For the year 1998-99, BSES has posted clear profit (PAT-Statutory and Special Appropriations), slightly less than the reasonable return (calculated on the capital base). Unlike TEC, in its annual results, BSES does not disclose the clear profit. The statutory appropriations for the year is Rs 9 crore. One of the probable reasons why CP is lower than RR could be that during the year, BSES reapid loans worth Rs 125-130 crore and this has resulted in higher capital base (debt is deducted for calculating the capital base).

The other reason could be the payment of standby charges of Rs 42 crore to TEC and probably ad hoc payment of an additional Rs 9 crore. PLF at 76.55 per cent was lower by 8.45 per cent, compared to 85 per cent in 1997-98. The company also incurred expenditure of Rs 182 crore to modernise the distribution system, which resulted in a higher capital base. These factors have more than compensated for reasonable return being reduced to 15.5 per cent of the capital base in 1998-99,compared to 17 per cent in 1997-98. Another reason could be that the growth in sale of units in the licensed area has been the normal 6.5 per cent and bulk of the growth is due to demand from residential clients and not commercial/industrial clients.

As regards RR for 1999-00, the popular belief is that the RR delinked from the bank rate is a flat 16 per cent. However, the notification issued does not allow any such interpretation. The notification provides that the Centre, in consultation with the Authority, specifies that the `standard rate' shall comprise in addition to the percentage referred to in sub-clauses (i) and (ii) of clause (b), (2 and 5 per cent respective over the RBI rate as on April 1 of the relevant year) the differential between sixteen percent and the RBI rate ruling at the begining of the year (8 percent), for investments made thereafter in respect of any year of accounts. According to the BSES management, this translates into RR being not higher than 13.65 per cent of the capital basefor 1999-2000 but the notification defeats the very purpose of issue and hence negotiations with concerned authorities are on, and in all probability, a flat RR of 16 per cent will be notified by the end of the year.

A point to be considered is that income of EPC, Contracts, Computer and International divisions amounted to 21 per cent of the total income. Since the restrictions of sixth schedule of ESA are not applicable to these divisions unless the income from this divisions can be treated as income ancillary or incidental to the business of electric supply (in this case, it would be stretching it too much), it is good news for the shareholders.

In the last quarter, compared to the previous quarter, the PLF was lower by almost 3 percentage points, PLF in the first two months of the year is above 90 per cent (the highest PLF in 1998-99 was 85.05 per cent in March), resulting in sharp reduction in purchase from TEC. The clear indiaction is that the first quarter of the current year will be substantiallybetter than the corresponding period of the previous year.

With EPC/contract/international divisions contributing substantially to the bottomline and the healthy order book position which indicates that this will be the case for at least next two years, the discounting of BSES will contine to be higher than that of electricity utilities.

Chemical exports

Newsreports suggest that the Union commerce ministry has chosen three sectors -- chemicals and pharmaceuticals, textile and engineering -- for providing a thrust to exports. While the intention of the government is good, the ground reality is that Indian companies, specially in the chemical sector, are having a tough time trying to survive due to domestic and international competition.

Industry sources say that some of the products that were earlier manufactured in the country have been compeletly stopped like most of the phosphorus-based chemicals.

The inorganic chemical industry and alcohol- based chemical industry are one of the worst hit,operating at 50 per cent of their capacity, this too after a large number of plants have closed down. Same is the case with the small-scale sector.

What has affected the chemical industry the most is the sharp drop in import duties resulting in increased imports and a sharp drop in prices. Further, countries like Japan and Korea, which sold their products earlier to the US, Europe and South Africa started diverting their produce to India. During the same time, domestic manufacturers were faced with higher input costs like power, transportation, finance, among others.

To add to the woes of the industry, most of the products manufactured by the small-scale sector like dyes and bulk drugs used to be sold to the south- east Asian market. With this market facing a reccession, these companies were left high and dry, in some cases either there products were send back, while in other cases the companies did not recieve any payments.

Even when the government is planning to increase chemical exports, nothingfundamental has changed. The industry continues to be affected by high input costs and poor infrastructure. Even the markets to which India exports are showing no signs of improvement. Further, Indian exports of chemicals have been in generic products, which have been manufactured by most of the countries. With the domestic economies of south-east Asia being severly hit, products manufactured in these countries are also entering the international market, further increasing competition. A case in the point is the bulk drugs industry, which has been showing appreciable growth rate in the past, has slowed down due to increasing competition from other countries. Under such conditions, it has to be seen what measures the government takes to improve exports apart from giving lip service.

Emcee (With contributions from Urmik Chhaya and Shishir Asthana).