Politics & the Nation
  • PriceWaterhouseCoopers to be banned from auditing in India?
    • This is what is reportedly being recommended by the ICAI (Institute of Chartered Accountants of India), the regulatory body for accounting professionals in India.
    • But this recommendation can be challenged in a court of law. PWC is expected to challenge this recommendation.
    • At the heart of the problem is the Satyam fraud that is perpetrated by the promoter family and the failure of auditors to verify the bank deposits reported to have been held by the tainted firm. It appears that it is the duty of auditors to verify independently with banks about the veracity of bank statements filed by a firm which is under audit. The two partners of the PWC -- S. Gopalakrishnan and Srinivas Talluri -- reportedly failed in carrying out this due diligence. They are behind bars as of today.
    • The investigation carried out by ICAI has however cleared the partners of otherwise being in the know of the fraud perpetrated at Satyam.
    • What was puzzling was the statement made by PWC head in India that these two partners are not partners of PWC and that PWC did not carry the audit of Satyam. This appears to be a case of hiding behind technicalities. PWC reportedly operates in India through a network of 10 audit firms. This is to circumvent a ban by ICAI regulations. ICAI regulations prohibit foreign firms from using their own names in India. So, global firms like PWC operate in India through local firms. PWC reportedly operates through 10 such local firms each of which can have a maximum of 20 partners. PricewaterhouseCoopers audit network consists of — three Price Waterhouse firms, four firms named Price Waterhouse & Co, two Dalal & Shah firms and one firm, Lovelock & Lewes. Each firm has a head office and branch offices. Price Waterhouse, Bangalore, was the firm that audited the Satyam account.
Finance & Economics
  • Our crude production scene
    • At the current level of oil production of around 660,000 barrels a day, India remains grossly energy deficit.
    • With Cairn Energy's production scheduled to ramp up to its full capactiy of 1,75,000 bopd (barrels of oil per day) by 2010-11, about 20% of the country's production will be met by Cairn Energy alone. This will help savings on transportation costs for imported crude and will also meet the robust demand for crude.
    • The calender 2008-09 witnessed a healthy growth in demand for petrol and diesel by 9% and 8.4% respectively.
  • The importance of monsoons
    • At least 58% of India's net sown area depends on monsoons.
    • With the driest June in 83 years followed by an 8% rainfall deficit in July 1-8, live storage in 81 key reservoirs countrywide is down markedly. This could also hit regions not dependent on monsoon, inflating prices for staple commodities such as rice and winter pulses (like chana) and oilseeds (mustard).
    • Agriculture contributes about 20-25% of the national income, and a decline here is expected to pull the overall GDP rate down to 5-6% against 7-8%.
    • The poor rains mean that not only do we have to worry about farm output, but also about the power and water supply situation countrywide. Hydel power accounts for about a quarter of the power generation of 149,400 megawatts.
  • On India's natural gas demand supply situation and related issues
    • There is huge demand for gas in the country. The demand for gas is expected to shoot up to 280 mmscmd whereas the supply will only be about 202 mmscmd by 2011-12. Currently, the supply is about 180 mmscmd against a demand of over 228 mmscmd.
    • In spite of the recent record discoveries of natural gas, India is plagued by the absence of pipelines transmitting gas to consumption points. City gas distribution (CGD) projects have also not taken off well as yet.
    • Currently, two major pipelines run across the country, connecting the North to the West and the South to the West. The HBJ pipeline operated by GAIL acts as the backbone, connecting an ONGC delivery point in Hazira (Gujarat) to Jagdishpur (Uttar Pradesh) and Bijapur in Madhya Pradesh. It is the largest at 3,187 km long. The other pipeline — Reliance Gas Transportation India’s transports gas from Kakinada on the Andhra coast, the landfall point for gas from the Krishna Godavari Basin, to Bharuch in Gujarat is about 1,386 km, connecting south India to the West.
