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December 27, 2000, Chandigarh, India   
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2000: year of consolidation for Finance Ministry
HLL tops with 88 pc rural penetration
External factors take heavy toll of Re value Of rejoicing & rejigs as banks bid adieu to
2000 MRTPC asks complainant to pay cost |
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Oswal plans to enter
garment segment ‘Ease norms
for assessing bank income’ PSB revises rates
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2000: year of consolidation for Finance
Ministry NEW DELHI, Dec 26 — It was a year of consolidation for the Finance Ministry with the Union Minister incharge of the portfolio, Mr Yashwant Sinha, treading cautiously in the second phase of economic reforms. Opposition from within the Sangh Parivar to the various economic policies of the government and a belligerent Congress which has issued notice that its support for the various policies cannot be taken for granted has made Mr Sinha’s job even more difficult. The Finance Minister has changed his entire team in the Ministry and it would be new brains which would be working on the Union Budget for the year 2001-2002. The task is cut out for the Minister. While he has to give a decisive thrust to the second stage of the reforms programme, which has the active backing of the Prime Minister, Mr Atal Behari Vajpayee, Mr Sinha has to take in his stride the sharp criticism from various quarters. The next Budget would have to give a greater thrust to the social sector and keep up with the government’s promise of delivering the fruits of reforms to the common man. This unfortunately was not achieved in the first round of reforms. It is not that that the Government has been oblivious to this aspect of the reforms programme. To ensure that economic reforms reach all the sections of society, particularly those living in rural areas and belonging to SC, ST and OBC, the gap in basis services like health, education, drinking water unit and roads need to be removed. The Prime Minister’s initiative on rural roads and foodgrains at subsidised rates for the poorest of the poor is a welcome development. The major strides in the second generation reform process have been the passing of the Insurance Bill, Forex Management Bill and the Securities Laws Bill. The Forex Management Act which came into force from June, 2000 is meant to facilitate external trade and payments and promote orderly development and maintenance of forex markets. A Competition Policy and privatisation of public sector undertakings to infuse efficiency and dynamism has made little progress as the just concluded winter session of Parliament got bogged down in the Ayodhya controversy and precious time was wasted as there were too many adjournments.
Capital Market
The Capital Market has come to occupy an important place in the economy. There have been wild swings in the fortunes of many companies. However, the Government has chosen not to interfere directly and is confining its role to that of a regulator and policy maker. With the growth of the Capital Market, there was need for introducing different instruments to enable investors and participants to diversify their portfolios as well as hedge different risks in the capital market. An options and futures market fulfils the need for hedging against market risk in a cost-efficient way while strengthening and deepening the cash market. Based on the recommendations of the Kumaramangalam Birla committee on corporate governance, stock exchanges have been advised to modify their listing agreements with companies. Norms for companies in the media, entertainment and telecom sectors have been relaxed. SEBI has been made the single point nodal agency for registration and regulation of venture capital funds. Stock exchanges have been exempted from income tax on contribution for setting up investors protection fund with effect from April 1, 2000.
Banking
Reforms in the banking sector have been steady. A major move in this direction this year was the Government’s decision to implement the Narasimham Committee recommendation on reducing the minimum shareholding of Government in nationalised banks to 33 per cent without changing the public sector character of banks. A Bill to this effect was resisted strongly by the Opposition and the Lok Sabha had to resort to voting even at the introduction stage of the proposed legislation. The Ministry is also proposing to bring about other legislative changes to accord flexibility and autonomy to the boards of banks.
