Policy Update

1. India ready to consider lower tariffs
2. 15 % revenue share in force till TRAI decides
3. TRAI proposes free incoming mobile calls
4. India advocates harmonizing TRIPS and CBD on biodiversity

Economic News

Inflation rate in India climbs to 1.67%

Industrial News

1. India tyre exports surge 22%, production up by 9% in July
2. Indian Space Organization scientists to man ground stations on December 31^st to tackle Y2K
3. India's power sector to be Y2K compliant by October 15^th, 1999
4. Indian sports goods exports up 6% in Rupee terms

Bilateral Trade

1. Indian & French co-operation on submarine production in the offing
2. Power Trading Corporation to import power from neighboring surplus countries
3. French Alpha Jet and Mirage-2000s on India's shopping list

Corporate News

1. ICICI to delist from London bourse
2. Power Grid Corporation of India Ltd. plans to raise $100 million with Asian Development Bank
3. Gillette to launch more shaving products in India through India Shaving Products Ltd.
4. Kinetic to launch five two-wheeler models
5. ITC considering employee stock option
6. IDBI in talks with Commonwealth Development Corporation & Walden Group of Silicon fund

India ready to consider lower tariffs

India is willing to accept lower bindings on industrial tariffs on a quid pro quo basis in a new round of international trade negotiations at World Trade Organization. India's position regarding the issue is that if a new round is launched post- Seattle, it may be desirable to have negotiations on the entire issue of market access, which includes tariffs for agricultural products.

India is, however, not in favor of any form of standstill agreement on applied tariffs for the next two to three years, according to government sources. A government analysis has found that the trade-weighted tariff averages from all sources for two major groups - textiles, clothing and leather and rubber and footwear - are as high as 12.1 per cent and 7.3 per cent, respectively.

There are several tariff lines that attract much higher peak customs duties, particularly for the items of export interest to developing countries. In other words, the average level of 3.8 per cent tariff in the post-Uruguay round period for developed countries is not a proper indication of the market access allowed to the exports from developing countries.

Telecom Regulatory Authority of India (TRAI) has said the 15 per cent revenue sharing mooted by government for private cellular and basic operators while deciding to shift them to the New Telecom Policy will be in force till the authority takes a final decision on it. "The 15 per cent revenue share will remain in place till a final decision is taken later, on the basis of TRAI's recommendations," the consultation paper on Calling Party Pays (CPP) released by the regulatory body has said.

It said the final decision on the percentage of revenue share that will be charged as license fee would be taken in a few months taking into account the regulator's recommendation. It also said that license fee formed part of the costs incurred by the service providers.

Telecom Regulatory Authority of India (TRAI) has proposed a calling party pays (CPP) regime effective from November 1, allowing free incoming calls to cellular phones, a 33 per cent tariff cut for outgoing calls and over 20 per cent cut in monthly rental. The proposed cut in rental and outgoing call charge will be subject to review by government when the revenue sharing package comes before the new Parliament after 13th lower house of parliament elections, TRAI chairman Justice S. S. Sodhi said. The regulator also proposed Rs four per minute for an outgoing call compared to existing Rs six and changing the pulse rate from the current 20 seconds to 30 seconds. TRAI had proposed to introduce CPP from August 1, in the telecom tariff order (TTO) in March last. However, it was rescheduled to be operational from September one and now the regulator said it would come into effect from November one. Under the new dispensation, monthly rental will be Rs 475 instead of the existing Rs 600.

India has advocated harmonizing the approaches to WTO's Trade-related Intellectual Property Rights (TRIPS) and the UN Convention on Biological Diversity (CBD) to ensure conservation of natural resources, equitable sharing of benefits from their use and prevent biopiracy. "While the preamble to the TRIPS agreement recognizes Intellectual Property Rights (IPR) to be private rights, the CBD recognizes it as the sovereign right of nations over their own biological resources," India said in a paper circulated in the General Council of the World Trade Organization (WTO) earlier this year on IPR.

The paper also suggested that commercial exploitation of innovations based on biological resources be allowed only on the condition that the innovators share their benefits through material transfer agreements or transfer of information agreements. The CBD underlines the importance of equitable share of benefits arising from the use of these provisions to meet the requirements of developing countries. India has proposed that such an obligation should be incorporated in Article 29 of the TRIPS Agreement, which deals with conditions of patents application, requiring a clear mention of the biological source material and the country of origin.
Apart from this, the patent application should be open to public scrutiny, the paper said, adding that this would help prevent biopiracy.

Economic News

Inflation rate in India has moved up by 0.11 percentage points to 1.67 percent for the week ended August 21, following a sharp rise in prices of edible oil and fuel. The annual inflation rate, based on Wholesale Price Index (WPI), rose during the week to 1.67 per cent compared to 1.56 per cent last week. It was, however, less than one-fourth of 8.39 per cent in the corresponding period last year.

