The ninth five year plan has got off the block two years behind schedule after getting the nod of the National Development Council, where Prime Minister A B Vajpayee asked states to shun populism and high borrowings to achieve the overall 6.5 per cent growth target. Warning ofan imminent financial crisis in the absence of efforts to check borrowings and target subsidies to stop the race to offer concessions and curb irrational pricing, Mr Vajpayee sought a political consensus to end competitive populism that was eating into the resource base of states.

However, Mr Vajpayee's call did not appear to go well with states as several chief ministers demanded rolling back the hike in prices of foodgrain and other essential commodities despite centre giving a detailed note on the reasons for the price increase, particularly on the mounting subsidy burden. Envisaging a public outlay of Rs 8592 bn, the plan (1997-2002) targets an overall 6.5 per cent Gross Domestic Product (GDP) growth that would necessitate an over seven per cent annual economic growth in the remaining three years of the plan.

 Criticising the states for not contributing to the plan in his opening remarks to the 48th NDC, Mr Vajpayee said states' contribution to plan financing was almost non-existent and they were even borrowing to fund their current consumption. He sought all-round austerity and accountability on the expenditure front and said reluctance to mobilise additional resources was the root cause of the problem.

Portraying a dismal picture of the central and state finances at the NDC, the Planning Commission deputy chairman K C Pant said the states' borrowings accounted for 115 per cent of the plan expenditure in the current financial year while in case of centre it was an alarming over 140 per cent in 1997-98.

"The centre and states are borrowing not only to finance their developmental activities but also to cover a significant portion of their non-developmental expenditure. This is a recipe for fiscal disaster," Mr Pant warned. Mr Pant expressed concern over the large fiscal deficit of the government, and said enhancing revenues was the top priority and states must shun tax competition to lure investors and go for a harmonised tax regime and rationalised service harges.

 The central budgetary support to the plan, that envisages a 3.9 per cent agriculture growth, 6.8 per cent in services and eight per cent for manufacturing sector, is pegged at Rs 3,740 bn while resources from states are fixed at Rs 1950 bn. The plan focuses on building up physical infrastructure, agriculture and social sector for attaining growth with equity besides making India a knowledge-driven society through stress on information technology. There is a special provision of Rs 223 bn for the Prime Minister's special action plan that focusses on social infrastructure and development of information technology.

The states, on the other hand, complained of tremendous pressures arising out of mounting revenue deficits mainly due to the Fifth Pay Commission burden and reduction in the states' share in central taxes devolved. There was hardly any state that responded to the charge of competitive populism though some chief ministers said revision of user charges, tariffs and curtailment of subsidies could not be done by them on a stand alone basis.

Nonetheless, some chief ministers agreed with Mr Vajpayee's suggestion for a national consensus on these issues as such measures could not be done by states on a stand alone basis. In relation to another issue pertaining to allocation of funds for poverty alleviation schemes, the chief ministers appeared divided on the prescribed criteria.

ECONOMY LIBERALISING IMPORTS MAY STRAIN BOP POSITION: NINTH PLAN

India's commitment to further liberalise imports under the World Trade Organisation (WTO) regime may strain its balance of payment (BoP) position unless measures are taken to boost exports and attract higher foreign direct investment (FDI), the ninth plan (1997-2002) has said. The plan suggested judicious use of exchange rate as a "strategic" instrument for boosting competitiveness of Indian goods and achieve an export growth rate of 11.8 per cent in the five year period.  The plan slammed the continued anti-export bias in the country and said exports must be made profitable compared to domestic sales by re-orienting policies on investment in tradeable goods and services. Greater inflow of foreign direct investments (FDI) would permit higher level of sustainable current account deficit and help avoid a 1991-type BoP crisis, the plan said. However, the plan has cautioned about encouraging foreign portfolio investment (FPI) as it comes "when BoP position is seen to be strong and goes out when the BoP is expected to weaken". Efforts should be made to meet the challenges of inter-regional blocs besides creating a conducive environment for joining existing trade blocs, particularly under the aegis of SAARC.

