassoff said, “India has made giant strides since independence in raising food production to keep up with the growing population ... but it is worth looking at the constraints and problems the country may have to face in the future in continuing to meet food reqirements.” The study, titled “Population, food production and nutrition in India”, critically examines the linkages between the food situation, including trends in production, levels of nutrition and population growth in India. With the bulk of Indian population — varying from 90 per cent in Assam and Bihar to 61 per cent in Maharashtra — living in rural areas, most of whom were engaged in agriculture-related activities, the study envisages greater pressure on the rural segment. Although agricultural production increased rapidly since independence (foodgrains by 3.5 times, cereals by about three times and protein by 1.5 times) the increase in per capita availability was much less, the study pointed. While there was just a 27 per cent increase in per capita availability of foodgrains, 35 per cent in cereals and two times for edible oils, the per capita availability of protein in 1996 had dropped to only half of what it was in 1951. The Planning Commission had estimated 2,400 and 2,100 calories as the minimum requirement for rural and urban areas respectively, the study said, noting that substantial proportion of the population fell below these minimum categories. Data also showed a worrying decreasing trend in per capita intake of calories in both rural and urban areas in the last 20 years. High levels of irrigation and a growing population in the future would increase fragmentation of landholding in the future, the study warned, saying that highly productive States like Punjab and Haryana may well see declining productivity in the future. Another matter of concern was the impact of agricultural practices on environment, leading to unsustainable outcomes, UNFPA pointed out. Deforestation continued
unabated, reducing the capacity of soils and vegetation
to absorb and store water, the study said. Soil erosion
by water and wind due to inappropriate agricultural
techniques as well as overuse of scarce resources,
particularly water, made every effort to improve food
security an even more difficult task, it said. |
Do ads make people consume more? NEW DELHI: High profile advertising of consumer goods including white goods like refrigerators and washing machines in the print and electronic media in India is leading to overspending and overconsumption often “undesirable”, a study has said. “Advertising and marketing not only make people consume more but is also responsible for the consumption of luxuries in developing countries including India while forsaking necessities”, a study by Consumer Unity and Trust Society (CUTS), a NGO in the field of consumer protection, has said. “On the one hand there is over-consumption which is unsustainable, while on the other there is under-consumption of basic food items”, it said. “There are about 210 million destitutes in the country whose right to basic needs are not always fulfilled. As against this there are about 156 million people who over-consume and 275 million more who are gradually moving towards potentially unsustainable consumption levels”, Pradeep S. Mehta, Secretary General of CUTS told PTI. Advertising has influenced the consumption habits of this group of about 431 million people and sustained beaming of advertisements in the media often result in poor people forsaking some of their basic needs and buying commodities not required immediately. Quoting from the latest data gathered by National Council of Applied Economic Research (NCAER), the NGO said there has been a definite increase in the rural share of high-value items consumed. NCAER data also found that between 1993-94 and 1995-96, the number of durable items owned by consuming households had increased at an annual rate of 9.6 per cent and at the top of this list of durable goods, which experienced maximum growth in purchases, are washing machines (25.5 per cent), colour television (14.8 per cent) and refrigerator (13.3 per cent). “In India the buy-no-pay-later syndrome is pushing more and more people into avoidable debt. Lured by advertisements and the various credit schemes consumers are buying more and more commodities without assessing whether the loans can be paid back without difficulty”, the study said. “The number of people possessing credit cards at the beginning of 1997 was 1.8 million and their number is increasing at a fast rate of 35 per cent to 40 per cent per annum”, Rajat Chaudhuri, the coordinator of the study said. According to McKinsey
report on India’s consumption patterns, Indians have
given up many of their traditional used soaps, shampoos
or medicinal remedies. The national advertisement spends
on toilet soaps on television have increased from Rs 230
milliion in 1993 to Rs 370 millioin in 1995. — PTI |
