19.03.2007

• Press Note 5
• This is about increasing the FDI cap in telecom sector to 74%.
• It was first issued in November 2005. It envisaged that all key positions in telecom companies be held by resident Indian citizens. It was kept on hold since it was issued, due to differences between ministries of home and defence.
• A Cabinet Note of October 2006 on this proposed that foreign nationals be permitted in all key positions after a one-time clearance from the home ministry. It was also deferred.
• The Cabinet Note of December 2006 also was rejected due difference in opinion between ministry of defence and the Department of Telecom on security norms.
• Cricket: India’s loss and commercial and law and order consequences
• While I do rue the loss suffered by India at the hands of less fancied Bangladesh, what certainly needs to be deplored is the attacks on the properties of our players by irate fans. We should never support such lawlessness. Sport is sport. Period. We lose sometimes and we win sometimes.
• But that apart, look at what it entails commercially. The ratings for non-India matches are a poor 0.5 while those for India matches are between 5 and 7 for cable and satellite homes.
• Even the India-West Indies practice match prior to the tournament managed ratings of about 3.5.
• The higher the rating, the higher the ad revenue. If India doesn’t figure in the super eight of this version of the World Cup, a lot many businesses are set to lose lot of advertising money. That money is expected to be in the range of about Rs. 2000 crore.
• What is ADC
• Access Deficit Charge. It is levied by TRAI on all telecom operators and paid to BSNL to help sustain the latter’s rural operations.
• It is generated from three sources:
• 1.5% of the annual aggregate gross revenues
• Rs. 1.60 per minute for all incoming international calls to India
• Rs. 0.80 per minute of every outgoing ISD call.
• The levy is proposed to be phased out from April 1, 2008.
• Two important export promotion schemes
• Focus market scheme
• It gives incentives for exporting to certain Latin American and African countries where India’s exports are low.
• Under this scheme, the exporters are entitled for a transferable duty credit scrip equivalent to 2.5% of the total FOB value.
• The scope of this scheme has been reduced to 53 countries in the entire Latin America (LatAm) and Africa excluding big countries such as Brazil and South Africa.
• Focus product scheme
• It provides sops to exporters of identified prodcts which are high employment generating.
• Under this, the exporters are entitled for a transferable duty credit scrip equivalent to 2.5% of 50% of the total FOB (Free On Board) value.
• The commerce ministry has been fighting with the finance ministry for increasing allocations for these two schemes. The budget provided for Rs. 600 scheme for these two schemes.
• China says the moon is not for sale
• An innovative company in China sold some 49 acres on moon to about 34 individual buyers. The Chinese authorities took this company to court.
• The court ruled that the sale is not valid. China is signatory to an international treaty of 1983 under which moon and other celestial bodies were not subject to national appropriation or occupation. Exploration and use of outer space is to be carried out in the interests of all countries.
• The legal issues concerning ownership of extra-terrestrial real estate are still extremely vague. One of the underlying issues is whether private ownership of such property is recognized or not. It is generally accepted that, as stated by the United Nations "Outer Space Treaty", space is the "domain of all mankind", and can no longer be claimed by any governments. It omits mentioning private individuals.
• Legal experts agree that private ownership of the Moon is not explicitly forbidden in the Outer Space Treaty of 1967 which states that only governments are not allowed to own lunar or celestial property. The Outer Space Treaty has been currently ratified by 98 countries including all space faring nations.
• Because private ownership was not included in the Outer Space Treaty, a new treaty, the Moon Treaty of 1982 attempted to explicitly fix this omission by forbidding private ownership of the Moon and the celestial bodies. After three attempts in the UN, no major or space faring nation has signed or ratified the treaty, for fear that private use of the Moon and its resources would be hampered by the treaty.
• RBI working on roadmap for repo in corporate debt
• I have been covering for quite sometime about deepening of the corporate debt or bond market. We have noted that the recommendations of the RH Patil committee in this regard are supported by the more recent Deepak Parekh committee on infrastructure funding.
• In an effort at deepening the corporate debt market, the RBI is looking at the possibility of allowing repo transactions in corporate debt. But what is a repo? We have so far seen repo in the context of RBI either raising of lowering the repo and reverse repo rates; didn’t we? A repo actually stands for repurchase obligation. What this means is that the seller while selling an asset for a price, agrees to buy it back at a later time for a fixed price. This allows the seller to raise money backed by his security holdings. So far this is allowed in India only on government securities.
• If this is allowed in corporate debt, it would help deepening the corporate debt market. Such deepening is helpful to bridge the present asset-liability mismatch seen in infrastructure sector. What this refers to is the fact that the infrastructure projects require funding for longer periods. But funding is not forthcoming from financial institutions at such longer tenor. So while these companies hold the asset in their hands, the liability (debt needed) will not be of equal duration. This pushes up their costs of borrowings and makes the projects unviable beyond a point.
• Subprime US mortgage market
• We have been seeing this phrase for the last couple of days in the context of global volatility in all markets.
• There were some queries on this asking me to explain this in a little more detail. What this term ‘subprime’ refers to is to borrowers. A borrower is considered subprime if his credit ratings are poor. If financial institutions (read housing finance companies) lend money to such people, the chance of default is very high. Because housing finance companies have lent lots of money to such borrowers and because there are fears about their defaults, it is affecting the market sentiment.
• Formula One racing: Australian Grand Prix
• Finland’s Kimi Raikkonen won this grand prix beating the World Champion Fernando Aloso. Raikkonen was working for Ferrari’s team after Michael Schumacher retired.