The Cabinet Committee on Economic Affairs (CCEA) has approved the re-structuring of the state-owned Mazagaon Docks Ltd at Mumbai in the western state of Maharashtra. The re-structuring would include conversion of the outstanding government loan of Rs 980.55 million and accumulated interest of Rs 250.17 million upto March 31, 1997 against Rs 1.24 billion in seven per cent redeemable cumulative preference shares. The CCEA also approved re-structuring of North Eastern Regional Agricultural Marketing Corporation, a food processing unit which had been referred to the apex body Board of Industrial Finance and Reconstruction (BIFR). The re-structuring that would cost Rs 100.36 million is on the basis of the revival package proposed by the BIFR, Information and Broadcasting Minister Pramod Mahajan said. Of this, the outstanding loan component was Rs 40.78 million and capital subsidy was Rs 30.07 million, he added. The CCEA also approved transfer of 1,50,000 shares of the state-owned Spices Trading Corporation to State Trade Corporation (STC) at the rate of Rs 182 per share. The total value will be about Rs 20.5 million, he said, adding the transfer has to be completed within a period of one year. The committee also dereserved and delicensed five bulk drugs - Vitamin B1, Vitamin B2, Tetracycline, Oxyettracycline and Folic acid, which were exclusively reserved for manufacture by public sector units. It also approved the rollback in the central issue price of foodgrains to be supplied to people below the poverty line (BPL) through the public distribution system. It also cleared 12 railway projects costing Rs 25.29 billion and covering 1,831 km of rail line. Of the 12 projects, six would be new lines, four gauge conversions and one each for doubling and electrification.

The finance ministry has approved a $ one billion external commercial borrowing programme (ECB) of the Dabhol Power Company. The company is planning to mop up this amount from markets abroad to part-finance the phase II of the Dabhol power project, promoted by the US-based Enron Corporation. The company has appointed Abillion Amro Bank, CS First Boston and ANZ as arrangers for forex loans, which would be raised from the US, European and Japanese market, finance ministry sources said. It has tied up with the Japanese Exim Bank (J-Exim) for export credit facility. The company is trying to raise around $500 million from J-Exim. The company is also planning to raise a part of the foreign currency loan from the State Bank of India's Resurgent India Bond kitty, which is parked abroad. The Dabhol Power Company has announced that the financial closure for $ 1.2 billion Dabhol Phase-II power project would be achieved in the next 30 days.

TRADE DEFICIT WIDENS TO $7.3 billion

India's exports increased by 6.73 per cent in December 1998 and imports fell by 3.37 per cent even as trade deficit widened to $ 7.3 billion for the first nine months of current financial year. Exports in December were up at $ 2.79 billion against $ 2.61 billion in December 1997. This is the highest monthly growth registered in the current financial year after it registered a 3.35 per cent growth in November. The cumulative export performance from April-December was estimated at $ 24.27 billion, a negative 2.88 per cent growth compared to the same period last year. Exports during April-December 1997 were to the tune of $ 24.98 billion. Trade deficit was higher by 63 per cent during the current fiscal compared to the same period last year when the figure stood at $ 4.48 billion. Imports during December slid to $ 3.4 billion against $ 3.52 billion in December 1997. Oil imports during April-December registered a sharp fall of 26.3 per cent to $ 4.42 billion from $ 6.01 billion during the same period last year. Non-oil imports, however, increased by 15.7 per cent during April-December 1998 to $ 27.16 billion against $ 23.48 billion during April-December 1997.

