Politics & the Nation- One more regulator on the anvil
- This time it is a regulator for wireless radio spectrum.
- TRAI wants to exercise this power. But the telecom minister Mr. A. Raja feels otherwise and is toying with the idea of establishing a separate regulator who will also have control over the wireless spectrum used by the Armed forces. Even the Armed forces are reportedly unhappy with the move.
- It would be called the National Radio Regulatory Authority of India.
- Wireless spectrum has been the cause of much heartburn, bickering and scandal. Mobile phone companies have been squabbling with each other over the amount of 2G frequencies — the airwaves which carry most of our cellphone communications now — they are entitled to hold. Allegations of corruption in the allotment of 2G licences and airwaves in 2008 are being investigated by CBI and the auction of 3G airwaves for high-speed data services was delayed for months because the spectrum that was meant to be allotted was in the hands of the armed forces.
- Former IG of Kerala sentenced to life
- Four decades after the sensational murder of Naxalite leader Arikkad Varghese, in February 1970, a CBI special court in Kochi on Thursday sentenced retired IG K Lakshmana to life imprisonment for the crime. Lakshmana’s colleague P Vijayan, who retired as DGP, was acquitted in the case after being given the benefit of doubt.
- Varghese’s death had been passed off for an encounter killing for almost three decades until Ramachandran Nair, one of the police constables who had been a part of the squad that killed Varghese, made the startling confession that Varghese had been shot to death by him at the orders of Lakshmana, then a deputy superintendent of police.
Finance & Economy- Round tripping in diamond trade
- Look at the following for some lessons in how this occurs: (excerpted from today's ET)
- STEP 1: Diamond merchant ABC gets pre-shipment or packing credit for three months from a bank of, say, $100 to import rough diamonds and pay for labour charges
- STEP 2: ABC cuts and polishes the diamonds and exports them at $120 to, say, EFG, not a genuine client, but his own person, located in Dubai, New York or HK
- STEP 3: Once this is done, he takes post-shipment credit of $120 against export receivables, extended by the bank for up to six months. Of this, he pays back $100 extended by the bank as pre-shipment credit
- STEP 4 The same diamond is returned through another destination to ABC from say, XYZ, again his own person, and the same procedure of acquiring bank finance is repeated against export of the same diamonds. The practice is easy as there is no duty on polished diamond import.
- Chemicals industry to get first right over ethanol?
- An expert panel on ethanol pricing headed by the Planning Commission member Saumitra Chaudhuri is reportedly considering recommending giving priority to the chemical industry in ethanol allotment. If this were to happen, it is likely to deal a big blow to the programme of blending ethanol with petrol.
- The Union Cabinet had approved a mandatory 5% ethanol blending with petrol under the programme and an interim price of Rs 27 per litre was approved. The Plan panel is expected to arrive at a formula to derive a long term, fair and remunerative price for the commodity.
- India imports more than 80% of its crude oil requirement. The 5% ethanol in petrol would have helped cut import of crude oil.
- India lets IMF, Bank check its financial pulse
- India has agreed to an International Monetary Fund (IMF) and World Bank scrutiny of its financial system to assess the country's capacity to manage a financial crisis, as part of the global efforts to prevent a 2008 type of financial meltdown, which could also trigger some financial sector reforms.
- The government has communicated to the Financial Stability Board (FSB) to be considered for a full-fledged financial sector assessment programme (FSAP) by IMF and World Bank. This follows asuggestion by the FSB in this regard after the results of self-assessment were communicated to it.
- The result of the scrutiny would be a report from them and it would only be recommendatory and there would not be any mandatory obligations on India to carry out any reform it does not agree to.
- The FSAP provides the framework for comprehensive and in-depth assessments of a country's financial sector, and was established in 1999, in the aftermath of the Asian crisis.
- India was among the first to undertake the pilot FSAP in 2000-01. In addition, India also undertook a comprehensive self-assessment of International Financial Standards and Codes during 2002 and undertook a review in 2005.
- Do we have another Raghuram Rajan in the making here?
- Take a look at this interview from a very well informed Professor Gita Gopinath from Harvard University. The perspectives that she brings to the table on issues close to the heart of many an indophile and students of Indian economy like us, are really worth our attention. Recommend a strong read of the entire interview.
