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Demonetisation: Rs 4,500 per day ATM limit is of little help when 2/3 machines run dry

ATMs will dispense a maximum Rs 4,500 per day per account holder beginning 1 January, said a circular from the Reserve Bank of India (RBI) on Friday. Friday marked the end of the 50-day period Prime Minister Narendra Modi promised he will take to bring back normalcy after the demonetisation of Rs 500 and Rs 1000 notes on 9 November. Earlier, daily limit was Rs 2,500 per day. An enhanced limit is a relief for citizens and will help to shorten queues further, but only in areas where ATMs are dispensing cash.

The problem is only a third of the total ATMs in the country (around 2 lakh) are dispensing cash and most of them are in urban centres with the periphery areas continuing to run dry, according to reports (read here and here). In other words, the enhanced ATM withdrawal limits would not help the people in non-metros much.

PTI file photoPTI file photo

PTI file photo

Banks are unable to fill their ATMs on account of an acute cash shortage, especially lower denomination notes that is persisting even after 50 days of demonetisation and the situation is unlikely to get better soon, said a few bankers this writer spoke to.

“We are looking at February-March before things become normal,” said one of the bankers. This is the reason banks have asked the government to extend the curbs on cash withdrawals beyond 30 December till the time there is adequate quantity of new currency infused in the banking system. Ultimately, it is the banker who has to face the angry customer.

The RBI has retained the weekly cash withdrawal limit of Rs 24,000. But, the problem is that banks are unable to honor even that amount and the customer is forced to often settle for what is available at the moment at the bank counter. Of course, this situation will ease further in the weeks ahead, but much depends on the ability of government mints to churn out sufficient units of new currency. Until 19 December, the RBI has infused Rs 5.92 lakh crore of currencies into the system, which is less than half of what the public has deposited in the form of invalidated notes (Rs 12.44 lakh crore as on 10 December).

On Friday, PM Modi launched a new payment app, BHIM, that allows anyone to transfer money to any bank accounts. The PM stressed on the need to embrace cashless payment modes at the earliest and elaborated on the incentives government planning to encourage individuals and merchants using electronic payment modes. A change into cashless economy is indeed good in an aspiring economy and government initiatives, such as UPI-supported BHIM app, are helpful to facilitate such a migration.

But, Modi’s immediate challenge remains to 1) normalise the cash situation in the economy; and 2) give a convincing cost-benefit analysis of the demonetisation exercise to 125 crore Indians. Modi has a major task of justifying his act that has pushed the economy into an economic standstill and has caused gross inconvenience to a large number of the population due to the lack of preparedness of the government to implement the currency swap.

When PM address the nation on the New Year Eve, there are questions he’ll need to answer on how did the note ban help the country to achieve the originally stated goals — black money, fake currency, corruption and terror funding. Also, most critically, the general public would expect clarity from the PM on when the cash crunch will end. The 50 days the PM sought has, for sure, eased the pain to an extent, but has not ended the cash crunch.

Another question the PM owes answer is clarity on the political funding. Though his government has repeatedly assured that rules will be same for all, there is lack of clarity on political funding since the government also says that provisions of existing laws will continue.

This would means that political parties will enjoy certain immunity from tax scrutiny since cash donations below Rs 20,000 do not require the source to be revealed. Can Modi score a point by stating that the government will work towards the necessary changes in laws to make all political donations through digital mode? If yes, that’ll be much bigger catalyst in the process of creating a cashless economy than announcing lucky draws.

For now, when the PM addresses the nation on the eve of new year, the big question common man probably would want to ask the PM is how long the current cash shortage will continue.

First Published On : Dec 31, 2016 11:28 IST

Demonetisation Day 50: Expect no clear winner in this drawn Test for Indians

For a nation that loves cricket, the demonetisation drive launched by Prime Minister Narendra Modi on November 8 to pull out 86% of the cash floating in India’s economy has been like a one-day match, with roughly 50 days to the core deadline set by the government to swap bad cash with good resembling the number of overs in a game full of twists and turns.

As Modi gets ready to address the nation on December 31 in a stock-taking speech, sober watchers of the game may find no nail-biting finish or clear winner. We might need to use something resembling the Duckworth-Lewis method that cricket scorers use when rains or disruptions mar a match.

