The National Company Law Tribunal (NCLT) has turned down a request from the Shapoorji Pallonji Group [SPG] vide heir two investment outfits viz. Sterling Investment Corporation and Cyrus Investments to initiate action against Tata Sons for ‘oppression of minority interest and mismanagement’. It was done on the ground that the group does not have minimum shareholding of 10% needed to make such an appeal. SPG holds 18.4% shares of Tata Sons which is significantly higher than the 10% threshold. But, its holding plummets to a mere 2.17% once preference shares are also included in computation. Preference shares by nature are entitled to special privileges in regard to dividend payment vis-à-vis equity shares but these carry much lower voting rights or...
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Category: Regulatory environment
FDI in retail – a flawed idea
In the Union Budget for 2016-17, the Finance Minister had announced 100% foreign direct investment (FDI) in retail food. This was subject to the retailer selling only food procured from farmers in India and processed locally. However, guidelines in this regard are yet to be notified. Meanwhile, the Government is reportedly considering a proposal to allow 100% FDI in all goods “manufactured domestically”. The policy will be applicable to both offline (brick-and-mortar retailers) and online (e-commerce companies). The idea is flawed. At the outset, a few words on the existing policy dispensation on the FDI in retail. For this purpose, retail is classified in two broad categories, viz, single-brand retail (SBR) and multi-brand retail (MBR). In the SBR, 100% FDI...
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BS IV fuel norms – don’t fall prey to auto lobby
The Society of Indian Automobile Manufacturers [SIAM] has raised a hue and cry over a staggering 880,000 Bharat Stage [BS] III vehicles [including four wheeler and two wheeler] with automobile dealers facing the prospect of being scrapped as BS IV fuel norms take effect from April 1, 2017 all over the country. The cacophony of all powerful SIAM – an association of vehicle and engine manufacturers – seems to be working as a 2-judges bench of the Supreme Court [SC] which heard a plea of a clutch of automobile manufacturers on March 25, 2017 directed the Centre to come with options to mitigate the crisis. The apex court even discussed various options taking on board the possibility of allowing registration...
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Tata-DoCoMo deal – RBI must not condone violation
It is not always the case that regulatory authorities and policy makers mess up things affecting ease of doing business and vitiating investment climate. Quite often, it is none other than the businessmen and industrialists themselves who vitiate the environment by exploiting loopholes in the system or blatantly violating the extant laws while taking decisions and conducting business. There could not be a better example than the dispute between Japanese telecom major NTT DoCoMo and Tata Teleservices [TTSL] – a Tata group company which is currently pending adjudication by Delhi High Court [DHC]. Briefly, facts of the case are as under:- In November 2009, NTT-DoCoMo had acquired 26.5% stake in TTSL for about Rs 12,740 crore [at Rs 117 per...
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Tackling NPAs – deep surgery needed
The non-performing assets [NPAs] or bad loans [as these are known in common parlance] in the banking system are threatening to cross the Rs 700,000 crores – this is 100% more since the asset quality review [AQR] was ordered by Reserve Bank of India [RBI] two years ago. For an economy that has been on a high growth trajectory since 2014-15, NPAs of banks has been identified as a major structural problem that poses risk in the medium-term even by International Monetary Fund [IMF]. To address it, RBI deputy governor, Viral Acharya has come up with a two-pronged strategy. First, for assets which are capable of generating cash flow in short-run, these may be transferred to a private asset management...
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Milching of ONGC/OIL halts
In an unprecedented move rarely seen in the financial history of independent India, the government has exonerated its undertakings in the oil sector viz. Oil and Natural Gas Corporation [ONGC] and Oil India Limited [OIL] from a potential liability of about Rs 22,000 crore in royalty dues to states of Gujarat and Assam. ONGC had to pay Gujarat Rs 8,392 crore and Assam Rs 1,404 crore in royalties for the period between April 1, 2008 and January 2014. Together with interest Rs 2,868 crore, total liability was Rs 12,664 crores. OIL had to pay to Assam government Rs 4,902 crore in royalty dues plus Rs 4,355 crore in interest adding to Rs 9257 crore. Union government has settled this pending...
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Sun-set for P-notes, sun-rise for clean money
A major challenge facing Modi – government in its fight against black money is so called ‘rounding tripping’ of Indian black money. The euphemism refers to money that leaves the country, often routed to non-resident Indians [NRIs] and making its way back to India in the form of foreign direct investment [FDI]. Until a few years ago, the extant policy and regulatory environment hugely facilitated ‘rounding tripping’. Thus, there was little regulatory oversight on money leaving and there were tax haven jurisdictions ever ready to attract it. The shell companies [albeit owned by persons to whom the money belonged] set up in those jurisdictions would then, invest in India fully leveraging benevolent tax treaties between India and those countries. Under...
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FDI in retail for ‘local goods only’ – a flawed idea
In the budget for 2016-17, finance minister, Arun Jaitely had announced 100% foreign direct investment [FDI] in food retail. However, this is subject to the condition that the retailer will sell only food procured from farmers in India and processed locally. Even as the guidelines in this regard are yet to be notified, meanwhile as per reports, the government is considering a proposal to allow 100% FDI in all goods ‘manufactured domestically’. The policy will be applicable to both offline [brick-and-mortar retailers] and online [e-commerce companies]. The idea is seriously flawed. To put things in perspective, let us capture the broad contours of existing policy dispensation in regard to FDI in retail. For this purpose, retail is classified in two...
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Subsidies – forget targeting, even cash transfer not in sight
In an exclusive interview given to a leading economic daily, Dr Arvind Panagariya, deputy chairperson, NITI Aayog has exalted the virtues of targeted cash transfer [TCT] instead of universal cash transfer [UCT] opining that opting for the former would help in reaching out more of state financial assistance or subsidy to the poor. This is stating the obvious. A given amount of subsidy if distributed among a lesser number of persons say, those living below the poverty line [their number is naturally less than the population universe] will result in each person getting more than the amount he would get if that given subsidy amount were distributed amongt the entire population. Yet, its reiteration by none other than Dr Arvind...
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Stop demonizing demonetization
These days, those who are determined to see flaw in each and every action of the present government – come what may – are now blasting RBI/Modi for policy flip-flop on demonetization of 1000/500 notes. They cite issue of 60 notifications in 43 days after prime minister’s announcement on November 8, 2016. One must take note of the ‘background’ and ‘far reaching’ nature of the decision before jumping the gun. It was taken in the backdrop of mountain of corruption and black money that had taken deep roots in all institutions of governance and at almost every point of their interface with the public. It had spread like cancer in every nook and corner of the human body. Besides, affecting...
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