Politics & the Nation
  • A good editorial comment on funding in politics
    • Politics in the real world needs funding. And this funding must have an institutional basis. In the absence of an institutional source of funding, diverting funds from the exchequer, predatory practices and patronage have become routine forms of moibilising funds for political parties. Politicians do the mobilising and keep a good part of what they collect to themselves. In the process, they also suborn the bureaucracy, without whose collusion neither predation nor patronage can work.
    • Political funding has to change. Funding must become broadbased, state-aided and transparent. Auditing of political party accounts must cease to be cursory. We need reform, and need it fast.
  • IRDA working overtime to come up with an insurance scheme that covers almost all poor families.
    • The insurance regulator has proposed a new consolidated health and life cover for over six crore poor families that will replace all existing insurance schemes sponsored by the central and state governments.
    • The Insurance Regulatory and Development Authority (Irda) plans to provide every poor family a life cover of Rs 1.5 lakh and a medical cover of Rs 1 lakh. An integrated cover will cost Rs 1,500 per annum, of which the Centre will bear half the premium and the rest will be shared equally by the states and the beneficiaries.
    • The proposal, estimated to cost Rs 12,000 crore, will cover most families in the unorganised sector and will replace all other central and state-sponsored insurance schemes.
    • The proposal is being examined by the Thirteenth Finance Commission, which is a constitutional body that recommends formula for sharing revenues between the Centre and the states.
    • The Centre’s share of the premium works out to around Rs 6,000 crore per annum, and about Rs 30 a month for a poor family.
    • Today, both the Centre and the states spend over Rs 4,000 crore on social insurance schemes with different claim ratios. It is believed that the insurance coverage and costs can be optimised with a well-designed scheme that integrates all the risk covers: health, partial and full disability, and death.
    • Government-sponsored insurance schemes include the flagship Rashtriya Swasthya Bima Yojana (RSBY) that provides health insurance to poor households and Aam Aadmi Bima Yojana (AABY) that offers death and disability insurance to the unorganised sector.
  • BJP heaves a sigh of relief
    • With the dissident campaign in Karnataka having been effectively contained, and truce having been brokered between the two -- the Chief Minister and the dissidents led by Janardhan Reddy, BJP can at last heave a sigh of relief; even if it is temporary.
    • Read this story. Makes an interesting reading.
Finance & Economy
  • RIL in acquisition mode?
    • Reliance Industries is reportedly in talks to acquire LyondellBasell, a US based petrochemical major that is undergoing reorganisation under the protection of a US court.
    • RIL will enjoy a lot of synergies if it acquires LyondellBasell. It will benefit from state-of-the-art technologies of LyondellBasell. Besides, its marketing and distribution network come in handy. LyondellBasell will provide a ready market for RIL and RIL may turn it around if it is able to source feedstock at a cheaper rate.
    • LyondellBasell had posted a loss of $7.3 billion on annual revenues of $50.7 billion. It has $27 billion of assets and $19 billion of debt. RIL is smaller. It had a profit after tax of $3 billion on a topline of $29 billion for the year ended March 31, 2009.
    • LyondellBassell is the outcome of a number of mergers. Lyondell Chemical Company was earlier listed on the NYSE. It was the third largest chemical company in the US. In December 2007, it was acquired by Basell Polyolefins for $12.7 billion to create LyondellBasell — one of the world’s largest polymer, chemical and fuel companies. RIL has been eyeing the company after it filed for Chapter 11 under the US Bankruptcy Code in January 2009.
    • The primary products of LyondellBasell are polymers (polyethylene, polypropylene), chemicals (styrene, ethylene) and fuel (two oil refineries — one in Houston, one in France). The Houston refinery processes heavy crude (mostly from Venezuela) and has a capacity of 13.5 million tonnes/year.
    • The other refinery in France, which was purchased from Shell in 2008, has a capacity of 5 million tonnes. The US arm of the company had filed for bankruptcy protection on January 6, 2009.On September 15, LyondellBasell announced it will shut its 185,000 tonne a year low density polyethylene plant (LDPE) in the UK.
  • Should insurance agents be paid commission?