PTI file photoPTI file photo

PTI file photo

We can expect the prime minister to announce on Saturday some populist handouts that would make the headlines on the New Year Day as he declares partial victory in a long-term war on black money that he will vow to carry on. But the real ammunition may be held back until the February 1 budget.

What is clear is that there is no fairy tale El Dorado of a huge pile of unambiguously wasted black cash as it was being made out soon after the government pulled the plug on old 500 and 1,000-rupee notes. There was talk of a fiscal bonanza for the government through a windfall dividend from the Reserve Bank of India then. The RBI has since virtually ruled out such a possibility.

Of the Rs 15.4 lakh crore worth of scrapped currency, some Rs 14 lakh crore has been deposited in banks or exchanged already. Some more money may trickle in through the ambiguous Pradhan Mantri Garib Kalyan Deposit Scheme window over the next three months or in last minute deposits on Friday. Clearly, there is no winning shot in this match in sight.

What we can expect next is a patient round of bean-counting in the Finance Ministry as taxmen zero in on high-value cash deposits. Some 60 lakh depositors have put in deposits totalling Rs 7 lakh crore since November 8 in instances exceeding Rs 2 lakh each. But toothcombing these and actually calling the bluff on tax evaders may take months or years and in cases involving big fish, involve appeals to income tax tribunals or even high courts.

However, we can reasonably expect Finance Minister Arun Jaitley to announce a very comfortable fiscal deficit situation for the 2017/18 financial year when he rises to present the budget on February 1. This would be largely though anticipated income tax gains from the deposits made in banks. The minister is already setting the mood by pointing to robust growth in tax collections..

A low deficit will give the government enough elbow room to play shots – be it in the form of lower taxes for citizens, populist schemes, recapitalising banks scarred by bad loans or fresh spending on infrastructure.

A Robin Hood-like transfer of a big chunk of fiscal gains to the poor holders of Jan Dhan Yojana may be the most romantic outcome of the demonetisation drive.

This, in fact, may become a political necessity because the government has been bitten badly on two fronts. A fall in the current year’s GDP growth resulting from the demonetisation is an economic scar, while stories of millions of industrial workers and farm hands suffering due to the cash squeeze resulting from demonetisation spell political wounds ahead of state elections in UP and Punjab.

To this we may add the image damage caused by a slew of ad-hoc measures linked to the drive – the latest of which is a Quixotic ordinance to fine those who may be caught with more than 10 outlawed notes. The international media has hit Modi where it hurts.

The government also faces a 5-judge bench of the Supreme Court on the Constitutional validity of the demonetisation. In the judiciary and in election rallies, the after-effects of demonetisation may drag on – long after the queues in front of ATMs vanish. That would make it seem like a drawn test match, not a one-day sizzler.

(The writer is a senior journalist. He tweets as @madversity)

First Published On : Dec 30, 2016 07:56 IST

Sex workers should ?sell pickles and papads instead of their bodies: IGP Vishwas Nangre-Patil

<!– /11440465/Dna_Article_Middle_300x250_BTF –>To say Vishwas Nangre-Patil (above) has one of the largest fan followings compare​d​ to all his IPS peers both on social media and otherwise would be an understatement. This IGP (Kolhapur range) has always been known for being progressive and a clean cop. Which is why his patriarchal misogyny at a ​recent ​press conference ​in Miraj, western Maharashtra​, came as a shocker.Announcing a crackdown operation against sex workers he wanted to know why they can’t work hard. “They should ​be rehabilitated to make and ​sell pickles and papads instead of their bodies,” he advised without getting into ​circumstances which force women into sex work. And we are not even talking of women who want to do this for a living of their own volition.An activist who has been working on HIV/AIDS awareness in the region for decades said, “Will he be able to match ​the corporate markets that sell papads and pickles? And we are not even talking about ​matching a sex worker’s daily income here.” All ears sir for your response. Hopefully you’ll give the patriarchal conservatism a rest…

Ratan Tata-Cyrus Mistry spat: Here’s the timeline of biggest corporate battle of 2016 in a graphic

The Ratan TataCyrus Mistry boardroom battle was easily the biggest corporate spat of 2016. It started on 24 October, when Tata in a surprise and unexpected move, dismissed Mistry as the chairman of Tata Sons.