FOODGRAIN PROCUREMENT RECORDS 30.7 PER CENT INCREASE

Procurement of foodgrains recorded a sharp 30.7 per cent increase in December compared to last year at 1.63 million tonnes. This is the first time after April in the current fiscal that procurement of foodgrains has shown a positive trend over last year, according to the latest official economic indicators. Rice accounted for the entire 1.63 million tonnes procured in December. The stock of foodgrains with the central pool also registered 33.1 per cent in November at 24.96 million tonnes. Stock of rice at 11.23 million tonnes in November registered a negative growth of 1.1 per cent during the month, while wheat at 13.73 million tonnes recorded a 85.7 per cent growth. The data said money supply (M3) grew by 19.6 per cent in December at Rs 9252.53 billion. The growth in net Reserve Bank of India credit to the government came down to 15.7 per cent in December compared to 26.9 per cent a month ago. Growth in total credit from scheduled commercial banks also came down to 16.4 per cent in December from 17.4 per cent in November.

India's garment exports increased to a record $ 5.5 billion during 1998, increasing by four per cent compared to 1997 despite a general recession worldwide, Textile Minister Kashiram Rana has said. "The clothing industry has witnessed a phenomenal growth in a short span of time and has crossed the landmark of $ five billion during 1998," he said. The 1998 exports were also up by seven per cent in rupee terms and this was against 4.9 billion dollars shipments in 1997. The chairman of the apex body Apparel Export Promotion Council (AEPC) Bharat Goyal said the export growth was better than the 1.5 per cent growth in dollar terms and 6.3 per cent in rupee terms during 1997. India's clothing exports in 1998 accounted for nearly 14 per cent of the foreign exchange earned by India, Mr Rana said, adding rupee terms in shipments earned Rs 310 billion. Reiterating the Indian government's commitment to revitalise the textile industry in the next millenium to develop new business opportunities, he said the government was considering the garment sector's demand to reduce the ceiling for availing zero duty Export Promotion Capital Goods (EPCG) scheme to Rs five million from the present Rs 10 million.

Indian software exports have posted a growth of 68 per cent and crossed the Rs 95 billion mark during calender year 1998 compared to Rs 56.40 billion the previous year. Exports are expected to exceed Rs 110 billion for the financial year 1998-99 and would cross Rs 175 billion mark by 1999-2000, according to India's National Association of Software and Services Companies (NASSCOM). President of Nasscom Dewang Mehta said increase in offshore services and the year 2000 (Y2K) date conversions were the major factors contributing to the spurt in Indian software exports. He said Indian companies have bagged export orders worth $ two billion for Y2K projects. Similarly, euro currency conversion applications are expected to generate business worth $ three billion for Indian software exporters.

India has asked the World Trade Organisation (WTO) to allow developing countries to continue agriculture subsidy for maintaining food security, a senior Food and Agricultural Organisation (FAO) official has said. In a paper presented to WTO for the upcoming review on agriculture agreement, India has however, attempted to make a distinction from subsidies being extended by developed nations to produce surplus, FAO senior liasion officer Panos Konandreas said. India had sought flexiblity to support its domestic agriculture sector, which was the largest sector to offer employment to its vast population. "India has told WTO in the paper that subsidies for developing countries must continue to help them achieve self-sufficiency, while developed countries were subsidising for surplus production for exports," Mr Konandreas said.

Finance Minister Yashwant Sinha has hinted at a harsh general budget later this month saying India was left with no 'soft options' to tackle the current economic situation beset by some 'problem areas.' "Over the last many years India has been exhausting, one by one, the softer options and then you come to a point where no soft options are left to deal with the situations," Mr Sinha said after attending the annual meeting of the World Economic Forum (WEF) at Davos. Identifying fiscal deficit, revenue deficit and current account deficit as "problem areas," the minister said they could be improved only if "we are able to control expenditure and improve our revenue compliance and collection." "We will be enunciating steps in this direction to tackle these problem areas," said Mr Sinha, who is due to present his second consecutive general budget (1999-2000) of the ruling BJP-led coalition government on February 27. Asked for his assessment of the current state of Indian economy, Mr Sinha said it was under some "pressure" but the situation was 'well under control." "India's economy can only improve in future and it is not likely to deteriorate," he said.