WORLD BANK RESUMES LENDING TO INDIA

 The World Bank has welcomed new nuclear power India further back into its lending fold, approving a $ 210 mn loan to fund energy sector reforms in the southern state of Andhra Pradesh. Bank officials said the loan was the first non-humanitarian advance for India since the United States led a drive for sanctions to punish India  for exploding a nuclear bomb.  The bank has loaned India $ 1.4 bn since the blasts, but the money has gone for things like agriculture and health care rather than for the energy sector or structural reforms.  ''The reform of the power sector is the single most important element of structural and fiscal reform in Andhra Pradesh,'' said World Bank analyst Mohinder Gulati. ''Its power sector has deteriorated in the past several years and is now in a critical physical and financial situation.'' The loan is the first in a series of planned World Bank credits to help Andhra Pradesh restructure its energy sector and make it more efficient. Loans could total  $ one bn over eight years if the whole plan goes ahead.

GOVT BORROWING PUTS STRESS ON FINANCIAL SYSTEM

Increased government borrowing and excessive money growth may lead to high inflation and mounting interest rates putting heavy stress on the Indian financial system, official sources said. The amount borrowed by the central government in gross terms this year stood at Rs 814.53 bn till January 11, 1999 as against budgeted amount of Rs 793.76 bn for the fiscal 1998-99, the sources said. The net market borrowing during this period amounted to Rs 554.72 bn against the budgeted amount of Rs 483.26 bn, the sources said, adding the higher level of central government borrowing had necessitated borrowing from Reserve Bank of India (RBI) leading to a sharp increase in money supply. The annual rate of broad money (M3) growth as on January one, 1999 was 19.5 per cent ad against 16.5 per cent in 1997-98 in the corresponding period last year. This exceeds by a wide margin the targeted broad money growth indicated by the RBI at 15-15.5 per cent for 1998-99. The sources said the government currently bore a subsidy burden of over Rs 190 bn on food and fertilisers only. Any further increase in subsidy would impinge on not only fiscal deficit but would be highly inflationary also, the sources said.

ANTI-DUMPING PROBE BY EU CAN RESTRICT INDIA'S DEVELOPMENT

Anti-dumping and anti-subsidy investigations by the European Union (EU) could restrict scope of economic development of countries such as India, a senior commerce ministry official has said. India's share in EU's total trade was insignificant and any move by the EU to investigate into Indian exports would make a difference for a country like India, Nripendra Misra, additional secretary in the commerce ministry told a Spanish delegation at a meeting organised by the Joint Business Council of Federation of Indian Chambers of Commerce and Industry (FICCI and Associated Chambers of Commerce and Industry (ASSOCHAM). EU had recently decided to impose countervailing and anti-dumping duties on Indian steel exports. Mr Misra said India and Spain need to engage closely in very constructive dialogue to remove these misunderstandings and asked Spain to support India in such cases. Assuring the delegation about India's commitment towards liberalisation and economic reforms, Mr Misra said that the liberalisation as not only stable but also getting stronger with consensus at different levels of government. He invited foreign investment in the infrastructure sector which has been thrown open for foreign direct investment. "We do want that globalisation efforts should get integrated with our production system where we have natural advantage of cheap labour, well established legal system and highly transparent trade structure," he said. He said EU was the single most strong economic block and India's largest trading partner and India was looking ahead for more closer bilateral trade ties with EU. On the issue of World Trade Organisation (WTO), Mr Misra said there was a growing feeling in India that WTO had failed to fulfil its promises which were made at the time of its origin. He said WTO should address the existing agenda first and then add other items on to it.

