CABINET CLEARS IOC-MARUBENI JV,
AIRPORT CORPORATISATION

The Cabinet Committee on Economic Affairs (CCEA) has approved a proposal of the state-owned Indian Oil Coproration (IOC) to form a joint venture with Japanese multinational Marubeni for a 301 mw power project in Panipat in the northern state of Haryana. It also cleared the move to corporatise five major airports in the country and a Rs 250 bn technology upgradation fund for the textile industry. IOC and Marubeni would have a 26 per cent stake each in the joint venture project with the rest being shared between the financial institutions and associates.

"The joint venture is aimed at increasing the profitability of IOC which will be providing the entire electricity generated to Haryana," an official spokesman said. The feed stock - vaccum residue fuel (VRF) - for the power would be taken from the Panipat refinery of IOC. The estimated cost of the project is about Rs 12 bn. The cabinet has also decided to corporatise five major airports at Delhi, Mumbai, Calcutta, Chennai and Bangalore. "With the corporatisation, privatisation of the airports in the country will begin," Civil Aviation minister Anantha Kumar said. The move is aimed at financial and management restructuring of these major airports in the country, he added.

The Rs 250 bn technology upgradation fund to modernise the textile industry is mainly to modernise weaving and processing sector, Textile Minister Kashi Ram Rana said. The much awaited fund would offer an interest incentive to the industry to accelerate investment in the processing and weaving sectors and jute industry. Loans amounting to Rs 250 bn would be distributed to textile industry by financial institutions for a five year period starting April One, 1999. The government would bear an interest subsidy of Rs 30 bn for this. Asked if the spinning sector would also be eligible for the upgradation fund, Mr Rana said," spinning sector has already been modernised during the seventh five year plan, when Rs 7.5 bn was allocated for it." He said the jute and silk sectors would also have access to the fund.

POLICY: GROUP OF MINISTERS TO LOOK INTO DTH ISSUE

Prime Minister Atal Bihari Vajpayee has constituted a group of ministers to go into the controverisal issue of allowing direct-to-home (DTH) television that will help satellite broadcasters dramatically expand their reach. The five-member group includes Home Minister L K Advani, Defence Minister George Fernandes, Communications Minister Jagmohan, Finance Minister Yashwant Sinha and Information and Broadcasting minister Pramod Mahajan.

Mr Mahajan said the group has been asked to recommend to the government whether to allow DTH and if so what steps were needed to ensure that the decision is transparent and there was a level playing field for all. Making it clear that the decision was of "executive nature", he denied suggestions that if DTH was allowed it would lead to severe problems for cable operators. Stating that all over the world the number of cable operators are on the decline, he said, the operators are having a different clientele than the satellite broadcasters. "I cannot punish one for nother," he said. Earlier, he said, the DTH issue was with the group of telecom but the Prime Minister has now taken it out from that group and given it to the group of ministers which was constituted on January 22. The information and broadcasting ministry will service this group. Cable operators have protested against any move to allow DTH contending that it would only benefit multinational media companies.

BUDGET TO PROTECT DOMESTIC INDUSTRY: F M

Finance Minister Yashwant Sinha has indicated that the forthcoming budget would contain measures to protect the domestic industry from the ravages of globalisation and foreign competition. "The government is determined to protect the domestic industry and the forthcoming budget will contain measures for their protection. If some section of the industry need some breathing time it is the government's responsibility to provide for this time," he said adding the centre could not be a mute spectator to see the Indian industry perish. "We cannot afford to lose what we have built over the years with so much of investment in the country", he said adding the forthcoming budget would also witness a drastic reduction in the excise duty to three slabs. "Indian industry must become competitive and we can give them time to adjust, if they want", he said adding there was no question of reverting to protectionism. Mr Sinha also expressed the government's determination to restructure the anti-dumping mechanism that was causing hardships to the Indian industry.

The finance minister said the government would be coming out with simplified tax laws. "Provisos such as notwithstanding or riders in the tax incentive defeats the purpose of the tax concession", he said.

GOVT TO COME OUT WITH PAPER ON ECONOMIC REFORMS

The government will soon come out with a "paper" detailing the second phase of economic reforms during the budget session of parliament beginning next month. The paper would list out the form, content and various modalities for launching the second generation of economic reforms for enabling India to become an economic super power in the next decade, highly placed government souces said, reiterating the state's commitment to pursue reforms more aggressively.

The next phase of reforms would come alongwith the process of fiscal consolidation, the sources said, adding that India would would utilise the current phase of economic recession worldwide for taking corrective measures.

In India, fiscal consolidation could be achieved by a strict control on revenue deficits and arresting non-plan exenditure which alone could help rein in fiscal deficit and inflation, they said, adding that "quick fix" solution were no alternatives.