Has India failed to attract FDI for development? NEW DELHI, Oct 19 (PTI) — Despite more liberal rules for Foreign Direct Investment (FDI) than many other countries, India has not only failed to lure substantial funds from abroad but their inflow is now on the decline for want of adequate regulatory mechanisms and transparent policy guidelines, warn analysts. According to a UN report on Trade and Development in 1997 only $ 160 billion of approved $ 548.9 billion FDI actually flowed in the country. Both approvals (Rs 308.16 billion) and actual inflow (Rs 133.26 billion) fell down considerably in 1998. Among the developing countries China remained the single largest recipient of FDI among developing countries with an inflow of $ 45 billion in 1998, a slight increase over 1997, India registered an over 20 per cent decline in FDI inflows over 1997. Even the five crisis-hit economies of Indonesia, Republic of Korea, Malaysia, Philippines and Thailand remained resilient in 1998, says the report. “While economies across the world see foreign direct investments as ‘catalysts’ in development, which have a stabilising effect, in India most still fear that they would have a detrimental effect on domestic industry and crowd them out, “ says Bibek Debroy, Director Research, Rajiv Gandhi Institute for Contemporary Research. “The capital inflow in the form of FDI is less than two per cent in India compared to what the other developing countries get every year”, says Debroy. But FDI is considered the most stable form of capital inflow than other forms like international bank loans, that is syndicate loans for working capital; or export credits or investment in international debt securities, which can be withdrawn quickly to suit the investor”, says N.S. Siddharthan of Institute of Economic Growth. Compared to the other forms of borrowings which go along with heavy interest payment irrespective of whether the capital is utilised or not, FDI are always preferred because the investor here is taking the profit or dividend only if his investments have brought any return, he says. Such forms of capital inflows are so volatile in their movement and in search of quick profits that they always have disequilibrating impact on the recipient economy,” he says. FDI’s link the host economy with the global markets and help advance economic growth by fostering more efficient international division of labour. Recent studies by economists Radelet and Sachs for the developing countries of Argentina, Chile, Mexico and East Asian countires in post financial turmoil have proved that FDI is more stable than other types of private flows. The highest volatility was, in fact, found in portfolio investments and other commercial bank loans during 1998, the studies have revealed. Most of all they improve balance of payments through import substitution, export generation and efficiency seeking investments. “If there is domestic financial repression FDI inflows are almost certain to add to supply of financial resources directly or indirectly, and the possibility of crowding out of domestic firms in such conditions is low”, says the UNCTAD report. India can even go in for foreign investment in the real estate and urban housing sector and in financial sectors and insurance, but an adequate infrastructure policy guideline is neccessary before stepping into it, he adds. Going a step forward a PHDCCI report of 1999 says,”FDI should also be encouraged in agricultural sector in India, especially in the fields of post harvest technology, infrastructure and support systems. “An industry which is characterised by small scale units, low productivity, weak backward and forward linkages and inadequate marketing can gain a lot by MNCs participation. It has louded setting up of a Foreign Investment Implementation Authority (FIIA) within the Ministry of Industry to work as a single point interface between investors and government agencies for obtaining necessary approvals and sorting out operational problems. However, the alarming
situation comes when after the clearance from FIPB, the
projects are not implemented, it says. |
IOC plans to upgrade power units at Panipat NEW DELHI, Oct 19 (PTI) — Indian Oil Corporation (IOC) is contemplating upgrading its two proposed power projects into mega projects with a capacity of 1000 MW each to cater to Delhi, Rajasthan, Haryana and Gujarat, IOC sources said. The corporation would expand the capacity of the 301 MW Panipat power plant and the 500 MW Savli power plant to 1,000 MW each for getting the mega power status, that would entitle IOC for concessional import of machinery, sources said. IOC is already talking to concerned States for supplying of power and on a positive response, it would approach Central Electricity Authority (CEA) for necessary techno-economic clearance, they added. The upgradation of the project was envisaged in view of the proposed expansion of Panipat and Gujarat Refineries that would make available