19.04.2011

Politics & the Nation

• Election economics
• The number of voters in each Lok Sabha seat has shot up from around 3,50,000 in 1951 to 1.3 million in 2009.
• For an assembly seat you can legitimately raise and spend Rs. 16 lakh; if you’re fighting the Lok Sabha polls, the number mandated by Parliament goes up to Rs. 40 lakh.
• Anecdotal evidence suggests that in the last Lok Sabha polls, candidates spent anything between Rs. 4 crore to Rs. 40 crore to fund their campaigns.

Finance & Economy

• On Torrens system
• In this system the ownership of land is directly registered by the state. In the system in force now, title instruments are registered, still leaving scope for multiple deeds and unregistered instruments. In the Torrens system, the sovereign is the keeper of all land and title records and the land title serves as a certificate of valid ownership.
• Torrens system is considered a better bet to curb benami transactions in properties.
• Problems of plenty
• Take a look at this op-ed about our rich wheat harvest and how wheat is being sold below the MSP in our mandis in the North.  
• It is reported that we have about 46 mn tonnes of wheat in our granaries, which is more than double the buffer stock norm prescribed.  
• The question is -- will the government wake up in time?
• BEE plans incentives for energy efficient devices
• The Bureau of Energy Efficiency (BEE), an agency of the power ministry, is set to launch a 'super efficient equipment programme' to encourage manufacture of products that are 30-50% more efficient than fivestar labeled goods, considered to be most energy efficient in the country. This programme seeks to promote domestic manufacturing of energy-efficient gadgets by reducing their cost through market incentives.
• The bureau, which is in the process of defining specifications for super-efficient refrigerators, air conditioners, television sets and other appliances, will kick off its initiative with companies making fans. It will seek quotations for expected incentives under an open bidding programme and offer cash incentives for each fan to those who qualify. A super-efficient fan should consume just 25-30 watts per hour against 50 watts for a normal fan.
• At present, BEE rates electrical appliances on a scale of 1 to 5, with higher star ratings implying more energy savings, or efficiency. Five-star labeled products are costlier by Rs. 2,000-3,000 than four-star labeled products, depending on the product and model.
• The super-energy-appliances scheme is part of the government's national mission on enhanced energy efficiency that seeks to achieve annual savings of 19,598 MW of power and 23 million tonnes of fuel and greenhouse gas emissions reduction of 98.55 million tonnes. The mission is one of the eight under the prime minister's national action plan on climate change.
• On the inflation spiral and RBI's failure
• Central banks the world over, as does our own RBI, do have lot of constraints.  After the loosening of the taps on spending by way of fiscal stimulus it is the banks that are left to pick up the pieces.  Add to this the constraints that are there, as on our RBI, on the degree of independence they can exercise in their functioning, do add to the cup of woes.  But no central bank keeps the real interest rates negative for so long and yet expect to get away from the consequences.  That is what has caused the inflation spiral in our country.  
• In addition, the combination of rising commodity prices, a spillover of the reckless quantitative easing by the US Federal Reserve, structural bottlenecks and a government unwilling to share the burden of reining in prices through tighter fiscal management have contributed their own share for the spiral.
• Tax breaks on water conservation on the anvil
• In an effort to promote judicious use of water, the government is planning to offer incentives, such as tax breaks, to big industrial users if they are able to reduce wastage of water.  
• The incentives may feature in the new National Water Policy, which is being prepared by the water resources ministry and the Planning Commission. The policy is likely to be introduced next year.  The new policy will encourage sustainable use of water by reducing wastage and promoting recycling.
• Industrial wastage of water has emerged as a big concern amid a growing realisation of an imminent water crisis. The per capita availability of water in India is 1,600 cubic metres. A level of less than 1,700 cubic metres is considered a ‘water stressed’ condition and less than 1,000 cubic metres is a ‘water scarcity’ condition. As many as nine out of the country’s 20 river basins are now in a water scarce situation.
• India has 2.4% of the world’s area, 16% of the world’s population but only 4% of the total available fresh water.
• India gets proactive about attracting SWFs
• Sovereign wealth funds (SWFs), which have emerged as formidable global investors and often evoke concerns in countries where they put in money, will soon have a greater play in India.  The finance ministry and regulators will change the rules to give these investment funds floated by governments of rich countries more headroom when they buy shares in listed Indian companies. Also, local authorities will treat SWFs emanating from the same country independent of each other—a proposal that is expected to go down well with the two Singapore government owned funds, Temasek and GIC.
• The 50-odd SWFs registered in India invested between $8 billion and $10 billion last year. The proposals were recently discussed by the board of capital market regulator Sebi. It was proposed that SWFs belonging to countries that have signed treaties or agreements with India should be allowed to buy up to 20% shares of a listed company without making an open offer to existing shareholders. At present, all entities, except banks and financial institutions like LIC, have to make a minimum 20% open offer after their holding touches 15%.
• The suggestions reflect the terms of economic co-operation treaties that India signed with countries like Singapore. It has, however, not been able to implement the terms following resistance from the Reserve Bank of India (RBI), which among other things viewed that funds like Temasek and GIC, owned by the same government, should be treated as investors belonging to the same group.
• Most sovereign funds investing in India are registered with Sebi as foreign institutional investors (FIIs). Since no FII or FII group can hold more than 10% in a single company, RBI had said the combined investments of Temasek and GIC should not cross the stipulated limit in India’s second-largest lender, ICICI Bank.
• Some notable SWFs operating in India include China's National social Security Fund, Abu Dhabi Investment Council, Australia's Future Fund Board of Guardians, Ireland's National Pensions Reserve Fund, Brunei Investment Agency, New Zealand Superannuation Fund, and Canada Pension Plan Investment Board.
• All about the public debt office
• Look at this ET in the Classroom column.
• While on the subject, did you notice the phrases “merchant banking” and “investment banking” in the column?  Do they mean the same?  Or do they denote two distinct activities?  Can be confusing for experienced people too at times.  Take a look at this investopedia writeup on the subject.  An interesting read.

International

• In defence of nuclear power
• A very able defence put up by Bjorn Lomborg.  It is a must read.  Do so here.  Some excerpts worth our attention:
• It is worth noting that the worst nuclear disaster in history directly caused only 31 fatalities. The World Health Organization estimates that 4,000 deaths could be linked to the disaster over 70 years, whereas the OECD projects a range of 9,000-33,000 deaths during this period.
• But consider that, according to the OECD, every year, nearly a million people die from fineparticle outdoor air pollution. Yet, the massive death toll provokes no discernible fear in the developed world, and receives almost no news coverage.
• We see coal as a polluting but reasonably ‘safe’ energy source compared to nuclear energy. Yet, in China alone, coalmining accidents kill more than 2,000 people each year — and coal is a leading cause of smog, acid rain, global warming and air toxicity.
• Why is decommissioning of nuclear plants wasteful?
• Decommissioning of nuclear reactors may make us feel safer, but we should acknowledge that this will often mean compensating for the lost output with more reliance on coal, meaning more emissions that contribute to global warming, and more deaths, both from coal extraction and air pollution.
• Moreover, given that the plants are already paid for, waste facilities are already in place and the high decommissioning cost will have to be paid regardless of timing, the actual operating costs are very low — half or lower per kilowatt-hour than the cost of the cheapest fossil fuels.