New York, September 17
Fearing worldwide impact of collapse of American Insurance Group (AIG), the United States government has agreed to a $85 billion bailout that gives it control of the troubled insurance giant operating in 130 countries.

The US Federal Reserve decided to bail out AIG hours after it decided to keep the benchmark bank rate unchanged at two per cent, despite hopes expressed by many financial experts that it would be slashed.

The federal government reversed its decision against intervention late Tuesday after it became clear that AIG was unable to get bank loan and would have to file for bankruptcy protection within hours, leading to major consequences and danger to the financial system.

Only last week, the government had declined to support investment banker Lehman Brothers Holdings leading to it filing bankruptcy protection, but analysts say AIG was too big to be allowed to fail.

What frightened Fed and Treasury officials, the New York Times said, was not simply the prospect of another giant corporate bankruptcy, but AIG's role as an enormous provider of financial insurance to investors who bought complex debt securities.

That effectively required AIG to cover losses suffered by buyers in the event of securities defaulted. It meant AIG was potentially on the hook for billions of dollars worth of risky securities that were once considered safe.

If AIG had collapsed and been unable to pay all of its insurance claims, institutional investors around the world would have been instantly forced to reappraise the value of those securities, which in turn would have reduced their own capital as well as the value of their own debt, the Times added, giving the consequences of insurer's failure.

Reporting the terms of hard fought-out deal, the Wall Street Journal said the Fed will lend up to $85 billion to AIG, and the US government will effectively get a 79.9 per cent equity stake in the insurer in the form of warrants called equity participation notes.

The two-year loan will carry an interest rate of Libor plus 8.5 percentage points. (Libor, the London interbank offered rate, is a common short-term lending benchmark.) The loan is secured by AIG's assets, including its profitable insurance businesses, giving the Fed some protection even if markets continue to sink. — PTI 

Miami, September 17
In a major setback to Indian pharmaceutical giant Ranbaxy, the US has blocked imports of 30 generic drugs, including antibiotics and cholesterol medicines, produced by it in two of its plants due to "serious" manufacturing deficiencies.

"The Food and Drug Administration (FDA) has issued two warning letters to Ranbaxy Laboratories Limited and an import alert for generic drugs produced by Ranbaxy's manufacturing facilities in Dewas (Madhya Pradesh) and Paonta Sahib (including the Batamandi unit in Uttar Pradesh)", a statement from the administration said.

The warning letters identify the agency's concerns about deviations from US "current good manufacturing practices requirements (cGMP)" at the pharmaceutical major's two manufacturing facilities, it said yesterday.

"Because of the extent and nature of the violations, FDA issued an import alert, under which US officials may detain at the US border, any active pharmaceutical ingredients (the primary therapeutic component of a finished drug product) and both sterile and non-sterile finished drug products manufactured at these Ranbaxy facilities and offered for import into the United States", the statement said.

Reacting to the FDA decision, Ranbaxy said it "is very disappointed in the action FDA has taken. The company has responded to each concern FDA has raised during the past two years and had thought that progress was being made.

"We are, however, pleased that FDA's testing and review led the agency to conclude that there is no reason to question the safety or effectiveness of Ranbaxy's drugs," the company said. — PTI

New Delhi, September 17
The finance ministry is looking at relaxing External Commercial Borrowing (ECB) norms soon. This is being done with a view to enhance borrowings by the corporates, resulting in enhancement of sluggish economic activity, and in turn, give boost to the industrial production. The industrial sector has been facing an onslaught of expensive credit by the domestic banks in the present year. Expensive credit has led to companies borrowing less from the banks and in turn cut down on production, leading to lukewarm industrial growth.

By relaxing ECB norms, the government will give corporate India the advantage of accessing cheap funds abroad. In the US and Europe, the bank lending rates are between 2-4 per cent as against India where the lending rates are between 15-18 per cent. Expensive credit means more expensive product, which Indian companies in the globally competitive environment cannot afford to make, given the competition from China, Taiwan and other Asian economies.

The finance ministry sources have clarified that the ECB policy should not be linked to the rupee value, which at the moment is showing sharp depreciation against the dollar.

The RBI and finance ministry officials will meet by the month-end to take a view on easing the norms for external borrowings.

