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India News Network Digest    Fri, 18 Mar 94      Volume 2 : Issue 208

Today's News Topics:

   India: The spirit of the highlands is abroad
   India opposed to any change in U.S. Law on military sales to Pakistan
   Mauritius beckons investment
   Talk: "India and the United States: Issues and Opportunities"
   Australia's Command/India : Negotiating Bank finance
   Talk of Kashmir chills U.S.-India rapport; New Delhi sees political
                                                shift in human-rights debate
   Wisner in line as Envoy to India; Solarz drops out
   India's Banking Industry prepares for nine new private institutions

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Date: Thu, 17 Mar 1994 05:31:28 -0700
From: RAJESH <RAJESH_H1@sfov1.verifone.com>
Subject: The spirit of the Highlands is abroad

#1  INDIA: THE SPIRIT OF THE HIGHLANDS IS ABROAD

Scotch's potential in India is huge - especially as local distillers'
maturation process is measured in weeks, says Rahul Bedi
THE DAILY TELEGRAPH  London    (DTEL)
Byline:   RAHUL BEDI
03/15/94
   THERE IS an apocryphal story that Indians yearly consume more
Scotch whisky than is produced in Scotland.
   But, with at least four leading Scotch whisky companies entering
India's potentially massive liquor market over the past few months,
this myth should soon cease to have any basis. United Distillers,
part of the Guinness group, International Distillers and Vintners
of the Grand Metropolitan Group, and Hiram Walker of the Allied
Lyons Group have all launched joint-venture companies in India to
market Scotch and other international brands of liquor locally
within the next few months.
   Seagram, the fourth player, whose brands include market leaders
such as Chivas Regal, Glenlivet, Martell Cognac and Mumm's
champagne, will go it alone. Having got permission to float a
wholly-owned subsidiary in India, Seagram is awaiting a
manufacturing licence and expects to become operational this year.
   Sources says that the four competitors will pursue a
three-pronged strategy: import in bulk, add-mix the best of Indian
liquors with Scotch whisky, and water down Scotch whisky
concentrate.
   Scotch distillers have long eyed India, with its upwardly mobile
and brand-conscious middle class, as a vast untapped market. In
tandem with the breaking down of economic barriers, social
attitudes are also undergoing a metamorphosis. Drinking, once
frowned upon, even among the middle class, is gaining acceptance,
and Scotch is much coveted. Recent surveys indicate that 1.8
million 12-bottle cases of Scotch were consumed in India last year.
Some 200,000 were legally imported, the remainder being either
smuggled or "manufactured" locally.
   India consumes around 240 million cases of liquor a year, of
which country liquor or moonshine manufactured under government
licence amounts to 150 million. Indian Made Foreign Liquor (IMFL),
which includes whisky, gin, vodka, rum, wines and beer, makes up
the balance.
   In the IMFL segment whisky is preferred. It accounts for 60 per
cent of sales and is the fastest-growing end of the market. This is
the area where the newcomers are hoping to sell at about Rs 800
(#17.20) a bottle.
   Industry sceptics say the multi-nationals will ultimately
introduce only second class brands into India, and indeed most
joint ventures are unwilling to say which brands they will market.
   But they will introduce technology to upgrade Indian liquor,
particularly the whisky, which is a blend of malt spirits and a
generous portion of neutral alcohol made from molasses, an option
cheaper than grain.Seagram, for example, is believed to have
committed itself to agricultural research aimed ultimately at
producing grain-based whisky in India and upgrading IMFL quality.
   Indian distillers, unwilling to age their spirits more than a few
weeks, will also be tutored in maturation processes, and in
controlling their high rate of evaporation.
   IDV has agreed with Polychem to set up, in Bombay, International
Distillers India. IDV has a 60 per cent holding and is expected to
market several of its international brands such as J & B whisky,
Smirnoff vodka and Gilbeys gin, and to help to develop a range of
international-standard spirits for the Indian market.
   Hiram Walker, maker of whiskies such as Teachers and Ballantines
and Beefeater gin, has tied up with Jagajit Industries, distillers
in north India. United Distilleries - Johnnie Walker, Vat 69,
Dimple, Bells and White Horse, and Gordons Gin - has an agreement
with United Breweries of Bangalore.
   Besides basic infrastructural problems, the newcomers will face
import duties of around 400 per cent, burgeoning temperance
movements in several states, corrupt politicians, advertising
embargoes on liquor products and a complicated distribution network
based on an equally confusing system of levies differing from state
to state.
   All incoming companies want to export Indian-distilled vodka and
whisky to Russia and the Middle East.