Language Lessons- don’t give a fig about: idiom
- if you say that you don't care a fig, you mean that something or someone is not important to you at all
- eg: It’s a reaction the 1-lakh car has been evoking among people who otherwise, in their choice of cars, don’t seem to give a fig about price, fuel economy and the like.
- tipster: Noun
- One who sells advice about gambling or speculation (especially at the racetrack)
Politics & the Nation- A sampler of the corruption that has gone into CWG
- Prasar Bharati was more than willing to bend backwards to accommodate the whims / demands of SIS Live to serve the latter’s commercial interests.
- Read this new report.
- Should the practice of presenting a separate Railway budget be discontinued?
- This question is popping up of late in quite a few debates. Take a look at this interesting face-off in today’s ET.
- Some interesting historical facts about Railway budgeting:
- A separate Railway budget was the brainchild of Acworth Committee.
- Railway budgets were presented separately for the last 86 years.
Finance & Economy- Small investors may get bigger share in PSU floats
- The department of disinvestment plans to pitch for a higher quota for retail investors in forthcoming share sales at state-run companies, as it looks to use the buzz generated by the Coal India IPO to take equity culture to Indian households.
- Existing norms stipulate that at least 35% of the shares offered in a book-built share sale, where investors are asked to bid in a pre-decided price band, must be reserved for retail investors.
- Sebi’s decision to double the retail investment limit in public offers to 2 lakh from 1 lakh will help small investors benefit more from higher reservation. However, the increase in retail quota is likely to be done on a case-to-case basis, after consulting the company concerned and the administrative ministry.
- The current move is aimed at sharing public wealth with small investors, spreading equity culture to a wider population, and broad-basing the market.
- In 2009-10, public offers from PSUs, including that of power producer NTPC, received lukewarm response from retail investors. The retail portion of the NTPC offer was subscribed just 0.16%.
- The offers from REC and NMDC also met the same fate, with their retail portions failing to attract enough investors. Market analysts attribute this to aggressive pricing. All these issues received an overwhelming response after the government cut the offer price.
- Why do we want to dilute the IFRS standards before moving to them?
- Take a look at this interesting news report which details how we are trying to dilute the accounting standards before moving to them.
- The government is reportedly planning to dilute some key provisions relating to foreign exchange differences and overseas borrowings which will make global investors suspect Indian accounting.
- In the case of accounting for foreign exchange differences that rise because of currency derivatives taken by firms, the government is looking at an option where companies need not provide for any loss in the profit and loss statement but rather just carry forward the value as at the end of March 2011.
- The National Advisory Committee on Accounting Standards (NACAS), an advisory body for the corporate affairs ministry, is reportedly in favour of allowing companies not to provide for mark-to-market (MTM) losses on their foreign currency convertible bonds (FCCBs).
- MTM is an accounting principle where the value of the contract is marked at current exchange rate for currency derivatives and current bond price for FCCBs.
- Both dilutions will be major departures from what the International Financial Reporting Standards (IFRS) prescribe. It has huge upside for India Inc in the short term by helping it to avoid reporting such MTM losses prescribed by IFRS. But it may work to its detriment in the long term by making companies unattractive to global investors.
- On FII inflows into the country
- The FII inflows in the current year has crossed $25 billion ($20 billion in equity and $5 billion in debt) in the current fiscal with $6.11 billion equity inflow coming in October itself. At this rate, inflows could cross the bumper $61.6 billion inflows seen in 2007-08, when the government was forced to take some tough measures.
- Government tries to extend health cover
- The government is set to take another step towards extending free health cover to the vulnerable low-income earners that are above the poverty line in mathematical terms but are in need of protection from debilitating health emergencies.
- The Union Cabinet will consider including the country’s four million-plus domestic workers into its flagship insurance scheme for the poor, rashtriya swasthya bima yojana (RSBY), after adding street vendors to the eligible categories last week.
- India’s domestic workers are not covered under any labour legislation and for the first time they are being made eligible for some social security cover.
- The RSBY entails cashless treatment up to Rs. 30,000 annually to a family of five at empanelled government and private hospitals through smart cards.
- The domestic workers, like BPL families, will not have to contribute at all to the insurance scheme except for . 30 as registration charges. The Centre will take care of three-fourth of the funds requirement, while states will have to foot the rest.
- A report on domestic workers prepared by the task force set up by the labour ministry points out that most laws do not recognise domestic work as real work, and domestic workers as real workers.