The lower rate of inflation witnessed during the current year is due to the comparison with a higher base last year when prices of vegetable had skyrocketed as a result of lower agricultural production, according to the official statistics. The inflation rate, which touched a peak of 8.64 per cent on October 31 last year, has been falling steadily and touched a two-decade low of 1.19 per cent for the week ended July 24. While the index for edible oils registered a sharp increase of 2.18 per cent, fuel, power, light and lubricants' index rose by 0.4 per cent during the week under review.

India tyre exports surge 22%, production up by 9% in July

Aided by the revival in the global automobile industry, India's tyre exports have registered a robust 22 per cent growth in July, according to the Automotive Tyre Manufacturers Association (ATMA). Exports of tyres in July rose to 1,98,974 units as against the figure of 1,63,497, shipped during the same period last year, figures compiled by ATMA revealed. The total shipment of tyres during the April-July period, however, was up only by 10 per cent with an average monthly export of 1,76,704 tyres, as compared to 1,60,542 recorded during the same period last year.

While the shipments of truck and bus tyres recorded an impressive 22 per cent growth in July to 1,43,480, exports of passenger car wheels fell by 65 per cent to just 1,999, as compared to 5738 tyres shipped during a year-ago. With the robust export growth of truck and bus tyres in July, which accounts for a major portion of industry's turnover, the overall exports during the first four months have risen up to 15 per cent as compared to a negative growth of 53 per cent witnessed in the passenger car wheel segment during the same period. Another segment which witnessed sharp rise in shipment was light truck tyres, registering a growth of 40 per cent to 33,736, from 24,171 wheels exported during July 1998.

As a part of its contingency plan to tackle any eventuality arising out of the Y2K problem, the apex body Indian Space Research Organization (ISRO) in the southern city of Bangalore will depute select groups of scientists to man its ground control stations at Hassan and Peenya in the southern state of Karnataka on December 31^st, 1999. ISRO teams involved in the launch of its satellites -INSAT and Indian Remote Sensing (IRS) types - would monitor the systems at the two control stations, ISRO sources said. Another option in case of any unforeseen problem would be to place the satellites in "safe mode" in which certain critical systems on board including the payloads would be shut down but the satellites would continue to respond to ground commands.

India's power sector will be Y2K compliant before October 15 and there will not be any power disruption in the country due to this, according to the power secretary V K Pandit. "There is no need to fear that the country will suffer power failures as the sector would not be Y2K compliant. We would be Y2K compliant before October 15," Pandit said. The state-owned National Thermal Power Corporation (NTPC) has already made all necessary preparations to meet the Y2K problems and could be 2K compliant soon," NTPC chairman and managing director Rajendra Singh said.

Sports goods exports from India grew by six per cent to Rs 270.69 million in the first quarter of the current fiscal compared to the corresponding period in 1998-99. Inflatable balls occupied the top position with a share of 41 per cent of the total sports goods exports in April-June 1999-2000. The country also exported cricket gear, fishing and boxing equipment. The major destinations included Australia, Italy, Japan, U.K and the U.S. Indian companies had booked orders worth Rs 50 million and received enquiries worth Rs 180.5 million at the 51st International Trade Fair for Sports Equipment and Fashion held in Munich (Germany) at the beginning of the month.

Bilateral Trade

India has initiated talks with France to revive its submarine production line with French assistance even as talks over purchase of 10 Mirage-2000 fighter jets remained inconclusive. Though the Cabinet Committee on Defense decided to buy the additional Mirage-2000 H fighter jets two years ago, talks between both sides picked up only during the recent visit of the Indo-French high committee on defense here last month. However, wide differences persist between the two sides over price of the jets, the sources said. Dassault Aviation, which produces Mirage jets, is reportedly demanding a very high price and this has now put a question mark over the deal. The French aviation company has, however, offered full transfer of technology for the Alpha Jet which the IAF has short-listed as its trainer jet. Dassault stopped producing the Alpha jet in 1986.

The additional Mirage jets will replace those lost during training missions in the two squadrons of Mirage-2000Hs in the Air Force (IAF). India ordered about 42 Mirage-2000 jets in the early eighties of which four were lost during training. Meanwhile, sources said India is exploring the possibility of acquiring the advanced Mirage-2000-5 jets fitted with sophisticated radar and electronic devices. These jets, costing 12 million US dollars each, are expected to significantly enhance the IAF's strike capability.

State-owned Power Trading Corporation (PTC) is planning to import power from neighboring countries like Nepal and Bhutan which are expected to have surplus electricity soon. "PTC is planning to purchase the electricity generated from the 336 MW Chuka hydro power project and upcoming 1020 MW Tala hydel power project (Nepal) to meet the demand in the eastern region of India," according to the PTC chairman and managing director R K Madan. He said the company had also got an offer from an Australian firm willing to do power trading with India from a plant the multinational had set up in Nepal.