The government had last year imposed curbs on ECBs, limiting remittance of such funds only up to $20 million for rupee expenditure and that, too, with RBI approval.

However, earlier this year, this limit was further relaxed to $100 million for infrastructure companies and $50 million for other firms.

Experts say, the government should now give much more flexibility to the corporates to raise funds abroad since capital flows are no longer in excess and the rupee has been depreciating.

The fear is that once again there will be a deluge of ECB funds in the country and may find a way in stock and money markets, where it is becoming more lucrative to park funds in the given situation, say experts. 

New Delhi, September 17
The government does not see any payment crisis on stock exchanges following volatility caused by turmoil in the US financial market triggered by collapse of the investment banker Lehman Brothers and financial problems being faced by other large entities.

"As of now, turbulence (in the US financial market) may have some impact on capital markets, but payment obligations are being met currently and there won't be any payment-related problem," top finance ministry sources said.

The sources said there was no definite trend noticeable about FIIs pulling out of capital markets following financial turbulence in the US.

Investments from FIIs, the sources said, are flowing into debt markets, including government securities, even as there is slight pullout from equity segment.

After the news of Lehman Brothers filing for bankruptcy came, FIIs net withdrew $212.30 million from equity markets on Monday and $156 million yesterday, according to SEBI figures.

However, they net pumped $62.80 million in the debt market on Monday and $73.40 million yesterday. — PTI 

Bangalore, September 17
Even the Chinese state, founded by his mentor, has turned a new leaf by “opening up” its economy. It is, therefore, no surprise that Pushpa Kamal Dahal ‘Prachanda’, the Maoist leader who has catapulted himself to the post of the Prime Minister of Nepal by overthrowing the monarchy, will seek private investments for his country too.

Prachanda landed up in Bangalore today with an itinerary to visit the who’s who of Bangalore’s industrial landscape, namely, Infosys, Wipro, Biocon and an ITC establishment. The session was organised by the CII here.

The Indian Space Research Organisation (ISRO) was only destination other than the private sector industry that figured in Prachanda’s engagement list during his one-day trip to the city. At the ISRO, Nepalese Prime Minister was given a presentation on the remote-sensing capabilities of the organisation. He was also shown ISRO’s satellite manufacturing and testing facilities.

Addressing the gathering here, Prachanda said the government headed by him was keen to play the role of a catalyst for Indian investments in IT and other industries in Nepal.

Members of the Nepalese delegation, who shared the dais with the Prime Minister, were not Kalashnikov-wielding reds. Kush Kumar Joshi, president of the Federation of Nepalese Chamber of Commerce and Industry, and Binod Chaudhary, president of Confederation of Nepalese Industries, sat by the two sides of the Prime Minister and, when their turn came, spoke eloquently about how “pragmatic” Prachanda was with regard to private investment. The Communist Party of Nepal, of which Prachanda was the chairman, was also a pragmatic one and not averse to private investment, the two representatives of Nepalese industry said.

Prachanda revealed that an investment clearance board, which had been set up for approving foreign investment, would be headed by him personally so that the investors did not face any roadblocks in pursuing their projects. IT, hydro-electric power, tourism and agriculture were some of the sectors that were being given top priority by his government, Prachanda said.

He, however, ducked a question regarding possibility of giving tax concession to IT industry and only said Nepal would have a very conducive atmosphere for the IT sector. Replying to another question, Prachanda said all sectors in Nepal would be open for private investments.

Chandigarh, September 17
Haier Telecom proposes to set up a software development centre in India. This centre, which will focus on the needs of the Indian mobile users, will be launched this year.

This centre will also work on networked mobile gaming, streaming media, advertisement and incentive distribution, content management, and speech-enabled applications, in both GSM and CDMA handsets.

Talking to TNS here today, Sudhir Agarwal, president of Haier Telecom, said the Chinese electronics major was also looking at making India the global hub of its design production. “India is a complex market in terms of mobile handset designs and design sensibilities of Indian consumers are similar to consumers in Europe and Canada. We have started designing products in India six months ago, and hope to sell these products in South America and Canada, as we launch our operations there,” he said.

He added that design production was very capital intensive, and as the company scales up its operations, over two per cent of the turnover would go into the design production. “The emphasis will be on creating handsets based on convergence. The thrust will be on new and emerging technologies like 3G, e-video, high-speed downlink packet access (HSDPA) and high speed-uplink packet access (HSUPA),” he said.