------------------------------

Date: Thu, 17 Mar 1994 22:10:12 -0500 (EST)
From: kvrao@dad.bgsu.edu (Prof K. V. Rao)
Subject: India opposed to any change in U.S. law on military sales to Pakistan

#2  INDIA OPPOSED TO ANY CHANGE IN U.S. LAW ON MILITARY SALES TO PAKISTAN

Date=3/16/94
Byline=Michael Drudge
Dateline=New Delhi

Intro:  U-S Officials say the Clinton Administration is prepared
to resume delivery of American Combat Jet Fighters to Pakistan as
part of a new strategy to curb nuclear weapons proliferation in
South Asia. But -- as Correspondent Michael Drudge reports from
New Delhi -- India is opposed to any change in the U-S Law which
has suspended military sales to Pakistan.

Text:  The United States cut off military and economic aid to
Pakistan in 1990, when then-President George Bush said he was
unable to assure Congress Pakistan did not possess nuclear
weapons.

Mr. Bush was acting under a law called the Pressler Amendment --
named after its author, Republican Senator Larry Pressler.

The Pressler Amendment requires the President to certify each
year Pakistan does not possess nuclear weapons, as a condition
for U-S aid.

At the time President Bush invoked the Pressler Amendment,
Pakistan was in the middle of one-point-four-billion-dollar
purchase of 71 F-16 fighter jets from the Lockheed Corporation.

Dozens of the planes had been built at a Lockheed plant in Fort
Worth, Texas.  Pakistan has already paid more than 650 million
dollars for them, although delivery is suspended because of the
Pressler Amendment.

But now, U-S Officials say the Clinton Administration is forging
a new strategy that might result in Pakistan getting its jets, if
it agrees to halt production of nuclear weapons materials.

U-S Officials stress the plan is only in the preliminary stages
of discussion between Washington and Pakistan.  They say,
Congress will have to approve any exceptions to the Pressler
Amendment.

Still, U-S Defense Department Spokeswoman Kathleen Delaski says
-- if the proposal is accepted by all the parties -- Pakistan
could receive the F-16s it has already purchased.

India -- which exploded a nuclear device in 1974 -- is reacting
warily to these developments at a time when tensions are running
high between India and Pakistan over the disputed Northern
territory, Kashmir.

Indian Prime Minister P-V Narasimha Rao has told visiting
American Senators India will reassess its defense policy, if the
Pressler law is modified.

Senator Pressler has told Indian News Agencies he also
is worried that -- if his amendment is waived and Pakistan gets
the jet fighters -- it will spark a new South Asian arms race.

Senator Pressler has asked for an urgent meeting with
President Clinton to discuss his concerns.

The U-S non-proliferation initiative is expected to come up next
week, during a visit to New Delhi by U-S Assistant Secretary of
State for South Asian Affairs Robin Rafael.

In Congressional testimony last week, Ms. Rafael said she could
not discuss the Administration's plans in public.  But she
assured members Congress will be consulted, if the Administration
decides to go ahead and deliver the planes to Pakistan.

Mr. Rao -- visiting London this week -- says India rejects any
regional approach to non-proliferation.  India favors only global
negotiations to eliminate all nuclear weapons, worldwide.

India regards the current non-proliferation treaty as
discriminatory, because it lets Britain, China, France, Russia
and the United States to retain nuclear weapons.   (Signed).

------------------------------

Date: Fri, 18 Mar 1994 05:27:02 -0700
From: RAJESH <RAJESH_H1@sfov1.verifone.com>
Subject: Mauritius becons investment

#3  MAURITIUS BECKONS INVESTMENT

WALL STREET JOURNAL (J)
   Compiled by Catherine Bolgar

   Mauritius is setting itself up as an investment hub and tax haven
in the Indian Ocean region. The island nation increasingly is
attracting funds that invest in India. Mauritius seeks to become a
financial center similar to Dublin, which last year had the greatest
growth in offshore mutual-fund listings. The 15 offshore funds now
based in Mauritius invest in India and are mostly European. The
country expects to register U.S. funds investing in India, and later
to attract funds investing in Pakistan, Sri Lanka, South Africa and
other African nations.