    • While developed economies have a well-developed gas trading market with gas exchanges, futures and city-wide gas pipelines, India has none of these, and has a total pipeline length of just 10,600 km. In comparison, even Pakistan has a pipeline length almost five times at about 56,400 km.
    • The US, on the other hand, has one of the largest networks with a total pipeline length of 18.3 lakh km.
    • India also has the unique distinction of having one of the lowest spreads at 0.003 km of pipeline per sq km compared to the UK (1.08 km) and the US (0.19 km). Rapid technology advancement is also needed in the area to improve pipeline utilisation and efficiency. India also has one of the lowest density of gas being carried in per km of pipeline at 116 km/ mmscmd compared with the US (1086 km/ mmscmd) and France (1,405 km/ mmscmd).
    • Of the 25,000-mw captive power generation, only 13% takes place through natural gas, at present.
  • DTAAs (Double Taxation Avoidance Agreements) and 'limitation of benefit' clause
    • DTAAs are pacts between two countries that seek to eliminate double taxation of income or gains arising in one country and paid to residents or companies of another. The idea is to ensure that the same income is not taxed twice.
    • A DTAA usually leads one of the countries to the DTAA becoming a tax haven. As for example in the case of our DTAA with Mauritius. The India-Mauritius tax treaty provides that capital gains arising in India from the sale of securities can only be taxed in Mauritius, and since the island nation does not tax capital gains it leads to zero taxation. As of now, a certificate of residence from the Mauritius government entitles a company for exemption from capital gains tax.
    • More than 43% of foreign investment inflows into India are routed through the island nation to take advantage of the tax benefits provided in the treaty.
    • One method of preventing misuse of the DTAA is to bring in a 'limitation of beneifts' clause. This is a clause in the DTAA that allows the benefits to be passed on only if certain conditions are met. Such a clause exists in our DTAA with Sangapore.
    • The conditions could be those that prescribe a minimum level of investment, to ensure that there is no or limited tax arbitrage. Some other countries impose additional tax on investments flowing from such tax havens.
    • India has now reportedly initiated discussions with Mauritius to tweak the provisions of their tax treaty, following domestic and international pressure to act against tax havens.
  • Building on crude strategic reserves
    • The country’s current oil storage infrastructure can only meet less than 30 days’ requirement, against developed countries’ practice of having reserves to meet 90 days’ requirement.
    • The government is building three strategic crude oil storage facilities at Mangalore, Visakhapatnam and Padur (near Udupi). The total capacity is, however, just 5 million tonne, which can barely meet the country’s crude oil requirements for 15 days.
    • Now it has approached several Gulf-based oil producers with a proposal to invest in creating large crude oil storage facilities along the country’s coastline.
    • The idea is that while it will enable the rich Gulf countries store refined crude closer to their customers (India, the Asian countries etc.) it will enable the country to develop a huge regional crude oil hub. The creation of the hub will make available huge crude reserves at short notice to India. Perhaps it need not even then invest in building a huge reserve of its own at great cost.
    • But, will the Gulf states bite?
Life Sciences
  • On increasing one's lifespan
    • Various experiments are going on this subject. Two of the experiments that are worth our noting include:
    • Sirtuins is a group of proteins that reportedly have a role in extending one's lifespan. A company called Sirtris Pharmaceuticals is running trials of drugs that affect sirtuins.
    • Rapamycin is a substance that acts by suppressing a particular signalling mechanism inside cells, called the TOR pathway. The TOR pathway, in turn, promotes protein production and inhibits the active destruction of parts of cells that are no longer needed. Slowing down all this molecular turnover seems to slow ageing, at least in worms and flies.
Language lessons
  • phylogenetic: Adjective
    • Of or relating to the evolutionary development of organisms
  • Methuselah: Noun
    • (Old Testament) a patriarch (grandfather of Noah) who is said to have lived 969 years; A man who is very old
  • topiary: Noun
    • A garden having shrubs clipped or trimmed into decorative shapes especially of animals; Making decorative shapes by trimming shrubs or trees