Say no to the practice of booking cars
IN the round of brand wars in the Indian automobile market, the advantage has certainly gone to the consumer. The slashing of prices by Maruti Udyog is not only an indication of competition hotting up, but also of the nervousness that has now gripped the Indian car manufacturers.

FIs stall ACC preferential issue to Tatas

MUMBAI, Jan 7 (PTI) — Financial Institutions (FIs) today stalled Associated Cement Companies Ltd’s (ACC) move for preferential issue to the Tata Group, but faced the ire of small shareholders at an extraordinary general body meeting here today.

ACC Chairman Pallonji S. Mistry announced withdrawal of resolution No 5 on preferential allotment of 90 lakh naked warrants/equity shares of Rs 10 each at Rs 110 each to raise Tata Group’s stake from the present 13.3 per cent to around 20 per cent.

Mistry said the FIs led by IDBI even opposed an amended proposal offered by the Tatas themselves whereby each shareholder could apply for a minimum of 50 warrants on same terms as the preferential issue to the Tatas exclusively and the Tata Group would subscribe to the warrants remaining unsubscribed during an 18 months period.

The FIs, who have two representatives on the Board of ACC, have nor cited any reasons for their opposition to the preferential issue.

Mistry also denied the allegation made by IDBI Chairman that the Tatas had not subscribed to a rights issue in 1994 at a price of Rs 4,000 for a share of Rs 100.

“This allegation of non-subscription by Tatas is totally incorrect. In fact, against their rights entitlement of 78,000 shares, they applied for and were allotted 1.15 lakh shares confirming the promoter group’s commitment to ACC.

ACC had proposed the preferential issue to mobilise Rs 99 crore besides another Rs 189 crore through rights issue of shares in the ratio of 1:4 to supplement internal resources to finance approximately Rs 700 crore strategy of acquisitions, expansion and modernisation to improve the company’s competitive position over the next two to three years.

The resolution on rights issue of shares at Rs 55 per share was passed at the EGM.

After the meeting, ACC Vice-Chairman Dr S. Ganguly said “I don’t know why the FIs are opposing the preferential issue. They have not disclosed the reasons for the issue not finding favour with them.”

Ganguly said ACC will pursue the matter with FIs despite being unsuccessful in carrying through the proposal at the EGM, where small shareholders made vitriolic attack on the FIs.

Commenting on IDBI Chairman’s statement that the FIs had acquired ACC shares in a rights issue at Rs 4,000 per share, a shareholder C. Dalal reminded the FIs that their acquisition of the shares was a commercial decision.

S. Dapake said this will set a bad precedent since the preferential issue had adhered to the norms laid down by SEBI and added the FIs have lost credibility.

“Is this the responsibility and accountability of FIs to common shareholders,” Dapake asked, wondering why the institutions, who together hold 24.19 per cent of ACC shares, were not even setting out the reasons for disagreeing with the proposal of preferential issue.

Mistry said notwithstanding the fact whether ACC is a Tata company, it is not adequately realised that SEBI’s guidelines for preferential issues are not at all restricted to promoters.

The preferential issue to Tata Sons Ltd was proposed after taking into account the need to secure the stability and position of the management of the company and to strengthen the company even during the current difficulties faced by the cement industry.

‘Pay PSU chiefs more than Secys’

NEW DELHI, Jan 7 (PTI) — Chief Executives of major public sector undertaking (PSUs) have asked the government to put them in a higher salary bracket than that of top bureaucrats in accordance with the traditions and cautioned against any change in the pattern under fitment.

In their comments on Mohan Committee recommendations on pay revision for PSU executives sought by the Industry Ministry, some PSU chiefs have demanded that the Chirmen of Schedule A PSUs should be given higher salary than Secretaries in the ratio of 1.28:1, official sources said.

Even the standing committee on public enterprises (SCOPE) wrote to the government that even if the Mohan Committee report was implemented from January 1, 1997, PSU executives would be at a disadvantage vis-a-vis Secretaries due to D.A. benefits extended to the later as per the Fifth Pay Commission.

