Singapore, September 14
The IMF today asked India to “very carefully” look at the much-touted special economic zones, saying that the give-aways and tax sops to the zones could divert industrial activity from the rest of the country.

“Overall, it (tax sops for SEZs) becomes yet-another give-away which the government cannot afford,” IMF Chief Economist Raghuram Rajan said here.

It seems that tax sops are the only reason for setting up smaller SEZs of 10 hectares, he said, adding that it would be far better to make people compete on the basis of the quality of the infrastructure they create in such zones.

People should be made to compete on the basis of rules and regulations that are there in SEZs to attract capital than making them attract capital because the tax laws are more beneficial, he said.

Tax sops and give-aways may also divert a lot of activity from the rest of the economy into these zones, which creates problems of inequitable regional development, “also something that the RBI has focussed on,” he said.

Reserve Bank recently said in its annual report that SEZs could aggravate an uneven pattern of development, as they may pull out resources from less developed areas.

According to Finance Ministry’s estimates, SEZs could lead to a revenue loss of Rs 1,75,000 crore in direct taxes, customs and excise duties over the next five years while the Commerce Ministry says the zones will lead to Rs 44,000 crore revenue gain for the government in a year.

Meanwhile, the IMF said India’s fast-growing economy should expand by 8.3 per cent this year instead of 7.3 per cent as previously projected.

Interest rates may have to be raised further to check inflation, the IMF said in its twice-yearly World Economic Outlook, predicting that India and China would be the twin engines driving the roaring economies of emerging Asia.

In 2007, India’s growth is forecast to slow to 7.3 per cent, still higher than the 7 per cent projection made by the IMF in April, after growth of 8.5 per cent in 2005.

“On the upside, there is the possibility of even faster-than-projected growth in China ... and in India,” the IMF said.

At the same time, higher inflation due to the rising oil prices could pose a risk for India and the monetary authorities there may need to raise interest rates further to check an increase in consumer prices.

“In India, inflation has picked up with rising oil prices and strong domestic demand,” the IMF said, projecting inflation of 5.6 per cent this year and 5.3 per cent in 2007.

“While the RBI has raised interest rates in recent months, further tightening may be needed to resist inflationary pressures.” India’s central bank raised its key interest rate by a quarter point to a four-year high of 6 per cent in July, the fourth increase since last October.

The IMF said countries including India, Pakistan and the Philippines with high public debts or budget deficits should put their fiscal positions on a sustainable footing for the medium term.

With pressure on the government to spend more, the IMF urged India to take measures to broaden its tax base and reduce state subsidies.

“In India, strong spending pressures have emerged, limiting fiscal adjustment in financial year 2006/07,” the IMF said.

“With the general government deficit and debt still high, further consolidation is clearly warranted at both the central and state government levels, including through measures aimed at broadening the tax base and reducing subsidies.” — Agencies

Chennai, September 14
Global computer major Dell today signed an MoU with the Tamil Nadu government for a Rs 280-crore plant at Sriperumbudur, near here, which is expected to begin production by June next year, a top Dell official said.

The facility, to come up on 50 acres in the Sriperumbudur hi-tech park, would initially manufacture desktop computers that account for 70 per cent of the company’s current business in India, Dell Vice-President (South Asia) Paul- Henri Ferrand told reporters here.

The investment would be made in two phases, with about Rs 140 crore in the first five years and then scaled up in the second phase. The plant is expected to manufacture three to four lakh units in the first year, Mr Simon Wong, Vice-President, Asia operations, said.

Mr Kip Thompson, Vice-President- Global Facilities, said the facility would initially cater to the Indian market. The pricing of the computers would be “cost-effective compared to other branded computers in the Indian market”, he said.

Mr Rajan Anandan, Vice-President, Sales-India, said Dell would introduce a whole new range of products for the Indian consumer market over the next six to nine months.

The company would target small and medium businesses in India, which is a huge market.

Meanwhile, Tamil Nadu has decided to allocate 10 acres of land to Wipro and five acres to Tata Consultancy Services in Coimbatore. This decision was taken at a Cabinet meeting chaired by Chief Minister M. Karunandihi here today. — PTI

New Delhi, September 14
The industrial units in Punjab, especially in the border areas falling under Amritsar, Tarn Taran, Gurdaspur and Ferozepore districts are likely to get a financial package from the Centre on the pattern of neighbouring hill states of Himachal Pradesh and Uttaranchal.

Prime Minister Manmohan Singh is expected to make an announcement in this regard during his visit to Ludhiana to initiate the prestigious project of North-East freight corridor. He is expected to visit Punjab on September 27.

