New Delhi, September 22
The finance ministry has relaxed the norms for overseas borrowing by allowing infrastructure companies to bring in $500 million raised abroad for rupee expenditure as against the present limit of $100 million.

Earlier in the day, new economic affairs secretary Ashok Chawla said the unfolding global situation called for vigil on the part of government and all regulatory agencies, and there was very little scope for the government to manoeuvre domestic interest rates, though he did not agree that External Commercial Borrowings (ECBs) were drying up because of the turbulent environment in big economies.

The limit of $500 million has been extended only for the infrastructure sector under the approval route.

Experts say this is an indication that the government wants certain domestic drivers for growth. At present, the shaky situation in the world market is likely to pall a gloom on India’s economic growth. In addition to this, other intention is to allow fund flows that are cheap in markets abroad to domestic stock markets.

Most companies borrow through the ECB route at 5-6 per cent as against domestic lending rate of 17-18 per cent, and pump a part of the funds into the stock markets. This has been the common practice that had led the government to curb ECBs in the month of January. But now that the stock markets are faltering because of flight of foreign investors, the government may not mind if some funds come through this route and enter the stock markets, say experts.

The finance ministry also decided to allow corporates to pay higher interest rates on borrowing funds with a maturity of over seven years, in view of widening credit-spreads in the international financial markets.

Under the new norms, corporates can pay up to 4.5 per cent over six-month London Inter Bank Offered Rate (LIBOR), against the earlier ceiling of 3.5 per cent.

The government had last year imposed curbs on ECBs following rupee appreciating enormously.

On persistent demand from corporates, the government in May had allowed infrastructure companies to bring in $100 million for rupee expenditure, while it raised the limit for other companies to $50 million.

All other aspects of ECB policy, like $500 million limit per company per year under the automatic route, remains unchanged, the statement said.

Chandigarh, September 22
For the first time since Pakistan was carved out of India, the two countries have decided to start cross-LoC trade in Kashmir from next month. The two countries have decided that the trade would take place through Kaman post on the Srinagar-Muzaffarabad route.

A high-level meeting of commerce ministry officials from the two countries was held at New Delhi today. It was decided that while trade would begin on the above-mentioned route, trade on the Poonch-Rawalkote route in Kashmir has been delayed because of security concerns.

Though the official date for the same has not yet been announced, official sources informed TNS that the list of items to be traded, mainly handicrafts, dry fruits, carpets and leather goods, has already been finalised and agreed upon by the two countries. Initially, the trade will be allowed once a week, and in case the response is good, the frequency for trade will be increased.

Confirming that the trade route would become operational next month, chief commissioner, Customs and Central Excise, D.S. Sra, said the opening of these trade routes was part of the confidence- building measures being adopted by the two sides. "The passenger traffic is already allowed on both routes. Right now, we are in the process of creating requisite infrastructure for allowing trade between the two countries. If trade is allowed once a week, within prescribed timings, then we will depute our staff from Srinagar to Kaman post," he said.

The list of items to be traded on both sides had already been exchanged between India and Pakistan. It is learnt that Pakistan had earlier insisted on a common list but has reportedly now changed its earlier position and agreed on eight items to be exported from India and 14 to be imported to India. India had forwarded to Pakistan the names of a proposed trade delegation to visit Pakistan-occupied Kashmir for finalising modalities of import and export of items with their counterparts. India, too, has cleared the proposed delegation from PoK for a visit to Jammu and Kashmir.

Sra informed TNS that the Jammu and Kashmir government was presently working on widening of road between Srinagar and Kaman post, and additional land was being acquired for setting up the land custom stations and godowns at Kaman.

It may be mentioned that at present trade between India and Pakistan is allowed via the Wagah post between Amritsar and Lahore. 

Washington, September 22
Goldman Sachs and Morgan Stanley gave up their cherished investment banking status in return for cover under the Fed's wing to survive a financial storm that US authorities aim to tackle with a $700-billion bailout plan.