- Because of this, the existing labour legislations fail to include them in the categories of workers and some even specifically exclude them from labour legislations.
- Tough times for MFI sector
- With allegations about collecting agents of microlenders driving borrowers to suicide making their appearance, the MFIs are in for some tough times. Even the RBI has reportedly appointed a committee under financial sector expert YH Malegam to study and recommend measures to handle their growth without causing social disturbances.
- Is inflation going to moderate in the coming months?
Sport- Venky’s acquires English club Blackburn Rovers for £46 m
- Venkateswara Hatcheries, a seller of poultry products based in Pune, has emerged as the rather unlikely buyer of Blackburn Rovers, a football club that plays in the English Premier League (EPL), for £46 million.
- Look at the reasoning given by Anuradha Desai, the Chairperson of the group: “Football is a global craze and as the VH group globalises, setting up feed plants and hatcheries around the world, we believe we can benefit from being owners of a major football club. It will help build our brand, too. Moreover, we are a protein company, in the health business and there is synergy with health and sports. We have been sponsoring tennis and cricket matches and tourneys here. Now that we are going global, we need a global sport, hence a football club.”
- Blackburn Rovers FC, established in 1875, is among the three English football clubs to have been among the founders of both, the Premier League, and its predecessor the Football League. It has been facing financial difficulties.
- The VH group will acquire the Blackburn, Lancashire based football club, from its current owners, the trustees of the Jack Walker 1987 Settlement, a Jersey trust. Jack Walker, a Lancashire steel magnate, bought the Club in 1992 and followed it up with some high-profile acquisitions of players which took the Club win the Premier League in 1995.
Language Lessons- party pooper: Noun
- Someone who spoils the pleasure of others
- gainsay (gainsaid): Verb
- Question the truth or validity of; take exception to
- dogma: Noun
- A religious doctrine that is proclaimed as true without proof; A doctrine or code of beliefs accepted as authoritative
- eg: ...while sound economics is critical in the formulation of governmental policy, it should not regress into dogma.
Politics & the Nation- Terms of reference for the Shunglu panel
- You might be aware that the government has appointed the VK Shunglu Committee to probe allegations of corruption charges in the conduct of the CWG. The other member of the committee is Shantanu Consul, Secretary of the Department of Personnel and Training (after his retirement on October 31).
- The committee has been asked to give its report within three months.
- It would not look into specific cases of graft as investigative agencies like CBI, Central Vigilance Commission, Enforcement Directorate and incometax department are already handling various corruption-related cases.
- While the committee might not try and establish the money trail, it would be given powers to investigate larger decision-making process. There are allegations about how decisions on award of contracts were delayed so much that there was manifold cost escalation. The probe panel would try and fix responsibility for delayed decision-making process that led to embarrassment for India.
- I-T search in 60 places of Reddy pals
- Income tax officials searched about 60 places of persons close to mining magnates and ministers Reddy brothers, amid allegations of horsetrading levelled by Congress and Janata Dal (Secular) against the Yeddyurappa-led BJP government in Karnataka.
- The legislators who faced I-T searches are B Nagendra, representing Kudligi, and T H Suresh Babu, elected from Kampli, both in the iron ore rich district of Bellary, the political stronghold of the Reddy brothers.
- The I-T searches saw Congress rebel MLAs showing public display of unity. Congress MLA from Afzalpur, Mr Mallikayya Guttedar, who had on Sunday had threatened to quit the party did a turnaround on Monday.
Finance & Economy- Sebi issues ‘warrants’ to rein in promoters
- The Sebi tightened the rules governing warrant issues, which in the past allowed promoters to enrich themselves when the markets soared, but get away lightly when they crashed.
- If the promoters don’t exercise warrants by the stipulated date, they won’t be eligible for any share or warrant purchases for the next 12 months. Convertible warrants give promoters the option to convert warrants into equity shares at a pre-determined price.
- There were complaints that promoters allotted warrants to themselves and select investors at a pre-determined price, but didn’t buy them when the due date came if the prevailing stock prices were lower than the decided price. If the prices were higher, they would convert those warrants and at least make a paper profit, and in some cases encash the gains. If promoters or promoter groups sold shares in the previous six months, they would not be eligible for allotment on preferential basis either. Warrants are seen as an instrument that gives an advantage to promoters above retail investors, who have all other rights equal to company founders.