Recognising the need for higher salaries for Schedule A PSU chiefs, the Mohan Committee had recommended salaries in the scale beginning at Rs 27,750 for them as against Rs 26,000 for Secretary as on January 1, 1996.

Pointing out that the salary of a Secretary on 1.1.97 had become over Rs 28,000 after taking into account the D.A. SCOPE said in such a system a PSU chief would always remain below that of a Secretary and demanded that the salary level at the earlier level of 1.28:1 be maintained.

After consulting a number of PSU chiefs, the SCOPE said that for the purpose of relativity the pay scales of PSU executives be notionally implemented from January 1996 but give the benefits from a year later.

The SCOPE, in its note, has demanded a 100 per cent increase in annual increments for PSU chiefs for maintaining uniformity in increment at the present level, sources added.

The PSU chiefs have also recommended “point to point” fixation of pay against bunching of pay which, according to the SCOPE has been drawn by the pay committee in such a manner that will erode seniority of many years.

The SCOPE pointed out that there was no 100 per cent neutralisation of dearness allowance (DA) for PSUs, as recommended by the pay committee, as compared to Central Government officers.

Say no to the practice of booking cars
by Pushpa Girimaji

IN the round of brand wars in the Indian automobile market, the advantage has certainly gone to the consumer. The slashing of prices by Maruti Udyog is not only an indication of competition hotting up, but also of the nervousness that has now gripped the Indian car manufacturers. It also means that automobile manufacturers can no longer remain complacent or take consumers for granted. They will have to woo them with more competitive prices, better quality and an even better after-sales service.

However, what does not fit into this scenario is the continuing practice of vehicle manufacturers seeking and collecting advance deposits towards booking of vehicles. Advance booking was understandable when the demand was far higher than the supply. But it certainly does not make sense now. Of course, since these deposits provide easy finance at very low rates of interest to the manufacturers, they would certainly be reluctant to let go of the opportunity. But it’s difficult to understand why the Indian consumer is willing to go along with a practice that is not to his or her advantage. Today, the Indian consumer is in a position to say “no” to the practice of “booking” of vehicles. If only the consumer does that, then cars can also be bought like any other commodity. The consumer can just walk into a showroom, test drive a car and purchase it. Why should buying a car be different from buying any other goods?

Of course till recently, it was a seller’s market and the Indian consumer had very little choice either in the brands of vehicles or in the terms of contract drawn up by the manufacturer. There was no guarantee that the manufacturer, after receiving the initial deposit or even the full price of the car, would stick to the time schedule for delivery. If during the waiting period, the price of the vehicle was increased, the consumer had no choice but to pay the enhanced price, never mind the contracted price. A perusal of some of the cases filed before consumer courts gives a clear picture of the kind of problems that consumers faced as a consequence of the practice of paying the initial deposit towards booking of vehicles.

Of course the largest number of complaints pertained to failure of vehicle manufacturers to pay back the initial deposit following cancellation of booking. While in the initial years, such complaints were filed against Andhra Pradesh Scooters, Lohia Machines, followed by Sipani Automobiles, more recently, they were against Premier Automobiles. There were also cases against dealers and manufacturers for delivering vehicles “out of turn” and for charging a higher price. In response to one such allegation made against a dealer and distributor of Maruti Udyog, (Modern Automobiles vs Dr Hari Mohan Swami) the manufacturer argued that as per the terms of the contract of sale, the consumer or the complainant had agreed to pay the prevailing price at the time of delivery of the vehicle. In the case of vehicles which were released by the company prior to price increase and which were in transit or were in the stockyard of the company before the price increase became effective or were available in the stockyard with the dealer, the increase did not apply. Otherwise, whenever there was price revision, it became operational, effective and applied to all sales made thereafter and customers who were delivered vehicles after the price increase were governed by this clause in the contract and had to pay the increased price. (Consumers who had “booked” Maruti models whose prices have been slashed, please note. If there is such a clause in your contract, then you will have to get the car at the prevailing price at the time of delivery and not at the price ruling at the time of booking).

In another case the Supreme Court held that delivery of the car within the specified period was part of the service to be performed by the dealer and there was patent deficiency in service when the dealer withheld delivery intentionally to take advantage of the impending price hike and charged the consumer nearly Rs 6000 more (Mohinder Pratap Dass vs Modern Automobiles).