The core group on disinvestment has recommended Rs 60 per share for the disinvestment of the government stake in Gas Authority of India Ltd.(GAIL). According to sources 30.58 million shares have been booked at this price to mop up around Rs 1.84 billion for the government. The government had given a mandate to GAIL to sell its stake within the price band of Rs 60-68 and the average price of the last ten trading sessions. Sources said Rs 60 would conform to both the conditions laid down by the government. The disinvestment figure falls below the government expectations as orders from financial institutions including Unit Trust of India (UTI), country's largest mutual fund were low on account of liquidity crunch. At present, government holds about 96 per cent stake in
this gas company.

The government has reversed its decision to ban import of all kinds of plastic scrap and wastes with immediate effect. According to a statement by the Government of India, a notification in this regard has been issued by the Director General of Foreign Trade. The Indian government had through two notifications on Nov 13 and Dec 23 last decided to ban import of plastic scrap and wastes.

The Reserve Bank of India (RBI) has further liberalised the norms for foreign direct investment under the "automatic route of RBI" in infratructure sector. The RBI said in a statement that the general permission granted under this route for issue of shares in terms of its earlier notification in January has been extended to cover issue of shares upto 100 per cent in respect of all activities. These include construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels, ports and harbours, the statement said.

The government has granted a total of 20 prospecting licences over an area of about 30,000 square kms in first nine months of the current fiscal. The licences were given in states of Rajasthan (west), Gujarat( west), Maharshtra(west) and Bihar (east) and form part of 44 proposals for prospecting cleared in pursuance of policy changes in the mineral sector. The propsecting licences were granted in favour of Indian subsidiaries of well known international companies like BHP Mineral of Australia, Meridien Peak Resources Canada, Metdist and Rio Tinto of UK and Phelps Dodge Corporation of the USA. The Foreign Investment Promotion Board (FIPB) has so far cleared 51 proposals involving foreign direct investment (FDI) of about Rs 31.58 billion in the mining sector. Of these, 12 proposals with FDI amounting to Rs 4.74 billion were cleared in the first nine months of 1998-99. Aerial prospecting has already been completed over an area of over 18,000 square kms in western state of Rajasthan and a secretary -level internal minsiterial committee was working on facilitating removal of bottlenecks in the grant of security clearance for aerial exploration, import of aircraft and inspection. The department of mines expected that more investment would be forthcoming during the ensuing financial year.

Neelachal Ispat Nigam Limited (NINL), promoted by state-owned MMTC Ltd for manufacture of steel products, is planning an initial public offering (IPO) of Rs 2.5 billion in December-January 1999-2000, a top company official said. "We have decided to go public in December or January to mop up about Rs 2.5 billion to complete the equity part of the project," NINL managing director Subrata Ray said. He said Industrial Development Bank of India (IDBI) has been appointed lead manager for the public issue as it has earlier done the project appraisal and lead arranged the term loans to the tune of Rs 12.48 billion. "If the market sentiments continue to be sluggish we would prefer private placement of a portion of the IPO," he said adding efforts would be made to time the IPO of the sister company, Konark Met Coke Limited (KMCL) along with the NINL offering. NINL is jointly promoted by MMTC, Industrial Promotion and Investment Corporation of Orissa Ltd (IPICOL) and MECON among others, with an equity contribution of Rs 1 billion, Rs 0.73 billion and Rs 50 million respectively of the total equity capital of Rs 6.03 billion.

State-owned Rural Electrification Corporation (REC) has approached the market with a Rs one billion issue of taxable priority sector bonds, to be placed privately. The issue comes with a green shoe option to keep the excess subscriptions and REC plans to keep up to Rs 2.75 billion. The proceeds from the issue are to be used for priority sector financing, particularly agriculture. The bond issue is for a tenure of seven years, with put and call option at the end of five years. The coupon rate of 11.75 per cent, payable half-yearly, has been fixed after consulting banks in a pre-launch survey. The REC issue has already received `AAA (SO)' rating from both Icra and Crisil, the two major investment credit rating agencies, and closes on Feb 10. REC has already received an overwhelming response to this bond issue in form of commitments to the tune of Rs 1.25 billion. The proceeds of the present issue shall be necessarily invested in pumpset energisation and system improvement in electrical network in rural India so as to improve on quality of electrical supply to electrical motors that churn water for agricultural crops and improve intensity of cropping.