surplus vacuum residue fuel, a feedstock for the power project. As per the present arrangement, Japanese Multinational Marubeni and IOC would have a 26 per cent stake each in the Panipat project, besides 20 per cent stake of ONGC and 4 per cent stake to Engineers India Ltd (EIL), corporation officials said. In case of upgradation, IOC would supply power from Panipat project to Haryana, Rajasthan and Delhi, and from Savli project to Gujarat and Rajasthan, sources said. The two projects are part of IOC’s diversification plans into power and petrochemcial sectors, for which it has earmarked seven per cent of its Rs.60,000 crore planned investment upto the Tenth Five-Year Plan. IOC sources said even with the proposed petrochemcial complex, the Panipat refinery, sought to be expanded from present six million tonnes to 12 million tonnes would have sufficient residue fuel to cater to the upgraded power plant. Likewise, expansion of Gujarat refinery from six million tonnes to 18 million tonnes would generate the surplus heavy residue and its use as power feedstock would only help value add the product, sources said. Upgradation of the project would also help generate the electricity at an economical cost, they said, adding that generation cost at Panipat at the present level would be around Rs 3 per unit. The corporation, which
posted a net profit of Rs.2214 crore in 1998-99, has
provided for a budget of Rs.1700 crore during the Ninth
Plan period for diversification. |
Critical
sectors to become Y2K compliant in time NEW DELHI, Oct 19 — With just 75 days to go for the dawn of the new millennium, critical sectors of the country are still to attain complete Y2K compliance, but Indian Government officials say there is no need to panic. The National Task Force on Y2K, chaired by Planning Commission member Montek Singh Ahluwalia, is giving finishing touches to the final draft of its latest Y2K status report which is likely to be released shortly. According to the draft report, 11 critical areas — banking and finance, insurance, civil aviation, telecom, atomic energy, power, ports, railways, space, petroleum and defence — are expected to become fully Y2K compliant by October 31, 1999. But the report further says that external audit may spill into November in some sectors. The report doesn’t mention details of the areas which are yet to be addressed. The 11 critical areas have been identified according to the extent of penetration of information technology (IT) in these sectors and the impact it would have on normal life if any of these sectors stop functioning due to the Y2K bug. Ahluwalia told IANS, “We are now reviewing the remedial measures taken by various sectors. Periodically we are coming out with statements on the Y2K status in these 11 sectors. We have asked all these sectors to get themselves assessed by a third party. However, we are not specifying any agency.” According to the draft report, in the banking sector all the commercial banks and scheduled urban cooperative banks which account for 90 per cent of the entire banking operations in the country are fully Y2K compliant. All other banks like the regional rural banks, computerised cooperative banks and primary urban cooperative banks are in the process of achieving complete readiness. Nonetheless, contingency measures have been spelt out in case there is a sudden breakdown of services due to the Y2K bug, upsetting vital data in the accounts. Among major plans are maintaining hard copies of all important books of accounts and transactions. Computerised branches of banks have been instructed to carry out ‘dry runs’ of the earlier style of manual transactions. The RBI is likely to print extra currency notes in case there is a rush for withdrawals. In the power sector, which the Action Force has designated top priority because of the dependence of all sectors on availability of uninterrupted power supply, 99 per cent Y2K readiness has been reported and the balance one per cent is expected to be complete by the month end. A rectification programme in certain areas such as application software and hardware is in progress and is likely to be completed by the end of the month. As a contingency measure to avert sudden breakdown in power supply and its cascading effects the task force has suggested integrated operation of regional grids. Power stations having analog controls, immune to Y2K, would be kept in full operation during the 2000 transition time. No new machine would be installed for power maintenance during the period from December 25, 1999, to January 2, 2000. Hydro machines which normally shut down at nights would remain in operation during the period and they would act as reserve in case of tripping. Also a help desk would be set up in all State Electricity Boards and major power stations to give advice in case of any unforeseen event. Says task force coordinator S. Ramakrishnan, “The power sector and the port sector are the two sectors that