- But others believe they give the company an assured capital at a future date, when it may be required for a planned investment but may not be available from other sources. When the markets melted during 2008 and early 2009, promoters of many companies such as Hindalco Industries, Tata Power, GE Shipping and Pantaloon Retail did not convert those warrants, regulatory filings show.
- Status of multibrand retail FDI
- Foreign investment in multi-brand retail is not allowed at present, but multinationals can invest up to 51% in single-brand retail. Foreign retailers such as Wal-Mart and Germany’s Metro that operate in the wholesale segment have been lobbying hard to open up multi-brand retail.
- Despite the advent of players such as Reliance, Aditya Birla Group and Bharti, organised retail accounts for just 6% of the Indian market and the presence of these players is restricted to large cities and suburbs.
- Sebi may rule financial sector in rejig
- Market watchdog Sebi could be the sole regulator for all financial transactions when the financial laws are rewritten by a body proposed in the budget, taking over the jurisdiction of the other regulators over some products.
- The February 2010 budget has announced a new body, the Financial Sector Legislative Reforms Commission, or FSLRC, to rewrite the financial sector laws.
- The prime objective of the FSLRC will be to clean up the financial sector regulator and create a unified legislative framework.
- A retired Supreme Court judge will head the body that will examine the inconsistencies and overlaps in the financial sector laws and work out a standard principle-based financial regulation.
- Most of the legislation governing the country’s financial sector are very old and a number of amendments to them over time have further increased their ambiguity and complexity.
- This has lead to turf war between the regulators, the recent public tiff between Sebi and the insurance watchdog, IRDA, over regulation of unit-linked insurance products, or ULIPs.
- The FSLRC will look at the objectives of each financial regulator so that there is no overlap amongst the regulators or different financial bodies over regulation of different products.
- Most of the expert committees, including Raghuram Rajan panel, Percy Mistry committee and UK Sinha panel, set up to look into the development financial sector have emphasised on the need to rewrite financial sector regulations.
International- Indo US relations
- This is a very good essay on Indo US relations and what guides them in the present and in the near future.
- Tarun Das gives 7 solid reasons why the importance of India to the US has not diminished. Take a look; makes an interesting reading.
- But the fact remains that historically, Democrat Presidents have not been well disposed towards India. Even when they mouthed encouraging words about strengthening relations, their actions at least showed quite the opposite.
Language Lessons- au courant: Adjective
- Being up to particular standard or level especially in being up to date in knowledge
- eg: The learned judges’ choice of outmoded words for companions usually described in more on-trend, gender-neutral terms as ‘significant other’ or ‘partner’ could be understood, if not condoned, as they may not be au courant with popular parlance; but consider the consequences of their succumbing to political correctness.
- peremptory: Adjective
- Offensively self-assured or given to exercising usually unwarranted power; Not allowing contradiction or refusal; Putting an end to all debate or action
- eg: A swaggering peremptory manner; spoke in peremptory tones; peremptory commands; peremptory decree.
- chutzpah: Noun
- (Yiddish) unbelievable gall; insolence; audacity
- eg: The new nomenclature has all the chutzpah of a Soviet-style administrative department.
- hors d’oeuvre: Noun
- A dish served as an appetizer before the main meal
Politics & the Nation- Was it just shooting from the hip? Or does it have more than what meets the eye?
- Take a look at this news report about the statement made by an interlocutor in the Kashmir issue. After reading the report, we were dumbfounded and were wondering whether or not the statement was made with an intent to create more chaos.
- Whose purposes are such statements serving? Is it India’s or Pakistan’s?
Finance & Economy- Diwali gift: Retail investors to be allowed 2 lakh in IPO
- Retail investors will get to double their bets on initial public offerings as the market regulator is set to raise the limit to Rs 2 lakh, the first revision in five years, as it attempts to keep pace with the eroding value of the rupee.
- Unlike most developed markets where investment bankers have the discretion to allot shares to their favoured clients in an IPO, the Indian regulator has mandated specified portions that go to funds, wealthy individuals and retail investors.
- In case of public issues done on a book-building basis, the rules now in place mandate that 35% of the offering should be allotted to retail investors, 15% to non-institutional investors and the remaining 50% to institutions.
- Nearly 75% of the retail applications in recent public offerings were for value between 80,000-1,00,000, said the Sebi study. In the non-institutional category, the number of applications below 5 lakh was negligible.