The Federal Reserve approved the two bank's transformation into bank holding companies regulated by the central bank, effectively ending Wall Street's investment banking model and subjecting the two to much tighter regulation.

In return it gives Goldman Sachs and Morgan Stanley greater access to central bank funds and makes it easier for them to buy retail banks.

"It creates a perception of greater safety and supervision. It really rationalises the regulatory system. It should be good for both Goldman Sachs and Morgan Stanley," said Chip MacDonald, mergers partner at law firm Jones Day.

The move is the latest effort by the US authorities to restore calm to chaotic financial markets follows frantic weekend talks between the Bush administration and the Congress on the bailout scheme to prevent further financial market turmoil from hurtling the economy into a severe recession.

The largest-ever bank rescue would give sweeping powers to the US Treasury to buy up toxic mortgage-related debt from financial firms, including US subsidiaries of foreign banks. — Reuters

New Delhi, September 22
The auction of the 3G spectrum space has already generated a lot of interest for the telecom operators in the country and those from abroad. And ahead of the start of the process in the coming few weeks, there is speculation as what amount the government would be able to garner from the auction.

India being the second largest telecom market in the world, the auction of the 3G space has also evinced a lot of interest from telecom companies abroad, and with the government relaxing norms for them, there is hope that there would be strong bidding for the limited space that is available.

However, experts point out that inhibitive starting up costs for the foreign telcos and the ceiling on the spectrum space available could actually keep them away. The Department of Telecom (DoT) has put the ceiling on 5 MHz for which a telco can bid and the department itself agrees that a minimum of 10 MHz space would be needed for providing basic services in the 3G segment.

There is also speculation that the government would not be able to garner the kind of money it had thought initially through the auction. According to assessments, most of the operators are unlikely to bid beyond the reserve price of Rs 2,200 crore kept by the government.

While a maximum of 5-7 operators are expected to bid for 3G spectrum, keeping the bidding amount to be within the maximum limit of Rs 2,200-2,500 crore, the government is likely to get a maximum of Rs 17,500 crore. It had earlier assessed that about Rs 40,000 crore could be raised through the auction.

Reports suggested that any pan-India bid beyond Rs 2,500 crore would make the operations financially unviable for even the already existing operators and services costlier to the subscribers.

Although the DoT had earlier earmarked 60 MHz spectrum for 3G mobile services to accommodate 10-12 service providers, but now reports suggest that a maximum of seven operators are likely to put in their bids. These could include two international players.

In fact, keeping this in mind the finance ministry had earlier asked DoT to consider increasing the reserve price to Rs 2,500 crore from Rs 2,200 crore, but it was turned down.

The government has already started the process to appoint e-auction agency to conduct auctioning and hopes to end the process by end of November this year.

As per reports, the private operators would be able to start the 3G services by the first quarter of next financial year while PSUs BSNL and MTNL have already announced their plans to start services from December this year.

Meanwhile, reports also suggest that the finance ministry wants tighter norms for third generation (3G) spectrum auctions and is expected to ask the DoT to allow only those Indian companies to bid for 3G which have an active subscriber base.

Current norms allow foreign telcos to participate in 3G auction only if they furnish experience certificates, but this does not apply to Indian telcos. This means that companies which have recently received the licence would also be able to bid for the 3G space along with the existing operators despite having no experience in providing telecom services.

The ministry feels the current policy encourages a newcomer to buy 2G spectrum from DoT at a fixed price and auction it to a foreign player at a much higher price.

Gurgaon/New Delhi, September 22
Amid prospects of good kharif output, finance minister P Chidambaram today expressed the hope that the ban on export of non-basmati rice, which was imposed as a temporary measure, would be lifted soon.

"I know that we were forced to put temporary constraints on certain kinds of rice...hopefully these restrictions can be removed as early as possible," he said after inaugurating the new facility of rice exporting firm Tilda Riceland here.

The government had banned export of non-basmati rice in April as part of initiatives to check rising inflation that touched the 13-year high mark of about 12 per cent.