What it all amounts to is that car manufacturers in India have taken advantage of a sellers’ market all these years to dictate terms of sale, one of them being the practice of collecting hefty deposits towards advance booking of vehicles. A few years ago, in one of my columns, I had questioned this practice on the ground that it was unfair to the consumer in every respect. Today, with better choice and more competition in the small passenger car segment, consumers are better placed than ever before to demand a fair deal. In fact now, in a buyers’ market, consumers can call the shots. And the first step in this direction should be to stop “booking” of vehicles.

Govt takes sugar on loan for PDS

NEW DELHI, Jan 7 (PTI) — The government has taken two lakh tonnes of sugar as loan from millers to meet the current demand for the public distribution system (PDS), a top Food Ministry official has said.

The quantity taken as loan from the millers would be adjusted against the mandatory obligation of mills to offer sugar for the PDS during the current season (October 1998-September 1999), R.P. Sinha, Sugar and Edible Oil Department Secretary in the Food Ministry told PTI.

The government had saved Rs 28 crore by taking the two lakh tonnes of sugar on loan from the industry as otherwise it would have to pay a higher price than what was normally paid for the commodity procured for the PDS, he said.

As per the mandatory PDS (levy) obligation, sugar mills have to offer 40 per cent of their production for the PDS at a cost fixed by the government.

However, in actuality only 32 per cent of the total sugar produced by the mills was available for the PDS in view of various incentives given to the millers, especially for new units, Sinha said.

India, China rank lowest in economic freedom

NEW DELHI, Jan 7 (PTI) — A US-based foundation has ranked India and China as the worst in economic liberalisation saying government restrictions still persisted in these nations’ systems. The Heritage Foundation has ranked India 24th and China 25th in its “index of economic freedom” among the 25 countries based on 10 factors of government restrictions.

The factors considered include taxation, monetary policy, government expenditure and its ownership of business, banking system and foreign investment rules. The rankings were given by the Foundation after considering economic environment in 25 countries. Incidentally, Hong Kong was ranked at the top of the list.

‘Amartyanomics’ is the new mantra
From T.V. Lakshminarayan
Tribune News Service

JAIPUR, Jan 7 — Nobel laureate Amartya Sen’s welfare economics seems to be the new mantra for Indian policy-makers.

The annual Partnership Summit organised by the (CII), which began here today, heard senior government ministers deviate from the oftspoken “globalisation and economic reforms” and instead their thrust was on the human element.

The External Affairs Minister, Mr Jaswant Singh, who addressed the inaugural session of the three-day conference, drew attention to the importance of Prof Amartya Sen’s works in today’s context.

Speaking at another session, the Union Power Minister too stressed the need for addressing issues concerned with illiteracy, unemployment and poverty.

He pointed out that greater economic reform and increasing globalisation can contribute to human well-being, but only if they are accompanied by credible social sector safety nets.

This net, he said, was the field of social infrastructure where vital needs like primary education, health, housing, drinking water need simultaneous attention.

Differing with the concept of a former Finance Minister, Dr Manmohan Singh, that economic growth would finally trickle down to the social sector, Mr Jaswant Singh said: “These can simply not be left to the consequences of a possible trickle-down effect”.

In a democratic policy, support for reform would be forthcoming only if it is seen that benefits of reform actually accrue to all sections of society. In this regard he referred to the attention that the subject has been receiving in recent weeks following the award of the Nobel Prize for Prof Sen.

The Union Power Minister, Mr P.R. Kumaramangalam, too indicated the government’s changed thinking and referred directly to Dr Manmohan Singh’s views.

He felt that economic growth would not automatically trickle down to the social sector and there was a need for affirmative action on the social level.

In this context, he referred to the popular demand of economists for the removal of subsidies. Subsidy was an essential requirement as it was the sanctified duty of the State to help the needy. The only question could be “how much of subsidy?”

Contrary to Indian policy-makers’ assertion that their caution in economic liberalisation prevented India from succumbing to an ASEAN type of crisis, several experts at the summit debunked this view.

