Politics & the Nation- SC upholds death for Amma’s boys
- The Supreme Court has upheld the death sentence awarded to three AIADMK workers for burning alive three girls in a bus in Dharmapuri, following the conviction of former chief minister J Jayalalithaa in the Pleasant Stay Hotel case.
- The girls, who were on an educational tour, were burnt alive in the bus during the agitation that ensued on the conviction of Ms. Jayalalitha in the Pleasant Stay Hotel, Kodaikanal case.
- “There can be absolutely no justification for the commission of such a brutal offence. Causing the death of 3 innocent girls and causing burn injuries to another 20 is an act that shows the highest degree of depravity and brutality on the part of (AIADMK’s) Nedunchezhian, Ravindran and C Muniappan,” said a bench comprising Justice G S Singhvi and Justice B S Chauhan.
Finance & Economy- RIL makes Grand entry into EIH with 14% buy
- Mukesh Ambani turned white knight for the Oberoi family by helping it keep control of luxury hotel chain EIH, dashing ITC chairman YC Deveshwar’s long-cherished dream of one day gaining control of one of the world’s best hospitality brands for his diversified conglomerate.
- Reliance Industries, which has been investing in shale gas and exploration assets, took investors by surprise with a stake buy in the hospitality company for 1,021 crore, paying an over 30% premium to EIH’s Friday close. The deal upsets cigarette-maker ITC’s desire to one day control the company, and ends Max Group chairman Analjit Singh’s flirting with the Oberois for a substantial stake.
- RIL bought 14.12% in EIH, which runs the Oberoi and Trident chains, from the promoters, providing funds to them to subscribe to a possible preferential share sale. A new share issue could be designed to take the Ambani-Oberoi holding to more than 52%, people familiar with the plans said, with each holding 26%. The Oberoi family’s stake fell to 32% from 46% after Monday's deal.
- Look at this graphic for some more details.
- A good graphic on the Direct Taxes Code
- Look at this graphic for getting a bird’s eye view of the major proposals in the DTC bill introduced in the Lok Sabha.
- Should new telcos be allowed to surrender spectrum and get back their license fee?
- Yesterday we have noted that some of the new telecom companies are likely to exit -- i.e., surrender their license and get back their fee.
- Today’s ET editorial argues very well as to why they should not be allowed to surrender and get back their fee. Take a look at it here.
- How can we encourage entrepreneurship in India?
- This article makes a good read and presents some ideas in this regard. Some excerpts:
- First, put our own capital to work. Make prospective entrepreneurs understand that money should be means to improving our lives and not be an end in itself.
- Second, encourage the marriage of private companies with the public sector via public private partnerships (PPP). This ecosystem can harbour fresh ideas and provide navigational skills around regulations, and encourage people to take risks, while offering fair returns.
- Third, reengineer our legal system so that it is conducive to speedy reconciliation of pending disputes and within a time limit. A Paperwork Reduction Act that does away with the red tape that we see today in the public sector is also needed. This will make investments easier, bureaucracy accountable, decision-making speedier, and profits higher, both for, private and public sectors.
- Fourth, do away with the 10% cap (on total funds raised) imposed on venture capital funds for investments in foreign start-ups. Doing away with this cap will mean access to a multitude of technologies from the heavy R&D capital-invested West, which can be provided access to the huge markets in India through Indian entrepreneurs.
- Lastly, incentivise our existing private companies to take on the challenge of spotting and nurturing intrapreneurs to generate newer streams of shareholder value.
- On benchmark bonds
- Here is an ET in the Classroom column that explains the concept.
Language Lessons- probiotic: Noun
- A beneficial bacterium found in the intestinal tract of healthy mammals; often considered to be a plant
Politics & the Nation
- Geeta Johri files a curative petition before the Supreme Court
- In yet another twist to the Sohrabuddin encounter case, Ms. Geeta Johri who is being questioned by the CBI for conducting a no-so perfect enquiry into the case, has filed a curative petition before the Supreme Court seeking the removal of CBI's Balwinder Singh as supervisor of CBI's investigation into the matter. She has further accused the CBI of forcing her into implicating some politicians in the case -- including the jailed former Home Minister of Gujarat -- Amit Shah.
