25.09.2010

Politics & the Nation

• The story of slow but sure death of the quarry workers
• Take a look at this story which tells us how the poverty stricken quarry workers in Rajasthan are dying a slow but sure death.  What are your suggestions with regard to tackling this problem?
• Celebrations cut short, extra 1% EPF interest to be taxed
• The government’s surprise gift for workers isn’t much of a gift after all. The labour ministry has hiked the employees’ provident fund, or EPF, rate to 9.5%, but a finance ministry notification says that anything in excess of 8.5% will be taxed.  This is because, even before the EPF board met to declare the higher rate, the CBDT (Central Board of Direct Taxes) had notified a tax-free PF rate of 8.5% for 2010-11 -- effectie from September, 1.  This means that the 9.5% provident fund return would be tax-free from April to August, but taxable thereafter.
• This is an unprecedented situation that is witnessed.  Historically, the tax-free PF rate notified by the income tax department has never been lower than the EPF rate declared for the year.
• Implementing tax deduction by the EPFO and the company-run trusts is sure to pose lot of problems.  For instances they will find it hard to calculate the tax liability on 1% PF income for seven months, as they don't have the appropriate systems in place to do so.
• The labour ministry is, however, confident that the tax department will renotify the higher rate, as otherwise a lot of contentious issues will come up.
• Cabinet agrees for giving statutory powers to UIDAI
• The government on Friday cleared the decks for the formation of a statutory body to be christened — National Identification Authority of India (NIAI), in order to give collection of data for allocating unique id numbers, a legal sanction. The approval by the cabinet paves way for introduction of the NIAI Bill 2010, in winter session of the Parliament.
• The legal sanction is for collection of private data of citizens and makes it difficult to challenge in a court of law. The sanction is needed as the government plans to allocate the first set of numbers to citizens in a few weeks in Maharashtra. In 2009, the Unique Identification Authority of India (UIDAI) had already made it clear that an Act of Parliament will set it up as a statutory body. But, already many NGOs are planning to challenge the proposed Bill.
• Once passed, the NIAI Act 2010 will contain a prescription against collecting any other information than the information permitted, with specific prohibitions against collection of information regarding religion, race, ethnicity and caste. It will also contain penal provisions against persons employed by, or associated directly or indirectly with, the data repository, registrars, enrolling agencies and other service providers for failing to comply with the directions issued under the Act.
• A very good comment made in the context of Sonia and Rahul realizing the importance of protecting the rights of the displaced and poorer sections of society
• You might be, by now, aware of the way Rahul has been conducting himself.  He championed the cause of the Dalits in the Dalit hinterland -- UP.  Then he took up the cause of the displaced tribals in Orissa and congratulated them saying that they won the battle against Vedanta.  
• It is in this backdrop that the following comment made by CP Bhambhri in today's op-ed deserves to be appreciated:
• “There is no disconnect between social welfare market economics of Europe and their economic growth trajectory because every social class and group, on the basis of historical experience of industrialisation, has come to realise that a politics that seek to primarily uphold working class interests has to be guided by a pragmatic definition of enlightened self-interest. Hence, European welfare capital is not at all guided by any ideology of socialism because experience has shown that non-ideological pragmatism is a good guide to diffuse social conflicts which arise if the labouring classes are neglected and they are not provided with social security.”
• Sonia and Rahul seem to have realized that what is possible in Europe, cannot be impossible in India.

Finance & Economy

• SEBI boss slams steep IPO pricing
• Market regulator CB Bhave (SEBI Chairman) charged investment bankers with fleecing investors by pricing initial public offers (IPOs) at astronomical valuations, leading to investor anguish when the market tide turns.
• Steep pricing could enrich bankers and companies, but persistence of the practice could demoralise investors, damaging capital markets, he said in what may be the first regulator comment on share-sale pricing since the abolition of the Controller of Capital Issues in 1992.
• The underperformance of the BSE IPO index—it gained 14.5% in the last 12 months, when the benchmark Sensex rose 19.45%—reflects the Sebi chairman’s charges. Furthermore, a price performance study by CARE Research, a unit of rating company CARE, showed that 62% of the 116 IPOs between August 2007 and August 2010 are trading lower than their sale price while 35% are ruling higher.