The Deputy Prime Minister of Thailand, Dr Supachai Panitchpakdi, was very brief and effective in dispelling this notion.

To begin with he said there was a wrong assessment in India about globalisation. The economic propriety of the ASEAN countries was no “miracle” and it was achieved with a lot of hardwork and planning. Countries like Thailand, Indonesia and Malaysia went fullway in taking bold decisions on currency convertibility, financial liberalisation and easy norms. The problem with the case of Thailand was that it failed to free exchange rate which led to people borrowing from abroad at lower interest rates and investing in Bangkok, where the returns were higher.

The second error, he said, was the wrong assessment of the capability of financial sectors. The banks failed to ensure that the funds were invested in productive sectors and instead they found their way to sectors like Golf Clubs and real estate.

The third reason was the speed of loss of confidence. With communications being so far the international community was quick to grasp the Thai government’s problems and there was a capital flight.

Listing the lessons that India has to learn from the ASEAN crisis, Dr Supachai said first India should not ignore market signals. The administration should ensure that the market was highly efficient and take note of their signals. This was one mistake that Thailand made.

Reliable statistics and information was yet another remedy prescribed by the Thai Deputy Prime Minister to avoid an ASEAN type of crisis. He said the government should share all statistics with the market and bring about transparency.

He said economic management during a downturn in the economy often resulted in mismanagement and governments should be very cautious while making such adjustments.

Lastly, he said, legal reforms should be undertaken to ensure an efficient market economy.

Sensex breaks barrier, gains 93 pts

MUMBAI, Jan 7 (PTI) — Equities rallied smartly lifting the sensex past 3300-mark during trading in brisk activity on the stock market here today as foreign institutional investors (FIIs) stepped up purchases attracting operators in making fresh commitments.

Contrary to market expectation of a small reaction at 3240 sensex level, the upsurge broke this level and even pushed the sensex beyond another strong resistance level of 3290 indicating a bull orbit if the market remained firm above this level during the next settlement.

The BSE sensitive index opened at 3239.85 and moved upwards to the day’s high of 3321.47 before closing at 3299.09 as against yesterday’s close of 3205.68, netting a hefty gain of 93.41 points. The BSE-100 index rose by 37.15 points to 1461.64 from previous close of 1424.49.

FIIs had focussed their attention on Indian stocks in the light of a boost in Asian stocks as prices on the Indian capital market were comparatively very cheap.

Dealers said FIIs reportedly made purchases of over Rs 100 crore in key scrips like Telco, Reliance, BHEL, MTNL, Tisco, SBI, L & T, ITC and Glaxo besides some automobile shares, which were reportedly sold by domestic institutions led by Unit Trust of India (UTI). The institution was a continuous seller in Hind Lever and Castrol.

Operators went on making fresh commitments in spite of approaching end of account tomorrow providing signals of high badla rates at the turn of the settlement.

Indian banks and mutual funds were reportedly net buyers, albeit in small quantity, in Reliance, Voltas, L&T, Tisco, MTNL and some others.

The index scrips like Mah & Mah. BHEL, Grasim, L&T, Ranbaxy and ICICI besides ICICI banking hit the upper circuit breaker after exhausting the daily limits.

The BSE-200 and the Dollax were quoted sharply up at 336.82 crore of the total volume of business of Rs 1747.14 crore.

Other top traded scrips were SBI (Rs 169.79 crore). RIL (Rs 156.90 crore), Pentafour Software (Rs 112.37 crore) and Satyam Computer (Rs 111.64 crore).

ITC spurted by 20.75 to 817.50. SBI was up by 10.40 at 170.00. RIL by 6.10 to 130.00. Satyam Computer by 1.50 at 754.00. BHEL by 22.50 at 304.50. Telco by 8.80 at 191.40.

CLB disposes of plea on Okara

NEW DELHI, Jan 7 (PTI) — The Company Law Board (CLB) has disposed of the application of Okara Agro Industries Ltd depositors without any repayment order.

CLB member A.K. Doshi in the final order said: “Since the High Court is seized of the entire matter relating to the company (Okara), it would not be proper for me to consider any schemes of repayment of deposits as proposed by the company.”

