Introduction

Economic reforms introduced in 1991 in India brought about fundamental changes in economic policies. The most radical changes were in the form of dismantling industrial controls. Industrial licensing has been abolished except for a small group of hazardous and environmentally sensitive sectors and defense. Industries even the so called MRTP houses are, no longer required to take separate permission for investment and expansion. The list of public sector industries has been reduced. Equity in public enterprises is being divested. Forsdeign direct investment (FDI) policies have been more liberalized and technology imports have been made freer. Quantitative restrictions on imports have been virtually abolished and the quantum of import duties has also been significantly reduced.

The basic idea of such economic reforms is to usher in a more competitive environment, improve efficiency and hence growth by doing away with many government controls and regulations on production, trade and investment. It is hoped that such pattern of industrialization will be not only competitive but also contribute to acceleration in output and employment. In reality, the post-reform period has seen many vicissitudes in terms of overall economic and sect oral growth. To begin with, industrial growth in particular suffered a set back but it revived in the middle of the 1990s only to face a severe and prolonged recession for about seven years, from 1996-97 to 2002-03. During the past 3 years or so, manufacturing output has been buoyant and growing at about 9 to 10 per cent. Industrial investment has picked up. But, one disconcerting aspect of this growth process has been the absence of employment growth pari passu with the growth in industrial output. Actually there has been a fall about 6 lakh between 1992 and 2003 in organized sector manufacturing sector employment.

This has been the consequence of an acute competition that has set in during the liberalization period. The industrial sector has been facing a series of challenges in the face of this competition. One of the obvious measures applied by them has been to reduce manpower as a cost cutting strategy.

This and many other aspects of the private corporate sector’s responsibilities are reflected in its financial performance. Aggregate of financial and non-financial enterprises in the private sector is construed as private corporate sector. In this non-financial enterprises engage in manufacturing /production of goods and services. Public limited companies mainly dominate the non-financial private corporate sector as this forms about 70 per cent of total paid-up capital in the private corporate sector. Further, they contribute about 40 per cent of gross value added of the registered manufacturing private sector. Against this background, while keeping the basic idea of presenting all the massive data published by RBI relating to this sector in one place, the objective is to analyse the performance of the sector in pre- and post-reform periods through a series of financial indicators and to see whether they throw any interesting insight into the responses of the private corporate sector to the liberalization process.

Data and their Background

The Reserve bank of India (RBI) has been regularly publishing studies on the financial performance of the private corporate sector for the past five decades. Early two studies of non-financial companies by the Reserve Bank in 1949 and 1952, comprising 2,500 and 1,000 companies, respectively, were exploratory in nature, aimed at understanding the presentation of corporate statistics and the subtle nuances, if any, in the concepts and definitions adopted by the companies. Based on the experience gained from these studies, a system for the analysis and processing of financial statistics from the annual accounts of companies was evolved and the studies based on the same were taken up on a regular basis from 1954 onwards. Though early studies covered only non-Government non-financial public limited companies, later they were extended to other sub-sectors of the corporate sector.

Change in the Format of the RBI Study

Moreover, even in the non-government non-financial public limited companies, the studies were conducted separately for small companies and medium & large limited companies. However, from 1985 onwards, all non-government non-financial companies were put together into a single study viz., performance of non-government non-financial public limited companies. Earlier, each study carried data for five years in respect of the same sample companies. Now, the RBI covers three years, ie, study year and the earlier two years by selecting and studying the three-year balance sheets of companies in the sample. In this note, the selection of year is done in such a way that the selected year is the largest of the samples in terms of the number of companies included in that particular year for the study, pre-reform period is taken as 1982-83 to 1990-91, ie, 9 years and the post-reform period is from 1991-92 to 2004-05 (latest data available), ie, 15 years.

Selection of Companies

The criterion adopted by the RBI ,for the selection of companies in the studies is the size of their paid-up capital, though the distribution of companies in the population according to the size of paid-up capital is found to be skewed with a few large companies with high PUC accounting for the bulk of the coverage in total PUC , as it is the only characteristic for which information is readily available at the population level.

Study Year

Initially, the RBI selected the study year from July to June till 1965-66. However, considering several factors like distribution of companies, the need to synchronize the corporate statistics with other economic indicators and the availability of population information from the Department of Company Affairs, etc. the study year was changed to April-March from 1966-67 onwards. That is, companies closing their accounts in any month of a year between April and next March are covered as belonging to that year.

A Brief Information About Methodology Adopted By RBI

Whenever a company changes the closing date, its account cover a period exceeding or falling short of the 12-months period. To make the data comparable, all items in the profits and loss account are annualized and adjusted proportionately to cover 12 months’ working. The balance sheet data of such companies are retained as presented in the accounts of the companies. Hence, balance sheet data reported in these cases may refer to varying periods.

In the case of amalgamation/merger of companies, adjustments are required in the data for ensuring comparability which has been done by getting comparable statistics for such companies for back periods and necessary adjustments are in their accounts by RBI; in doing so inter-company transactions, if any, are eliminated, from the amalgamated accounts of the constituent units before they are combined. And hence, in the case of amalgamation/merger of companies, adjustments in accounts are made to the extent the information is available.

The items, closing stock and opening stock, were shown under income and expenditure sides, respectively, in the statements of combined income and expenditure upto the year 1960-61. This practice was later changed to present change in stock ie Increase (+) or Decrease (-) in the value of stock of finished goods and work-in-progress and the net figures were included under Income. Reported non recurring income not related to the business are termed as non-operating surplus/deficit.

Sections 205 and 305 of the Companies Act 1956 deal with the methods and rates which the companies adopt for working out depreciation provisions. The Companies Act 1956 mentions that under each head of fixed assets, original cost, addition to or deletion there from and total depreciation written off or provided for up to the end of the balance sheet year should be given in annual accounts of a company. Section 205 states that no dividend shall be declared or paid by a company for any financial year except out of profits of the company for that year after providing for depreciation. The depreciation provision made by the company should be in accordance with provision of Section 205(2) and Section 350. RBI presents the data on depreciation provision as reported in the accounts of companies.

Concepts and Definitions

Manufacturing Expenses comprises (a) raw materials, components etc. consumed, (b) stores an spares consumed (c) power and fuel and (d) other manufacturing expenses.

Remuneration to Employees or Wage Cost comprises (a) salaries, wages and bonus, (b) provident fund and (c) employees’ welfare expenses.

Gross Saving is measured as sum of retained profits and depreciation provision.

Gross Value Added is the sum of net value added and depreciation provision.

Net Value Added comprises (a) wage cost, (b) managerial remuneration, (c) rent paid net of rent received, (d) interest paid net of interest received, (e) dividends paid net of dividends received, (f) tax provision, and (g) retained profits net of non-operating surplus/deficit.

Net Worth comprises (a) paid-up capital, (b) forfeited shares, and (c) all reserves and surpluses.

Current Assets comprise (a) inventories, (b) loans and advances and debtor balances, (c) book value of quoted investments, (d) cash and bank balances and (e) advance of income tax in excess of tax provision.