Insurance
To promote and regulate the insurance industry, the Insurance Regulatory and Development Authority Bill was passed by the Parliament in 1999. The provisions of the Act has been enforced from April 19, 2000. The Authority has been constituted and it has called for application for registration of new insurance companies from the private sector. The Act provides for foreign equity participation in the new insurance companies up to 26 per cent of the total equity shareholding. The process of issuing licenses to new insurance companies has begun. The Government has undertaken a fiscal reform programme for the states to improve the “Balance on Current Revenues” so that the revenue deficit is brought down in the medium term. This programme comprises of reduction in non-plan revenue expenditure through appropriate taxation and expenditure measures and down-sizing of Government where possible; pricing/subsidy reforms, reduction of fiscal burden of the State and improve allocative efficiency; reduction in the role of Government from non-essential areas through decentralisation, disinvestment and privatisation. The Government has created a facility of Rs. 5000 crore comprising of Rs. 3000 crore as extended Ways and Means facility and Rs. 2000 crore as additional market borrowings. The Eleventh Finance Commission as per its terms of reference reviewed the finances of the Union and States and suggested Ways and Means by which the governments, collectively and severally can bring about a restructuring of public finances so as to restore budgetary balance and maintain macro economic stability having regard to the needs of the States for meeting not only non-plan revenue expenditure but current expenditure under the plan. The recommendations of the Eleventh Finance Commission have been accepted by the Government and the States’ share of Central Revenues has been increased to 29.5 per cent. An Expenditure Reforms Commission was set up to suggest road map for reducing functional activities and administrative structure of the Central Government, review the framework of subsidies both explicit and implicit, determination of user charges, review the adequacy of staffing under Central Government Ministries/ attached offices and Institutions and suggest measures for rationalising the staff cadres of different services and review procedure of setting up Government funded autonomous bodies. The Commission has so far submitted three reports. Its first report giving recommendations on food subsidy has been accepted.
Uniform floor rates of ST
Uniform floor rates of sales tax have been introduced throughout the country and steps are being taken to introduce VAT from April 1, 2002. Customs and Central Excise Settlement Commission has been set up to streamline the tax machinery relating to indirect taxes and to increase revenue from such taxes.
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HLL tops with 88 pc rural penetration NEW DELHI, Dec 26 (PTI) — Increasing brand consciousness and expanded disposable incomes have altered consumption patterns not only in urban India but also in the rural hinterland, with leading personal care brands like Hindustan Levers and Nirma fighting for the numero uno position. In a recent survey ‘Emerging Market Trends’ conducted by the Centre for Industrial and Economic Research, it was found that top the marketer HLL had overtaken both Nirma as well as Colgate-Palmolive in brand awareness and penetration in rural households. While HLL topped the survey list with 88 per cent rural market penetration, Nirma was a distant second at 56 per cent while Colgate-Palmolive was next at 33 per cent penetration. The shift in the consumption patterns of rural households had been the main reason for the increasing demand of high-quality personal care products, the report said adding that an average rural household spends anywhere between Rs 116 and Rs 333 on consumables besides foodgrain, milk and vegetables. Of the household’s total spendings, the highest 20 per cent are on toiletries, followed by 13 per cent on washing products, 10 per cent on cosmetics, 4 per cent on over-the-counter (OTC) products and nine per cent on other consumables, the report found. in the past, marketing of these products has remained primarily an urban phenomenon but in recent years, fuelled by increasing education levels and increased awareness created through the media blitz, the rural market has been growing as well, it said. Brand consciousness is also on the increase and the expanded disposable incomes are jacking up the appetite for these products. The report was also optimistic about growth patterns in the personal care segment on the whole, confirming that this segment had maintained steady growth in the post1996-97 period. As per the survey, while the demand for toothpaste is estimated to grow by 4.5 per cent this year, soaps are expected to log in 8.5 per cent while detergents will grow by a whopping 20 per cent. On the fast emerging consumption pattern in rural areas, it said, “in rural areas upgradation of products is being witnessed, local and branded products getting replaced by national brands and low priced by high-priced ones”. Quoting a survey conducted by an leading market research organisation, it said of the monthly average expenditure, the rural household spent as much as 56 per cent on personal care products.
