INDEX

Government announces RS 100 billion disinvestment for 1999-2000

The government has announced a RS 100 billion disinvestment programme in public sector undertakings including privatisation of IndianTourism Development Corporation (ITDC), offloading 19 million shares of Mahanagar Telephone Nigam Ltd (MTNL) and 180 million shares of G as Authority of India (GAIL) in domestic and international markets. Outlining the programme, the Information and Broadcasting Minister Pramod Mahajan said the state owned enterprises in which government would disinvest its equity in fiscal 1999-2000 were Hindustan Zinc, Madras Fertilisers, Central Electronics Ltd, Indian Oil Corporation, Videsh Sanchar Nigam Ltd and Hindustan Latex Ltd.

The government had also decided to disinvest equity in ITDC up to 74 per cent which amounts to a strategic sale of the corporation. Mr Mahajan said disinvestment of up to 19 million government held shares in MTNL, which provides basic telephone services in the four metros, would be made through an institutional offering in global depository receipts and domestic market with a common book. The government stake in MTNL will thus get reduced from 56 per cent to 51 per cent raising an estimated revenue of Rs four billion. In Hindustan Zinc, 25 per cent of goverment equity would be divested to bring down its stake to 51 per cent. In Madras Fertilisers, government stake would be brought down to 26 per cent from 32.74 per cent through strategic sale. Disinvestment in ITI (IndianTelephone Industries), anotherpublic sector unit, was deferred. In GAIL, government had decided to offload 210 million shares last year but could divest only 30 million. The remaining 180 million would be divested this year to bring down its equity holding to 62 per cent from 92 per cent at present. While in Indian Oil Corporation, five per cent of government equity would be divested through global depository receipts and domestic market, in VSNL one million government shares would be sold through retail offering in domestic market. In Hindustan Latex, government decided to offload 49 per cent of its equity to hold just 51 per cent.

The cabinet committee on disinvestment finalised the detailed plan for offloading government equity in the state owned enterprises in the fiscal 1999-2000 in line with the recommendations of the Disinvestment Commission headed by G V Ramakrishna. In Central Electronics, the cabinet committee on disinvestment decided that if performance does not improve within a year the research oriented units of the company would be merged with other government R and D units and the remaining part of the company would be sold up to 100 per cent. Last year, against the target of Rs 50 billion, government realised Rs 61.90 billion, he said. The government had realised only rs 1,000 crore through disinvestment in the wake of bearish conditions in the domestic and the international markets. However, after the decision to allow cross holding of equity in cash rich oil companies, government was able to raise further resources.

Policy

In a major decision aimed at revamping the telecom industry, government has allowed the existing telecom operators to shift to revenue sharing system introduced in the new telecom policy in march last. The package deal approved by the cabinet will be effective from August one and will allow all cellular, basic, paging and value added service operators to migrate to the system as a measure to provide relief to the service providers who have been hit hard by the poor demand for services. Giving details of the package, Information and Broadcasting Minister Pramod Mahajan said the existing licences would be extended by 10 years from the date of licence agreement. Current licences are valid for ten years, which would be 20 years after migration. Companies have to make an upfront payment of 15 per cent of licence fee arrears by August 15 over and above the 20 per cent required to be paid under the existing guidelines. Companies who have licence fee arrears would have to make bank guarantees for their entire dues and interest till the period all arrears were cleared. Transfer of shares by stakeholders would not be allowed for a period of five years from the date of licence agreement, he said, adding, this lock-in period would be applicable to all present share holders. Migration into the new system would be allowed in a circle only if both the operators in the area have accepted the package. Otherwise both the operators will remain under the old regime. Effective date of all licences for basic and cellular services would be extended by a period of six months except for metro cellular circles. Relief by way of reschedulement of payment of arrears will also be given, Mr Mahajan said. Operators have to accept the package in toto and thereupon all legal proceedings would have to be withdrawn for transition into the new system. Integration of 1994 licences into the new telecom policy would not be retropective, but only from the prospective date. The cut-off date for change over to the new telecom polciy, 1999 has been fixed by the cabinet as August one. Migration for paging and other value added services would be permitted on the basis of similar package and modalities for these sectors would be finalised by the communications ministry in consultation with the Telecom Regulatory Authority of India (TRAI). Mr Mahajan said the decision to allow the existing operators into the new telecom policy has been taken considering the fact that a large number of these operators were finding it difficult to pay licence fee and wanted to switch over to the revenue sharing mooted in NTP-99. The package, he said, has been arrived at after extensive consultations and analysing legal opinion.