------------------------------

Date: Fri, 18 Mar 1994 11:33:13 -0700
From: RAJESH <RAJESH_H1@sfov1.verifone.com>
Subject: India and the United States: Issues and Opportunities

#4  TALK: "INDIA AND THE UNITED STATES: ISSUES AND OPPORTUNITIES"

PR NEWSWIRE (PR)
  Professor Jagdish Bhagwati of Columbia University, whose perspectives
have provided significant inputs for the revolutionary market reforms
that are transforming India's economy, will discuss economic
opportunities emerging in India for American businesses in a talk
titled "India and the United States:  Issues and Opportuities," said
the Embassy of India.
  Bhagwati will be joined by India's ambassador to the United States,
Siddhartha Shankar Ray, and the U.S. under secretary of commerce for
international trade, Jeffrey Garten.  There will be an opportunity for
questions and answers.  The event will take place:
                 Tuesday, March 22, at 5:30 p.m.
         In the Grand Ballroom at the J.W. Marriott Hotel
  The hotel is located at 1331 Pennsylvania Ave. N.W., in Washington
        A reception will follow with Indian hors d'oeuvres.
  For further information, please call the contact below.
  CONTACT:  Nirupama Rao, minister of press and information at the
Embassy of India, 202-939-7041.

#5  AUSTRALIA'S COMMAND/INDIA : NEGOTIATING BANK FINANCE

AP-DOW JONES NEWS 03-18-94
  Command said the Ravva field was discovered by India's Oil & Natural
Gas Commission in 1987 and was subsequently appraised by 28 wells, 18
of which encountered 'significant' signs of hydrocarbons.
  The Australian company said many aspects of the production sharing
agreement have already been successfully negotiated with the Indian
government, accelerating the approval process to a point where Command
believes it will receive the necessary approvals to begin developing
the field before June 30, 1994.
  Once the formal production agreement is concluded, Command
anticipates it will own 22.5% of the Ravva field, with the remaining
equity shares with the Oil & Natural Gas Commission (40.0%), Videocon
(22.5%) and Marubeni (15.0%).
  Command said it is negotiating with a number of international banks
'who have expressed an interest in providing project finance,' although
the company considers project-financing only one of several options for
funding development of the Ravva field.
  John Doran, Command's managing director, said that while India is
currently 'not very fashionable with the world's oil companies,' he
believes the country is becoming more attractive to western companies
given the government's determination to privatize its resources sector.

  'Command is convinced that the Indian government is very serious
about its attempts to reform its petroleum industry as part of a sea
change that is currently surging through many sectors of the Indian
economy,' Doran said.

#6  TALK OF KASHMIR CHILLS U.S.-INDIA RAPPORT; NEW DELHI SEES POLITICAL
                                                SHIFT IN HUMAN-RIGHTS DEBATE