State-owned National Thermal Power Corporation (NTPC) has defered its $ 100 million Euro bond issue in the face of adverse market conditions and instead decided to borrow $ 120 million from the foreign banks to part finance its ongoing projects. The decision to defer the Euro issue till the next financial year was taken at the board meeting of the corporation last week, NTPC chairman and managing director Rajendra Singh said. "We have deferred the Euro bond issue in the current financial year and might go for it in April or May," he said. For raising the foreign loan the corporation had invited offers and was talking to various international banks, NTPC sources said. Besides the corporation was also seeking credit of about Rs 20 billion from domestic financial institutions for its various projects in the next 2-3 years, sources said. NTPC is talking to various leading financial institutions - Industrial Credit and Investment Corporation of India (ICICI), Industrial Development Bank of India (IDBI) and State Bank of India (SBI). On the Euro issue, Mr Singh said "We would definitely like to go for such a float as it gives the corporation a wider acceptability in the international market. We might need such an acceptability for our future borrowing programmes." He said the foreign loan would be through a syndication of banks, but declined to give further details.

State-owned Neyveli Lignite Corporation (NLC) is expanding its lignite mining and power plant capacity over the next three years at an estimated cost of over Rs 60 billion. As part of the expansion, NLC is increasing the mining capacity of lignite by 11 million tonnes to 28 million tonnes and thermal power generation by 920 mega watts (mw) to 2990 mws by the end of fiscal 2001-02. "NLC has already tied-up most by the fund requirements through borrowings and internal accruals and the projects would be complete by the end of fiscal 2001-02" NLC chairman and managing director P V Bhupati said. The Rs 60.83 billion expansion would be funded from internal resources worth Rs 17.45 billion, Rs 16.89 billion worth bonds issue, Rs 18.28 billion through budgetary support from the Indian government and the balance Rs 8.21 billion in the form of soft and commercial loan from KFW, a German financial institution, Mr Bhupati said. The German institution for funding development projects would provide 50 per cent of the sanctioned Rs 8.21 billion as a soft loan at 0.75 per cent per annum with repayment period of 40 years. The remaining 50 per cent would be a commercial loan at 7.5 per cent interest per annum payable in 12 years.

The C K Birla group has withdrawn from its joint venture with General Motors in the face of its inability to expand equity on par with a US partner. In a joint statement the two equal partners said "they would seek government approval for restructuring their joint venture, GM India, under which General Motors will become sole owner".

This is the third car joint venture in which the Indian partner has withdrawn completely or became minority holder in the recent past. The other two being, DCM Daewoo and Mahindra Ford. The US auto giant had signed an agreement with the government in December to raise foreign equity to $ 50 million as stipulated in the auto policy. The General Motors needed to bring $ 30 million more in the Indian venture to meet the norms. "Our decision in respect to GM India is based upon our mutual assessment of the best option in the long term interest of the joint venture and both partners," C K Birla said. He said from the group's point of view, this was a step in the drive for consolidation and would allow the group to focus attention on investment and growth programmes.

Cheminor Drugs, a Dr Reddy's group company, has received tentative approval from the United States Food and Drugs Administration (USFDA) approval for manufacture and sale of Ranitidine Hydrochloride tablets of 75 mg.

Cheminor received approval from USFDA in about 12 months of filing the first abbreviated new drug application (ANDA) for Ranitidine Hydrochloride 75 mg in December 1997, a company statement said. The company's state-of-the-art formulations manufacturing facility here was inspected by USFDA in October 1998, the statement said. The formulations facility was also inspected by a South African regulatory agency and the company expects inspections by several other regulatory agencies of the world.