Mistry was appointed as the chairman of the Tata group holding company in December 2012.

Ever since the ouster, the Tatas and the Mistrys of the closely held Shapoorji Pallonji group have been sparring in the public. While the Tatas have said Mistry was ousted, as the board of the company lost its confidence in him, Mistry has maintained that the Tatas were afraid of his clean-up drive which resulted in his dismissal. Mistry has also raised various corporate governance issues in the Tata Group since his expulsion.

The Tatas also called up extraordinary general meetings of the shareholders of the listed group companies to oust Mistry from their boards. However, Mistry himself resigned from the boards after TCS and Tata Steel shareholders voted him out.

However, a day after resigning from the boards of six listed Tata firms, he took the legal route by filing a suit in the National Company Law Tribunal against Tata Sons.

In response, Tata Sons on Tuesday slapped a legal notice on Mistry, alleging breach of confidentiality by making public sensitive company documents including minutes of board meetings, financial information and data.

One thing is clear, there is no end in sight to the boardroom battle.

Here’s a time line of the developments in one single graphic:


PTI graphic

First Published On : Dec 28, 2016 13:33 IST

BK Bansal suicide: CBI DIG Sanjeev Gautam removed

<!– /11440465/Dna_Article_Middle_300x250_BTF –>Central Bureau of Investigation (CBI) Deputy Inspector General (DIG) Sanjeev Gautam was on Wednesday removed from former Director General Corporate Affairs Bal Kishan Bansal’s suicide case probe. Sources said, Gautam, a 1995 batch Internal Revenue Service (IRS) officer (Custom & Excise), has been sent to the parent department.BK Bansal, a senior bureaucrat, who committed suicide along with his 31-year-old son in September end had in his alleged suicide note, mentioned that his family was tortured by Gautam and his team members. Bansal, had named several persons for making his family’s life “hell”, including Gautam, Superintendent of Police Amrita Kaur, Deputy Superintendent of Police Rekha Sangwan and Investigating Officer Harnam Singh, apart from an unnamed head constable.In July, Bansal was arrested by the CBI on charges of corruption. Hours after he was produced in court, his wife Satyabala and daughter Neha were found hanging in two separate rooms at their residence in Neelkanth Apartments on July 22. The Supreme Court earlier in November issued notices to the Centre and the CBI on a Public Interest Litigation (PIL) seeking a Special Investigation Team (SIT) probe into the controversial suicide case.

Demonetisation: Four things Narendra Modi should do to take the economy out of the mess

For the Narendra Modi government, which stormed into power in May 2014, to come out of the demonetisation mess unhurt isn’t an easy task. This is despite what it promises to achieve in the future –an economy free of black money, corruption and fake notes, and no matter how good the latter-stated objectives are (including a shift to a cashless economy). And certainly not in the manner it has gone about scrapping 86 percent of currency in circulation all of a sudden on the night of 8 November throwing the economy into a crisis. The consequences so far have been disastrous — corporate profitability has taken a hit, lakhs of jobs have been reportedly lost in the informal sector, consumer ability to spend has been curtailed, farmers affected as prices have crashed, services and manufacturing sectors have been impacted and there is skepticism globally on the rationale behind Modi’s currency ban.

Not surprisingly, both government and private forecasters are competing to show lower India GDP numbers for fiscal year 2017. The estimates range from 7.1 percent (Reserve Bank of India) to an extremely pessimistic 3.5 percent by Ambit Capital, a private brokerage firm.  The available data–advance tax payments by corporates, PMI numbers, auto sales and slowdown in service-oriented sectors confirm the fear of a deeper impact to the economy.

Prime Minister Narendra Modi. AFPPrime Minister Narendra Modi. AFP

Prime Minister Narendra Modi. AFP

Most economists have ruled the third quarter as a miss, but the real danger comes if the cash crunch-woes spill over to the fourth quarter since then there will be a cascading impact in the economy.