Current Liabilities constitute (a) short-term bank borrowings, (b) unsecured loans and other short-term borrowings from companies and others, (c) trade dues and other current liabilities and (d) tax provision in excess of advance of income tax and other current provisions.

Quick Assets comprise (a) sundry debtors, (b) book value of quoted investments and (c) cash and bank balances.

Sales are net of rebates and discounts and excise duties and cess.

II

Performance of Public Limited Companies

(Pre Reform Period (1982-83 to 1990-91)

Pre-reform period was generally characterized by licence raj and high interest cost as the RBI was following a tight money policy. During this period, the presence of various controls on investment and expansion, high tax burden of 9 years, average annual growth rate in the index of industrial production for manufacturing averaged about 7.6 per cent.

The 1980s were a period of high industrial growth , thus piercing through the meagre growth of 4.5 per cent observed in the preceding decade. This was reflected in accelerated growth in sales and gross profits (in nominal terms ) which worked out to 14.5 per cent and 18.0 per cent, respectively.

Obviously, the annual growth rates of sales and profits have fluctuated rather widely. Initially sales growth picked up to 15.5 per cent in 1984-85 to experience a steep fall to 8.8 per cent in 1986-87. Thereafter, the growth rate in sales picked up in the next three years to reach the peak of 22.1 per cent in 1989-90, followed by a slowdown to 15.8 per cent in 1990-91. More or less, a similar trend had been witnessed in the case of the rate of growth in gross profits also (Chart 1).

The 1980s, saw a gradual easing of manufacturing expenses and wage bills in relation to value of production (Chart 2). The share of manufacturing expenses in value of production in the early 1980s has generally accounted for two-thirds, while the wage bill absorbed about 12.6 per cent. But thereafter, both fell through the years. The share of manufacturing expenses in value of production fell from 66.8 per cent in 1982-83, steadily declining to reach 65.4 per cent, in 1990-91 (Chart 2).

Likewise, the share of wage bill in value of production, after touching 13.2 in 1983-84, persistently slided to reach 9.9 per cent in 1990-91. Roughly, the per company wage bill during the period went up from 2.52 crore to Rs. 4.63 crore , thereby registering an average annual rise of 25.7 per cent as against the rise of 32.0 per cent in manufacturing expenses and 30.8 per cent in interest (Table 2).

The companies’ intention to reduce inventory cost was met with some success as can be seen from the inventory cost to sales ratio which went down to 25.0 per cent in 1990-91 from 27.7 per cent in 1982-83. But, a steady increase in short-term bank borrowings to inventories reflected the companies reliance on banks for their working capital requirements during the period.

Profit Margin

The profit margin on sales measured by the ratio of gross profit to sales moved in a narrow range from 8.9 per cent to 11.2 per cent – generally on the uptrend and touched the highest point in 1990-91. But, the corporate sector benefited greatly after the tax rates were slashed in the later half of 1980s. The effective tax rate, ie., tax provision as percentage of profit before tax had reached as high as 50.2 per cent in 1987-88 but there-after it was brought down to 32.4 per cent in 1990-91. Because of heavy taxation, the return on equity (profits after tax as percentage of net-worth), had suffered in the most part of 1980s; the ratio was at 12.1 per cent in 1982-83 and it had deteriorated sharply in the next five years to reach the lowest of 4.3 per cent in 1987-88, but thereafter, with tax rate reductions, the return on equity continuously rose to reach 13.5 per cent by 1990-91(Chart 3).

Interest Cost and Other Allocations

The incidence of interest cost measured in terms of interest payments as percentages of total expenditure (consisting of manufacturing expenses, wage bill and other expenses including depreciation and interest as depicted in Table.2) during the period experienced more or less a steady increase over the year to reach 5.8 per cent in 1990-91 from 4.6 per cent in 1982-83 (Chart 4). The interest burden thus remained high during the 1980s.The interest burden on gross profits, which was 51.6 per cent in 1982-83 leaped to 70.6 per cent by 1987-88 , though there had been some decline to reach 51.6 per cent by 1990-91.

Dividend rate, defined as the ratio of ordinary dividend to ordinary paid-up capital, was the lowest in 1982-83 at 12.0 per cent but it steadily rose, after a downward hiccup in 1983-84, to attain a height of 18.1 per cent by 1990-91. Retention ratio at 62.2 per cent in 1982-83, and after some heavy up and down fluctuation during the intervening period, remained at 62.8 per cent in 1990-91.

Pattern of Liabilities

Total net assets/liabilities of the private corporate sector increased at an average annual rate of 15.5 per cent during the period 1982-83 to 1990-91. Composition of total liabilities is given in Table 7. Borrowing was the major constituent of total liabilities followed by ‘Reserve and Surplus’ and ‘Trade Dues and Current Liabilities’. The share of borrowings recorded an increasing trend during the period. But within borrowing, the share of borrowings from banks recorded a declining trend; thus the increase borrowings took place under long-term borrowings.

The debt to equity ratio rose steadily from 84.5 per cent in 1982-83 to 103.6 per cent in 1989-90; it declined thereafter to 99.0 per cent in 1990-91.

Pattern of Assets

Net fixed assets constituted 39.9 per cent of the total net assets in 1982-83. This share marginally moved up to 41.3 per cent in 1990-91 after reaching a high of 45.8 per cent in 1987-88. (Table 11). This 9-year period also witnessed significant decline in the share of inventory in total assets. Another important component of total assets, the loans and advances and other debtor balances rose from a low of 23.2 per cent in 1982-83 formed about one-fourth of total assets in 1990-91. The share of current assets to total net assets declined from 58.6 per cent in 1982-83 to 52.0 per cent 1987-88, but thereafter picked up to 54.3 per cent by 1990-91. The quick ratio ie quick assets to current liabilities fluctuated in a narrow range of 47.0 to 46.8 per cent during the period. The ability to meet current liabilities or short term liquidity comfort level as indicated by the ratio of current assets to current liabilities was at 1.2 through out the period. The rate of return of investment ( gross profits as percentage of total net assets) registered a steady rise during the period albeit with some fluctuations and it was at 10.7 per cent in 1990-91. The efficiency of assets deployed in business indicated by the ratio of sales to net fixed assets deteriorated from a high of 110.6 per cent in 1982-83 to 95.4 per cent in 1990-91; this, however, reflected faster growth of assets during the 1980s, which helped to reap benefits in the later period.

Sources of Funds

During the period under review, for financing their assets formation the companies relied more and more on external funds rather than on internal generation. The dependence on external funds which was at 62.5 per cent in 1982-83, went up to 71.0 per cent in 1988-89 and thereafter slided to 64.2 per cent in 1990-91 (Table 15) and (Chart 5). Among the external sources, the share of borrowing as a source of funds fell from 40 per cent to 34 per cent during the period under review, this reduction in share being replaced to some extent by sundry creditors; there were also some resources mobilizations through equity.

