On August 25, 2014, the Supreme Court (SC) pronounced 194 coal blocks allocated since 1993 ‘illegal’ as all these allocations suffered from what it described as ‘vice of arbitrariness’ and showed no concern what so ever for public/national interest. The judgement vindicates findings of Comptroller and Auditor General (CAG). In its report (August, 2012), CAG had estimated loss due to such arbitrary allocations made during 2006-2011 to be Rs 186,000 crores or US$ 31 billion (based on price at which coal is sold by CIL). This would be many times more if computation is done using price of imported coal. At another level, the judgement has created consternation among beneficiaries of illegal allotments. They are crying horse if these allocations...
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Category: Regulatory environment
National Judicial Appointments Commission (NJAC) – a big leap to stem rot in judiciary
Lok Sabha has passed the landmark National Judicial Appointments Commission (NJAC) bill. After its passage in Rajya Sabha – likely in view of support from parties across the spectrum – its enactment in to law is a foregone conclusion. NJAC will replace the extant collegium system whereby a group of senior most judges of the Supreme Court (SC) under chairmanship of Chief Justice of India (CJI) recommend appointment of judges of high courts and their chief justices as also the judges of SC. Government of India (GoI) makes appointments on the basis of recommendations of collegium. The former can at best send back recommendation for re-consideration. But, when collegium reiterates its initial choice, GoI has no option but to fall...
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Suzuki bid to trample Maruti Suzuki India
Suzuki Motor Corporation (SMC) parent company of Maruti Suzuki India (MSIL) is going ahead with setting up of a car manufacturing plant in Gujarat with 1.5 million units per annum through its 100% subsidiary, Suzuki Motor Gujarat (SMG). During an investor presentation, SMC informed that SMC/SMG intends to fund the investment of Rs 18,500 crores in the plant with own equity and accumulated depreciation. It will make cars on a strictly no-profit, no-loss basis. SMG will enter in to a contract manufacturing agreement (CMA) with MSIL for an initial period of 15 years for supply of entire production to the latter. The CMA could be extended by mutual consent. In case, it is not extended, the “assets would be transferred...
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Vacillating BJP on FDI in multi-brand retail
During parliament debate in 2012, BJP had vehemently opposed foreign direct investment (FDI) in multi-brand retail (MBR) arguing that this would affect millions of traders besides small and medium enterprises. In run up to general elections, BJP’s prime ministerial candidate, Narendra Modi hinted at reviewing party’s stance when he opined that our traders should gear up to face competition from organized retail. He exuded confidence they can do! However, in its manifesto released on April 7, 2014 BJP categorically ruled out FDI in MBR while welcoming it in all other sectors to give a boost to jobs, build assets especially infrastructure and access to niche technology and special expertise. Now, Nirmala Sitharaman, Minister of State with independent charge (MoS-IC) for...
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Sahara scam – a crystal clear case of ‘money laundering’
It is almost 20 months since Supreme Court (SC) ordered Dr Subroto Roy, chairman, Sahara Group in August, 2012 to return a gargantuan sum of Rs 20,000 crores that two of its group companies in real estate sector had taken from millions of investors. Dr Roy had contested the amount stating that its outstanding liability to investors was only about Rs 5000 crores and this was deposited with SEBI towards end of 2012. SEBI – with full backing of SC – has been doing a wild goose chase to ensure recovery of full amount with interest and penalties. But, that has not yielded results leading to recent arrest of Dr Roy. SC had directed him to come up with a...
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Price control on ‘patented’ medicines – a tough call
All developing countries with preponderance of poor would like to ensure availability of medicines at affordable prices even if these happen to be product of new discoveries entailing much higher cost of supply. Discovery and development of new medicines involve huge effort in terms of both time and money to demonstrate their safety and efficacy through R&D and clinical trials conducted as per stringent regulatory requirements. The cost involved in carrying out these efforts have increased substantially due to escalating cost of materials & manpower and high failure rate on one hand and ever increasing bar of regulatory standards on the other. For a new medicine, this may be well over US$ 1 billion. An innovator company has a fundamental...
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Price of meddling with Government banks
Every year, Government of India (GOI) infuses tens of thousands of crores in to public sector banks (PSBs) (Rs 14,000 crores during current year 2013-14) to shore up their capital to meet prudential norms and help them meet requirements of growing business. With ready and fairly cheap access to public funds especially by way of savings and current accounts, banking is potentially a profitable business. This is even after one considers the social obligations on banks to serve remote and backward areas. Yet, profitability of PSBs is much below expectations. PSBs (24 in all where majority ownership is with GOI) together account for about 3/4th of total banking business in India. Yet, their market capitalization (number of shares multiplied by...
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FDI in retail – Delhi Government’s volte face
AAP Government in Delhi has addressed a letter to Ministry of Commerce, Department of Industrial Policy & Promotion (DIPP) – nodal point for foreign direct investment (FDI) related issues – saying that it will not permit FDI in multi-brand retail. FDI in multi-brand retail has been on reforms agenda of UPA Government for several years now. Due to intense opposition from various quarters, it was forced to take a vote in Parliament which approved in November 2012 subject to foreign investor taking prior permission of concerned state. Delhi is one of the 9 Congress-ruled states including AP, Rajasthan (prior to Assembly elections held in November, 2013), Maharashtra etc which decided to go along. In this backdrop, decision of AAP Government...
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Should private companies be under CAG scrutiny?
The order of Delhi High Court (DHC) to let the Comptroller and Auditor General’s office (CAG) to conduct audit of 5 major private telecom companies has led to consternation in corporate circles as also within the ruling UPA establishment. FICCI President has observed that ‘CAG was constituted to be answerable to Parliament in respect of businesses owned by the Government. There is no place for CAG interfering in to a private company’s books. It can happen only if there is a contract between a private company and Government in this regard’. The apex industry body is either oblivious of the background and developments culminating in the current order of DHC or conspicuously ignoring facts as that could cause it embarrassment...
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