According to data from Centre for Monitoring Indian Economy (CMIE), unemployment rates fell to less than 5 percent in the week of 27 November, but has since risen to 6.1 percent in the week of 4 December to 6.6 percent in the week ended 11 December and then to 7 percent in the week ended 18 December. The impact comes with a lag and we need to wait for fresh numbers.

Need of the hour

There are a few critical tasks before the Modi-government that should be done urgently:

First, refrain from populist, non-productive expenditures such as promising the poor that the gains on black money will be distributed to them and that farm loans will be waived. The government should focus on boosting the capital base of banks on an urgent basis so that bank credit flow to productive sectors doesn’t suffer, and sell off the loss-making banks or consolidate a few if there is synergy amongst them. Finance Minister Arun Jaitley has a good opportunity in the 2017 Union Budget slated for 1 February to announce some bold measures to take the reform process ahead in the public banking sector.

Presently, state-run banks are severely undercapitalized and the problem is worsened with their non-performing assets (NPAs) hitting the roof (nearly Rs 6 lakh crore as on September, 2016 or nearly 8 percent of the total bank credit), and total chunk of stressed assets (bad loans and restructured loans together) jumping to 12-13 percent of the total bank credit. Under the government’s Indradhanush plan, of the Rs 1.8 lakh crore capital needed by banks under Basel-III, the government has offered to infuse Rs 70,000 crore over four years till 2018-19 and wants the government banks to fend for themselves for the remaining Rs 1.1 lakh crore from the market. This is not enough. Also, it is almost impossible that weak state-run banks will find takers. This compounds the problem. So far, there is not much progress on the reform front. That is why the government, the majority owner in these banks, will have to think about infusing them with higher chunks of capital and push the reform button.

Two, offer a fiscal boost to the economy by ramping up infrastructure spending. A section of economists agree that the economy is in need of a strong stimulus to get back on track. This is warranted because several layers of economy have taken a hit post-demonetisation. One of the expectations from the demonetisation exercise was to get a ‘windfall’ of Rs 4-5 lakh crore provided that kind of money doesn’t return to the system as black money hoarders run for cover. The government was expecting to garner around Rs 10 lakh crore of the Rs 15.44 lakh crore demonetized on 8 November. But, that hasn’t happened yet. This, coupled with the Reserve Bank of India’s (RBI) clarification that there is no possibility of a transfer of surplus from the central bank to the government on account of reduced currency liability, has ruled out any immediate tangible gains for the government. Instead, the exercise has resulted in considerable damage to the economy.

Third, Jaitley should also announce reliefs to both individuals and corporations in Budget 2017 by offering substantial direct tax reductions to tide over the difficult phase. This will work in three ways—to make India still an attractive destination for companies when US president-elect Donald Trump’s administration rolls out massive tax cuts, reverse the negative mood on account of the artificially imposed cash-crunch and put more money into the household kitty to keep the consumption story going. Corporate tax incentives should be over and above the ongoing plan to bring down corporate tax rates to 25 percent over a period and gradually remove exemptions. But this hasn’t found much appeal in the industry since the effective rate is only about 23 percent after exemptions. This is the reason the marginal tax cut in the last budget hasn’t received much response. The government will have to act to regain losing momentum by offering industry a temporary stimulus.

Fourth, it is even more critical now to resolve the cash crunch as fast as possible and bring things back to normalcy. The government can’t expect a miraculous shift to digital payments in a few months replacing a world of cash. Estimates are that 70 percent of the economy still transacts in cash. Pulling out 86 percent cash in one go in a country like India and then facing a cash shortage could be compared to an act of removing blood out of a healthy human body to filling it again with better quality blood, only to realize that there is not enough stock!

Until 19 December, the RBI has infused only Rs 5.92 lakh crore into the banking system as compared with deposits worth Rs 12.44 lakh crore in old Rs 500, Rs 1,000 currencies. Of the total 22.6 billion pieces of notes of various denominations infused, only 2.2 billion belonged to higher denominations of Rs 2,000 and Rs 500. It is not clear how many of the 2.2 billion is in Rs 2,000 notes and how many are Rs 500 notes. Herein lies the problem. The ongoing cash crunch, according to bankers, is mainly due to shortage of the new Rs 500 notes. An end to the current cash crunch is possible only when there is enough Rs 500 notes coming out of the government mints.