Uses of Funds

The addition to gross fixed assets per company depicted a steady gain, from Rs. 1.41 crore in 1983-84 to Rs. 4.19 crore by 1990-91. The share of gross fixed assets formation in the use of funds decreased from 61.5 per cent to 50.9 per cent during the pre-reform period under review. On the other hand, gross capital formation to uses of funds recorded an increase from 66.6 per cent in 1983-84 to 72.2 per cent .There was four-fold increase in the share of inventory formation in total uses of funds during the period. The share of loans and advances and other debtor balances in total uses of funds registered a dip from 25 per cent in 1983-84 to 22 per cent in 1990-91.

III

Performance of Public Limited Companies

( Post-Reform Period (1991-92 to 2004-05)

This 14-year period witnessed metamorphic changes in the evolution of the Indian Economy.

With a view to harnessing the latent entrepreneurial talents in the economy, the Government of India usher in an era of free market regime. The licensing system was drastically reformed. The Monopoly and Restrictive Trade Practice (MRTP) Act has been eased thereby allowing companies to invest and to expand freely. Corporate txes were slashed and interest rates were liberalised so that the borrowing cost became cheaper. Liberal trade policy, especially import policy helped importing of capital goods and technology easier. There were drastic reforms in India ’s tariff structure and the system of protection rates.

As a result, the corporate performance has exhibited an allround buoyancy. The average annual growth in sales during the 14-year period from 1991-92 to 2004-05 worked out to 13.4 per cent. The annual growth, after jumping from 19.0 per cent in 1991-92 to 23.7 per cent in 1995-96, has registered a fluctuating trend, during the next six years, but started picking up in the next four years to reach 24.1 per cent by 2004-05 (Table 1). Gross profit also witnessed the same trend during the period. The growth in gross profit, was high at 22.2 per cent in 1991-92 and after a dip in 1992-93, accelerated in the next two years, to touch 32.9 per cent by 1994-95. The mid-1990s saw the beginning of an industrial recession and hence, corporate profits began to slip and registered a negative growth about 2.8 in the next two years. In 1998-99 gross profits increased by 9.0 per cent , but in 1999-2000 gross profit again declined by 0.2 per cent . Finally, we saw a revival and from 2001-02, gross profits have witnessed a steady rise in the next four years to touch 32.5 per cent in 2004-05.

Trends in Cost

The cost structure as measured by the shares of manufacturing expenses and the wage cost in value of production has shown improvement over the years. S in the pre-reform period, the share of manufacturing expenses in value of production has remained within a high range of 63 to 66 per cent throughout the period. The declining trend that began in the pre-reform period in wage cost to production ratio has continued in the post reform period. This ratio has recorded a steady decline from 9.2 present in 1991-92 to 7.4 per cent in 2004-05. During the period, the annual growth rate in value of production has worked out to be 36 per cent, but wage cost per company has registered a lower increase per annum though per company wages as such have registered a sharp five fold increase from Rs.5.59 crore in 1991-92 to Rs. 18.59 crore in 2004-05. In a liberalised environment, companies have to face severe competitions. One way to face the competition is to reduce the sale price in order to increase the total sales. This companies can achieve this only by reducing wage cost on the face of stable manufacturing cost. Another way to achieve this is to increase production by change over to innovative methods of production by using automatic machines, which make employees who work in old methods of production, redundant. Companies, in order to keep their technically qualified employees with them, have to confer on them attractive remuneration which may be the reason for the three fold increase in the per company wage cost even though there has been a reduction in employment. Whatever may be the reason, there is deterioration in the employment growth during the period. Moreover there can be a decrease in the number of employees during the period due to normal attrition, attrition due to voluntary retirement or even retrenchment in the face of no new recruitment which has been the basic tenet in the organized sector employment . This phenomenon is further bolstered by the fact that the actual organized manufacturing sector employment has come down from 18.6 lakh in 1992 dipped drastically to 12.6 lakh in 2003.

That the companies’ effort at reducing the inventory has been successful can be gauged from the fact that the ratio of inventories to sales dipped from a high of 25 per cent in 1991-92 to 14.8 per cent in 2004-05. Also, short-term bank borrowings to Inventories recorded an increase of 53.0 per cent to 71.2 per cent during the period. This also reveals one interesting fact, that the companies are depending more and more on bank finances for their working capital requirements during the post reform period mainly because of low cost fund

Profit Margin

The Gross profit registered a five fold quantum jump from Rs. 12,721 crores in 1991-92 to Rs. 65,301 crores in 2004-05. In spite of this the profit margin on sales measured by gross profit as percentage of sales moved in a narrow range of 9.2 per cent to 14.2 per cent during the period, reaching the highest margin in 1995-96.

Even though the period is characterized by a low tax period, the effective tax rate revealed by tax provision as percentage of profit before tax showed a basic downward movement till 1995-96 to reach 19.6 per cent, there after, the tax rate continuously moved up to reach 36.7 per cent in 2001-02, subsequently, in the next three years the effective tax rate dipped to reach 25.7 per cent.

Return on equity ie the ratio of profit after tax to net worth which reveals the return of the investment made by the corporate investors has increased from 12.0 per cent in 1991-92 to 14.4 per cent in 1995-96 , thereafter , it moved in a very narrow range of 6 to 10 per cent in the next 7 years , then in the next two years the returns was better at 13.2 per cent and 16.8 per cent .

Interest Cost and Other Allocations

In an low interest regime, the interest cost ie the cost of borrowing measured in terms of interest payments as percentage of expenditure (including depreciation and interest) after a marginal increase from 6.3 per cent in 1991-92 to a peak of 6.8 per cent declined substantially to reach 2.8 per cent by 2004-05. Consequently, the interest burden on gross profits (interest paid as percentage of gross profits) from 53.5 per cent in 1991-92 gone up to 63.2 per cent by 2000-01, there after declined to 21.8 per cent by 2004-05, the lowest in the last two decades.

Profit Allocations

The increase in gross profit, low taxes and interest rate all contributed for an increase in the return of investment. This is manifested from the fact that the dividend rate ie the ratio of ordinary dividend to ordinary paid-up-capital rose from 18.5 per cent in 1991-92 to 26.4 per cent in 2004-05. Retention ratio ie profits retained as percentage of profit after tax in 2004-05 is 71.7 per cent.

Pattern of Liabilities

The total net assets/liabilities of the private corporate sector increased at an average annual growth rate of 14.5 per cent during 1991-92 to 2004-05. The composition of total liabilities during the period 1991-92 to 2004-05 is given in Table 7. It reveals that the Share of Borrowing by companies though still a major contributor at 33.4 per cent their dependency to this kind of financing their need has come down from a high of 43.3 per cent in 1991-92 to 33.4 per cent in 2004-05 , replaced mainly by reserves and surplus whose share went up from 22.7 per cent in 1991-92 to 30.7 per cent in 2004-05 and increasing provisions from 1.7 per cent to 6.4 per cent in 2004-05 there by bolstering the fact that corporate sector in 2004-05 is in vibrant growth path. This is also can be seen from that the debt to equity ratio from a high of 99.5 per cent in 1991-92 came down drastically to 52.7 per cent in 2004-05.

Among borrowing, bank borrowing with a share of 51.7 per cent in 2004-05 as against a share of 32.1 per cent in 1991-92 reveals the fact that companies prefer low cost bank fund to other modes of borrowing.