Industry Minister Sikandar Bakht has said that term of the Disinvesment Commission would be extended to enable the panel to complete its task. "We will extend the term of the Disinvesment Commission after reviewing the original functions of the panel and the extent to which it has accomplished them", Mr Bakht said. The present term of the commission will be ending on August 22. Earlier, Mr Bakht said restructuring of PSUs had become the need of the hour to operate in the competitive environment particularly in the post liberalisation phase. "Restructuring does not necessarily mean infusion of capital alone. It may be improvement in technology and skills, product diversificiation and expansion into new markets," he said. Mr Bakht said the government wanted returns from the whopping Rs 2500 billion investment that have been made on PSUs.

In a move that would double the F M (frequency modulation) network in the country, the government has approved private participation in the F M radio broadcasting services. A decision to this effect was taken by the union cabinet which would open nearly 150 new F M channels with licenses being given to private operators in 40 cities. Announcing this after a cabinet meeting, Information and Broadcasting Minister Pramod Mahajan said these channels would not be allowed to broadcast news and current affairs and would cover only areas like music, entertainment, information and education. He said though the entry would be confined to only 100 per cent Indian companies, foreign institutional investment would not be a disqualification. 

FDI Approvals

The Foreign Investment Promotion Board (FIPB) has cleared 26 proposals involving foreign direct investment (FDI) of Rs 2.02 billion that includes the Dutch subsidiary of Reckitt and Coleman, Maddison Square Holding BV. Maddison Square, which will be a fully owned subsidiary of the Netherlands-based company, will bring in an FDI of Rs 336 million. The company would manufacture and market various consumer products such as hair care, fabric care, toiletries and pharmaceuticals products. The approval for manufacturing would be subject to reservations of items for small scale industries, official sources said. It would also set up brand development, technical services and research and development projects, they said. The board also approved the restructuring of Modi Xerox and allowed it to act as a non-banking finance company (NBFC) subject to the condition that they met capitalisation norms. The proposal of Non-Resident Indian (NRI) Nataraj Ramaiah for setting up an entertaintment and tourism complex in Chennai worth an FDI of Rs 775 million has also been approved. Future World Investment of USA will hold the foreign partners' equity of 49 per cent while the rest will be held by NRIs. Various facilities like bowling alley, restaurants and multiplex cinemas would be created. Isvor-Fiat of Italy's proposal to buyout 65 per cent equity held jointly by Fiat India and other group concerns in Isvor-Fiat India Pvt Ltd was approved by the board. The fully owned company would provide technical and managerial training services to Fiat group. U K-based Math Engine's proposal for setting up a 100 per cent company for software development and services was also cleared. The firm would bring in an FDI of Rs 125 million. The other computer software proposals to be cleared were MCS Software Solutions Ltd, India Intellisp Technologies, Nichi-In Software Solutions, Tumlare Corporation and DTS Information Systems. Canadian Standards Association's Proposal to set up technical consultancy services with an FDI investment of Rs 4.2 million was also approved. The proposal of Magnum Papers Ltd to allow its foreign partner--Rose Corner Trading of UAE-- to hike its equity to 89.9 per cent from 74 per cent was approved by the board. The company makes speciality papers. Okegawa of Japan will hike its stake to 31.2 per cent from 30 per cent in Sona Okegawa Precision Forgings Ltd. The company manufactures precision gears. Korean company Daewoo Corporation's proposal to transfer its holding in the Indian automobile company to Daewoo Motor Corporation of Korea was also cleared. The board deferred the proposals of telecom major JT Mobiles, SHV Energy and Woolmark. The proposals of De Nocil Crops Protection Ltd and KSM Ingenieurgemeinschaft GMBH were rejected.

Economy

Commerce Minister Ramakrishna Hegde has favoured withdrawal of quantitative restrictions on imports, introduction of a scheme for reimbursement of taxes and duties to exporters through a transparent system and phasing out of other export promotion schemes. Mr Hegde suggested consideration of second generation of reforms to make Indian industry globally competitive, enabling exports to withstand the vicissitudes of recession and price competition. As part of immediate reforms, he urged for development of a long-term agricultural export strategy, decanalisation of imports and exports, promotion of globally strong trading corporations which could export the products of small-scale industry and introduction of electronic data interchange (EDI)/electronic commerce, among others. Mr Hegde also emphasised the need to introduce electronic fund transfer in all banks dealing with exports and self-certification in all excise and customs procedures and provision of only random checking on the basis of intelligence and strict penal action for violators. He advocated privatisation of ports, cargo handling in airports, dereservation of industries and special facilities for software, processed food, floriculture and such sectors' exports.