CRUDE OIL PRODUCTION AT 2.934 MN TONNES IN JAN '99

India's crude oil production in the country during the month of January this year was recorded at 2.934 mn tonnes as against the target of 3.045 mn tonnes, a 96 per cent achievement of the set target. The achievement of the monthly target for producing of crude oil by the India's state-owned Oil and Natural Gas Corporation (ONGC) was 85.5 per cent for the western state of Gujarat, 95.1 per cent for the eastern state of Assam and 121.2 per cent for  the southern state of Tamil Nadu (including Andhra Pradesh in south and 95.7 per cent for offshore areas).

Cumulative production for April last year to January 1999 was 27.465 mn tonnes against a target of 29.083 mn tonnes representing an achievement of 94.4 per cent of target. While refinery production in terms of crude oil throughout the month of January 1999 was 5.756 mn tonnes against a target of 6.122 mn tonnes. The natural gas supplies for the month was at 1766 mn cubic metres, 2 per cent higher than January 1998.  Cumulative refinery production in terms of crude throughout April 1998 to January 1999 was 55.889 mn tonnes as against a lanned target of 56.062 mn tonnes.

OILSEED PRODUCTION TO TOUCH 27 MN TONNES

India's oilseeds production is set to touch 27 mn tonnes by the terminal year of the ninth five year plan (1997-2002), Minister of State for Agriculture Sompal has said. "The target of raising oilseeds output to 27 mn tonnes by the end of the ninth plan is likely to be achieved with proper coordination between farmers and various government agencies," he said. He said rapid growth in oilseeds production, from 19 mn tonnes in 1985-86 to 24.96 mn tonnes in 1996-97, was mainly possible due to the price support extended by the government to the farmers. The success of oilseed technology mission launched in 1986 needs to be emulated in years to come if India is to achieve its ambition of doubling agriculture output during the next 10 years, he said. The government needs to effectively combine the strategy of increasing area under cultivation and enhancing productivity to bridge the demand-supply gap in edible oils, he said. Mr Sompal said to augment the availability of edible oils efforts should be made to scientifically process rice bran and cotton seeds into consumable products.

POLICY INDIAN COs ALLOWED TO MINE COAL SANS CAPTIVE RESTRICTION

The government has decided to amemd the Coal Mines (Nationalisation) Act to allow Indian companies to mine coal without captive restriction. The decision to open coal mining for private companies is to bridge the demand and supply gap which is expected around 235 mn tonnes by the end of 10th plan (2002-2007). As part of this process the government has decided to amend

Section three of the Coal Mines (Nationalisation) Act 1973. However, the bill to amend the act is not a privatisation bill. Under the bill, nationalised coal companies will not be privatised. In order to bridge the increasing gap and to bring in adequate investment from private sector it is necessary to allow coal mining not only for captive consumption but also for all other purposes including sale, an official statement said. "Keeping in view the estimated addition of new coal based thermal capacity in the country by end of 10th plan, it would not be possible for the nationalised coal companies and captive coal mining companies to bridge this huge gap" it said. The statment said the import of coal to India to meet the emerging shortage was not a sound step in the interest of national economy.

FERTLISER INDUSTRY NOT 'EFFICIENT': AGRICULTURE MINISTER

The fertiliser industry in India is not "efficient" as the present pricing mechanism does not encourage manufacturers to use their entrepreneurial capabilities, Agriculture Minister Sompal has said. "Fertiliser and sugar industries in India are gold plated industries. They show production at an unbelievable capacity utilisation level and in the process get higher subsidies from the exchequer," Mr Sompal said. Fertiliser manufacturers are not entrepreneurs, he said adding the industry was functioning solely at the government's expense.  Under the present Retention Price Scheme (RPS), the mechanism evolved by the Indian government to calculate subsidy for nitrogenous fertiliser manufacturers, producers get assured return on their production.

Producers can earn more profits under the RPS mechanism if they produce at higher capacity levels than the declared one. For example, if they produce at 150 per cent capacity level while the declared capacity level is 100 per cent, then the difference of 50 per cent qualifies them for subsidisation.  Almost all urea manufacturers in India operate above 100 per cent capacity. The fertiliser industry artificially builds up capacity levels to take advantage of the administered price mechanism (APM) and in the process accumulates huge profits.