The disposal of the application follows the Delhi High Court order in October 1998 restraining plantation/agro companies operating collective investment schemes from selling or disposing of their immovable properties.

The court had also restrained these companies from transferring their immovable properties in any manner.

The board order said since the matter was with the High Court, payment of deposits could be made voluntarily by the company.

Okara Agro was booked under Section 58-A of the Companies Act by CLB for default in repayment of principal and interest amount.

The company had raised money from depositors under two schemes — money multiplier and teak scheme.

While the teak scheme was not taken for consideration by CLB under the acceptance of deposits rules, money multiplier was considered for repayment.

Regarding the disposal of application under the teak schemes, CLB said the amount invested under the scheme was for purchase of properties in the form of teak trees and therefore had to be excluded from the definition of deposits.

“Section 58-A of the Companies Act is not applicable in respect of the teak scheme,” it said.

For money multiplier scheme, CLB felt that the company had to pay fixed profit including principal amount. It observed that the scheme had assured returns of about 30 per cent annually and fell under the purview of deposits.

The total liability by Okara towards repayment of fixed deposits was about Rs 60 crore.

Okara had problems in repayment of amount due to certain actions initiated by SEBI in respect of companies running collective income schemes in early 1998.

The repayment schedule was also affected to mismatch in asset-liability.

Druckgrafen declared sick
Tribune News Service

CHANDIGARH, Jan 7 — Druckgrafen India Ltd a Chandigarh-based company and an RBI-approved security printer has been declared a sick company by the board for Industrial and Financial Reconstruction (BIFR). The company networth as per the accounts for the period ended 31.3.98 is Rs 568 lakh (comprising paid-up capital of Rs 453.83 lakh and reserves of Rs 117.77 lakh) which has been wiped out by the accumulated losses of Rs 577.98 lakh the company was incorporated on 23.1.1986.

The unit has been taken over by the Punjab State Industrial Corporation. The company took a term loan of Rs 90 lakh and repaid Rs 151 lakh to the corporation.

The BIFR order dated December 29,1998, said the Industrial Financial Corporation of India (IFCI) has been appointed the operating agency to examine the viability of the company and formulate a rehabilitation scheme for its revival.

Insurance Bill not in Budget session?

NEW DELHI, Jan 7 (UNI) — The Insurance Regulatory Authority Bill, which has been referred to the Standing Committee on Finance, may not be passed in the Budget session as no time frame could be stipulated for the committee to complete the work.

The IRA Bill was introduced in the Lok Sabha during the last session of Parliament. The Speaker had announced that the Bill would be referred to a joint committee of Parliament for scrutiny. But no motion for the purpose could be moved and hence the idea was dropped.

The Bill has now been referred to the standing committee on finance headed by Congress leader Murli Deora. The Congress, which was keen on the passage of the Bill in the last session, changed its strategy and demanded that it be referred to a joint committee.

Growth forecasts for euro zone cut

BONN, Jan 7 (PTI) — Growth forecasts for Germany as well as the 11-nation euro zone in 1999 have been sharply reduced and a call made for further cut in interest rates even before the new Pan-European currency completes one week of its historic launch.

The traditionally left-leaning German economic institute DIW cut this year’s growth forecast for Europe’s largest economy to 1.4 per cent from a previous range of 2 to 2.5 per cent.

The forecasts by DIW which is one of the six leading economic research institutes in Germany, is much lower than market forecasts, which ranged from 1.8 per cent to 2.5 per cent growth in the gross domestic product (GDP).

Budget deficits too high: Desai
Tribune News Service

NEW DELHI, Jan 7 — An eminent economist and Member of the House of Lords, Lord Meghnad Desai, said here today that “intolerably high” Budget deficits stemming from populist measures have proved counterproductive for India.

This together with high commodity taxation has conspired to push India’s vulnerable sections into abject poverty, Lord Desai said while delivering a lecture on “What should be India’s economic priorities in a globalising world” organised by Assocham and the Indian Council for Research on International Economic Relations (ICRIER) here today.