Pattern of Assets

Net fixed assets constituted 42.2 per cent in 1991-92. This share moved up to 49.0 per cent in 1997-98 and subsequently declined to 41.4 per cent in 2004-05 .The period witnessed a significant decline in the share of inventory. It, recorded a sharp fall, from a high of 22.4 per cent in 1991-92 to 12.2 per cent in 1998-99 after that it marginally picked up to 13.4 per cent in 2004-05 albeit some oscillating movement in the intervening years.

Another important component of the assets ‘ loans and advances and other debtor balances ‘ accounted for about one fourth of total assets during the period under review. Share of this component fluctuated in a narrow range during the period under review, although it decline from 26.2 per cent to 23.7 per cent .

The share of current assets in total net assets declined steadily from 53.8 per cent in 1991-92 to 41.8 per cent in 1999-00, then , it moved in a narrow range of 42 per cent to 45 per cent (Table 21). The quick ratio , per cent of quick assets to current liabilities also moved in a narrow range of 50 to 52 per cent during the period. The ability to meet its current liabilities ie short term liquidity comfort level, measured by the ratio of current assets to current liabilities was at 1.4 per cent in 1991-92 moved to 1.5 per cent by 1994-95 , thereafter dipped to a some what comfortable level of 1.1 per cent in 2004-05.

The rate of return on investment over the period though experienced a wide fluctuations during the period under review settled at 10.8 per cent in 2004-05 , the same as in 1991-92.

The efficiency at which assets deployed in business, measured in terms of sales as percentage of total net assets stood also experienced wide fluctuations between 1991-92 and 2004-05, it was 90.5 per cent in 2004-05.

Sources of Funds

The period 1991-92 to 2004-05 witnessed a metamorphic change in how the companies finance their assets formation. The data revealed that the companies depend more and more on external sources for financing their asset formation. External sources of funds constituted more than 70 per cent in the early nineties, which declined to around 60 per cent in 1999-00, thereafter there was a sudden dip in the share of external funds to 30 per cent by 2002-03 then it picked up to 44.5 per cent in 2004-05. Among the external sources, paid-up-capital contributed 23.6 per cent , borrowing constitutes 34.2 per cent and sundry creditors 32.1 per cent in 2004-05. Internal sources were financed by provisions to the extent of 51 per cent and reserves and surplus’s share was 48 per cent in 2004-05.

IV

An Assessment

The above survey of pre-reform (1982-83 to 1990-91) and post-reform period (1991-92 to 2004-05) performance of the corporate sector reveals some interesting insight in to the way the private sector responding to the challenges of reforms and competition. in the performance of public limited companies.

First, the growth in sales in the post-reform period may appear similar to that in the pre-reform period, but because of the lower level of inflation; the real growth certainly been much higher in the later period. Also, there has been a significant change in the structure of industries experiencing better growth. Secondly, the declining trend in wage cost had began in the 1980s when a semblance of economic reforms had already been tasted by the corporate sector. Again, there has occurred a significant qualitative change in the composition of wage labour, with a sharp increase in the size of superior technical and managerial staff.. Third, companies’ have began to save on inventories, on interest cost and on general intermediate costs. Fourth, companies have begun to improve their technological levels in the production and investment process. Fifth, the corporate sector has been engaged in the post-reform period in the process of financial engineering , replacing high cost funds with low cost funds. Finally, there has been considerable attempt by the companies to have foreign exposures through larger exports; higher imports and also increasing foreign borrowings.

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*This note is prepared by R. Krishnaswamy.

The author wishes to offer his sincere thanks to Seema Shetty for rendering her expertise in preparing the charts.

Detailed Statistics on Public Limited Company Finances

Table 1: Finances of Non-Government Non-Financial Public Limited Companies : Income and Value of Production

Table 2: Finances of Non-Government Non-Financial Public Limited Companies : Expenditure

Table 3: Finances of Non-Government Non-Financial Public Limited Companies: Manufacturing Expenses - Components

Table 4: Finances of Non-Government Non-Financial Public Limited Companies: Remuneration to Employees (Wage Cost) - Components

Table 5: Finances of Non-Government Non-Financial Public Limited Companies : Other Expenditure Details

Table 6: Finances of Non-Government Non-Financial Public Limited Companies : Appropriation of Profits

Table 7: Finances of Non-Government Non-Financial Public Limited Companies :Balance Sheet - Liabilities

Table 8: Finances of Non-Government Non-Financial Public Limited Companies : Balance Sheet : Liabilities -Net Worth

Table 9: Finances of Non-Govt. Non-Fin. Public Limited Cos. : Balance Sheet : Liabilities - Borrowings

Table 10: Finances of Non-Government Non-Financial Public Limited Companies : Balance Sheet : Liabilities - Borrowings -

Trade Dues and Other Current Liabilities and Provisions

Table 11: Finances of Non-Government Non-Financial Public Limited Companies : Balance Sheet : Assets

Table 12: Finances of Non-Government Non-Financial Public Limited Companies : Balance Sheet

Table 13: Finances of Non-Government Non-Financial Public Limited Companies : Balance Sheet : Assets

Table 14: Finances of Non-Government Non-Financial Public Limited Companies : Balance Sheet : Assets

Table 15: Finances of Non-Government Non-Financial Public Limited Companies : Sources of Funds

Table 16: Finances of Non-Government Non-Financial Public Limited Co. : Uses of Funds

Table 17: Finances of Non-Government Non-Financial Public Limited Co. : Earnings and Expenditure in Foreign Currenc ies

Table 18: Finances of Non-Government Non-Financial Public Limited Companies : Gross Savings and Quick Assets

Table 19: Finances of Non-Government Non-Financial Public Limited Co. : Gross and Net Value Added (GVA)*

Table 20: Finances of Non-Government Non-Financial Public Limited Co. : Selected Indicators

Table 21: Finances of Non-Govt. Non-Financial Public Ltd. Co. : Selected Financial Ratios (in per cent)

Out of the total wheat contracted for import by the centre, 12.11 lakh tonnes have arrived in the country by September 18, 2006, including initial 92,000 tonnes received during April-May and another 637,792 tonnes delivered to the Food Corporation of India (FCI). In addition, a total quantity of 3,06,225 tonnes have currently being discharged from six vessels at the Chennai, Tuticorin, Visakhapatnam , Mundra and Kandla ports, of which 51,044 tonnes have already been unloaded. Besides, four other vessels carrying 1,75,084 tonnes have arrived and are under fumigation/quality-check/berthing at various ports. That takes the aggregate wheat arrivals till date to 12,11,101 tonnes.

As per the Import of Wheat (Stock Declaration) Order, 2006 the centre has made it mandatory for private traders to disclose particulars of imports within 7 days. The order, which has come into effect from September 19, 2006, has not been applied to wheat imported on the government account. As per the new order, every importer of wheat would be required to submit a return by the 10^th of every month to the central and state government concerned about the stock of wheat imported, released and retained by him. The order has also asked for submission of returns to the central government by deputy commissioners of customs at every port on receipt of any cargo containing wheat imported to India .