- Take a look at this news report, which makes an interesting reading.
- BTW do you know what a curative petition is?
- The concept of Curative petition was evolved by the Hon'ble Supreme court in the matter of Rupa Ashok Hurra vs.Ashok Hurra (2002) 4SCC338 where the question was whether an aggreived person is entitled to any relief against the final judgement/order of the Supreme Court,after dismissal of a review petition.The Supreme Court in the said case held that in order to prevent abuse of its process and to cure gross miscarriage of justice,it may reconsider its judgements in exercise of its inherent powers.For this purpose the Court has devised what has been termed as a "curative" petition. In the Curative petition,the petitioner is required to aver specifically that the grounds mentioned therein had been taken in the review petition filed earlier and that it was dismissed by circulation. This has to be certified by a senior advocate. The Curative petition is then circulated to the three senior most judges and the judges who delivered the impugned judgement,if available.
- No time limit is given for filing Curative petition.
- An excellent commentary excerpted from today’s ET editorial
- The comment was made in the context of Home Minister’s saffron terror remarks.
- India is as yet a developing democracy where primordial custom and tradition hold greater weight, for many, than the laws created by Parliament. For the polity to evolve to a coherent concourse of citizens who consciously create and perform their rights and duties, both collective and individual, leaders must show commitment to the core values of democracy, even when these conflict with custom and tradition. To shirk that responsibility, for fear of risking power, comes naturally to the average Congressman. Average Congressmen should not become party leaders or spokesmen.
Finance & Economy
- New telcos may exit, set off consolidation
- Some new telcos had reportedly approached DoT seeking refund of entry fee if they surrendered licences and spectrum while some others wanted to selectively surrender licences and spectrum in several circles as they faced ‘several’ constraints.
- New players have struggled with their rollout plans and their rate of adding new subscribers has slowed down. Etisalat and Loop (except in Mumbai) are yet to launch commercial operations despite holding pan-India airwaves to launch mobile services for nearly three years. Videocon has launched in only five of the 22 circles. STel, another new player, is also exploring options to merge or buy out another telco as its licences are limited to just six small circles.
- The telecom department (DoT) is reportedly examining proposals that would allow new mobile operators, who were given licences and airwaves under controversial circumstances two years ago, to sell out or exit, paving the way for a possible consolidation in the 14-player domestic telecom market.
- Some of the options that are available in this scenario include:
- Allowing some of the new entrants to merge with larger operators
- Relaxing the three-year lock-in clause for promoters
- Allowing incumbents to retain airwaves they hold even after merger
- On India’s energy scenario
- Here is an excellent graphic that gives facts and figures relating to the energy (petroleum sector) scene in the country. Very good one.
- IT department wakes up to the pending litigation
- With more than Rs. 75,000 crore locked up in litigation at the first stage of appeal itself, the income tax department appears to be looking for solutions to tackle the pendency.
- Reportedly it is looking at coming out with a jurisdiction less appeal management system to tackle the issue. For example, a commissioner appeals handling salaries cases has lesser number of cases but cannot look into corporate cases due to jurisdiction issues. To overcome such limitations, it is reportedly looking at a centralised system at the national level to manage distribution of appeals within the apex direct taxes body.
- It is time the IT department wracks its brains on pending litigation as it has about 1.78 lakh cases pending with commissioners (appeal), the first level of litigation, as of February 1, 2010.
- Can we achieve 4% farm growth?
- This is an excellent essay from a retired Secretary to Government of India -- Mr. Nanda Kumar. You can use material from this essay to answer quite a few different interview and mains exam questions.
- Some alarming facts about water consumption in the country
- Excerpts from an essay that appeared in today's ET.
- India’s inconvenient truth is that our country’s per-capita water availability has declined from 2,309 cu m in 1991 to below 1,700 cu m — the official waterstressed mark today. And if we do not change our ways dramatically, we are in real danger of becoming water-scarce, with per-capita availability nearing the 1,000 cu m by 2050, and our economic aspirations but a rude mirage.