GOVT, ONGC SIGN OIL BLOCK CONTRACT WITH CANADIAN COMPANY

The government and the state-owned Oil and Natural Gas Corporation has jointly  signed a roduction sharing contract for an oil block located in the eastern region of Assam and Nagaland with a consortium led by Canada-based Centurion Energy.  The block (AA-ON/7), which was awarded under the eighth round of bidding, covers an area of 1900 sq kms and would involve a total investment of $10 mn.  Since the consortium that includes Canada-based Canaro Resoures and Assam Company Ltd wanted to make some changes in its constitution, the agreement could not be signed last year.  The Indian government had earlier signed a total of 13 contracts for exploration blocks in June and July 1998. So far 23 contracts have been signed since the fourth round of bidding for exploration of oil and gas. Out of these, the contract for one block has already expired.

VENTURE CAPITAL FUND FOR INFOTECH

The Department of Electronics (DoE) will set up a National   Venture Capital Fund (VCF) with an initial corpus of Rs one bn to boost the software industry, a senior government official has said. The proposed VCF is awaiting the approval of the expenditure finance committee of the finance ministry, secretary, DoE, Ravindra Gupta said adding that with its creation, the entrepreneurs in the Information Technology (IT) sector would have easy availability of finance.  Small Industrial Development Bank of India (SIDBI) and ICICI would be the two main promoters of the fund along with DoE, Mr Gupta said. A provision has been made for industry's participation in the fund, Mr Gupta said adding that the VCF would provide suitable legal and fiscal framework. Recently, the finance ministry had done away with the stipulation of 20 per cent, 50 per cent and 80 per cent investment over a period of three years by a Venture capital company in a venture capital undertaking. The amendment will come come into force from April this year. This would provide flexibility to venture capital funds in planning their investments in venture capital undertakings. The finance ministry is also actively considering other recommendations of the DoE which include expansion of the term "venture capital undertaking" to cover the entire spectrum of IT software and services for funding by VCF and also to be made eligible for tax exemption. The DoE had recommended that income tax act applicable to mutual funds should be extended to include venture capital funds to bring it at par with mutual funds, as venture capitalists take on greater risks.  The department has also made certain recommendations to the capital market regulator Securities and Exchange Board of India (SEBI) saying mutual funds be encouraged to invest a small portion of about five per cent of their corpus in the VCF. This will increase the flow of fund in the venture capital sector. For this SEBI is likely to issue guidelines soon, an official statement said.

ECONOMY STILL UNDER GOVT CONTROL: FINANCE COMMISSION OF INDIA CHIEF

Chairman of the 11th Finance Commission of India A  M Khusro has said liberalisation seems to have come to a grinding halt with much of the economy still remaining under government control. "Despite years of economic reforms nine-tenth of the economy still remains under state control and liberalisation seems to have come to a grinding halt," Mr Khusro said.  The economic reforms till date have mainly focused on containing deficits and inflation, foreign exchange management and delicensing, even as "sector after sector were crying for liberalisation,'' he said. The financial sector has been partly reformed, but areas like land markets, education have yet to experience liberalisation, he added. In the case of land management, same age old rules and ''graft'' is standing in the way of reforms, Mr Khusro said. Turning to current economic slowdown he said "private sector was looking for government initiative and righly so, for taking steps to extricate itself out of the recession''.  He expressed confidence that recession would end in six months time as in general, no recession lasts for more than three to four years.