The Supreme Court has directed the centre not to go ahead with its proposed plan for approving field trials of genetically modified (GM) crops in the country. This verdict has given some relief to a group of independent scientists, NGOs and consumer organisations that have been opposing the proposed field trials of the country’s first transgenic food crop, Bt brinjal. The new Bt cotton hybrid approved for commercial cultivation in the current kharif season has escaped the purview of this order, as the court’s interim verdict is for restraining further approval of GM crops.

The United States has displayed its willingness to offer bigger cuts in farm subsidies in an attempt to restart negotiations on farm subsidies in the World Trade Organisation’s Doha round of trade talks, provided the European Union matches it by increasing its offer on tariff cuts. The Doha round of trade talks was suspended after the major trading powers failed to agree on agricultural trade, with the European Union and the United States blaming each other for refusing to make enough concessions.

As per the Solvents Extractor's Association of India (SEA), the import of edible oil during the first 10 months of the oil year (November – October) 2005-06 has declined to 34.2 lakh tonnes, from 41.7 lakh tonnes recorded a year ago. This has been attributed to the high international prices, sluggish domestic offtake and large rapeseed/mustard stock with the National Agricultural Co-operative Marketing Federation (Nafed).

Mother Dairy Foods Processing Ltd, a group company of the National Dairy Development Board and MCX-Financial Technology (FTIL) combine has entered into a 51:49 joint venture to set up Safal National Exchange of India (SNX), the country's first spot exchange for trading on perishable agri-commodities including horticulture, floriculture, dairy products and other allied commodities. This would make available on-line trading access to farmers, milk producers’ organisations and traders across the country. While the NDDB's fruit and vegetable project would provide expertise in post-harvest handling of perishable commodities, FTIL and MCX would provide the core technology along with the domain expertise and know-how to set up the electronic trading platform.

The department of fertilisers (DoF) has submitted a new urea pricing scheme to the Committee of Secretaries (CoS). Major proposals of the scheme include

Provision of single producer price for manufacturers on group basis, and reduction of retention price between Rs 50 to 75 per tonne.

Industry

The Planning Commission has proposed changes in the current Industrial Disputes Act and the Contract labour (Regulation and Abolition) Act which will enable private industrial units and other companies to ‘hire & fire’ or close down their units without government approval. Making a strong case for labour flexibility, the Planning Commission has suggested specific criteria under which any industrial unit could be closed down. A member has commented that retrenchment of employees or decision of closing down industrial units should be automatic under certain criteria and that the Planning Commission is strongly in favour of labour flexibility. But the Commission has clarified that the move is not aimed at enabling the corporate sector to get rid of its work force but to enable them to get more labour. The existing fiscal policies provide incentives to capital-intensive industries, rather than labour intensive ones. The Approach Paper to the 11^th Five Year Plan cites food processing industry, textiles, small and medium enterprises, tourism and construction industries as labour-intensive manufacturing sector.

Infrastructure

Faced with an infrastructure funding deficit of around $250 billion, the government is planning to seek foreign investment from about 350 US-based fund management companies that hold a total of $ 7.5 trillion in reserves. Out of the $ 250 billion deficit, targeted to be bridged by 2012, the power sector needs the maximum with $ 140 billion, followed by roads with $ 25-30 billion, petroleum and natural gas with $ 25 billion, telecom with $ 22 billion, $ 15-17 billion for civil aviation and $ 8-12 billion for ports. According to the World Bank, India needs huge investments in infrastructure to be able to stand on the same footing as China . To reduce the infrastructure deficit, the World Bank had recommended that India invest 12.5 per cent of GDP per annum till 2015 in the core sectors which is about four times of India ’s present investment in infrastructure. China , reportedly, spent 10.6 per cent of its GDP in infrastructure in 2003. The Planning Commission’s approach paper to the 11th Plan Five Year Plan also moots an increase in investments in infrastructure from 4.6 per cent of GDP to 7-8 per cent. A recent CII study had said the country needed $ 331 billion for infrastructure in the next five years.

The Arunachal Pradesh government has signed MoUs with NTPC Ltd, National Hydroelectric Power Corporation (NHPC) and North Eastern Power Corporation (NEEPCO) for setting up 9 hydroelectric projects in the state. NTPC would execute two projects with a total capacity of 4,500 MW, while NHPC would set up five plants with a capacity of 8,100 MW and NEEPCO would set up two projects with a total installed capacity of 1,230 MW. These projects entail an investment of Rs 75,000 crore while an additional Rs 25,000 crore would be required for evacuating electricity from them to other parts of the country. NTPC would take up the 4,000-MW Etalin and 500-MW Attunli projects, while NEEPCO would develop the 1,120-MW Kameng-I and 110-MW Pare projects. NHPC would execute the 750-MW each Tawang-I and Tawang-II projects, 1,600-MW Middle Subansiri and 2,000-MW Upper Subansiri projects. It would also develop the 3,000-MW Dibang project in a joint venture, where the state government can have up to 26 per cent equity. While Arunachal Pradesh would be entitled to 12 per cent free power from each of these projects, additionally, an amount of one paise per unit of electricity generated would be contributed by each project to a Local Area Development Trust to be used to take up developmental activities for people of the affected area.

The Orissa state government has decided to sign a memorandum of understanding with various private companies, including Reliance Energy Ltd, for setting up 11 thermal power plants in the state. The 11 power projects would involve an investment of over Rs 63,000 crore to produce 15,920 MW of power. Most of these projects would come up in the districts of Jharsuguda and Angul. Apart from REL, the other companies that will sign agreements with the state government include CESC, Tata Power Ltd, Sterlite Energy Pvt Ltd, Essar Power, Visa Power, Jindal Photofilms and Lanco Group. According to government officials, the 11 projects would generate direct employment for 15,000 persons and indirect employment for 30,000 and the state is likely to accrue Rs 2,400 crore revenue from these projects. The state government has specified that 25 per cent of the power produced at these plants would be reserved for Orissa and a fee of 6 paise per unit would be levied on the power sent to other states. REL plans to set up a mega power plant to produce 12,000 MW of power; the company will however sign an MoU for a 4,000-MW plant in the first phase.

NTPC Ltd has plans to triple its power generation capacity to 75,000 MW by 2017 while intensifying its focus on newly diversified areas including hydroelectric projects, coal mining and nuclear energy. The company plans to add about 21,941 MW generation capacity during the Eleventh Plan period (2007-12) at an estimated expenditure of Rs 1,60,000 crore. NTPC would have an installed capacity of about 51,000 MW by 2012 and over 75,000 MW at the end of Twelfth Plan from a generation capacity of 26,194 MW at present. NTPC is currently working on plants with a total capacity of more than 11,000 MW. The company has also taken up three integrated coal mining and power projects with a capacity of 10,400 MW. NTPC plans to have an increased share of hydro power in its generation mix with a total of 9,000 MW of hydro capacity to be developed by 2017. The company will start coal production from one of the eight mines allocated to it by December 2007 and it is also looking to acquire coalmines abroad as part of efforts to ensure fuel security. The company is buying natural gas from the spot markets as a short-term measure to run its gas-fired plants and for the long term, the firm is exploring opportunities for participation in the gas value chain including exploration and production.