But the tricky part for the Modi government will be to find the fiscal space to spend more simultaneously keeping the fiscal roadmap intact. It needs to meet a 3.5 percent fiscal deficit target for the fiscal year 2017. Given that demonetisation itself is unlikely to give any major fiscal boost, the only hope is for the taxmen to dig out substantial chunks of illegal cash from the system from the funds that reach bank accounts either through the black money declaration scheme or raids contributing to the exchequer. Handling a bigger budget, including that of the Railways, is another challenge. “There is a big monster called the Railway budget coming as part of the general budget this year. This can sharply spike numbers on the expenditure. How will the government handle the new situation is worth watching,” said Devendra Pant, chief economist at India Ratings and Research. The expected boost to tax kitty from more number of digital transactions will come, but only at the beginning of the next year.

The short point here is about balancing Union Budget 2017 with the much-required economic stimulus while keeping the fiscal deficit roadmap intact. This will be a trial by fire for the Modi-government.

First Published On : Dec 27, 2016 13:42 IST

Ahead of Budget 2017, Arun Jaitley says India needs globally compatible tax rates

Ahead of the Union Budget, finance minister Arun Jaitley has pitched for a lower level of taxation that is globally compatible. This, according to him,  is necessary if the country has to have a broader base of economy.

He said gone are the days of the philosophy that high taxation will bring greater revenues and that since 1991 the course of economy has altered itself.

Finance Minister Arun Jaitley. Reuters file photoFinance Minister Arun Jaitley. Reuters file photo

Finance Minister Arun Jaitley. Reuters file photo

“… What you need is a broader base of economy for which you need a lower level of taxation. You need to manufacture products and provide services which are more competitive in character and therefore your taxes have to be globally compatible,” Jaitley said while inaugurating the professional training of IRS officers.

The comments have raised speculation that the government may cut tax rates in the Union Budget for 2017-18 to be presented in Parliament on 1 February.

However, in a later tweet he also indicated that any such interpretation of his speech may be inaccurate.

Ever since the demonetisation of Rs 500 and Rs 1,000 notes, there has been speculation that the government may resort to some direct tax cuts to lessen the pain inflicted on the common man. A cut in income tax rates will placate the middle class, a key political constituency of the ruling BJP.

As far as corporate tax are concerned, Jaitley had laid out a road map for cuts in rates and exemptions in last year’s Budget.

In the speech on Monday, Jaitley also said competition is not merely domestic but global and therefore in the last two-and-a-half decades, the governments have been guided by these principles.

Tracing the behaviour of people in the last 70 years, the finance minister said there has been an impression if avoidance could be done of government revenue, there is nothing “improper or immoral” about it.

This was, he said, considered to be “commercial smartness” and of course some people were visited with very serious consequences.

He told the young revenue service officers that in coming future decades they should see that voluntary tax compliance has to increase in India.

“And the mindset of the tax payer (should be) that payment of legitimate taxes is a responsibility and then it should be reciprocated by you with a confidence in the tax payer. The tax payer is to be trusted, except when it’s proven otherwise.

And therefore only in those select cases, very objectively selected, you go in for a wider audit or a wider scrutiny itself,” Jaitley said.

With PTI

First Published On : Dec 27, 2016 08:35 IST

Black money hunt: India-Switzerland pact to share details of tax cheats is weak; it’s no game-changer

On November 22nd 2016, the NDA government signed an agreement with Switzerland for exchange of financial information, which will provide India details of the financial assets held by its citizens in that country. In the backdrop of black money dominating the media headlines and popular discourse in the country, this development was termed as a game-changer in the fight against black money by a number of commentators. In the celebratory noise, however, some of the subtle elements of the agreement were ignored, which on detailed examination reveal serious weaknesses of the current framework that could potentially undermine the success of this initiative.