INDIA BRAND EQUITY FUND LAUNCHED

The government has launched the long-pending India Brand Equity Fund (IBEF) to project the country as a reliable supplier of quality goods and set up sub-groups in the revamped board of trade to provide inputs and suggestions for fresh modifications in the exim policy. Chairing the first meeting of the board of trade, Commerce Minister Ramakrishna Hegde said the sub-groups would look into various aspects of export and import procedures, banking issues, identification of products and markets for special thrust and make recommendations for incorporations in the exim policy modification, slated for April one.  The government also announced that state-owned Hindustan Machine Tools (HMT), Bangalore in south India, and Coimbatore-based (south) K G Denim would be the first two beneficiaries of the scheme. IBEF, a Rs 1.02 bn corpus fund, would make "Made in India" label a symbol of quality.  Under the scheme, originally conceived by P Chidambaram, former Commerce and Finance minister, the government will extend funds  to promote Indian goods abroad and its image through the "Made in India brand". A  board of trustees, headed by commerce secretary P P Prabhu, has been set up for IBEF.

JOINT MARKETING FOR TEA EXPORTS BY INDIA, SRI LANKA

Commerce Minister Ramakrishna Hegde has mooted a global joint marketing and publicity campaign by India and Sri Lanka to promote tea exports. Mr Hegde admitted there were apprehensions among tea exporters over the country's export performance this year, following removal of quantitative restriction on exports. On promotion of free trade among the South Asian Association for Regional Cooperation (SAARC) countries, he said tea exporters and growers should be prepared for lifting of quantitative restrictions on export of tea.

NELP ROADSHOW IN JAPAN

India has decided to include Japan for the roadshows on   New Exploration Licensing Policy (NELP), Minister of State for Petroleum and Natural Gas Santosh Kumar Gangwar has said. "We are very happy over the response we got from global oil companies for the 48 blocks offered under NELP during our roadshows abroad and we are also planning to have roadshows in Japan," Mr Gangwar said. He, however, did not specify the exact date on when the roadshows would be held in Japan.  The government had started roadshows for the 48 blocks under NELP in New Delhi, on January 22 which were later followed by roadshows in London on January 27 and 28. Roadshows in Houston were held on the first and third of this month while in Singapore on February 11 and 12.  The government is also likely to conduct roadshows in Perth during the later part of this month, Mr Gangwar said. Multinational oil companies like Enron Corporation, Unocal, Total, Shell, British Gas had evinced interest in bidding for the NELP blocks. Domestic oil companies like Reliance, L&T, Indian Oil and Oil and Natural Gas Corporation are also willing to bid for these blocks. Of the total 48 blocks offered, 26 blocks are for onshore exploration, 12 blocks for offshore exploration with the rest for deepwater exploration.

BILATERAL JAPAN MAY EASE SANCTIONS ON INDIA

Japan is seriously considering partial easing of the embargo on lending to India by multilateral agencies like the World Bank, International Monetary Fund (IMF) and Asian Development Bank (ADB), a Japanese foreign ministry official has said. "The subject of partial easing of the embargo on lending to India by multilateral agencies is under serious consideration," the offical said in response to a query whether Japan would follow the US decision to ease sanctions against India. "However, our consideration is independent of what the United States does," he said adding America's idea seemed to be a "step by step" approach of lifting the sanctions by small measures. "The subject is under Japan's independent consideration and the action

will not necessarily be the same as what United States does," he said. Japan is already negotiating with India for the resumption of aid to the later and had recently said that it had information that India was working hard to sign the CTBT in May 1998. Japanese officials also point out that Japanese sanctions were much different from those of the United States. American sanctions very seriously affect the trade while the Japanese measures leave trade completely untouched, they said adding even debt relief arrangments are completely untouched.

INDIA OFFERS THIRD CREDIT LINE TO UZBEKISTAN

India has offered a third credit line of $10 mn to Uzbekistan and assured to consider the fourth credit line once the third was utilised. The offer was made by Commerce Minister Ramakrishna Hegde during the signing of the protocol between India and Uzbekistan at the conclusion of the fourth session of inter-governmental commission on trade, economic, scientific and technological cooperation between the two countries. India has so far extended two lines of credit of $10 bn each to Uzbekistan. While the first was fully utilised by Tashkent, the second was not fully tilised. The Uzbekistan delegation, led by the Uzbekistan deputy Prime Minister M Z Usmanov, assured to examine the India's proposal to extend third line of credit but said it should be directed towards spefific projects for new technologies. During the session, India and Uzbekistan had agreed to encourage business between both the nations to accelerate investment cooperation, in various potential sectors like pharmaceuticals, automotive components, food and food processing, textiles, telecommunications, construction, oil and gas, small and medium scale industries and industrial processing of minerals.  Both the sides also expressed satisifaction on the progress in establishment in joint ventures.