Crude oil production in August 2006 has risen by about 12 per cent as against a fall of 5.3 per cent in August last year due to a fire in July 2005 at one of the platforms at the field. Oil & Natural Gas Corporation and its competitors have produced 2.69 million tonnes of crude, up from the 2.41 mt produced in the the corresponding period last year. According to a data released by the petroleum ministry, production from the Mumbai High fields, operated by ONGC, has increased by 28.8 per cent to 1.39 million tonnes. However, in the same month natural gas output has fallen by 25 per cent to 1.95 billion cubic meters. The reasons cited for the dip in natural gas production during the month include less offtake of gas by consumers and ceasure of four wells, as well as no offtake by ONGC's Hazira plant due to floods. With a rise in demand, oil refiners such as Indian Oil Corporation and Reliance Industries Ltd have processed 12.2 per cent more crude oil in August 2006, 12.11 mt as compared to 10.79 mt during the corresponding month last year. The refinery runs have been 4.7 per cent above the government's target of 11.56 mt and the refinery utilisation rate has stood at 107.6 per cent of capacity, up from 99.8 per cent in the same month last year. Output at Indian Oil Corporation has risen by 12 per cent in August to 3.53 mt compared with last year as production due to a rise in production at its plants at Barauni and Koyali. Hindustan Petroleum Corporation has processed 1.38 mt of oil; 33 per cent higher than the previous year as output at its refinery in Visakhapatnam having risen by 78 per cent to 7,97,000 tonnes. Bharat Petroleum Corporation has processed 9,89,000 tonnes of crude oil in the month under review, 45 per cent more than last year while production at Reliance Industries Ltd has increased by 7 per cent in August to 3.16 mt.

The month of August 2006 has seen a decline in sales of oil products in annual terms since consumption has suffered due to heavy rains and floods in large parts of the country. According to data released by the petroleum ministry, oil product sales have dipped by 3.5 per cent during the month under review at 9.05 million tonnes (mt) from 9.38 mt in the corresponding month last year. According to the ministry, sales have also partly been down due to some stocking up of supplies last year. Diesel sales have dropped by 1.2 per cent to 3.13 mt from 3.17 mt in the same month last year, petrol sales have seen a marginal increase by 0.2 per cent and naphtha sales have risen by 14.3 per cent on higher imports by petrochemical units. The ministry expects the demand for fuel products to rise in September as weather conditions have improved. Additionally, in August, the oil products imports have gone up by 14.9 per cent to 1.44 mt due to higher imports of naphtha and kerosene. The government owned refiners have purchased 129,400 tonnes of kerosene, an increase of 143.3 per cent over 53,200 tonnes during the same period last year. Simultaneously, exports have witnessed an increase of 61.3 per cent to 2.90 mt with growth in India 's refining capacity far exceeding the demand.

Road sector projects are proving to be a speed-breaker along the infrastructure highway with the sector being the poorest performer among all infrastructure sectors during April-June 2006; road sector growth has decelerated by a striking 37 per cent during the first quarter of this fiscal year as compared to a growth of 9.4 per cent in the corresponding quarter of the previous fiscal year. According to official data, during April-June 2006, just 986 km of national highways have been upgraded by the National Highway Organisation (NHO), the Border Road Development Board (BRDB) and the National Highway Authority of India (NHAI), 13.8 per cent lower than the target of 1,143 km. The NHAI has been the largest defaulter, falling short of its construction target by 55.8 per cent, it has built merely 152 kms as against the target of 344 kms. NHAI officials have cited problems in land acquisitions and forest and environmental clearance as bottlenecks.

A large volume of cement traffic has got diverted to rail from road in the southern parts of the country following the introduction of various wagon incentive schemes in the last two years by Indian Railways, according to Southern Railway (SR) sources. The SR has increased its cement handling by nearly 45 per cent last fiscal year and the trend has continued into this year. During 2003-04, the zonal railway handled 1.87 million tonnes of cement which increased to 1.89 million tonnes in 2004-05 and further to 2.719 million tonnes in 2005-06. Between April to August this year, SR has handled 1.24 million tonnes of cement, a 45-per-cent increase over the corresponding period last year. The increase has come about despite no new cement manufacturing units being added in the south; the major cement manufacturers in the south are India Cements and Madras Cements. The increase in cement handling has been possible due to availability of wagons under piece meal scheme wherein manufacturers can take a minimum of 10 wagons; earlier, the manufacturers could only avail themselves of a full rake of 40 wagons with a full capacity of 2,400 tonnes.

Inflation

The annual point-to-point inflation rate based on wholesale price index (WPI) has gone down to 4.61 per cent for the week ended September 9, 2006 from 4.78 per cent during the previous week. The inflation rate was lower at 4.11 per cent in the corresponding week last year.

The WPI in the week under review has gone up by 0.3 per cent to 206.6 from the previous weeks’ level of 206 (Base: 1993-94=100). The index of ‘primary articles’ group (weight 22.02 per cent) has increased considerably by 1.6 per cent to 212.0 from its previous week’s level of 208.6, mainly due to an increase in the price index of ‘food articles’ by 2.4 per cent to 215.5 from 210.4. The index of ‘food articles’ has gone up mainly due to the higher prices of fruits and vegetables, moong, arhar, eggs, condiments and spices, moong, gram, jowar and milk. The index of ‘fuel, power, light and lubricants’ group (weight 14.23 per cent) has remained unchanged at its previous week’s level of 326.6. The index of ‘manufactured products’ group constituting the maximum of 63.7 per cent of total weight, has declined a tad by 0.1 per cent to 178.0 from it’s previous week’s level of 178.2, mainly due to the lower prices of ‘chemical and chemical products’, ‘non-metallic mineral products’ and ‘machinery and machinery tools’.

The latest final index of WPI for the week ended July 15, 2006 has been revised upwards; as a result both, the absolute index and the implied inflation rate stood at 203.9 and 4.62 per cent as against their provisional levels of 203.7 and 4.52 per cent, respectively.

Public Finance

The revenue collected through custom duties has seen an increase of 30.4 per cent during August 2006 to Rs 7,248 crore, while excise revenue has displayed a growth of mere 0.4 per cent to Rs 9,032 crore. Despite the cut in peak customs duty to 12.5 per cent in budget 2006-07, the custom revenue has seen an upward movement. During April-August 2006-07, customs collections have stood at Rs 34,141 crore, up by 34.1 per cent over Rs 25,446 crore collected during the corresponding period of the previous fiscal year. Excise revenue, on the other hand, has seen a modest increase of 6.2 per cent during the period under consideration to Rs 41,836 crore compared with Rs 39,380 crore a year ago.

Service tax collection has been growing at an accelerated pace because of the combined effect of an expansion of the tax base and increase in rate to 12 per cent in the Budget 2006-07. Service tax proceeds till July 2006 have stood at Rs 9,835 crore against Rs 5,924 crore during the corresponding period of the previous year, higher by 66 per cent. For the month of July, the collection has touched Rs 2,589 crore compared with Rs 1,534 crore a year ago.