- Rainfall is the main source of water in India, and we receive a substantial 4,000 billion cubic metres (BCM) annually. However, about 85% of this rainfall is confined to 4-5 months of the year, and varies widely from just 310 mm in the western belt, to a massive 11,400 mm in Meghalaya. This concentrated, yet uneven, rainfall leads to two major challenges: it causes floods as well as droughts at the same time.
- Compared to developed countries that capture and store over 900 days of rainfall in major river basins, India captures just 30 days. Consequently, of the total precipitation, a mere 1,123 BCM of water is available for utilisation: 690 BCM in the shape of surface water, and 433 BCM as groundwater resource.
- As is the case in most emerging economies, agriculture uses about 80% of our water supplies, industry uses 8% and domestic consumption is 6%.
- Can you guess how much water it takes to produce 1 kg of rice? 3,000 litres. Yes, 3,000 litres of water for each kilogram of rice. And India happens to be the largest producer of rice in the world. What’s more, the country ends up exporting up to 9.6 trillion litres of ‘virtual water’, in years of surplus rice production!
International
- ADB plans -bonds to fund pvt infra projects
- Multilateral institution Asian Development Bank (ADB) could take the lead in routing long-term insurance and pension funds into India’s infrastructure sector — an oft-repeated wish in India. ADB plans to enter the Indian debt market early next year to raise funds through rupee bonds to finance private sector infrastructure projects.
- ADB had issued rupee bonds worth $100 million in 2004, its firstever global foray into local currency borrowing. Since then, it has issued bonds in Chinese Yuan, Indonesian Rupiah and Phillipine Peso.
- In recent years, it has been financing Indian projects through crosscurrency swaps, or funds raised in other currencies are lent in India and the risk is hedged through swaps wherein payments in one currency are exchanged for another at an agreed rate.
- ADB is looking at offering a premium of 20 to 80 basis points on the rupee bonds over the prevailing government securities rate at the time of the issue.
- ADB is rated AAA by three international rating agencies. It needs to borrow an estimated $15 billion to $17 billion per annum in the next three calendar years.
- In India, the finance ministry had given the ADB a 4,475-crore window to raise local currency funds either through bonds or cross-currency swaps. Of this, about 2,711 crore has not yet been utilised.
- ADB’s infrastructure portfolio in India includes 66 projects (energy, power, transport, roads, railways, and communications) totalling more than $12.08 billion, and 129 technical assistance projects totalling more than $67.75 million.
- India needs over $1 trillion investment in infrastructure sector over the 12th Five-Year Plan (2012-17), more than half of which has to come from the private sector.
Language Lessons
- spot on: Adjective
- Exactly right
- eg: Home minister P Chidambaram was spot-on when he focused attention on the danger posed to India’s integrity by Hindu fundamentalist organisations that have taken to heart RSS guru Golwalkar’s thesis that non-Hindus can subsist in this country, at best, as second-class citizens.
- concourse: Noun
- A large gathering of people; A coming together of people; A wide hallway in a building where people can walk
- post-haste: Adverb
- As fast as possible; with all possible haste
- eg: The different segmental weights, as also the range of goods being tracked, clearly need to be revised and brought up-to-date, post-haste.
Politics & the Nation- Babri Masjid issue will be in the forefront again
- Babri Masjid-Ram Janmabhoomi dispute is set to be in the forefront again as Lucknow bench of the Allahabad HC is likely to pronounce verdict on the Ayodhya title suit in the second week of September.
- The Lucknow bench of the Allahabad high court is expected to pronounce its verdict on the Ayodhya title suit in the second week of September. The government foresees a crisis of sorts whichever way the judgement tilts. It will have major political consequences as votebank politics will take centrestage and could possibly lead to law and order disturbances not just in Uttar Pradesh but across the country.
- The court will be addressing three issues. One, whether there was a temple at the disputed site, prior to 1538. Two, whether the suit filed by the Babri committee in 1961 is barred by limitation. And third, whether Muslims perfected their title through adverse possession.
- Mukesh Ambani on World Economic Forum board
- Mukesh Ambani, on Friday, joined the foundation board of the World Economic Forum (WEF). Others joining the foundation board include French telecom major Alcatel-Lucent’s CEO J Verwaayen and Zhu Min, IMF special adviser and former deputy governor at People’s Bank of China.