“We have proposed that considering large-scale migration of Punjab industry to the tax-exempted Himachal Pradesh, the industrial units in the border belt should be given a financial package of excise tax and income tax exemptions on the pattern of hilly states,” said Minister of State for Industry Ashwani Kumar here today.

A delegation of Punjab MPs, led by Mr Kumar, had recently met the Prime Minister, demanding financial package for Punjab in view of shifting of units to the neighbouring states.

The Prime Minister had constituted a committee under Mr Ashwani Kumar, which subsequently met officials of the state government, industry representatives and other departments concerned. A meeting with Punjab Chief Secretary and Principal Secretary, Industries, has been called tomorrow by the minister to give final touches to the proposed package.

Mr Kumar said he has been instructed by the Prime Minister to prepare financial package within the parameters of present industrial package. “ I will submit my interim report to the Prime Minister on his return from the Havana”, he said.

The committee has recommended that apart from offering financial incentives to the investors in the border areas of the state, other industrial units in other districts should also be given incentives.

The government may extend assistance to strengthen infrastructure, marketing and training for other industrial clusters in the state.

However, the committee has disfavoured the acquisition of land by the state government on behalf of the industry at a lower rate than the market price. It has recommended that industry should get land directly from the farmers at the market rate.

The package is expected to encourage investment in the pharmaceutical, auto components, light engineering, machine tools, hand tools and related fields in the border districts.

Meanwhile, Mr Kumar also informed that the Civil Aviation Ministry has approved the proposal to start domestic flights from Pathankot airport. “The domestic flights by Air Deccan are expected to begin by November this year from the Pathankot airport,” he said adding that it would encourage tourism in Punjab, J&K and Himachal Pradesh, besides providing link to the investors. 

New Delhi, September 14
The Gujarat State Petroleum Corp (GSPC) has shortlisted four global energy majors, including Chevron, British Petroleum and ENI, for selling a 30 per cent stake in its gas rich KG-OSN-2001/3 block off the east coast.

Chevron Corp of US, BP Plc, BG Group of UK and Italy’s ENI have been asked to submit final bids by the third week of October, a company official said.

The four firms were shortlisted from about 13 firms, which had expressed interest in picking up a stake in the 20 trillion cubic feet gas discovery in the KG basin, he said, adding that Royal Dutch/Shell could not clear the preliminary qualifying round.

GSPC has set up a dataroom in Dallas.

At the 1850-sq km KG-OSN-2001/3 block, GSPC is operator with an 80 per cent stake with GeoGlobal Resources (10 per cent) and Jubilant Enpro (10 per cent) as partners.

ExxonMobil of US, Petrobras of Brazil, Spain’s Repsol, Petronas of Malaysia, Husky Energy of Canada and Crescent Petroleum of the UAE had also put initial bids.

The official said the block had become more attractive after the company made second oil discovery. KG No.15, the fifth well on the block, has found a “sizeable” oil pool at 2600 metres containing an estimated 100 million to 150 million barrels in-place reserves. The gas zone below is also learnt to be “significant”, though no estimates are available. — PTI

Mumbai, September 14
Reliance Communications today alleged that Tata-controlled Videsh Sanchar Nigam Ltd has violated its commitment under the construction and maintenance of the FLAG Europe Asia Cable System.

In a communication sent as a retaliatory disclosure to VSNL’s last week notice to the stock exchanges, Reliance said the writ filed by VSNL was aimed at maintaining monopoly in Indian market.

“This action of VSNL is designed to delay the implementation of this award with a view to continuing its monopolistic and anti-competitive practices in India which will harm the ultimate users of international capacity such as ITEs and BPO etc due to exorbitant bandwidth prices maintained by VSNL,” Reliance said.

The International Tribunal in May this year directed VSNL to grant access to FLAG to the Mumbai landing station, besides an upgrade of the cable system and access charges that are “fair and reasonable”.

Hitting out at VSNL’s stance against FLAG upgrade, Reliance said: “FLAG has already carried out the upgrade of the FEA cable from the UK to the UAE with the co-operation of the relevant landing parties and has been unable to proceed further because of VSNL’s anti-competitive attitude designed at maintaining its monopoly in the Indian market.”

Meanwhile, countering the Reliance arguments, VSNL said the company firmly believed that the Netherlands court was really the right authority to decide what was permissible under the Dutch law.

“It’s unfortunate that the stock exchanges are being used to make baseless allegations. VSNL maintained that its bandwidth prices have always been reasonable and even more so after its recent reduction by up to 40 per cent,” a VSNL spokesperson said.

