05.08.2010

Politics & the Nation

• The corruption scandal in CWG leaves our jaws dropped
• Take a look at lead story. CWG-OC’s decisions are baffling. Why is that they are not coming forward to explain the exhorbitant rents, prices and payments?
• Meanwhile newspaper reports are saying that many marketers and advertisers have decided to stay away from the Commonwealth Games because multiple agencies are trying to sell sponsorship deals at different rates, creating total confusion in the market.
• Of the 48 sponsorship opportunities identified by the organising committee, only 11 have been filled so far.
• Maharashtra proposes Green Cess on old vehicles
• Green cess is set to become a reality in Maharashtra. The state Cabinet on Wednesday approved a transport department proposal to levy a special cess on all vehicles, private as well as public, which have outgrown the age under the emission norms.
• For the tax to come into force, the state will have to amend the Mumbai Motor Vehicle Tax Act, 1958.
• The vehicles that will invite this tax broadly fall into two categories — those that have completed 15 years on road since their first registration and 8-year-old public transport vehicles.
• The state has 15 lakh vehicles falling under the first category while there are 6 lakh public transport vehicles which have completed 8 years on road.
• Protests halt work on Jaitapur nuke project
• The proposed 10,000-mw nuclear power plant at Jaitapur in Ratnagiri district along the Konkan coast, continues to face hostilities from local people. Violent protests by local villagers finally resulted in the work being stopped.
• People affected by the proposed project have made clear their resolve to continue the agitation and even higher compensation will not make them change their decision.
• Due to the stiff opposition by the villagers, the government has not been able to acquire enough land for the project that will house six European pressurised water reactors (EPRs), each with a 1,600 MW capacity.
• The villagers are angry over the government’s unilateral decision to take over their prized land against a meagre compensation which is based on the March ‘08 property rates.
• According to the initial plan, the project would come up over 938 hectares and was expected to be completed around 2020.
• Political impasse over GST
• In the context of the prevailing political impasse over the constitutional amendments required for implementing GST from April 2011, this interview from an expert on the subject is worth a read. Take a look.

Finance & Economy

• Hunt on for Ratan Tata's successor
• The search for a successor to Ratan Tata gathered momentum after India’s biggest conglomerate said a five-member panel would select its next chairman. Mr Tata, 72, head of the $70-billion salt-to-software group, who has built the world’s cheapest car and has taken the group global, will step down in December 2012, creating a vacancy for what is widely regarded as the top job in corporate India.
• At the helm since 1991, Mr Tata has led a spectacular international foray, resulting in 65% of the group’s revenues coming from abroad. In 2007, Tata Steel paid $13 billion to buy Anglo-Dutch steelmaker Corus, while Tata Motors paid $2.3 billion to acquire Jaguar Land Rover the next year.
• Ratan Tata’s great grandfather Jamshetji Nusserwanji Tata, born to a Parsi family in Navsari, Gujarat, founded the group. Dorabji Tata succeeded Jamshetji as the chairman of the Tata group. JRD Tata, who is considered as the architect of modern business in India, took the group to greater heights.
• In all the Tata Group’s 98 operating companies have annual revenues of $71 billion and 357,000 employees.
• Navi Mumbai airport may finally take off
• The Navi Mumbai Airport proposal, which had triggered a spat between civil aviation minister Praful Patel and environment minister Jairam Ramesh, appears to be heading for a resolution, with Prime Minister Manmohan Singh putting his weight behind the project. The environment ministry has been holding back clearance, as it could adversely impact ecology of the region identified for the project.
• The prime minister seems to be of the view that environmental issues should not be allowed to come in the way of the project, particularly when he had set an ambitious aim to convert the country’s financial capital into an approximation of Shanghai.
• Developing the airport would result in the destruction of 400 acres of mangroves, diversion of two rivers and the blasting of an 80-ft hillock. The destruction of the mangroves is of particular concern, as they act as a natural buffer against sea and coastal erosion.
• Other criticism that the project faces is that the environmental impact assessment report did not address issues regarding compliance with the coastal zone regulations, the impact of diversion of rivers and the clearing of the mangroves. The project proposal did not also include a social impact assessment (SIA) study, a requirement under the National Rehabilitation and Resettlement Policy, 2007.
• The Navi Mumbai airport project was given an ‘in-principle’ approval by the Union Cabinet in May 2007.