Finance & Economy- While Cairn makes profits, how come ONGC is incurring losses on the Rajasthan oil fields?
- Have patience and read this entire lead story to understand the intricacies. But for the impatient...
- The root cause of it lies in the production sharing contracts that were drawn up with the then new private sector explorers.
- As per a 1993 government regulation, PSU companies were meant to undertake the entire royalty burden to woo private companies in India’s oil blocks. For a long time, this did not pinch the Indian companies as the oil blocks had not commenced full operations. But following the successful operationalisation of the Cairn oil blocks, its royalty obligation from this block alone has shot up to $500 million a year.
- ONGC pays royalty on the revenue earned on crude oil sold from the block. Assuming a global crude oil price of $70 a barrel and an average selling price of $60 a barrel for Cairn crude, the annual royalty payment by ONGC works out to $500 million a year or $40 per barrel with a production of 40 million barrels a year. The cost of producing oil (opex, cess and capex) from this block works out to around $18 a barrel. Add to that the royalty burden which ONGC has to pay of $40 a barrel. It is left with just $2 per barrel as returns as opposed to Cairn’s $42 per barrel.
- That is how while Cairn keeps making profit, ONGC keeps incurring losses.
- Petrol price hike likely
- Petrol may become costlier by 50 to 70 paise next week as state-owned oil companies get ready to exercise their pricing freedom for the first time after the government decontrolled petrol prices on June 26.
- Petrol prices went up by 3.50 a litre with the decontrol, but for further increases oil companies were to devise a transparent and market-linked pricing system.
- Petrol price may go up by 50 paise if oil PSUs take a 15-day average of international prices and up to 70 paise if a one month average is taken.
- The three public sector oil marketing companies (OMCs)—Indian Oil, Bharat Petroleum, and Hindustan Petroleum—will meet to work out a mechanism to peg pump prices of petrol to international prices.
- The pricing mechanism of the three PSUs, which control over 90% of the fuel retail market, will also impact private oil companies—Reliance Industries (RIL), Shell India and Essar Oil. Private retailers are unhappy with the government’s reluctance to free diesel prices. Petrol pricing freedom alone makes no sense as real business volume comes from diesel sale, pricing for that is still restricted. Diesel constitutes 40.8% of the total sales of petroleum products in the country.
- Since 2002 private oil companies are free to charge market rates for petrol and diesel but are unable to compete with their public sector counterparts who sell fuel often below cost under government dictate.
- On June 26 the government had announced freeing both petrol and diesel pricing from its control but allowed state-owned oil companies to fix petrol prices only.
- The government continues to control diesel prices sold through pumps of public sector oil companies. As a result, state-owned oil companies are losing about 2.50 on every litre of diesel sold from their pumps.
- Core sector grows 3.9% in July
- Core sector refers to the six infrastructure industries in the IIP figures. They are: crude oil, petroleum refining, coal, electricity, cement and finished steel. They have a combined 26.7% weight in the index of industrial production, or IIP, and are considered an advance indicator of industrial activity.
- About India’s gold trading
- Take a look at this graphic that gives us a peek into how the country trades in gold. Good one.
International- At 1.6%, US growth loses steam in Q2
- The US economy grew at a 1.6% annual rate in the second quarter, less than previously calculated, as companies reined in inventories and the trade deficit widened.
- Experts said the likelihood of the economy slipping back into a recession is now 33%, up from a 20% chance 12 weeks ago. New York University economist and forecaster Nouriel Roubini, who predicted the financial crisis, said the odds of a return to recession at 40%.
- The trade gap in the second quarter widened to $445 billion, compared with an initial estimate of $425.9 billion, subtracting 3.37 percentage points from growth, the biggest reduction since record-keeping began in 1947. Imports grew at a 32.4% pace, the most since 1984.
Language Lessons- coy: Adjective
- Affectedly modest or shy especially in a playful or provocative way; Showing marked and often playful or irritating evasiveness or reluctance to make a definite or committing statement; Modestly or warily rejecting approaches or overtures
- imprimatur: Noun
- Formal and explicit approval
- eg: On Thursday, Rahul Gandhi added the Gandhi family’s formidable imprimatur on Mr Ramesh’s move as the Congress party seeks to win back its core constituency of dalits and tribals.