Agarwal was in town to launch the new GSM mobiles for the Punjab market. The company, which has so far been manufacturing only CDMA handsets, has now ventured into GSM handsets. “We had launched our CDMA handsets two years ago and have already sold about 10 million handsets. As against 4.5 million CDMA handsets sold last year, we propose to sell over 6.5 million CDMA handsets and over one million GSM handsets,” he said.

Agarwal said that as they scale up their operations, they will be opening exclusive Haier stores across the country. 

New Delhi, September 17
Aimed at enhancing customer base to 10 crore by 2010, PNB has announced a major plan of achieving financial inclusion with thrust being given to the Indo-Gangetic belt where the public sector institution has a dominant presence. Launching a pilot project of financial inclusion in Delhi circle, PNB chairman K.C. Chakrabarty said several steps had already been taken in this regard, but a more ambitious project was on the anvil. For instance, the second largest public sector bank has already issued 100 per cent financial inclusion in more than 11,000 villages, covering 198 identified districts.

Under the new plan, the bank targets to cover 30,000 villages by 2010 by making use of business facilitators and business correspondents.

Among those who were present on the occasion included Delhi minister for industry, labour and employment Mangat Ram Singhal and top executives of the bank. 

BRIEFLY

Rupee recovers 54 paise
Mumbai: The rupee on Wednesday recovered smartly by 54 paise and ended positive at 46.34/35 against the US dollar with heavy dollar selling pressure by nationalised banks following the RBI’s intervention to make rate on deposits by non-residents more attractive. Rupee rose sharply, posting its biggest single-day fall yesterday, supported by the RBI's move to sell off dollars at 46.70 to stabilise the Indian currency. — UNI

12 FDI proposals cleared
New Delhi: The government on Wednesday cleared 12 proposals, including National Housing Bank's Rs 570-crore plan, which will bring over Rs 1,400 crore of foreign direct investment into the country. NHB will set up the JV with United Guaranty Corporation and International Finance Corporation, both from the United States. — PTI

GSPC plans IPO by Jan
New Delhi: Gujarat State Petroleum Corporation (GSPC) is likely to sell 10-15 per cent of Gujarat government equity holding to public through an IPO by January 2009 to raise about $1 billion. "The IPO planning is in advanced stage. It was slated to hit the market sometime in November but now (with financial market turmoil) I think it is likely by December or January," a company official said on the sidelines of the GEO India 2008 conference at Greater Noida near here. — PTI

Gujarat NRE’s rights issue
Kolkata: The promoters of Gujarat NRE Coke will float a rights issue with differential voting rights (DVR) to ward off any takeover threat from companies seeking to secure coking coal assets. The decision to float a DVR rights issue was to raise voting rights of the promoters to ward off any takeover threat, Gujarat NRE's vice-chairman and managing director Arun Jagatramka told reporters here on Wednesday. — PTI

BHEL to enhance capacity
New Delhi: State-owned Bharat Heavy Electricals on Wednesday said it would enhance its manufacturing capacity to 20,000 MW in three years from the current 10,000 MW. The company expects to reach the 15,000 MW manufacturing capacity mark by this year-end, the statement said. — PTI

SpiceJet adds new flights
Mumbai: SpiceJet has introduced new flights, enhancing connectivity on its existing network. The new flights will now offer additional connections between key cities like Delhi, Hyderabad, Chennai, Pune and Coimbatore on a daily basis, thus providing a wider choice to the travellers and at very convenient timings. The flights will commence from October 1. — UNI

SanDisk rejects Samsung's bid
New York: World's largest supplier of flash storage card products SanDisk has rejected a hostile takeover bid from South Korean major Samsung Electronics proposing to purchase the US major's shares for $26 each in cash. The board of directors confirmed that the company had received an unsolicited and non-binding proposal from Samsung to acquire at $26 per share in cash, SanDisk said in a statement. — PTI

TCS inks pact with Ericsson
New Delhi: Country's largest software exporter Tata Consultancy Services has signed a five-year global contract with Swedish company Ericsson to deliver application maintenance and development services. However, the size of the deal is not disclosed. — PTI