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External factors take heavy toll of Re value MUMBAI, Dec 26 (PTI) — External factors, mainly a steep rise in global crude oil prices and a robust US dollar against major world currencies, together with a sharp fall in foreign capital inflows and a marked slowdown in the country’s economic growth took a heavy toll of the rupee value against the American dollar during the year-2000. The rupee depreciated by a whopping 8 per cent vis-a-vis the US dollar, the main unit of currency linked to the basket of currencies for trade and commerce. However, the Indian unit gained substantial ground against the Euro, British Sterling and the Japanese Yen, thanks to the rupee being anchored to the dollar in the basket of currencies and the US dollar’s strength against these units in overseas business. In a fairly tumultuous interbank foreign exchange (forex) market during the year under review, the forex trade was generally stable, despite external factors eroding a major chunk of the rupee value against the dollar. Although, the RBI had to intervene on several occasions with a series of measures to arrest the slide of the rupee when it tested record-lows at regular intervals, the forex trade was mostly calm and devoid of excessive speculation, bankers said. Sound economic fundamentals, healthy forex reserves and a strong industrial bases sustained the rupee’s credibility. Notwithstanding the external factors and a slowdown in forex inflows that exerted considerable pressure on the rupee, the Indian unit managed to retain its poise, albeit at sharply lower levels. But, towards the latter part of the year, a rise in forex reserves and a sharp declining trend in global oil prices allowed the rupee to assert itself and also recover moderate ground, analysts said. Higher industrial and agricultural growth, contained inflation and a fairly good export performance also went a long way to somewhat stabilise the rupee trade, they added. Global oil prices, which had touched a level of $ 35 a barrel during September-November, fell to below $ 30 a barrel in December. The benchmark Brent crude oil was quoted at $ 25.59 a barrel and the Dubai grade at $ 22.71 on December 19. India, which is a large importer of crude oil, is expected to gain tremendously from the sharp fall in prices. Forex reserves hit a record peak of $ 39.476 billion in the week ended December 8, boosted largely by foreign currency inflows from the SBI overseas India Millennium Deposit (IMD) scheme.
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Of rejoicing & rejigs as banks bid adieu to
2000 NEW DELHI, Dec 26 — Hardly a year after the Y2K scare, Indian financial sector was once again shaken by the forceful effort of “rightsizing” banks through voluntary retirement scheme (VRS) and tabling of the banking companies bill aimed at “diluting” state control to 33 per cent. There were reasons for rejoicing after the robust first half results despite the industrial slowdown and the whopping $ 5.5 billion inflow from State Bank’s India Millennium Deposit scheme that pulled up the rupee. But year 2000 was marked by rejigging — targetting a 10 per cent reduction of eight-lakh strong workforce through VRS, recovery of at least Rs 10,000 crore of the total Rs 53,000 crore non-performing assets (NPA) and giving “old economy” banks a facelift. Consolidation was easy for tech-savvy banks as HDFC Bank, which took over Times Bank, and ICICI Bank that inked a deal with Bank of Madura, showed how to merge balance sheets without affecting their market value. However, it would be an uphill task for PSU banks as no healthy bank would like to merge with an NPA-ridden bank and submerge its own growth prospects. The Government intends to open the ‘pandora’s box’ by tabling the Banking Companies bill although various strings of the sector viewed it with plurality of ‘threats’ and a deliberate effort towards privatisation process. “Public sector banks are not being privatised. They will retain the PSU status,” defended Finance Minister Yashwant Sinha. Bank unions wondered how PSU status can remain when the government becomes a minority share holder. It is a first step towards privatisation, they argued even as Sinha pointed out that the key positions of Chairman and Managing Directors would be held by government nominees. The unions paralysed financial operations spasmodically, as they were haunted by the thoughts — although banks would be freed from the clutches of government, employees would be on crutches with just a VRS package. Sinha clarified that if the government decides to privatise banks, it will come out with a “transparent policy” as has been the case with other PSUs. Despite repeated assurances, Opposition groups maintain that the proposed dilution of stake was an eye-wash and aimed at facilitating foreign banks to take over the reigns of cash-rich PSU banks. Major foreign banks including Hong Kong & Shanghai Banking Corporation (HSBC), Standard Chartered and Citibank, had in fact expressed intentions of acquiring