WALL STREET JOURNAL (J)
   By John Bussey and Suman Dubey
   Staff Reporters of The Wall Street Journal
03/18/94
   NEW DELHI -- To get an idea of how tense relations between India
and the U.S. are these days, pick up a copy of Sunday magazine, a
national newsweekly published out of Calcutta. Dominating the cover
is a photo of Bill Clinton, complete with horns and fangs. "Yankee
Devil?" asks the headline.
   Or listen as an Indian industrialist in Bombay buttonholes an
American visitor at a dinner party: "Those asses in the State
Department," he says angrily, waving a finger in the air. "Why are
they against India? It's getting to the point that a joint venture
in India flying the U.S. flag would get firebombed."
   These are passionate times in South Asia, where India, the
world's largest democracy, is undergoing a deeply wrenching shift
from socialism to a freemarket economy. Aloof from the U.S. during
the Cold War, the nation has put on a new face: The old Fabian
Socialists in the bureaucracy now eagerly talk of privatization,
foreign investment and the capitalist flag they have raised over
India.
   But many of them also complain that Washington, far from
embracing India, has -- either by design or misstep -- recently
driven a wedge between the two countries by repeatedly criticizing
New Delhi's human-rights record and questioning the legality of its
claim to Jammu and Kashmir, a brutalized land claimed by both
Pakistan and India. Matters got so heated recently that an
infuriated Indian government asked the U.S. Embassy in New Delhi
whether the U.S. was questioning "the territorial unity and
integrity of India."
   Ultrasensitivity abounds in India's Parliament and press -- in
part, a legacy of the U.S.'s close relationship with Pakistan, and
of India's loss of a powerful patron, the Soviet Union. It's no
surprise, then, that India has seized on Washington's year-long
failure to post an ambassador to this nation of 890 million as yet
another sign of Washington's tilt away from New Delhi. Late
yesterday, Clinton administration officials said Frank Wisner, the
Pentagon's top policy official, would be nominated as ambassador to
India.
   The business elite has even begun worrying that deteriorating
political ties might threaten the blossoming economic relationship
between the two countries, and also hurt America's broader influence
in this sometimes volatile region. Foreign Ministry officials,
meanwhile, are gritting their teeth in advance of the arrival in New
Delhi next week of Robin Raphel, the assistant secretary of state
for South Asian affairs and the focus of much of India's
displeasure. The ministry hopes to patch up matters. But bureaucrats
here also worry that Ms. Raphel may instead prove a lightning rod
for yet more controversy.
   One U.S. diplomat in India acknowledges: "We're going through a
public heartburn period." Indian officials, the diplomat adds, "have
been receiving some signals we're not sending."
   The problems began in September, when President Clinton angered
India by referring to ethnic conflict in Kashmir in an address
before the United Nations General Assembly. In December, in what
U.S. diplomats here say was a routine White House form-letter
response, Mr. Clinton answered a letter from Ghulam Nabi Fai, an
American citizen associated with the Kashmiri Action Council, saying
he looked forward to working with Mr. Ghulam "to bring peace to
Kashmir." India's ambassador to the U.S. complained to the State
Department, claiming the Action Council was a front for groups
"promoting militancy" in Kashmir.
   Then in February, Mr. Clinton wrote to Rep. Peter Blute (R.,
Mass.) that the treatment of the Sikh minority in India "is one of
the important human-rights issues on our agenda with India." And
that same month, Mr. Clinton accepted the credentials of Pakistan's
new ambassador, noting, "We share Pakistan's concern about
human-rights abuses in Kashmir."
   All of this generated heated criticism in India, as did remarks
by Ms. Raphel in October. During an off-the-record briefing she held
in Washington, Ms. Raphel was pressed by an Indian reporter to
comment on Kashmir. "We view the whole of Kashmir as disputed
territory, the status of which needs to be resolved," she said,
repeating U.S. policy. Then referring to the administrative means by
which Jammu and Kashmir joined India at the time of the partition in
1947, she added, "We do not recognize . . . that instrument of
accession as meaning that Kashmir is forever more an integral part
of India."
   The reporter printed the remark, much to the chagrin of some of
Ms. Raphel's colleagues, who felt she had been a bit too blunt on a
complex issue.
   The Jammu and Kashmir region, located at the northern tip of
India and often referred to just as Kashmir, rivals the Middle East
in its tortured modern-day history. The land was once a princely
state, where a Hindu maharaja governed a largely Muslim population,
though Muslims are not dominant in all parts of the state. Kashmir,
like other princely states which had special powers during British
rule, was given the option of joining India or Pakistan when the two
nations were carved from British India in 1947. The ruler of Kashmir
delayed. Irregular forces from Muslim Pakistan invaded to claim the
territory.
   The rattled maharaja of Kashmir quickly signed an "instrument of
accession" joining the state to India. India sent in troops to
battle the Pakistanis; ultimately, the two nations fought to a draw,
and the U.N. created a cease-fire line with the bulk of Jammu and
Kashmir in India and the rest administered by Pakistan. (China later
took control of part of the region.)
   Over the years, the area has been the wellspring for much U.N.
debate, and repeated clashes between India and Pakistan, including
two wars. A violent Muslim separatist movement has also taken hold,
particularly in the Kashmir valley. Both India and the separatists
have been accused of human-rights violations there.
   Ms. Raphel dived headlong into this morass. "We are hearing in
Raphel's statement a qualitative shift in U.S. position," the Indian
government declared. Ms. Raphel wasn't available for comment, but a
State Department official yesterday said, "Robin wasn't trying to be
confrontational." He said she and President Clinton have merely
reiterated oftstated U.S. policy: Kashmir is disputed territory for
which India and Pakistan must find their own bilateral solution. "We
don't accept that the instrument of accession means that Kashmir is
part of India," he says.
   "Overall, the relationship between the U.S. and India in
substantive terms has never been better," adds a U.S. diplomat in
India. "We're adding depth to places where we agree. I don't think
you can underestimate the value of the commercial relationship."
Indeed, U.S. investment in India continues to increase rapidly,
amounting to some $1 billion in commitments in 1993.
   That said, India's Prime Minister took a moment in Parliament a
few days ago to send a clear signal to the U.S., and to the
diplomats arriving from Washington next week. Kashmir is India's, he
insisted, the accession is final, and the only issue left to
negotiate is how and when Pakistan will withdraw.

