FI divestment subject of debate
New Delhi: Indian industry chiefs have protested against the move by Indian financial institutions to go ahead with divesting their stakes in companies in the open market. Bodies such as FICCI and Assocham have written to the finance minister to intervene and prevent such a move.

It is these businessmen's contention that their interests should be protected, and that FIs should offer the stakes to the existing promoters and give them first right to acquire the shares the institutions want to sell. They want FIs to arrange "negotiated deals" with promoters, and only if that doesn't work should they seek other buyers.

Financial institutions, on the other hand see this as an infringement of their right to exit as investors. They are of the opinion that such freedom is necessary to keep managements on their toes and improve returns and thereby increase shareholder value.

The protest has come in the wake of institutions (The Unit Trust of India, Life Insurance Corporation, General Insurance Corporation, and Industrial Development Bank of India) inviting bids for the purchase of their 44 per cent holding in Modi Rubber Ltd. If the open offer goes through, the Modis will lose control of the company.
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VRS policy, other reforms for PSU banks
New Delhi: A separate voluntary retirement scheme tailor-made for the banking sector is on the cards. This will be part of several measures that are being drawn up to bring in banking reform, which include, besides VRS, privatising public sector banks by amending the Banking Companies Act and the debt recovery tribunal. A VRS scheme for banks is expected to bring down costs through shedding excess manpower costs.

Changes have been proposed in the Banking Companies Transfer & Acquisition of Undertaking Act and the SBI Act to accelerate the pace of privatisation (including that of the State Bank of India) and reducing the government stake in banks to below 51 per cent. The Sick Industries Companies Act will also be amended to facilitate quicker recovery of bad debts from sick companies. The proposals are to be introduced in the next session of Parliament.
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Compensation for power companies
New Delhi: Power transmission companies are likely to be compensated for losses they incur due to delay in implementation of generation plants. A number of power generation plants are being set up in difficult terrain, due to which there has been cost and time delay. As a result, companies which have already put up transmission infrastructure are running at lower than estimated capacities.

The government is likely to accede to the demand of the transmission companies and introduce a policy to compensate a part of this loss. The compensation would be partly borne by the generating companies through penalties for delays, which would help to spur timely completion and deter delays.

One of the projects to which the compensation clause may apply is likely to be Nathpha Jhakri Power complex.
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Revenue collections up
New Delhi: The government's revenue collections rose 14.1 per cent during the first seven months of the current financial year, primarily due to a pick-up in indirect taxes. Excise duty collections rose 19.43 per cent.

Total revenues rose to Rs 80,060.09 crore during April-October 1999 (Rs 70,163.04 crore in the corresponding period last year), of which direct taxes accounted for Rs 20,917.40 crore, up 6.9 per cent rise over the Rs 19,561.5 crore collected in the year-ago period.
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FIPB slaps trading restrictions
New Delhi: The Foreign Investment Promotion Board has restrained trading companies with foreign equity from trading in products other than those manufactured by themselves. The restriction extends to products manufactured by associated or joint ventures in the domestic markets. The policy is aimed at encouraging the induction of more investment and expertise into the Indian industry by foreign partners, which would not come in if they were allowed to trade in out-sourced goods.

The specific restrictions have surfaced in the case of Herbalife, a company that manufactures and trades in nutritional food products and personal care products. Herbalife has contested the restrictions, saying it hampers its business.
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Norms for nidhis
New Delhi: The department of company affairs has rationalised norms for ‘nidhi’ companies (mutual benefit societies) so as to protect investor interests and restrict misuse by nidhi managements. Nidhi deposits are not to exceed Rs 20 crore, beyond which they will cease to have the ‘nidhi’ status and will be considered as non-banking finance companies.

Nidhis will not be allowed to change managements without prior approval from the DCA, the RBI, or the shareholders through a special resolution. No nidhi will be allowed to accept deposits for a period of less than six months, nor to extend loans to its directors beyond Rs 15 lakh.

Nidhis will have to restrict their branches within the states in which they are registered, and the number of branches in a state to three, besides the registered headquarters. Those with branches outside the state will be required to close them down within three years, and the three-branch norm within the state will have to be implemented in five years.

The new norms also specify that nidhis maintain a contingency fund, built up by transferring 0.5 per cent of each deposit into the fund, which is to be kept as a deposit with a nationalised bank.
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National internet backbone
Mumbai: The national internet backbone with 8mbps bandwidth across 45 cities is expected to be ready by early 2000. Five cities – Delhi, Bangalore, Calcutta, Jaipur and Madurai will have access to the backbone by November, while 45 other cities will be covered by February next.

Another 536 cities and towns are to be added to the internet backbone in the second phase of implementation.

The national internet backbone will, in addition to providing internet access, support the ISP operations of the department of telecommunications, making its equipment placed at internet access points of the backbone, ISP functional. The bandwidth is upgradable to 155 mbps over the next four years, and will cost Rs 1,200 crore.
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New accounting policy for insurance sector
New Delhi: The Insurance Regulatory and Development Authority has chalked out a draft accounting policy for the insurance sector. The new accounting policy will apply to both general and life insurance companies. The new accounting policy is designed to bring in transparency and make the shareholder its focus rather than the regulator.

To this end, some vital sections are to be taken out of the Insurance Act of 1938, and incorporated into the rules and regulations after the ratification of the new insurance bill. The new policy will include disclosure norms including segmental reporting over industry segments or categories of business activities within segments and geographical markets.
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