    • As the agent’s income is directly linked to sales, it is inevitable he will look after his own interest rather than that of the consumer and is likely to withhold the information that may jeopardise the closure of a transaction. This structure of commission encourages agents to sell policies that give them the highest commission. Generally, the agent lacks the qualifications and expertise of an adviser to assist consumers in evaluating and identifying a suitable product according to his requirements. Hence, the concept of commission-based agent is fundamentally flawed as it shortchanges consumers.
    • There are dozens of insurance companies offering a wide range of products from plain vanilla to complex insurance-cum-investment schemes. Evaluating them requires information, time and expertise. In such a scenario, the utility of the agent to a consumer is greatly reduced to mere service provider, at best, and gives way to a qualified adviser. This necessitates segregating the role of agents and financial adviser. Those consumers who want advise should pay for it and a regulatory framework for advisers would be desirable. Insurance companies can re-train their over one million agents if they want their services. There is no justification to make an exception, for commission, for insurance products.
    • Yet another view point runs like this:
    • Insurance companies carry additional risks on liabilities side. One bad risk would entail huge claim outgo. An agent plays a pivotal role in risk assessment process and therefore represents only one company and has to be compensated by his principal and not the investor.
  • A very good graphic on GST
    • You shouldn't miss reading this.
  • The concerted actions of policymakers to revive the global economy are doing more to reflate asset prices than lift economic growth; writes Ruchir Sharma
    • You must read this article to get a feel of the study. But some excerpts worth our attention:
    • Even though policymakers may have been successful in preventing the global economy from falling into an outright liquidity trap, there are now increasing signs that they are not getting the desired results in terms of fostering a sustainable recovery. A lot of the excess liquidity pumped into the system is heading towards unproductive assets in a way that could derail the comeback story.
    • It is incredible that oil and many other commodity prices are now trading well above the average price that prevailed during the 2003-07 economic boom even though demand is yet to recover. Global spare capacity is currently running at 8% and in the past, oil prices have only risen when spare capacity was below 5%. Indeed, world oil demand is set to contract in 2009 for the first time since 1983.
    • Speculative turnover in the commodity markets is also huge. Estimates put the daily trading volume of futures contracts in the energy space at a staggering 15 times underlying demand. The norm, just five years ago, for trading volumes of various commodities was four to five times actual demand.
  • SEBI mulls reforming the Mutual Fund industry
    • Capital market regulator Sebi plans to increase investor participation in mutual fund schemes to protect retail investors from the impact of selloffs by large investors and corporates.
    • Sebi is likely to increase the minimum number of investors required in a mutual fund scheme from 20 at present and bring down the maximum holding by a single investor from the current level of 25%.
    • The trigger for the proposed changes is the last year’s events that saw the mutual fund industry being rocked by sudden withdrawals by large institutional investors, especially in debt schemes, due to a liquidity crunch. Sebi is keen to ensure that redemptions by a few investors do not destabilise the schemes and create a run on the fund, impacting retail investors for whom MFs were designed. Industry officials say corporates own more than 50% of the total assets under management of MFs.
    • At present, Sebi rules require a MF scheme to have a minimum of 20 investors, with a single investor not owning more than 25% of assets. The rule — popularly known as 20-25 rule in MF industry circles — is applicable only at the scheme level and not at the plan or sub-plan levels. Typically, a scheme offers different plans that promise faster growth, higher dividends and bonuses. The 20-25 rule is unique to India.
  • It is two decades since the Berlin wall fell
Language lessons
  • execrable: Adjective
    • Of very poor quality or condition; Unequivocally detestable; Deserving a curse
    • eg: A recent report has it that among the plethora of existing execrable violent games , which seem to have legions of addicts across the globe, a new one is based on the ‘raping skills’ of players.
  • whinge: Verb (also whingeing or whinging)
    • Complain peevishly in an annoying or repetitive manner
  • zombified: Verb
    • Turn into a zombie
  • zombie: Noun
    • A dead body that has been brought back to life by a supernatural force; Someone who acts or responds in a mechanical or apathetic way
  • palaver: Noun
    • Noun: Flattery intended to persuade; Loud and confused and empty talk
    • Verb: Speak (about unimportant matters) rapidly and incessantly; Influence or urge by gentle urging, caressing, or flattering; Have a lengthy discussion, usually between people of different backgrounds