The producers not only have to meet the 40 per cent levy quota of the Government at prices far lower than their average cost of production, but also do not have the freedom to sell or store their stocks. As international prices of the sweetener have dipped, importers are often able to acquire their stocks at prices lower than the cost of indigenous production.

Besides, they are able to sell their stocks freely. Hence, while domestic players continue to make losses, importers are raking in the money.Although the domestic producers have been asking for a hike in import duties the Government has been loath to do so. Its argument has been that cheap imports help to keep domestic prices under control and increasing import duties further would not be in the best interests of the consumers.

However, it had gone ahead and amended the Sugar (Control) Order to include the importers as well. It was hoped that once the order was put into effect, it would result in a turn in the domestic manufacturers' fortunes. With a new Government finally in place, the possibility that the amendments would be put into effect appeared more imminent and the markets became optimistic about the performance of the more efficient sugar producers. Stocks like Balrampur Chini and Bajaj Hindustan have seen a significant appreciation since the new Government came into place. And sure enough, imported sugar also has been brought under the monthly release mechanism.

With this measure, part of the undue advantage that the importers had earlier enjoyed has been done away with. Just like domestic producers, the importers too would be required to sell their stocks against monthly release orders issued by the Directorate of Sugar. However, the fact that the Government has chosen not to subject importers to the 40 per cent levy obligation, could come as a disappointment to the markets and sugar stocks like Balrampur Chini and Bajaj Hindustan could lose part of their recent gains. Although the current measure is a welcome one, it is not enough to aid a reversal in the fortunes of indigenous producers.

Insider trading
News reports indicate that the Sebi-constituted committee to review insider trading norms may bring subscription to public and / or rights issue within the ambit of the regulations. If true, the move raises a few interesting questions. First, what is the reason for keeping preferential allotment to the existing management out of the purview of the regulations? If the management wants to hike its stake, the option of creeping acquisition / buy-back is always available. It is a common knowledge that institutional investors are always given better and far more price sensitive information by the listed companies than is provided in the public documents - particularly segment-wise reporting.

How does one justify UTI requiring presentation by the companies? The least that can be done is that every management that wants to opt for preferential allotment to the management should be forced to make disclosures prescribed for public issue. Regulating insider trading is a euphemism and more so in India because of dismal disclosure norms.

The management of any diversified company will not share even the division-wise debt on the pretext that the debt is raised on the strength of the balance-sheet of the company and not on the cash flows of the project alone as otherwise cost of funds would be higher and as a result, debt is ``allocated'' division-wise. This is utter nonsense. For claiming tax benefits under Sec 80IA (the benefit is available qua unit), the company will have to calculate debt unit wise as the benefit will be available only after company starts making profit for I-T purpose.

Second, unless a company is voluntarily providing information in accordance with either US GAAP or IAS (through reconciliation or by preparing accounts in accordance with either), even institutional shareholders won't know when the company will be a tax paying company and what will be the effective tax rate. The reason being deferred tax accounting is not mandatory. In the absence of segment-wise reporting and deferred tax accounting estimating the future is glorified guess work unless the management is more co-operative with one class of shareholders.

Plugging legal loopholes is fine but what is equally needed is civilised disclosure norms without which no amount of plugging will work. Sebi will have to take initiative and make at the very least, deferred tax, segment-wise reporting and consolidation of accounts mandatory as waiting for ICAI to frame standards will serve no purpose. A prime example is the guidance note on leasing. Though it was challenged in court, it took six years for the issue to be settled out of court and that too for an accounting treatment which is universally accepted. Needless to say, even after more than three years have elapsed since the settlement with ALFS, a standard is awaited.

Steel/Automobiles
Although the automobile industry is witnessing excellent growth, the steel industry has been witnessing declining realisations. Automobile companies have reported a 20 per cent growth in their turnover and a 35 per cent growth in profits for the first half. The turnover of 18 automobile companies grew from Rs 5,910 crore for the six-months ended September 1998 to Rs 7,057 crore while net profit grew from Rs 276 crore to Rs 373 crore. Auto ancillaries have also reported a 20 per cent growth in turnover and a 72 per cent growth in the net profits.

The growth of auto and ancillaries should have logically led to a reversal in the fortunes of the ailing steel industry. However, the first half results of 43 major steel companies are just contrary to the growth of the automobile industry. The half yearly turnover of steel companies increased by only 0.2 per cent from Rs 9,486 crore to Rs 9,508 and net losses rose from Rs 355 crore to Rs 844 crore. Almost all major companies have reported fall in their operating profits. Leading the pack are SAIL, Tisco and Essar.

Sail's operating margin plunged from 12 per cent to 3.2 per cent, Tisco's margin fell from 19.1 per cent to 17.5 per cent and Essar reported a heavy fall in operating margin from 17.3 per cent to 7.9 per cent.

Emcee (with contributions from Sarad Saraf, Urmik Chhaya and Dhruv Rathi)