IOC TO BORROW RS TEN BILLION FOR CROSS HOLDING IN ONGC

State-owned retailing and marketing oil major Indian Oil Corporation (IOC) will borrow Rs 10 bn from banks to part finance its proposed acquisition of 10 per cent equity in another state-owned oil company Oil and Natural Gas Corporation (ONGC). Disclosing this, a top company official said IOC would only take short term credit from banks for the cross holding while the remaining amount of about Rs 16 bn would be raised internally. IOC is talking to some banks including the country's largest commercial bank State Bank of India, the official said. ONGC, on the other hand, will buy 10 per cent stake in IOC at an estimated Rs 16 bn using its cash reserves totalling around Rs 35 bn. The corporation, having free reserves of over Rs 100 bn, is expecting to to buy ONGC stocks for about Rs 26 bn, though government is yet to determine the scrip price. Meanwhile IOC is also talking to some merchant bankers to evolve a pricing formula for government's consideration, and is likely to commission ICICI Securities (I-Sec) for this. IOC would be the second oil state-owned unit (PSU) after Gas Authority of India (GAIL), to seek bank credit for financing cross holding of equity in other public sector undertakings. GAIL is also talking to banks for a credit of about Rs three bn to part finance its estimated Rs seven bn share acquisition programme of ONGC. GAIL is expected to buy 2.5 per cent of ONGC equity.

HMT TO EXPLORE JVs POSSIBILITIES

Industry ministry has directed state-owned Hindustan Machine Tools (HMT) to explore possibilities of joint venture formation for its watch division. During a recent performance review meeting of heavy industries, Minister of State for Industry, Sukhbir Singh Badal also directed HMT to expedite the process of forming subsidiaries of its machine tools, watches and tractor business groups. He said the formation of subsidiaries would enable the company to pursue flexible growth strategies to successfully cope with increased competition. It would also help them to increase their financial strength while at the same time they would continue to enjoy the brand equity provided by the HMT name. It was agreed during the performance review meeting of Bharat Bhari Udyog Nigam Ltd (BBUNL) that the company would formulate a strategy for the future with focus on technological upgradation and modernisation. Mr Badal also directed state-owned company Bharat Yantra Nigam Ltd (BYNL) to prepare a long term strategy including diversification of their activities, keeping in view the emerging marketing scenario.

INDIA DEFENDS PROVISIONS IN PATENTS ORDINANCE

India has strongly defended the compulsory licencing provisions in the patents amendment ordinance and wil present the changed laws to the World Trade Organisation (WTO) on January 25 at Geneva. Indian ambassador to WTO S Narayanan will inform the dispute settlement body (DSB) on the changes next Monday when the board assembles for its monthly meetings, industry ministry officials said. Strongly defending the provisions of licencing under the ordinance which empowers the government to withdraw exclusive marketing rights (EMR) granted to a company under certain conditions, officials said that it was not a new provision. The government has taken this provision from the nearly 80 year old patent law, the officials said, adding that safguards of the country were foremost. India contended United States' objections to certain provisions in the patent (amendment) ordinance providing exclusive marketing rights (EMR) to multinational pharmaceutical and agro-chemical firms, saying it could do so in the interest of public health. The Indian position was conveyed to the US when the two sides met here recently to negotiate Washington's reservations over the EMR provisions in the ordinance, official sources said.

The US had made a formal complaint to the DSB against the patent ordinance saying it did not comply with the ruling of the WTO body. Washington objected to the provisions which allow the government to give license to another company other than the one given EMR for marketing a specific item in public interest. While promulgating the ordinance, the government had included provisions like fixing floor prices for essential drugs and cancelling EMR in the interest of national security. The ordinance was promulgated on January 8 to meet the WTO deadline of April 19.

INDIA TO SEEK FAO HELP ON AGRICLUTURE PACT

India will seek assistance of the Food and Agriculture Organisation (FAO) for negotiations during review of the World Trade Organisation (WTO) agreement on agriculture due this year-end, agriculture secretary Kamal Pandey has said. "They (FAO) have not only the necessary international experience and expertise but also the requisite degree of empathy with developing nations, which, I feel will add great value to this exercise (review of the WTO agriculture pact)," he said. Stating that many of the developing nations were not familiar with what was expected of them in the emerging scenario, he said government support and guidance had led to complacency in the agriculture sector. The developed and developing nations differed widely in their perceptions and third world nations would have to proceed on the issue assuming the industrialised nations had not fully comprehended the effect of integration of the international markets on self-sufficiency and self-reliance in food production of the under-developed countries, he said. Mr Pandey said India, in particularly, would have to guard against detrimental consequences that could arise from overtures of developed nations, which were likely to impinge upon ensuring availability and accessibility of food at under-privileged sections of the society. The time had come for India and other developing countries to attempt to comprehend and quantify implications of international obligations on internal imperatives, he said, adding they would also have to be pro-active in analysing initiatives and intentions of developed countries so that they could defend their interests. He also called upon FAO to shift its focus and re-defined its role in view of rapid change in external environment.