• RBI unveils draft rules for CDS
• RBI unveiled draft rules for credit default swaps (CDS), instruments which offer protection to investors against non-payment.
• RBI's draft rules on CDS have proposed that regulated lenders, mutual funds and listed companies be allowed to insure themselves against a possible default on the bonds they hold. The protection, which will be offered in the form of CDS, to be sold by banks and finance companies with a net worth of over Rs. 500 crore and bad loans of less than 3%. Banks that intend to sell these swaps will need to have a capital adequacy ratio of at least 12% while for non-banks, the bar has been set higher at 15 %, according to the draft norms.
• In a way CDS works like an insurance cover. The premium cost of cover is reflected in the CDS spread. Higher the spread, the greater is the perception of a risk of defaulting.
• CDS came in for wide criticism after the global financial crisis after it emerged when insurance giant AIG had sold protection against sub-prime loans most of which turned bad.
• There are a number of ways in which CDS in India will be different from those that brought down AIG.
• First, the protection can be sold against risks of a single issue. In the case of AIG, the protection was provided for a mortgage-backed security representing thousands of unknown home loans.
• Secondly, the protection can be bought by only those who actually hold the bonds. The global financial crisis was accentuated by the fact that many investors, who were not holding any bonds, bought protection betting on the default of a particular corporate.
• Thirdly, RBI has severely restricted the number of parties that can offer or sell this product.
• All about the Purchasing Managers’ Index
• A very good ET in the Classroom column on the subject.

• India can afford to be cozy
• Given its state of the economy vis a vis the state of the major economies of the world, India appears to be comfortably placed. To understand what this means, you should read today's op-ed by TT Ram Mohan. A good read.
• But an excerpt on coupling thesis.
• In 2008-09, we found that we were far more dependent on global economic conditions than we had supposed. As the global crisis peaked, our growth rate dropped to 6.8%. Why should things be any different if the advanced economies were to go through another recession?
• There are reasons to expect a different outcome now. We were coupled with the world economy not so much through trade as through our dependence on capital flows. In a time of financial crisis, there is a flight to safety and out of emerging markets. This impacts domestic interest and exchange rates. It also impacted corporate investment in India as corporate investment had been financed by foreign borrowings to a greater extent than suspected.

International

• A recap on what is holding up the Doha round of WTO talks
• The current round of multilateral trade talks, launched in Qatar’s capital Doha in November 2001, hit a road-block in the July 2008 Geneva mini-ministerial following a disagreement over a handful of issues such as protection to poor farmers against import surges, steeper duty cuts on select industrial goods and commitments from the US on reducing its cotton subsidies.
• Apart from unresolved issues in the areas of agriculture and Nama, the entire services chapter remains to be worked out. Tighter rules on antidumping, regime for least developed countries, streamlining of fisheries subsidies and fair implementation of the intellectual property agreement (Trips) are other important issues that need to be sorted out.

• It’s a charity wave as billionaires rush in
• More than 30 US billionaires pledged on Wednesday to give away at least 50% of their wealth to charity as part of a campaign by investor Warren Buffett and Microsoft founder Bill Gates.
• Among the billionaires joining the campaign are New York Mayor Michael Bloomberg, entertainment executive Barry Diller, Oracle co-founder Larry Ellison, energy tycoon T Boone Pickens, media mogul Ted Turner, David Rockefeller and investor Ronald Perelman, according to The Giving Pledge campaign.
• The Giving Pledge was started in June by Gates and Warren Buffett. They wanted to persuade hundreds of US billionaires to give away most of their fortune during their lifetime or after their death and to publicly state their intention with a letter of explanation.
• Buffett pledged in 2006 to give away 99% of his wealth to the Bill & Melinda Gates Foundation and family charities. Bill and Melinda Gates have so far donated more than $28 billion of their fortune to their foundation.
• Since the foundation began in 1994, it has given away more than $22 billion for health improvements in poor countries and to improve access for Americans to opportunities they need to succeed in school and life.

Language Lessons

• purloin: Verb
• Make off with belongings of others
• eg: Wicked men endeavour, by means of their tongues, to purloin their neighbours' property.