• Government turns cautious in gauranteeing loans of PSUs
• The government came out with a policy shift in respect of its gaurantees to the loans advanced by bankers to the PSUs.  This is reportedly done with a view to ensure two things -- one to discourage laxity in loan appraisals by the bankers and two to ensure that the lenders do bear some risk in advancing loans to PSUs.
• This is a marked shift from the earlier policy where the entire loan was guaranteed. The new policy on government guarantees says the state will back only 70-90% of the loan amount in some cases, leaving the lender to bear the balance risk.
• In the case of default on such a partially-guaranteed loan, the borrower will also have to first negotiate with the lender for the unguaranteed part. It could then approach the government to settle the balance amount.
• The immediate fallout of the new rules will be that despite the credit enhancement provided through government guarantees, such loans will be priced higher because of the partial risk that will stay with the lender.
• The government had committed to keeping such guarantees in check by putting a limit of 0.5% of GDP in any financial year in the fiscal discipline act, or the Fiscal Responsibility and Budget Management Rules, 2004.
• At the end of fiscal 2007-08 the total outstanding central government guarantee was Rs. 1,04,872 crore, 2.2% of GDP. The bulk of these relate to those given to international financial institutions for funding local lenders.
• The tighter rules will help free up guarantees where they may be needed more.
• It went on to suggest that instead of a 0.5% annual ceiling, the government should put a cap of 5% of GDP on the guarantee outstanding at the end of every year.
• The reduced level of government guarantee will have the desired effect of forcing public sectors to use the public-private partnership mode more for financing projects.

• Govt names WDRA chief; FMC may lose turf war
• Putting to rest a simmering dispute between the commodity futures market regulator and the food department, the government has appointed Dinesh Rai, a retired IAS officer, as chairman of Warehousing Development & Regulatory Authority (WDRA). The regulator is being set up to develop a negotiable warehouse receipt (NWR) system for agri commodities.
• Soon after Parliament passed the WDRA Act in 2007, Forward Markets Commission held that since its jurisdiction extended from the execution of a trade on exchanges to the settlement of a futures contract, it should be notified as the WDRA authority.
• However, the food department was in favour of having a separate regulator for monitoring warehousing and had been scouting for a whole-time chairman and two members to sit on the board of WDRA. In the absence of an independent regulator for warehousing, FMC has been regulating over 1.5 million tonne of warehousing capacity.
• A very good editorial comment on the reported move of the government to raise the ceiling for investment in government and corporate bonds by foreign funds
• Take a look at this comment here.  Well worth a reading.

International

• Petrobras offers the largest share sale ever
• Petroleo Brasileiro, the state-controlled oil company, raised as much as 120.4 billion reais ($70 billion) from the Brazilian government and other investors in the world’s largest share sale as it seeks cash to develop offshore fields. Petrobras, based in Rio de Janeiro, sold 2.4 billion common shares for 29.65 reais each and priced 1.87 billion preferred stock at 26.30 reais apiece.

Arts & Literature

• Jnanpith for Kurup, Akhlaq Shahryar
• Eminent Malayalam litterateur ONV Kurup and noted Urdu poet Akhlaq Khan Shahryar have been chosen for the Jnanpith Award for the year 2007 and 2008, respectively, for their contribution to literature.
• The recipients for the country’s highest literary honour were announced on Friday after a meeting of Jnanpith Selection Board chaired by noted Oriya writer and Jnanpith award winner Sitakant Mahapatra.
• Born in 1931 in Kerala’s Kollam district, Kurup is a leading voice among the contemporary Malayalam poets who has reinvented the narrative transition of Malayalam poetry. Born in 1936 in a Muslim Rajput family in Bareilly district, Shahryar shaped himself as an “intellectual poet”, whose poetry strongly expresses an “ideological noncommitment”.

Language lessons

• epiphany: Noun
• A moment of sudden understanding or revelation; A divine manifestation
• eg: During the Cold War, one bumper sticker used by peace activists read: “Nuclear weapons: May they rust in peace.” We need a similar epiphany for the malcontents of the information age.
• snifter: Noun
• A globular glass with a small top; used for serving brandy