- pilaster: Noun
- A rectangular column that usually projects about a third of its width from the wall to which it is attached
- schist: Noun
- Any metamorphic rock that can be split into thin layers
- scrimp: Verb
- Subsist on a meagre allowance
Politics & the NationFinance & Economy- DTC gets Cabinet approval; bill to be introduced in Parliament on Monday
- The Union Cabinet on Thursday approved a new set of direct tax rules that proposes to raise income tax exemption limit from 1.6 lakh to 2 lakh, leaving more money in the hands of individuals, and a lower tax rate for companies.
- The much-awaited Direct Taxes Code, or DTC, Bill, which seeks to replace the nearly 50-year-old income tax law, is likely to be introduced in Parliament on Monday and may then be referred to a select committee of members of both houses of Parliament.
- Senior citizens and women will enjoy a higher exemption to up to 2.5 lakh. There will be no surcharge or cess on companies, thereby bringing the corporate tax rate to 30% from present 34%.
- The new code proposes three income tax slabs—income of up to 2-5 lakh will face 10%, 5-10 lakh will attract 20% and income over 10 lakh will face tax at the rate of 30%. The housing loan exemption of 1.5 lakh would also be available to individual taxpayers on the interest component.
- The government proposes to raise the minimum alternate tax (MAT) on book profits to 20% from current 18%.
- Look at this graphic to get a picture of what it means for our purse.
- Take a look at how Mukesh Ambani makes his RIL holding 'tax efficient'
- You might have noticed news reports which said that Mukesh Ambani has been restructuring his holdings in RIL, in the last few weeks. What exactly are the motives for this restructuring? 'Tax efficiency' is what is being touted as the reason. Is there something more behind it? Only time can tell. But here is what ET tries to explain for us.
- NTPC experiments with new business models
- With a view to ensure uninterrupted supply of fuel for its power plants, NTPC is offering stakes to gas suppliers in its power projects. This is in sharp contrast with the strategy of buying equity assets in gas abroad.
- The state-run power producer has offered up to 20% equity to Qatar Petroleum in its gas-based projects at Kayamkulam in Kerala and Ratnagiri Gas and Power in Maharashtra.
- The company’s board has empowered the management to negotiate a deal. NTPC doesn’t need prior approval from the government, which holds 74% in the company, as it has been granted maharatna status that offers functional autonomy to public sector firms.
- Offering equity stakes to component suppliers is a common practice in the automobiles industry, but replicating the same has been found difficult for resources based-companies, given the global competition for such assets. Secured fuel supply will help NTPC expand the capacity of these power plants.
- Bits and pieces on angel investing and crowd funding
- In developed markets such as the US, around 3.5 lakh angel investors put in up to $ 30 billion every year. In India, only about 1% of the total funds invested makes it to early stage companies.
- Crowd funding describes the collective cooperation, attention and trust by people who network and pool their money together, usually via the Internet, in order to support efforts initiated by other people or organizations. Crowdfunding occurs for any variety of purposes, from disaster relief to citizen journalism to artists seeking support from fans, to political campaigns.
International- Do you know it costs to keep your savings in banks in the US?
- It's getting tougher for US savers to find a bank where they won’t end up paying to keep their money safe.
- Average interest on savings, checking, money-market and certificate of deposit accounts fell to 0.99% in July, the first decline below 1% in a decade.
- The result is that an increasing number of savers are seeing their deposit earnings eaten up by charges.
- The low-rate environment is created by the Federal Reserve as it has kept the overnight interbank lending rate target near zero since the end of 2008 to stimulate the economy after the collapse of Lehman Brothers Holdings.
- Unattractive rates and new fees may drive consumers to smaller banks and credit unions.
- The average interest rate offered on a checking account by a credit union is 0.21%. That compares with 0.12% at the five largest banks and five largest thrifts in each of the 10 largest markets.
Language Lessons- appellation: Noun
- Identifying word or words by which someone or something is called and classified or distinguished from others
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