On September 8, VSNL had informed the exchanges that it had filed a writ in a court in the Netherlands asking for a review of the International Tribunal award that permitted FLAG to upgrade FEA cable and rights to access the Mumbai Landing station located in the VSNL premises.

The bone of contention between the two players is the Landing Station Access Charge which a customer of FLAG has to fork out in favour of VSNL. —PTI

Chamba (HP), September 14
The National Hydroelectric Power Corporation (NHPC), India’s second largest power-to generating firm, plans to foray in coal-fired projects and begin inter-state trading of electricity as it plans to become a 10,000 MW company by 2012 from about 3,750 MW now.

The public sector company has also revived plans to set up a 500- MW project in Nepal and will take up two projects in Bhutan with a total capacity of 1,600 MW as part of its overseas expansion. “We are looking to set up a coal-based power plant in Madhya Pradesh and have approached the state government for a coal mine, but nothing has been decided as yet,” NHPC Chairman and Managing Director S. K. Garg said here.

The preliminary discussions had been initiated through the Narmada Hydroelectric Development Corporation, a joint venture of the NHPC and the Government of MP, that already has two hydel projects in the state.

As part of its diversification strategy, the company would also enter the power trading business. He, however, ruled out plans to start electricity distribution or gas-based generation plants.

NHPC’s thermal plans follow the hydro foray by NTPC Ltd, formerly called the National Thermal Power Corp. The NTPC is the country’s largest generating company with a total capacity of more than 25,000 MW and has already started construction on various hydel projects in Himachal Pradesh and Uttaranchal.

In Bhutan, where it had earlier built the 60-MW Kuricchu project on a turn-key basis, NHPC would establish the Mangdechu and Punatsangchhu projects with a combined capacity of 1,600 MW, he added.

Mr Garg said the company was adding about 2480 MW capacity in the 10th Plan and would add about 6,300 MW capacity in the 11th Plan period (2007-12) to become a 10,000-MW firm.

The PSU currently operates 10 power projects with a total capacity of 3,755 MW and is constructing another 13 projects across the country. These include the 2,000- MW Lower Subansiri project in Arunachal Pradesh, the 800- MW Parbati-II, 520 MW Parbati-III, the 231 MW Chamera-III in Himachal Pradesh and 510- MW Teesta-V project in Sikkim.

The company would invest about Rs 60,000 crore over the next six or seven years, he said. —PTI

Chandigarh, September 14
The prices of gold have been falling steadily over the past four days. After touching an all-time high of Rs 10,800 per 10 gm in June this year, the prices have fallen to Rs 8600 per 10 gm (22 carats) today.

Inspite of the prices of the gold having dropped by Rs 600 per 10 gm during this week, the gold business in the region has failed to pick up. Jewellers in Ludhiana and Jalandhar — the two cities accounting for the highest trading in the region — say that business is not even 30 per cent as what it was during the same time last year. Though the marriage season is round the corner, the sale of the lustrous metal remains at an all-time low, they insist.

Mr Sanjeev Dhanda of Dhanda Jewellers, Ludhiana, says that the reason for the slump in business, inspite of the falling prices, was the lack of confidence in the metal as a sound investment option.

“Forward trading of the metal has led to sharp fluctuations in prices. In May and June, the prices of the metal had crossed Rs 10,800 and the market buzz was that the prices would reach as high as Rs 12,000. However, all of a sudden there was a sharp decline in prices and 24 carat gold has reached Rs 9020 per 10 gm now. Other than those who want to buy gold for marriages or functions, no one else is investing in gold,” he said.

Jewellers inform TNS that the prices of gold had gone up in the international market when the countries like the USA, the UK, Australia, China, Japan and Russia were buying the metal on a large scale to convert their dollars into gold. The daily consumption of gold in India is 2 tonnes, of which 40 per cent is bought in South India. Earlier in May this year, several countries, mainly China, Japan and Russia, were buying 4-5 tonnes of gold daily. With these countries stocking the metal, and no other country willing to release its stocks in the market, the prices soared.

“Now, these countries have stopped buying and started trading in the metal amongst themselves. This has led to a fall in prices,” explained Mr Anand Sekri, President of the Ludhiana Jewellers Association, while adding that as against a daily sale of 15 kg last year in Ludhiana, the daily sale now was just 6 kg in the city.

Agrees Mr Rakesh Malhotra, a wholesale gold jeweller at Jalandhar, “The speculation in gold has ensured that it is no longer a safe investment option. During the marriage season and before the onset of the festival season, the gold prices are always high. This is a rare occasion, when the prices have gone down at this time of the year”.