are lagging behind in becoming Y2K compliant. Other critical sectors like the railways, petroleum and natural gas, telecommunications, space, and atomic energy are all to become fully Y2K compliant by the month end. According to government figures, India will have spent close to Rs. 25 billion ($575 million) by the end of the year in countering the millennium bug threat. The country has spent close to Rs 10 billion already. Says noted fashion designer Ritu Beri, whose well-known face was used by the Department of Electronics to tell Indians how serious the Y2K problem is and how people must react to it, “We are lucky because India is not so deep into computerisation like the US Even in the Railways computerisation level is not so high. So in that way we are well guarded.” The draft report has
also called for the Cabinet Secretary to review the
compliance status of all the eleven mission critical
areas including third party audit and contingency
planning in the first half of November. The draft report
has also called for a legal framework to be put in place
by December end to handle legal issues related to the Y2K
problem and information technology in general, especially
in the post-Y2K scenario. — IANS |
Kumaramangalam to lead economic team NEW DELHI, Oct 19 (PTI) — Power Minister P.R. Kumarmangalam will lead an Indian team consisting of industrialists to the East Asian Economic Summit being held in Singapore this week. The agenda for the summit includes economic climate in post-currency crisis scenario in Asia Pacific and prospects for investments in South Asia especially India, CII, a leading industry chamber said in a statement here today. The agenda of summit, organised by World Economic Forum and Singapore Economic Development Board which began on October 18 would conclude on October 20. Tarun Das, Director General of CII would address the session on “Asia’s corporate performance: meeting the demands of globalisation” on October 20 at the summit, the chamber said. The team for the summit
includes Managing Director of Godrej and Boyce, Jamshyd
Godrej, MD of Tata Steel J.J. Irani among others.
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STUDENTS at one of Mumbai’s leading management institutes wanted to know at least one reason that mutual funds are not necessarily the best investment avenue for a small investor. Well, consider some of the advertisements blaring out at you from every nook and corner, not to mention the idiot box, suggesting that ‘XYZ Mutual fund’ offers unparalleled tax-free returns that are very tempting to say the least. Well, how many are informed enough to know that the dividend payout rate being promised or at least suggested as being promised is on the face value of the mutual fund’s unit and not at its Market Rate or Net Asset Value (NAV) which is the entry level for a fresh entrant into a mutual fund scheme. An amount invested into mutual funds is immediately distributed amongst all the holdings of the fund as on that day. Thus, more often than not, an investor into mutual funds is immediately buying into all the stocks that have already performed for the fund, which may not necessarily be the performers of the future. Mind you, this is especially true in today’s scenario where the BSE Sensex has risen sharply and seems well perched around the 5000 points level. In this context, while browsing through the offer documents of some of the funds, I was a little surprised to find that the recently launched IL&FS Growth &Value Fund has an inbuilt ‘Trigger’ mechanism whereby an investor can give instructions for full withdrawal as when the account balance reaches a desired value. To illustrate, if he gives an instruction of withdrawal if his investment of Rs 10,000 becomes Rs 15,000 then it will trigger off automatically as and when repurchase value of the investment becomes Rs 15,000 or more. Under this fund an investor can also give instruction for full withdrawal on a specific date desired by him, say for example, after 5 years or as on June 11, 2001. Similarly, under this fund an investor can give instructions for full withdrawal after the scheme achieves a specific return on a compounded basis, say for example, 40 per cent returns on compounded annual basis after minimum holding period of one year. Now, innovation alone can help the players in the rapidly overcrowding mutual fund industry survive and thrive. To that extent at least, IL&FS had made a positive beginning. However, it remains a fact that I still subscribe to the view-point that an informed investor is better off investing on his own rather than using the mutual fund route. There are several
rumours doing the rounds that the BSE Sensex will cross
the 5500 points mark before the announcement of the next
Union Budget. Well, to be frank, given the strong bullish
undercurrent at the bourses, I would not altogether rule
out such a possibility. |
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