30.04.2010

Finance & Economy

• Telcos dispute CAG’s power to audit them
• The country’s leading mobile operators, including Bharti Airtel, Vodafone Essar, BSNL and Tatas, have questioned the government’s move to direct the Comptroller and Auditor General of India (CAG) to audit their books. The CAG is a constitutional authority that conducts independent audits of all government accounts.
• This is the second instance of the government wanting to examine the telcos’ books. The move follows allegations of under reporting of revenues. Since telcos pay 6-10% of their annual revenue as licence fee and 2-6% as spectrum usage charges, reporting lower revenue brings down the component they have to share with the government.
• CAG officials, however, reportedly said that a 2002 notification authorises it to audit the accounts of telecom companies, as they share a part of their revenues with the government. So far, the CAG never exercised this power.
• In April 2009, the government had ordered a special audit of the account books of top private cellphone companies, including Reliance Communications (RCOM), Bharti Airtel, Vodafone Essar, Tata Teleservices and Idea Cellular, to ensure that they have correctly reported and shared revenue with it. The audits aimed to establish if there were any discrepancies in the revenues reported by these companies. The special audit reports for Reliance Communications, Bharti Airtel, Vodafone Essar and Idea Cellular have already been submitted to the department of telecom (DoT) while Tata Teleservices’ is expected to be completed soon.

• How should economic indices be built?
• We all know that India has very few indices to monitor its economy effectively. Even those that it has, many economicsts rue, are rarely ever dependable. So, building indices de novo, is one solution to the problem. Take a look at what ET recommends in its editorial today in this regard:
• India needs an official leading indicators index, to better gauge early growth trends, even as we have some such indices developed by non-government agencies. The objective ought to be to better monitor the Indian economy, detect early warning signals and firm up proactive policy in response. Leading indicators can include placement of new orders, intention to build and changes in profitability etc. In tandem, what’s called for is a suitable lagging index, encompassing levels of stocks, utilisation of sanctioned loans, the going rates of interest, etc, to clarify and confirm the emerging pattern in economic activity. Leading indicators come up before coincident indicators, which in turn are tabulated before lagging indicators. A composite index of the three indices would represent the broad industrial economy, able to iron out measurement errors due to statistical biases, cyclical trends and the like.
• The status of regulating the petroleum sector
• The PNG (Petroleum and Natual Gas) sector consists of four sub-sectors: exploration and production of PNG, oil refining and marketing, natural gas transportation and marketing, and crude oil and petroleum products pipelines. Of these four, the first, referred to as upstream, is supposed to be regulated by the directorate general of hydrocarbons (DGH) while the remaining three downstream sectors fall under the domain of the Petroleum and Natural Gas Regulatory Board of India (PNGRB).
• As per the MoPNG order, the DGH has been mandated to regulate only one area —the preservation, upkeep and storage of data and samples pertaining to petroleum exploration, drilling, production of reservoirs etc — and to cause the preparation of data packages for acreages on offer to companies. In all other areas relating to various aspects of exploration and production, it is only supposed to advise the MoPNG. In reality, therefore, it is the ministry that regulates the upstream sector, with the DGH virtually functioning as an advisory wing of the ministry.
• Before March 28, 2002, the marketing and pricing of petroleum products including transportation fuels, namely, motor spirit (MS) and high-speed diesel (HSD), were controlled by the government under a mechanism known as administered price mechanism (APM). The APM was dismantled by a notification dated March 28, 2002, under Section 3 of the Essential Commodities Act, 1955. Then, in 2006, the PNGRB came into existence. As a result of these two events, the theoretical position obtaining since October 1, 2006, is that all entities are free to price their products and the PNGRB is to regulate anti-competitive behaviour like predatory pricing. However, strangely, the government (read: MoPNG) still fixes the prices of MS and HSD and the PNGRB appears to be either powerless or disinterested in doing anything about it.
• EPFO finally seems to be facing some heat
• Reportedly there were over 46,69,330 withdrawals from the provident fund in 2008-09, a jump of 16% over the previous year.
• Competition apparently is forcing EPFO to switch to electronic payments through NEFT (National Electronic Fund Transfer Network), which covers 95 banks with over 67,000 branches. NEFT is a nation-wide system that facilitates electronic transfer of funds between any bank branches in the country.
• EPFO covers around five lakh establishments under its three schemes -- the Employees Provident’ Fund Scheme, Employees’ Pension Scheme and the Employees’ Deposit-Linked Insurance Scheme -- and has about five crore subscribers. It sends payments through cheques, a process that takes up to a month and leads to a large number of complaints.
• There were around 11,75,160 claims pending till March 2009. Around 60,000 of these claims had been pending over for more than six months.
• Asia may overheat on capital inflows
• The World Bank predicts as much as $800 billion in global capital flows this year, compared with about an annualised $450 billion to developing economies in the second half of 2009.
• Emerging markets need to take “urgent action” on the surge of liquidity and capital flowing into their economies because they could spur inflation and trigger another crisis.
• While that is expertspeak, what does it point to us -- the laymen? Our markets will be on the upswing, barring a few hiccups now and then.

Language Lessons

• critter: Noun
• A regional term for 'creature' (especially for domestic animals)