- The portions reserved for wealthy individuals and corporate treasuries have been consistently oversubscribed by 20-25 times as they borrow heavily to benefit from pop-up listing, while in the retail category that depends on savings, it was 3-5 times.
- Microfinance to get a regulator in Nabard
- A worried government has put on fast track the proposed bill to regulate micro-lenders, as it seeks to ensure that over-regulation by states does not kill the sector that is envisaged to play a big role in furthering financial inclusion.
- The finance ministry could move a bill in the winter session of Parliament that will make Nabard responsible for regulation of all non-profit microfinance institutions structured as trusts, cooperatives, or mutual benefit societies.
- At present, micro-lenders follow the relevant sector law, depending on the way they are structured. The new law will treat microfinance as a separate business and will also consider bringing nonbanking finance companies in the microfinance sector under the ambit of the legislation. The decision to fast-track the bill follows the October 15 ordinance, or emergency law, issued by Andhra Pradesh that imposed severe restrictions and debt restructuring obligation on lenders following a spate of suicides that were blamed on coercion by microlenders to recover their dues.
- As many as 15 states already have laws on money lenders in place under which they attempt to regulate the high interest rates and usurious practices followed by micro-lenders.
- The state governments say although the RBI protects the interests of the depositors, there is no framework to safeguard the interests of the borrower who are at times charged interest rates as high as 30%. The finance ministry wants to prepare a comprehensive law after discussing the issue with the regulators.
- The Micro Financial Sector (Development and Regulation) bill was first introduced in Parliament in 2007 and referred to the standing committee on finance. However, the bill subsequently lapsed due to dissolution of the Lok Sabha and has been in the works since then as the government decided to again hold consultations with the stakeholders.
- The new draft of the bill defines the role of the regulator more explicitly. It has a provision for registration of microfinance organisations collecting thrift from individual members of self-help groups or through a group mechanism. The bill provides for creation of a reserve fund that would be 15% of a microfinance institution’s net profit or surplus.
- The bill will also empower Nabard to appoint microfinance ombudsmen for settlement of disputes.
- Green Bank in works to power renewable energy projects
- The government is planning to set up a green bank by leveraging the Rs. 5,000-crore national clean energy fund expected annually through a cess on domestic and imported coal.
- The proposed bank will fund projects to generate electricity from wind, solar, tidal and other renewable sources, which currently contribute about 6,000 MW in India's power capacity of about 150,000 MW.
- India has the potential to generate 80,000 MW from non-conventional sources, according to estimates of the ministry for new and renewable energy (MNRE).
- The government levies a Rs. 50 per tonne cess on both domestically-produced and imported coal. The cess aims to fund research and innovative projects in clean energy technology.
- MNRE-proposed bank will be linked with the Indian Renewable Energy Development Agency (IREDA), a government-owned non-banking financial company.
- IREDA, established in 1987, promotes renewable energy and energy conservation projects.
- The concept of such a bank is not new. Clean Energy Development Bank of Nepal is operational since 2006 in a joint venture with the Netherlands-based financial institution FMO.
- MNRE expects rapid expansion of renewable energy projects, especially solar power in the country that will require dedicated funding. India is already one of the world leaders in generating wind energy.
International- The outcome at the Gyeongju G20 meeting of Finance Ministers
- The meet saw Europe cede two seats on the 24-member IMF board to emerging economies and the Bric four of Brazil, Russia, India and China all join the ranks of the countries with the 10 largest quotas in the Fund, with transfer of 6% of quotas from developed to developing countries. Quotas determine voting rights, financial commitment and access to aid.
- The Group of 20 major economies agreed on Saturday to shun competitive currency devaluations but stopped short of setting targets to reduce trade imbalances that are clouding global growth prospects.
- Take a look at this new report which lists all the major issues that were deliberated upon at the meeting.
Language Lessons- shrivel up: Verb
- Wither, as with a loss of moisture
- smorgasbord: Noun
- A collection containing a variety of sorts of things; An assortment of foods starting with herring or smoked eel or salmon etc with bread and butter; then cheeses and eggs and pickled vegetables and aspics; finally hot foods; served as a buffet meal
- aspic: Noun
- Savoury jelly based on fish or meat stock used as a mould for meats or vegetables
- yo-yo: Noun
- A toy consisting of a spool that is reeled up and down on a string by motions of the hand; [N. Amer] A stupid incompetent person; Something that fluctuates up and down or between extremes
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