#7  WISNER IN LINE AS ENVOY TO INDIA; SOLARZ DROPS OUT

WALL STREET JOURNAL (J)
03/18/94
   WASHINGTON -- The Pentagon's top policy official, Frank Wisner,
will resign soon and be nominated to become ambassador to India,
Clinton administration officials said.
   The move is significant for several reasons. Most notably, the
administration already had picked someone to be its envoy to India,
former New York Rep. Stephen Solarz. Mr. Solarz, former chairman of
the House Foreign Affairs subcommittee on Asia, said he agreed to
withdraw his name after meeting Wednesday with Vice President Al
Gore.
   The White House decided not to pursue Mr. Solarz's nomination
after receiving a Federal Bureau of Investigation report on the
ex-congressmen's effort to help a Hong Kong businessman extend a
visa to the U.S. The businessman was suspected of having connections
to organized crime in Hong Kong, but Mr. Solarz apparently was
unaware of that.
   Mr. Solarz said last night that the FBI report exonerated him of
wrongdoing. But it was clear that given the administration's current
Whitewater troubles, it didn't relish the prospect of a messy
nomination fight in the Senate.

#8  INDIA'S BANKING INDUSTRY PREPARES FOR NINE NEW PRIVATE INSTITUTIONS

WALL STREET JOURNAL (J)
   By Suman Dubey
   Staff Reporter of The Wall Street Journal
03/18/94
   BOMBAY, India -- India's banking industry, dominated by sluggish,
bloated state-owned institutions, is about to make way for the
nation's first new private commercial banks in 25 years.
   Nine privately owned banks have been given the go-ahead to open
for business, starting early next month with UTI Bank Ltd., which is
backed by Unit Trust of India, the country's largest mutual-fund
company. Dozens more potential applicants are waiting in line.
   As part of its broad economic-reform program, the government of
Prime Minister P.V. Narasimha Rao last year decided to grant the new
banking licenses to inject competition into the industry and thus
improve efficiency and service. Executives involved in setting up
the new banks appear happy to oblige.
   "What we'll offer is the latest in technology and quality of
service, and we're not going to have the disadvantages of a
nationalized bank, such as too many branches, too much staff," says
P.V. Maiya, managing director-designate of Icici Banking Corp.,
which plans to start operations, based in Vadodara, by midyear.
   Though some of the institutions licensed to set up banks are
state-owned, including Unit Trust of India, the Reserve Bank,
India's central bank, has said that 60% of each new bank's equity
must be held by private investors within a year of opening.
Significantly, the banks are expected to operate independently of
their backers -- state-owned or otherwise.
   "The important thing is to evolve a different corporate culture
altogether," says A.C. Shah, a former chairman of state-owned Bank
of Baroda, who is helping Unit Trust set up UTI Bank, based in
Ahmedabad, Gujarat state. "We have to put the customer at the center
and put professionalism in charge."
   Such changes would reverse the stasis of 25 years of state
dominance of the industry. The decision to allow new private-sector
banks broke a freeze on licenses imposed in 1969, when 14 of the
nation's largest banks were nationalized. The public-sector banks
now hold about 87% of total bank deposits in the country. (The rest
of the market is shared by foreign banks and several small private
and cooperative banks that weren't nationalized.)
   Among other things, nationalization was meant to answer criticism
that India's private banks gave favorable treatment to associated
businesses. But it also spawned lumbering giants burdened with
unionized labor forces, overstaffing, antiquated working methods and
bureaucratic and political interference.
   The new private banks expect to operate largely free of such
disadvantages. Many also plan to seek foreign partners. For example,
Housing Development Finance Corp., or HDFC, a private finance
company based in Bombay, says that it is talking to several
candidates, which it declined to identify, and that it is willing to
sell to a foreign partner a 20% stake in the bank it's setting up.
   IndusInd Bank Ltd., based in Pune, Maharashtra, and backed by the
diversified Bombay-based Hinduja Group, says 40% of its equity will
be held by Indians overseas or Hinduja-associated companies