"I am not giving you any date or I am not promising you any thing but things will ease and we will be able to remove these temporary restrictions," the minister said.

In view of record procurement of over 27 million tonnes rice during 2007-08 season ending September, the government permitted export of Pusa 1121, a non-basmati variety of rice. — PTI 

Paris, September 22
US investment giant Morgan Stanley has frozen talks on a merger with Wachovia bank but is pressing on with talks for CIC of China to end up with a big stake in it, the FT online reported today.

Morgan Stanley had frozen its talks with Wachovia Corporation after being authorised to switch its status from investment bank to a holding company, the Financial Times online reported, citing sources close to the matter.

Morgan Stanley was widely reported last week to be looking for help through a tie-up with another bank, but at the weekend the US Federal Reserve bank authorised it and Goldman Sachs to change status.

The newspaper quoted sources close to the merger talks as saying this change relieved the pressure for a tie-up.

The change means that the two companies, the last two independent investment banks on Wall Street after the collapse of Lehman Brothers a week ago and the purchase of Merrill Lynch by Bank of America, can have access to certain Federal Reserve support in exchange for respecting tighter banking rules. — AFP

Mumbai, September 22
As the US reels under a recession, India's diamond export trade is bearing the brunt as retail buyers go slow on the purchase of jewellery. The mood is sombre on the streets of Opera House in south Mumbai, the epicentre of the country's diamond trade.

According to exporters, the demand for small cut and polished stones, the mainstay of the Indian diamond industry has taken a big knock.

"The prices of rough stones have increased sharply even though the number of buyers have reduced," says Harshad Jhaveri, who operates from one of the many cubbyholes in the Panchratna building in the area.

The story is worse in Surat where the diamond industry employs the bulk of the population. Reports coming from that city indicate that scores of workers have been laid off and some of them have committed suicide in the past few months.

According to industry estimates, some eight of the 10 diamonds exported from India are polished in Surat.

"Things began to get worse for the army of diamond cutters and polishers last year when the government removed import duties on cut and polished diamonds," says a former employee who runs a small unit in Gujarat. Labour costs have been rising in India and the diamond industry has been importing pre-cut and polished diamonds from places like China where the cost of labour is lower.

Most of the stones that come to India are of the really small variety that are shunned by the bigger companies. American buyers usually buy gold rings studded with these small diamonds for presentation on birthdays, engagements and other social events. But the recession has badly hurt demand, according to industry observers.

According to exporters, demand has fallen by 40 per cent over the past two years and would decline further as the flow of bad news from that country continues unabated.

"Not only is the demand for diamonds in the US falling, some of us are facing a payment crisis due to the bank failures," says Jhaveri.

According to the trade, exports are done on credit and it takes exporters around eight to nine months to recieve payments. But payments have been delayed with some US importers going bankrupt, say exporters.

Some diamond exporters, who had set up offices in the US, have suspended operations in that country to save costs.

The Gem and Jewellery Export Promotion Council, the apex body of exporters in the trade has now begun to target newer markets in Asia to keep the export business going. However, the demand from these markets is different with buyers looking for bigger, high-value stones. "The US is facing a recession, so we have to look at newer markets," says Vasant Mehta, vice -chairman, Gem and Jewellery Export Promotion Council.

According to him, the council will undertake trade fairs and take delegations of exporters to these countries in order to grow exports in these markets.

New Delhi, September 22
In an effort to tide over rough weather that has gripped the aviation industry, Vijay Mallya-promoted Kingfisher Airlines is cutting 300 jobs, besides returning surplus aircraft.

"As part of a concerted company-wide effort aimed at minimising the impact of the ongoing turbulence faced by the aviation industry, Kingfisher Airlines has, over the past six months, embarked on a series of restructuring measures designed to achieve cost savings and rationalisation and operational efficiencies," a company spokesperson said.

"As a result, a set of 300 employees have chosen to move on and have parted ways with the company and/or put in their resignations," he added.