FDI APPROVALS FIPB CLEARS MCDONALDS, OSRAM PROPOSALS

The Foreign Investment Promotion Board (FIPB) has cleared foreign direct investment (FDI) proposals worth Rs eight bn including one by US fast food chain McDonalds. The fast food giants has been given the permission to acquire property in the metro cities of Delhi and Mumbai on condition that it would be strictly limited to running of outlets, industry ministry sources said. The board allowed German company Osram to buyout 17 per cent stake held by the Indian partner in Surya Roshini. After the buyout Surya Roshini would become wholly-owned subsidiary by Osram. Osram has also been allowed to increase the paid up capital in the venture from 40 mn Deutche marks to 60 mn Deutsche marks. FIPB also allowed Universal Holding West Indies' proposal to set up two technology parks in the western state of Maharashtra and the southern state of Tamil Nadu at a total foreign investment of about Rs 2.20 bn.  It also cleared a proposal by WSIL Mineral Sands India Pvt Ltd for setting up integrated project for processing beach sand and minerals and titanium dioxide in Tuticorin in the southern state of Tamil Nadu. WSIL would bring in Rs 1.40 bn in the project, where a Tamil Nadu state undertaking would hold 26 per cent in beach sand project, while the state-owned Indian Rare Earths Ltd take 26 per cent in the titanium dioxide project.

CORPORATE IDFC PROFITS TO CROSS RS ONE BN

India's leading infrastructure funding agency, Infrastructure Development Finance Company Ltd (IDFC) has said its profits are set to cross the Rs 1 bn mark in the very first year since its inception. "The profits will cross the three-figure mark in the fiscal ending March 1999," managing director of IDFC, Balaji Rao said. Mr Rao also said though the performance in its first year of operations was good enough, it could have been better had the projects been cleared faster by various authorities. "Too many clearances and the slow pace at which projects are getting leared is hampering our infrastructure lending," he said.  According to him, since its inception, the institution received several proposals seeking various forms of assistance in the form of term finance, guarantees to foreign lenders, lengthening maturity of loans, credit enhancement of buyers of services among other things. Last year IDFC provided assistance to five projects - four in the power sector and one in the port sector. Though IDFC was incorporated on January 30, 1997, the capital by both domestic and foreign financial institutions came in only in the beginning of this financial year, a company official said adding 1998-99 will be the first fiscal since IDFC's inception.

INDIAN TRADE FAIR IN MAURITIUS

An Indian trade fair showcasing the best of Indian business will be held in the Indian ocean island of Mauritius in September this year to familiarise the Indian industry with the emerging opportunities in African markets. Nearly 200 Indian companies are likely to take part in the trade show and Freeport Operations Mauritius (FOM), the organisers, have already initiated talks with Indian industry majors like Tatas and Arvind Mills, the FOM general manager James Jessamine said. "We have concluded an agreement with the Indian Trade Promotion Organisation (ITPO) under the commerce ministry on holding the show in Mauritius which is also part of the Indian Ocean Rim initiative actively being promoted by countries including India," he said.  "The show is being held to enable Indian business to look at possibilities of using Mauritius as a logistic platform to distribute its goods in African markets," he said.  Mauritius could soon become to Africa what Dubai is to Middle East and Hong Kong is to China, he said. Mr Jessamine who is likely to hold discussions with the Indian Business Council in Dubai said Mauritius was among the top five countries making foreign direct investment into India.

PIAGGIO GREAVES TO LAUNCH THREE-WHEELERS