overseas. "The main advantage of our business will be the strength
of nonresident Indians," says Ashok Hinduja, president of Hinduja
Group, referring to the growing flow of expatriate funds into India.
   Still, the government won't allow for unbridled expansion of
private-sector banking. Ravi Vira Gupta, the ranking civil servant
in the Finance Ministry's banking department, says the number of
banking licenses granted will increase very slowly. "We don't want a
situation like in some countries where there was a flood and several
went bust," he says. The ministry also will likely turn down
applicants involved in manufacturing.
   Once approval is in hand, the new banks face stringent financial
requirements, as well as prodding from the central bank to take
their business to areas of the country where access to banking is
limited.
   Start-up capital is set at a minimum of one billion rupees ($32.1
million), and most of the banks plan to raise additional capital
through public share offerings, which will let them meet the 60%
public-shareholding requirement. The banks also will have to satisfy
an 8% capital-adequacy requirement (equity capital as a percentage
of total risk-bearing assets) and adhere to international accounting
norms.
   And while most of the new banks intend to concentrate on
relatively high-profit areas such as foreign-exchange trading,
merchant banking and fee-based services like loan syndications, the
Reserve Bank insists that they establish large chunks of their
business outside major commercial centers. To meet the requirement
that they set up their registered offices in cities and towns where
no banks are currently registered, most of the new banks are basing
themselves in satellite towns close to big cities.
   The banks also will be required to direct part of their lending
to so-called priority sectors, such as agriculture and small-scale
industry. Nationalized banks have found such lending a drain on
their profits -- largely because they have been compelled for
political reasons to make some loans of dubious quality -- but the
new banks think they can cope.
   "There's a lot of small-scale, especially export-oriented
industry, which is growing fast," says Mr. Shah of UTI Bank. "Then
we'll go for plantations, agro-processing and self-employed people
who've done well."
   Adds Mr. Maiya of Icici Bank: "We'll aim at quality lending
wherever we are, including the rural areas. Our aim is to coordinate
financial services with increased production and productivity." The
bank plans to have 60 branches nationwide within three years.
   Many of the new banks expect their links to powerful backers will
help them build their businesses. Executives at Icici Bank, for
instance, believe that their bank has a natural client base among
the nearly 4,000 long-term corporate borrowers of Icici Ltd., the
Bombay investment bank backing it.
   Likewise, Mr. Shah says UTI Bank should have little trouble
luring clients since its backer, Unit Trust of India, has lent about
100 billion rupees of long-term investment funds to Indian companies
through state-owned banks. UTI Bank also plans to offer retail
banking services to potential clients among the millions of
investors in mutual funds managed by Unit Trust of India.
   Meanwhile, India's public-sector banks, most of them operating in
the red and receiving government aid to bolster their capital,
appear too preoccupied with their own problems to worry about
private-sector encroachments. However, labor unions at the
public-sector banks, fearful that increased competition could cost
jobs, don't welcome the newcomers.
   "Our feeling is that private-sector banking did nothing to
inspire the economy before nationalization," says D.P. Chadha,
president of the All India Bank Employees Association. "The belief
that private-sector banks will be more solid now isn't valid."
   True, private banks before nationalization were conservatively
run and failed to provide adequate banking services, particularly
outside major cities. But conditions have changed since then; in
addition to reducing bureaucratic interference in business, reform
has encouraged competition and the play of market forces. And the
unions, though powerful in the public-sector, know they're in no
position to influence the fate of the new banks.

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End of India News Network Digest
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