Advance tax collections during September 2006 have grown by a robust 32.5 per cent to Rs 21,593 crore, from Rs 16,287 crore during the corresponding month of the previous year. This buoyancy has mainly been attributed to the healthy growth in corporate and income tax collection during the period under consideration. Companies and individuals have to pay advance tax by September 15. Tax collected during September 1 to September 15 is usually counted towards advance tax. According to revenue department data, advance corporate tax collection has displayed a growth of 31.4 per cent totalling to Rs 17,273 crore during the period. Similarly, advance income tax collected during September 2006 has stood at Rs 4,320 crore, higher by 37 per cent compared with Rs 3,145 crore during September 2005. Advance corporate tax collection for the year till September has risen to Rs 30,898 crore, an increase of over 30 per cent, from Rs 23,708 crore in the same period last year. Total advance income tax collection has stood at Rs 6,237 crore, an increase of 28 per cent from Rs 4,884 crore in the same period last year.

Banking

The number of Indian students travelling abroad for higher studies has almost doubled over the last two years. Correspondingly, banking sector have witnessed a similar trend in the quantum of educational loans and is expecting the demand to rise by over 25 per cent in the current financial year. Banks exposure to education loans is increasing due to negligible defaults in the last 3 years; additionally, banks also see students as potential customers to be tapped for future business. As per the data compiled by Indian Banks Association (IBA), education loans outstanding of public sector banks were Rs 10,004 crore as on March 31, 2006 as against Rs 6,713 crore as of March 31, 2005 - a 49 per cent growth. The average size of about 70 per cent of the loans was up to Rs 4 lakh without security. State Bank of India tops the list amongst public sector banks with its outstandings as on March 31, 2006 being at Rs 2,356 crore and is expecting a growth of Rs 800 crore in 2006-07.

Insurance

Total premium of the general insurance industry has increased by 16.5 per cent in 2005-06 to Rs 20,421 crore from Rs 17,531 crore a year earlier. Of general insurers’ total premium, motor, health and fire account for close to 80 per cent. Their premium income from fire risk increased by 13.6 per cent y-o-y to Rs 3,753 crore and the motor insurance premium jumped by 16 per cent y-o-y to Rs 8,702 crore in 2005-06. The health premium income rose by 35 per cent over the previous year to Rs 2,258 crore in 2005-06. The premium income from the engineering portfolio in 2005-06 was Rs 981 crore, up 14 per cent from a year earlier. Detariffing of marine hull portfolio last year had seen a fall in premium rates of over 50 per cent consequently prices have fallen further by 15-25 per cent this year, according to provisional and un-audited portfolio performance of the 12 insurance firms.

Financial Markets

Between September 26 and 29, Gayatri Projects Limited is to tap the market through issue of shares in a price band of Rs.275 to 295 per equity shares.

According to Prime Data base, issues amounting to Rs 3,110 crore have already received Sebi approval, while Rs 7,175 crore worth of issues are awaiting SEBI approval as on September 10. But these are small numbers compared with the Rs1.6 lakh crore of funds that various companies have planned to raise from the market at an appropriate time. Investment bankers indicate that we could see heightened activity in the primary market, if the markets continue to remain conducive.

The BSE sensex has gained 227.41 points, to finish on 12,236.78. The S&P CNX Nifty has risen 65 points, to close at 3,544. The BSE Sensex has rallied on Monday, gaining 62 points on the back of strong FII inflows, and steady-to-firm Asian markets. On Tuesday, the sensex has fallen 101 points on profit-booking and on concerns over possible sales by hedge funds after US hedge fund Amaranth Advisors said on Monday (18 September) it may suffer billions of dollars in natural gas losses following a steep fall in price recently. Amaranth’s woes has fuelled concerns that many other hedge funds could also have been hurt by the steep fall in crude oil and natural gas price, and has bred concerns that such funds may book profits in Indian equities, to make up for losses suffered in their energy related investments globally. On Wednesday, the BSE sensex jumped 139 points as crude oil prices fell below $61 a barrel. On Thursday, the benchmark index rose 165 points, as investors have invested in equities ahead of the second quarter results and after the US Federal Reserve has kept interest rates unchanged. Buoyant direct tax collections in the current fiscal have also lifted the market sentiments, as it indicated a rise in corporate profits. The centre’s gross direct tax collections registered a 33.5 per cent growth in April-September 2006, to Rs 87,831 crore. However, on Friday, the sensex has lost 37.49 points, taking cue from weak global markets.

Around 50,000 demat accounts were closed last month as the October 1 deadline for submitting permanent account numbers (PAN) for holding such accounts nears. National Securities Depository Ltd (NSDL) has seen the closure of over 25,000 accounts since mid-August, the first time there has been a net decline in the number of account-holders in a month. Another 20,000-25,000 accounts are estimated to have closed at Central Depository Services Ltd (CDSL) this month.

The Investors Grievance Forum (IGF) will approach the RBI, Sebi and finance ministry to demand an explanation as to why IDBI was picked to acquire UWB. It will also ask why trading on prohibited even after the band was put under moratorium. The Bombay high court on Tuesday directed the RBI to file an affidavit in reply to a writ petition filed by some depositors of United Western Bank (UWB) challenging the apex bank’s orders of putting the Satara-based band under moratorium. The RBI has been given 7 days to file their affidavit and the court will hold the hearing in this case on September 27.

The continuous slide in the international oil prices and the US Fed deciding against hiking interest rates came as a shot in the arm for the Indian bourses on Thursday, which moved further northwards. Incidentally, in the last one month, when crude prices have fallen by nearly $11 per barrel, the benchmark BSE sensex has been the best performer in the world, gaining more than 6 per cent, followed by Taiwan's TSEC, which has moved up by 5.90 per cent in the last one month and by NSE Nifty with an impressive gain of 5.56 per cent. Interestingly, in the list of the top ten best performers, there have not been many from the emerging markets. Apart from the Indian indices, only Hang Seng of Hong Kong has been at the tenth slot. The US and European indices have performed well in the last one month.

Derivatives

During the current month, F&O turnover has increased more than 50 per cent from Rs 16,900 crore odd at the beginning of the month to Rs 26,300 crore as of September 19. The F&O contracts have still not entered in the last week of the triple-witching day (the date on which near month futures and options series expires). Usually turnover in the F&O segment increases by another 65-80 per cent or even more, a few days prior to the “triple-witching day”, as market players start rolling over positions to next month contracts and squaring off their current month positions.

Government Securities Market

At the weekly Treasury Bill auction this tightness was evident from the hardening yields. The cut off yield on the 91-day T-bill was 6.52 per cent, though the weighted average price was 6.48 per cent last week. This was up from the previous week's 6.44 per cent. Similarly the 182-day T-Bill also remained high at 6.78 per cent.

Bonds market has remained firm during the week supported by weak oil prices and stepped-up purchases by insurance companies. Traders have also said that with the oil outlook remaining bearish, some of refiners and marketing companies having deferred their drawdowns on their credit lines. But credit offtake remained buoyant, resulting in liquidity remaining tight. Advance tax payments by corporates also ensured a slight tightness in liquidity. This has been reflected at the week-end liquidity adjustment facility auctions, the RBI has mopped up only Rs 14,555 crore through the reverse repurchase operations.