Lord Desai said that misplaced priorities and misdirected policies have reduced India to a capital scarce country from the privileged position of being the seventh largest industrial power 50 years ago.

The need of the hour is to strategise the trade regime to make it freer so that India can cash in on the comparative advantages enjoyed by it, he said adding that globalisation has opened up a whole new world of opportunities for trade and free movement of capital.

“India therefore needs to create a regime of freer trade to set up the export effort, deploy capital intelligently and efficiently, for profits will ultimately flow from efficient use of scarce capital resources”, he said.

While the government’s priorities include missile technology, the consumer goods sector is ignored , he said adding that India must realise that it is the economic power that rules the roost in the new scenario.

The silver lining, however, was that despite having coalition governments at the Centre, the country has not moved back on the economic reforms process.

Referring to subsidies, Lord Desai said that “the Indian policy makers would be well advised to note that it is neither possible nor desirable to sustain large deficits. It is about time we all saw through the fallacy that Budget deficits held the poor”.

Calling for a concerted effort to raise exports by focussing on the comparative advantages enjoyed by India, Lord Desai said that “ we consciously threw away our comparative advantages in various sectors like textiles” through economic isolation and have landed ourselves in a mess.

Former Finance Minister P. Chidambaram said that the slow learning process of the coalition government in regard to issues that merit attention is exacting a very heavy price from the economy.

Mr Chidambaram emphasised the need for an expenditure commission with full authority to slash unproductive non-plan spending and other wasteful expenditure without reference to the Cabinet.”Such a drastic step alone can lead us out of the unsustainable deficits that we have run up”, he said.

Food processing
NEW DELHI, Jan 7 (PTI) — The Centre is likely to discuss ways and means to revive the food processing industries in states at a meeting of the state nodal agencies of the Ministry to be held here next week. “The Ministry of Food Processing Industries (MFPI) has convened a meeting of the nodal agencies in the states to evolve concrete measures to give a critical push to the food processing sector,” Secretary MFPI, P.S. Bhatnagar told PTI.

Printpack
NEW DELHI, Jan 7 (PTI) — Commerce Minister Ramakrishna Hegde today called for modernisation of the printing sector and improving packaging of products in tune with global standards. Inaugurating the sixth International Printing and Packaging Exhibition here, he also asked industry to also take advantage in full measure of various incentives announced by the government for packaging sector.

NTPC
NEW DELHI, Jan 7 (PTI) — The state-owned National Thermal Power Corporation (NTPC) has shortlisted multinational Asean Brown Boveri (ABB) and Bharat Heavy Electricals Ltd (BHEL) for plant package of its Rs 8,000 crore Talcher Phase-II power project in Orissa. A decision to award the contract for supplying the equipment to the 2,000 MW super thermal power project would be taken at a board meeting later this month, corporation sources said.

Forex rates
MUMBAI, Jan 7 (PTI) — The following were interbank forex and RBI rates (in rupees per unit):
US $ Rs 42.51/52
Stg £ Rs 70.29/31
Euro Rs 49.54/56
Jap Yan (100) Rs 37.19/21
The RBI reference rate was Rs 42.52.

Gold improves
NEW DELHI, Jan 7 (PTI) — Standard gold and ornaments re-bounded to cover the previous day’s loss of Rs 25 and finished at Rs 4400 and Rs 4250 per 10 gram respectively. The quotations: Silver .999 (ready) 7640, delivery 7620, coins buyer 10.700 and seller 10.800. standard gold 4400, ornaments 4250 and sovereign 3750.

Bank awards
Tribune News Service
CHANDIGARH, Jan 7 — The Government of India and the National Federation have awarded four national awards for 1997-98 to Punjab State Co-operative Agricultural Development Bank. The awards were received by Mr Dharamjit Singh Grewal, Managing Director of the bank, at a function of the National Co-operative Agriculture and Rural Development Banks Federation here today. The four awards are the Union Ministry of Agriculture Trophy for outstanding performance at the national level, the Uddaybhansinhji Memorial Trophy for the best performance amongst agriculture rural development banks, the M.N. Nambiar Trophy for best lending performance amongst the ARDBs and the Punjab Chief Minister’ Trophy.