Indian banks “when the laws of the land permit”. Financial power houses like ICICI, HDFC and IDBI would be ready for universal banking once they start their insurance ventures, as they already have banking, asset management and securities outfit. Even banks like SBI and PNB have set long-term targets of becoming universal banks. In the coming years, there would be more Indian banks listed in overseas bourses as many of them stalled their ADR/GDR issues considering the volatile market conditions. Some banks including Corporation Bank have even opted for the widely-acclaimed Generally Accepted Accounting Principles (US GAAP) as part of their efforts to follow best practices and come at par with their foreign counterparts. Not everything was rosy in the banking sector as the fate of three weak banks — Indian Bank, United Bank of India (UBI) and UCO Bank was still hanging fire. Banking Secretary Devi Dayal said the government was considering recapitalisation for the three ailing banks. The infusion of fresh funds would, however, be subject to conditions that the weak banks come up with a viable restructuring plan and carry out a manpower planning exercise. Mr Devi Dayal said the government was working out a package according to their needs. The reason of their sickness was not unknown to the government. The noose on “wilful defaulters” was tightened to the extent of carrying out criminal proceedings even as banks carried out one-time settlements with small borrowers. |
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MRTPC asks complainant to pay cost NEW DELHI, Dec 26 (PTI) — In a rare judgement, Monopolies and Restrictive Trade Practices Commission (MRTPC) has dismissed with cost a complaint filed by the city-based Haryana Flour Mills (P) Ltd and pulled it up for misusing the process of the courts. MRTPC quantified the cost at Rs 20,000 while dismissing the petition and asked the complainant to deposit the amount by January 21, 2001 at Delhi Legal Aid Cell. The MRTPC Chairman B.M.Lal and member R.L.Sudhir said, “It is a fit case whereby we may saddle the petitioner with cost.” The Bench said the petitioner was filing frivolous and misconceived petitions and approaching the courts time and again in giving different shapes and shades to the petition claiming one and the same relief, and wanted the case to be settled in their favour in the manner they wished. The complainant in their petition against the respondent, Haryana State Industrial Development Corporation Ltd (HSIDC), had claimed Rs 366.62 lakh as compensation from HSIDC for taking possession of the factory for recovering the loan availed from it. The complainant alleged HSIDC proceeded with recovering the loan amount under State Financial Corporation Act, 1951, not in accordance with the guidelines, but on the other hand, by adopting coercive means the factory was locked up and taken possession of. The petitioner had sought financial aid from HSIDC to set up a flour mill at Hisar. MRTPC Bench noted that the petition was filed after four years of its dismissal by a Division Bench of the Punjab and Haryana Court in 1993 and thus deserved to be dismissed on the ground of limitation as it had not been filed within the period of limitation. It also observed that the petitioner had submitted the second civil suit before the Civil Judge in Chandigarh which was also withdrawn. “This action of the petitioner cannot be said to be bonafide .... And therefore subsequent action, after dismissal of the petition, taken by the petitioner is indeed be characterised as abusing the process of the court.” The respondent in their reply denied the averments and submitted that HSIDC was only the financing agency. It said it was the petitioner who was unable to fulfil the obligation in repaying the loan and therefore, in compelling circumstances, HSIDC had to issue a show cause notice to proceed and take legal action. It said “after losing his case on all innings, the petitioner has resorted to the provisions of the MRTP Act claiming compensation.” |
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Oswal plans to enter garment segment NEW DELHI, Dec 26 (PTI) — Fabric manufacturers Oswal Cotton Mills Ltd will soon enter the garment segment and are targeting an export earning of around Rs 700 crore in this fiscal year. “We have recently commenced the production of fabrics from our new plant at Lalru in Punjab. We are planning to enter the garment segment within the next six to eight months,” Director of Oswal Cotton Mills Kamal Oswal said. Mr Oswal said the company was supplying fabrics to leading buying houses, including GAP and the American Merchandisers Corporation, as well as to countries in the Middle East, Sri Lanka and Bangladesh. “Last year the company earned around Rs 600 crore from exports. This fiscal year with a 10-15 per cent increase in our export earnings we hope to touch around Rs 700 crore,” he said. So far the company is using only 25 per cent of the installed capacity at its new plant, Mr Oswal said, adding that the company had recently launched 134 products under four ranges - platinum, diamond, gold and silver targeting the higher end of the retail segment. Mr Oswal said the company was open to entering into tie-ups with international companies for technology and marketing in the near future. Mr Oswal said the company would continue to focus on the production of specialised yarn and cater to niche customers. “Our new plant has a weaving capacity of around 70,000 metres per day and an equal processing capacity in addition to around 25,000 spindle processing units,” he said. The new plant set up at a cost of around $ 30 million started its production only in September this year, he said. The company’s entry into the garment segment will help increase earnings through value addition, he added. Mr Oswal admitted that the exports had been slow and added that the trend though temporary was expected to continue for some time. Competition from Pakistan and other countries will also reflect on exports from India, he said. The government should initiate steps to ensure that the domestic players had a level playing field, he added. |