However, despite the hardening at the short end, the 10 year yield to maturity has softened to 7.66 per cent on a weighted average basis last week, down from the previous week's 7.75 per cent. The softening has been partly on account of the US Federal Reserve board pre-empting market expectations of a hike in the Fed Funds rate. Some of the foreign banks in the country had borrowed in call and used the resources to purchase foreign currency hoping to take advantage of the rise in Fed Funds rate.

Bond Market

The Reserve Bank of India (RBI) has asked the securitisation companies or reconstruction companies that they shall invest in security receipts an amount not less than 5 per cent issued under each scheme with immediate effect. In the case of companies which have already issued the security receipts, such companies shall achieve the minimum subscription limit in security receipts under each scheme, within a period of six months from the date of notification issued in this regard.

National Housing Bank has raised Rs 500 crore (greenshoe option of Rs 300 crore) through two bonds with one of them being zero coupon bond and another one offering 8.10 per cent having same maturity period of two years.

Foreign Exchange Market

The 6-month forward premia has fallen to 1.21 per cent by the end of the week as against 1.36 per cent at the beginning of the week. The rupee–dollar rate has appreciated to Rs.45.94 on September 22, 2006 from Rs. 46.12 at the start of the week. The Indian rupee rose to its highest level in three months on Thursday at Rs 45.88, driven by a combination of soft oil prices, robust capital inflows and prospects of higher local rates.

In the address on ‘Foreign Exchange Reserves: New Realities and Options’, Dr. Y. V. Reddy said that in case of forex reserve management the importance of innovative ideas for utilising the reserves available with a country. But mentioned that apart from the exchange rate regime, several factors influence the comfort level with regard to reserves, there have been other factors such as vulnerability to the real sector shocks, strength of the fiscal and financial sectors, current account balance, the changing composition of capital flows, a medium-term view of growth prospects encompassing business cycles.

Commodities Futures derivatives

Mother Dairy Foods Processing, a group company of National Dairy Development Board (NDDB), has signed a joint venture with Financial Technologies ( India ) and Multi Commodity Exhange (MCX) on Tuesday to establish Safal National Exchange (SNX). The exchange will only have spot trades and will not have a derivatives segment, said Joseph Messey, deputy managing director, MCX. Mother Dairy Foods Processing Ltd will hold a stake of 51 per cent in SNX and the rest will be jointly held by MCX and Financial Technologies. SNX, the first nation-wide spot exchange for perishable commodities in India will provide infrastructure for electronic trading in horticulture, floriculture, dairy and allied products. It will also provide on-line price dissemination and warehouse-based delivery system. The exchange will enable farmers, milk producers organisations and traders across the country to have on-line trading. “SNX will have significant time-to-market advantage as NDDB has approvals from a number of states to set up horticulture markets,” said Jignesh Shah, chairman and managing director, Financial Technologies.

Metals retreated from the Monday’s high on strengthening the US dollar and falling crude oil prices. Crude oil was up on Monday night after production disruption at BP’s Thunder Horse facility and on concerns of possible sanctions that might be imposed against Iran on its failure to co-operate with UN team for inspecting the nuclear plant facilities. The reports of possibility of the Delhi government imposing stock restrictions to curb hoarding initiated a late session crash in pulses. Lack of fresh leads from domestic and international markets, profit booking and the talk of doubtful quality pepper lying in one of the exchange warehouses made speculators to shy away from buying pepper.

Corporate Sector

Bharat Earth Movers Limited has signed a memorandum of understanding (MoU) with Compagnie Comercio E Construcoes (CCC) in Brazil for establishing a joint venture company for manufacturing and supplying rail wagon, mining and construction equipments and spares.

Wockhardt Limited has signed a MoU with Maharashtra Industrial Development Corporation (MIDC) to establish a special economic zone (SEZ) in Aurangabad . The SEZ will be spread over 107 hectares of land leased by MIDC at Shendra. The Wockhardt group will establish a pharmaceutical and biopharmaceutical manufacturing and research facility at the SEZ and will provide employment to around 2,000 people.

Bharat Heavy Electrical Limited has secured Rs 1,224 crore contract for setting up a 500-mega watt (MW) thermal power plant in Uttar Pradesh. The order has been placed by Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited for two units of 250 MW capacity at the expansion project of Harduaganj thermal power station.

Suzlon Energy Limited, the Pune-based wind turbine manufacturer, has received order worth Rs 1,190 crore from US based John Deere Wind Energy to supply wind turbine equipment.

Solkar Solar Industry Limited has entered into a 50:50 joint venture with Singapore-based Eco Solar Technologies Private Limited. The venture will involve technology transfer from Solkar to set up a 2 MW per annum solar panel manufacturing unit in Singapore at a cost of about Rs 20.3 crore.

ONGC Videsh Limited and a subsidiary of China’s Sonopec Group have jointly acquired Omimex de Colombia from the Texas based Omimex Resources for an undisclosed amount.

AppLabs Technologies, a global software testing and development services company, has acquired the UK based IS Integration consultancy for Rs 170 crore.

Labour

Several problems of implementation are being reported with regard to India ’s ambitious National Rural Employment Guarantee Scheme (NREGS) guaranteeing 100 days of employment a year to every rural household in 200 districts. After a review of the implementation process in various states, the Ministry of Rural Development has found that the pace of utilisation of funds by 13 states has been below average. These states are Assam , Bihar, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Mizoram, Nagaland, Tamil Nadu, Uttaranchal, Uttar Pradesh and West Bengal . Out of the total funds availability of Rs 6,048.70 crore, all states together have spent only 31 per cent. As per the review, as of now, 3.41 crore families have applied for registration and 2.66 crore job cards have been issued. Out of these, more than one crore families have sought employ

External Sector

In order to ensure that only serious players participate for establishing special economic zones, the government has prescribed criteria of a minimum investment of Rs 250 crore and net worth of Rs 50 crore in industry specific zones. For multi-product zones the minimum investment is Rs 1000 crore and net worth requirement is Rs 250 crore. For information technology zones the minimum investment has been set at Rs 100 crore. Proposals not meeting these criteria would be still considered by boars only if there was sufficient justification. These new norms will be applicable to all 225 applications for developing zones pending for approval.

Following the doubling of gold prices from $300 an ounce in January 2006 to around $600 an ounce now, the government has relaxed value-addition norms for jewellery to boost exports as exporters were finding it difficult to achieve the previous value addition levels after an increase in international gold prices.

India

’s merchandise exports have risen by 34.5 per cent to touch $35.76 billion during April-August 2006 as compared to the same period previous year. Imports during the same period have been at $68.29 billion, 28.4 per cent higher than a year ago.

The government is likely to restrict Foreign Direct Investment in stock exchange to 49 per cent, however, its final decision will depend upon inputs from SEBI and the Reserve Bank.

Developing nations led by India and Brazil have failed in their campaign to stall the move for enhanced powers to China , South Korea , Turkey and Mexico within the IMF.

The government has approved 26 FDI proposals worth $215 million, including those of BG group and UK ’s Cairn Energy

*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project.