"We are also planning to make similar arrangements with Bangladesh and other SAARC countries for trading power," he said. "There is a need to do trading of power among the South Asian Association for Regional Cooperation (SAARC) countries to meet the growing demand of electricity in the developing countries," chairman and managing director of state-owned National Thermal Power Corporation (NTPC) Rajendra Singh said.

The upward swing in Indo-French ties has seen France emerge as one of the leading arms suppliers to India with New Delhi actively negotiating to buy Alpha Jet Trainers and additional Mirage-2000 fighter jets for the Indian Air Force (IAF). A high-level committee on Defense held negotiations with the French side recently focusing on acquiring military technology. India would soon acquire 10 Mirage-2000 fighter jets to replace the planes lost during training missions, diplomatic sources said.

French made Mirage-2000 jets played a stellar role in smashing Pakistani intruder's bunkers during the recent Kargil conflict. Besides their accuracy, the modern-avionics system in the jets helped jam Pakistani Radars which tried to track down IAF planes, they said. While the decision to acquire the latest version of the Mirage-2000 fighter jets was taken a while ago, the defense ministry recently said that it has short-listed French Alpha Jet along with the British Hawk 100 as the Advanced Jet Trainer (AJT) for the IAF.

Leading financial institution ICICI Ltd. plans to delist its shares from the London Stock Exchange (LSE) after its proposed 315 million US dollar American Depository Receipts (ADRs) issue is listed on the New York Stock Exchange (NYSE) before October this year. "We plan to delist our Global Depository Receipts (GDRs) from LSE and give the holders an option to convert their holdings into ADRs after ICICI was listed on the NYSE," K V Kamath, managing director of the institution said. He said with the de-listing from LSE, the foreign investors will have better liquidity on the NYSE as the exchange has wider reach. ICICI also announced its plans for the domestic investors with a public issue of around Rs 3 billion. The shares are priced at Rs 73 per share and issue will open for subscription on September nine, he said.

Power Grid Corporation of India Ltd. plans to raise $100 million with Asian Development Bank

Power Grid Corporation of India Ltd (PGCIL) is planning to raise $100 million from the overseas market based on Asian Development Bank (ADB) guarantee for funding its various transmission projects during the ninth plan. "We have begun negotiations with ADB for standing guarantee to raise the money from the overseas market. A team from PGCIL is likely to visit Bangkok soon," Chairman and Managing Director (CMD) of Power Grid R. P. Singh said.

This would be the first instance when a state-owned company would be raising money from the overseas market based on the guarantee of a multilateral lending agency, Singh said. Power Grid is also negotiating with ADB for another $250 million sectoral loan which would have a repayment period of about 25 years, he said. ADB has insisted that Government of India should also stand guarantee for Power Grid for raising the money from the international market, company sources said.

US-based shaving products major Gillette plans to expand it range of shaving and dental products in the country through a number of new launches under the Gillette and Oral-B brands. "Gillette will launch four-five variants of shaving products through its Indian subsidiary Indian Shaving Products Ltd in the next six-12 months in order have 30 per cent growth in terms of value," Gillette, Regional General Manager (India and South West Asia) Gunnar Doevle said.

Gillette holds 51 per cent in Indian Shaving Products Ltd (ISPL). Other companies of Gillette in the country include Duracell India for alkaline batteries, Oral-B for tooth brushes, Wilkinson also for shaving products and Luxor Writing Instruments for Parker and Paper Mate pens. The Boston-based multinational is also launching a electronic toothbrush, the first of its kind in the country, under Braun-OralB brand.

Kinetic group plans to launch five models of two-wheelers within a year to corner a larger share in this growing automobile segment. The company will roll out two scooter models and three motorcycles in a years time, all fitted with four-stroke engines, according to Kinetic Group chairman Arun Firodia. Kinetic group, which bought the entire stake of its Joint venture partner Honda Motor Company of Japan last year, has planned to introduce a 125 cc scooter with gears in March this year and another 125 cc model having auto transmission system, scheduled to be launched in September 2000, he said.

After termination of joint venture with Honda, the company has tied up with Hyosung Motors of South Korea to manufacture a range of motorcycles. Initially the group would manufacture two models of four-stroke Hyusung motorcycles with 125 cc and 150 cc engines and would be available in the market next year, he said.

Cigarette major ITC Ltd is considering a proposal to accord stock option for its employees. According to the company chairman Y C Deveshwar, ITC was examining a proposal and the board had to clear it once the scheme was ready. "The concept of aligning compensation with end results is a good one. But there is a danger in going the whole hog because the market may not reflect the true value of shares", he said. He said ITC's associate companies should also be considered while deciding on stock option, adding the boards of the respective companies had to take a final decision.