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‘Ease norms
for assessing bank income’ NEW DELHI, Dec 26 (PTI) — Associated Chambers of Commerce and Industry (Assocham) today said provisions made by banks for bad and doubtful debts as per guidelines of the RBI should be fully deducted and not considered towards tax liability. “Such a provision in the Income Tax Act will do away with the difficulty arising out of calculation of the current deduction of five per cent, allowed under the IT Act,” the chamber said in a statement here. Assocham further suggested that the tax liability should be applied only when there is a recovery or a write-back. Presently, banks make provisions for bad and doubtful debts in accordance with the RBI guidelines and statutory auditors require that adequate provisions are made from bank’s current profits to provide for risks in lending, it said. Assocham said the limit of 5 per cent provision for bad and doubtful debts has no rationale, the provision is ad hoc, and monitoring of cumulative tax deductibility causes problem. Full deduction would simplify and rationalise the allowability of bad and doubtful debts in computation of taxable income and would also be in line with the treatment being given to interest suspended on bad and doubtful debts, as per the guidelines issued by RBI, it added. The chamber also said that stipulations related to approvals required for rate of interest on External Commercial Borrowings should also be withdrawn adding that the same should be approved while giving basic approval for ECB. |
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PSB revises rates NEW DELHI, Dec 26 — Punjab and Sind Bank has decided to revise interest rates on its domestic term deposits depending on the amount of deposit kept with it from December 16, 2000, according to a press release said. For deposits less than Rs 15 lakh, the interest rate are 15 to 30 days 5.50 per cent p.a; 31 to 45 days 6.25 per cent, 46 to 90 days 6.25 per cent, 91 to 179 days 7.50 per cent; 180 days to less than one year 8 per cent. One year to less than 2 years 8.75 per cent; two years to less than 3 years 9.50 per cent; three years and above 10 per cent. The deposits of Rs 15 lakh to less Rs 1 crore
corresponding to the above tenure, the interest rate are: 5.75; 6.50; 6.50; 7.75; 8.25; 9; 9.75 and 10.25 per cent per year respectively.
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Holidays dampen market mood LACK of participation by Foreign Institutional Investors, mainly on account of Christmas holiday dampened market mood at the country’s premier bourse as in absence of their directions, speculators resorted to selling on most of the counters, dealers said. The last day of weekly settlement at the National Stack Exchange (NSE) also was another reason for them (players) to square up of positions. Although, the initial reports from US indicated firm trend in the futures, market continued the slide on the BSE, said a leading BSE broker. With today’s fall the Sensex has lost 310 points during the last six consecutive trading sessions. According to marketmen, players were worried of the increased, net outstanding positions of Rs 3500 crore. Rumours regarding payment crisis also prevented them from their active participation. Barring few prominent stocks like Global Tele, BSES,
Himachal Futuristic Communication, Nestle, the market witnessed across the board decline on both the bourses, dealers said. Infosys Technologies shares suffered the most in reaction to a steep fall of $ 7 in its ADRs value last Friday despite a turnaround at the Nasdaq. It also plunged to 52-weeks low of Rs 5505 at mid-session following all-round selling but staged a partial recovery to close at Rs 5556, still showing a fall of Rs 145 at the Delhi Stock Exchange. Wipro after showing some strength at the outset on low level buying by domestic infotech mutual funds, came under selling pressure in line with overall trends and fell back to close Rs 98, or almost 401 per cent down at Rs 2202 while
NIIT finished Rs 12.80 down at Rs 1520.20. Silverline Technologies also failed to sustain initial higher levels after profit-takers pressed massive selling and slipped back to close Rs 6.55 down at Rs 245.45 while
Satyam Computer lost Rs 8.05 at Rs 300.95. Among old-economy stocks, Reliance Industries rallied to Rs 341 early trading on the back of renewed buying by speculators but re-emergence of profit-taking at higher levels fell back to close Rs 8.25 down at Rs 328.75. Kothari Poineer Mutual Fund
has declared a dividend of 0.9 per cent under the monthly dividend option of its open end income scheme, monthly plan for the month of December. The dividend will be tax free in the hands of the investor. All the investments made in the monthly dividend option on or before the record date will be entitled to receive dividend, stated Mr Prem Khatri, Vice-President in a press release. Moser Baer India announced the establishment of a US subsidiary Company Glyphics Media, in New York, to be operational next month. The new subsidiary would spearhead its parent company’s penetration into North American markets, which comprises 40 per cent of the world market for removable computer storage media, a company statement said here adding the new company will support all Moser Baer’s products and channels.
— Agencies & TNS |
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Farindex-2000 Bridgestone Hot mix plants |
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