India will oppose any move by developed countries to erect new non-tariff trade barriers under the garb of environmental and social issues at the ensuing WTO (World Trade Organisation) ministerial conference, commerce secretary P P Prabhu has said. Criticising the efforts of the developed world to link environmental and social issues, Mr Prabhu said, "India will oppose any move by the developed world to expand the agenda of the WTO during the forthcoming conference in Seattle in United States."
"The world organisation should concentrate on implementation of what has been achieved at the Uruguay round," he said. The developing and the least developed countries continue to be the worst sufferers of trade barriers being imposed by the developed world, he said. Anti-dumping rules, quotas and safeguard actions were being continuously used by the developed countries as protectionist measures, he added.

Referring to the growing fear among developing countries that they were being taken for a ride, Mr Prabhu said, "When our exporters find that barriers both tariff and non-tariff continue to exist and are growing, they are justified in asking what they had gained from the globalisation." Echoing the sentiments of the commerce secretary, President of the Confederation of Indian industry Rahul Bajaj said though India was committed to globalisation and liberalisation, there were growing fears not only in India but other developing countries that they were being taken for a ride. India should step up the pace of privatisation to enable the Indian industry to jointly face increasing competition in the globalisation process, Mr Bajaj said. A separate ministry of privatisation should be set up for this purpose he said adding, "Public sector companies have to be liberated of state control." The rapid privatisation of public sector entreprises and the development of infrastructure had to go hand in hand, he said.

The government has initiated anti-dumping investigations into imports of optical fibre from South Korea following a complaint lodged by Sterlite Industries with the directorate of anti-dumping in the commerce ministry. An official notification said the Aurangabad-based company's complaint prime facie had established dumping of optical fibre by South Korean exporters into the country. The investigations would cover the period between April one, 1998 and February 28 this year and also optical fibre exports originating from Seoul. The notification said since Sterlite had a 79.40 per cent share of domestic production, it had the requisite standing to file the petition. It said various economic indicators relating to domestic industry such as market share, profitability, price, capacity utilisation and inventory collectively and cumulative indicated injury to domestic industry due to dumping by Korea. "There is sufficient evidence that imports of the product under consideration have caused injury to domestic industry," it said.
As per World Trade Organisation (WTO) norms, anti-dumping duty could be imposed by any country for five years if the domestic industry is affected by unfair trade practices such as underselling of products.

India has said its restrained approach of not exporting steel plates to the United States when the prices crashed could help the country win the anti-dumping case initiated by Washington. Making it very clear that India did not intend to exploit the low price regime for steel products, steel secretary A K Basu said, "We are hopeful of a favourable outcome in the anti-dumping case initiated against India by the U S." "Since September 1998, we have not exported plates to the U S. This is voluntary restriction we have imposed on ourselves to convey that we are not dumping," Mr Basu said. A preliminary judgement in the anti-dumping case from the U S is expected in the last week of this month. Steel Authority of India Ltd (SAIL), the supplier of plates and the concerned party in the anti-dumping case, exported about 1.35 lakh tonnes of heavy plates in the pre-September period last year from its Bhilai steel plant at an average price of $340 per tonne, which was quite above the average market price at that time. The exports, however, were discontinued after the prices fell below the international prices in September last year, Mr Basu said. "We have to increase our presence in the exports. But we believe in exporting at international prices and not at dumped prices," he added.

Corporate

State-owned National Research Development Corporation (NRDC) has signed a technology transfer licence agreement with U S-based pharma major Diakron Pharmaceutical Inc. for manufacture of bioactive compounds. These bioactive compounds manufactured from garlic, fenugreek and other natural sources such as banyan bark are to be used as drugs in the treatment of heart diseases and diabetes, an NRDC statement said. The agreement was signed between managing director of NRDC N K Sharma and president and chief operating officer of Diakron Dr P Sriramarao, the statement said. The know-how for the production of these compounds has been developed by Dr P S Murthy, ex-professor of the University College of Medical Sciences, Delhi and his associates, it said.

A German firm has acquired a 59.204 per cent stake in Delhi-based Porrits & Spencer (Asia) Ltd from its U K-based promoters for three million pound sterling and announced an open offer for the remaining stake at Rs 80 per share. The acquirer, Voith Bespannungstechnik GMBH, has agreed to pay Porritts & Spencer, a wholly owned subisidiary of the London based Scapa Group Plc, a price of 1.1536 pounds per share equivalent to Rs 78.90 at an exchange rate of Rs 68.395. The company's shares listed on the National Stock Exchange and the Delhi and Calcutta bourses have been infrequently traded and depending on the response to the open offer, the new management may consider delisting the company.