The carrier is also returning surplus aircraft to lessors, which are now redundant consequent upon route rationalisation, he added.

Elaborating the reasons behind downsizing of staff, he said as the process of integration of the two entities (Kingfisher and Simplifly Deccan) nears completion, the carrier examined the complete organisation structure of the airline and mapped the skill sets of the existing talent pool with the projected talent requirements of the company.

As a token of goodwill, the carrier is offering all these employees a severance package equal to two months gross salary for every completed year of service (subject to a minimum of 3 months pay-out), the spokesperson said.

Kingfisher Airlines currently operates 424 domestic flights and two international flights with a total of 86 aircraft. — PTI

BRIEFLY

Mumbai
Bajaj Hindustan buyout: Country's largest sugar producer in the private sector Bajaj Hindustan continues its expansion spree with the acquisition of two plants in Uttar Pradesh. Bajaj Hindusthan Sugar & Industries (BHSIL), a sister company of Bajaj Hindustan (BHL), on Monday announced the buyout of UP-based Phenil Sugars by merging the acquired company with itself. Phenil Sugars has two plants in Basti and Walterganj in eastern UP, each with a capacity of about 6,000 tons crushed per day (tcd).— PTI

Sahara Mutual Fund: Sahara Mutual Fund has launched its fixed maturity plan —Sahara Interval Fund Quarterly Plan-Series-1. The scheme will close on September 26 and carries no entry load, the company said. The company said that up to 100 per cent of the total assets would be invested in debt and money market instruments under the scheme.— PTI

Taurus MF to launch FMP: Taurus MF has announced the launch of a one-month fixed maturity plan (Series 1) with effect from September 23. The plan envisages investing in high-quality debt instruments such as bank certificate of deposits (CDs), a press release issued here stated.— PTI

Edelweiss MF schemes: Edelweiss Asset Management on Monday announced the launch of the Edelweiss Monthly Interval Fund-Series 1 and Edelweiss Quarterly Interval Fund-Series 1. The new fund opens on Monday and will close on Tuesday. The schemes will re-open for continuous subscription only during the specific transaction period and repurchase on an ongoing basis (subject to applicable load, if any).— PTI

New Delhi
NLC to invest Rs 6,120 cr: State-run Neyveli Lignite Corporation (NLC) ill invest Rs 6,120 crore for setting up lignite mines and lignite-fired thermal power plants in Rajasthan. "We will invest Rs 6,120 crore in Rajasthan for setting up lignite mines and power generation capacity of around 750 MW," acting chairman and managing director, NLC J.N. Prasannakumar said. — PTI

27 SEZ proposals cleared: The government on Monday cleared 27 proposals for special economic zones (SEZs), including those by Larsen and Toubro, JSW Bengal Steel, Ansal Properties and Bharat Forge. The Board of Approvals (BoA) chaired by commerce secretary G.K. Pillai granted formal approval to 17 SEZ proposals and gave in-principle nod to 10 tax-free zones.— PTI

BHEL dividend: State-run Bharat Heavy Electricals Ltd (BHEL) has paid 62.5 per cent final dividend to the government for 2007-08. The company paid Rs 207 crore dividend (62.5 per cent) on the 67.72 per cent equity holding of the government, a company statement said. BHEL recorded its highest-ever turnover of Rs 21,401 crore and a net profit of Rs 2,859 crore during the same period.— PTI

Chandigarh
Pyramis SA plans India foray: Pyramis SA, a Greek steel sink producer, is all set to enter the Indian market. The Indian subsidiary of the company has earmarked Rs 10 crore for its marketing and promotional activities and plans to open 25 exclusive showrooms across the country. — TNS

Airtel’s lifetime pre-paid offer: Bharti Airtel on Monday announced that it had slashed the price of its lifetime validity recharge for its pre-paid customers in Punjab. The customers will now have to pay only Rs 199 for lifetime validity as compared to Rs 295 earlier.— TNS