INDIA DRAGS EU TO WTO ON LINEN EXPORTS

India has once again dragged the European Union (EU) to the World Trade Organisation (WTO) against the anti-dumping duty imposed on its bed linen exports, a top textile ministry official has said. "We have called the EU for consultations under the dispute settlement understanding and give our questions. EU has answered some but we have asked them to reply to the unanswered question," textile secretary Shyamal Ghosh said. India had earlier moved the dispute settlement mechanism of the WTO on the issue of repeated anti-dumping proceedings initiated by the European Union members on unbleached cotton grey fabrics (UCF). India still has the case on UCF pending at WTO despite the EU dropping the anti-dumping proceedings against UCF imports from New Delhi.

The Indian commerce ministry sources said going by the nature of reply to India's queries, India would most probably request the WTO to set up a dispute settlement body. The issue was taken up at the WTO a couple of months ago, they said. EU had imposed definitive anti-dumping duty ranging from 2.6 per cent to 24.7 per cent on bed linen imports from India in December 1997.

ADB FUND FOR INFRASTRUCTURE DEVELOPMENT

The Asian Development Bank (ADB) has agreed to provide 400,000 dollars technical asistance for development of urban and environmental infrastructure sector as part of its aid to India. The assistance provided under the urban and environmental fund is aimed at developing the projects in the sector as well as policy reform to support private sector involvement in urban infrastructure development. The fund would also help in engaging the private sector in financing and implementing commercially viable urban infrastructure projects.

MARINE EXPORTS TO EU TO INCREASE SHARPLY

India's exports of marine products to the European Union (EU) is likely to go up sharply this year with 59 firms securing clearances for shipment to the Union, commerce ministry sources said today. "Nod for another 20 firms is in the pipeline and the country's exports of seafood to the Union should be substantially up this year", sources said.

Exports of marine products to the Union was worth $100.71 mn during April-November 1998 as against $76.14 mn during the same period in 1997. In volume terms, increase in exports during the first eight months of the current fiscal was 7641 tonnes from 24273 tonnes during the corresponding period last year. However, the comparative increase in volume and value of exports of acquaculture products to the Union this year was because of a steep fall during 1997-98, when EU had imposed ban on imports of seafood from India citing lack of hygienic and phytosanitary measures. The four month ban on exports was partially lifted in November 1997, with a few firms meeting the European hygienic standards certified to export to EU. The ban imposed by the EU has forced the commerce ministry to lay down stringent qualification norms for firms to be eligible for export to Europe.

CORPORATE
RIL NET PROFITS FALL OVER SEVEN PER CENT

Reliance Industries, India's petrochem major has announced an over seven per cent fall in net profits for the third quarter of 1998-99 at Rs.4.02 bn despite an over five per cent increase in total income at Rs.37.51 bn. However, the profits for the first nine months of current fiscal were four per cent higher at Rs13.23 bn compared to Rs.12.75 bn a year ago, with sales turnover going up to Rs109.47 bn from Rs 98.36 bn. Profits during the third quarter of 1997 stood at Rs 4.35 bn. Explaining the poor performance during October-December 1998, RIL said it had to incur additional expenses of Rs1.05 bn on account of damage at Hazira Petrochemical complex (in western state of Gujarat) due to an accident at its jetty. Claims of approximately Rs 2.44 bn for physical damage, loss of revenue etc., were pending, it added. During the April-December period the company posted record total income of Rs 113.52 bn, up from Rs100.66 bn in the comparable period of 1997. Announcing the results RIL managing director Anil Ambani said "during the last quarter, Reliance had to face a major challenge, arising from the damage caused by an unloading vessel to the primary feedstock supply system at the complex."

PIRELLI TO INVEST $ 500 MN IN INDIA

Pirelli Tyres, the Italian tyre major, is all set to enter the Indian market by the first half of the year 2000. The company will make an initial investment of $500 mn towards its Indian operations. Though Pirelli has decided to enter the Indian market, the company is at present weighing out the options of both 100 per cent subsidiary and a joint venture. In case, the company finalises its plans to set up a 100 per cent subsidiary, the initial investments would go up to $700 mn. Pirelli, at present, has a technical tie-up with a India's major company Birla Tyres for manufacturing radial tyres. According to sources, that makes Birla Tyres, the most eligible partner for a joint venture with Pirelli. According to sources, Pirelli has already started negotiating with Birla Tyres, a wing of Birla group of companies. The company will manufacture passenger car radial tyres and radials for multi-utility vehicles once it enter India, sources said. The Italian tyre major proposes to roll out about one mn tyres per year for the first three years and double it later. It will also export tyres from India to neighbouring countries where there is a demand for tyres, sources said.