Background of the agreement

Representational image. PTIRepresentational image. PTI

Representational image. PTI

There are two components of black money – domestic and international, also known as illicit financial flows (IFFs). Unlike domestic black money that can be dealt solely by the prerogative of national governments, international black money, which moves across countries, creates the problem of information inaccessibility and legal jurisdiction for national authorities, which are the biggest hurdles in detection and control of illicit financial flows. One way to deal with these hurdles is sharing financial information among countries; for example – Switzerland sharing the information of assets owned by Indian citizens in Switzerland. This seemingly simple solution is rather hard to implement because many countries (loosely termed as tax havens) benefit from such financial flows; hence are against any such initiative. The issue becomes more complex due to differences in the regulatory framework among jurisdictions, the sensitive nature and the legal implications of information sharing.

To overcome these difficulties, jurisdictions sign agreements making it legally binding for them to share the information in the pre-agreed format. Such bilateral agreements have been part of international cooperation for long, either as a clause of Double Tax (Avoidance) Agreements (DTAs) or more recently as Tax Information Exchange Agreements (TIEAs). India signed its first such agreement with Egypt in 1965 and since then, more than 100 such agreements have been signed with various countries.

After the financial crisis of 2008 and subsequent revelations about the misuse/ abuse of international Financial and Tax Architecture, there was a global outcry against illicit financial flows, and Exchange of Financial Information was accepted by world leaders as a major tool to fight IFFs. Consequently, it led to the creation of the Global Forum on Transparency and Exchange of Information for Taxation purposes by OECD, backed by the G-20. With more than 130 member countries, the Global Forum is currently the biggest intergovernmental organisation working on the issue of a multilateral framework for exchange of information. It has created Common Reporting Standard (CRS) as a model for Automatic Exchange of Information (AEOI), which has been accepted by 101 countries and they are expected to start exchange of information automatically from either 2017 or 2018. The agreement signed between India and Switzerland, which is based on the CRS, is part of that process in which around 40 countries have agreed to share information with India.

Improvement over previous arrangement

There are two major ways of information exchange – upon request and automatic. Under exchange of information on request (EOIR), country A has to make a request to country B for information about a particular entity that is a resident of country A. The limitation of this method is ‘fishing expedition’ and hence the request made has to contain very specific details such as name of person, bank name, branch name, account number, etc. Because of such limitations of EOIR, there are instances when requests made by countries like India and Argentina were turned down by countries like Switzerland.

This limitation of EOIR is expected to be addressed with automatic exchange of information (AEOI). Under AEOI, designated financial institutions within each participating country will collect and report the financial information of foreign entities to the government authorities, which will then share the information with the respective foreign governments. Since, information for all the foreign financial accounts of citizens will be available to government authorities, AEOI is expected to help in detection and deterrence for black money compare to EOIR, which works just as a confirmation tool for already suspected fund flow.

Drawbacks in the current framework

Notwithstanding the improvement over the previous framework, the current method of AEOI under CRS still has many loopholes, which may significantly reduce the expected benefits. A select few of them are listed below:

1) Exempting the pre-existing accounts: Only the information of accounts opened after 2016-17 will be shared and in some cases, like the recent Indo-Swiss agreement, this exchange will apply on accounts opened on or after 2018. Also, in some cases the new account opened by an existing customer can be considered an ‘old account’ – this essentially means all the wrong-doers of past might get an easy and convenient escape route.

2) Exclusion of many financial instruments and non-financial assets: Trusts, foundations, real estate, bullion, art work, individual broker, credit card issuer and such instruments, many of which are known to be among the big instrumentalities of IFFs are excluded from reporting requirements.

3) Possible exemption of the accounts with balance less than $2,50,000 (around Rs 1.6 crore), where balance is to be checked on a particular date instead of setting as minimum balance during a period. An account holder can reduce the balance for a few days during collection of data thus escaping the reporting requirement.

4) Fake certificate of residence: If a resident of India opens an account by using a fake certificate of residence from a tax haven then information will be shared with that tax haven instead of being shared with India rendering the entire exercise rather ineffective. The current framework does little to check this abuse.

5) Beneficial Ownership (BO): It refers to the individual who owns and ultimately benefits from a legal entity. The unavailability of BO information, which is rather easy to conceal, is another obstacle in identification and curbing of IFFs, especially if the owner (either individual or legal entity) is resident of a foreign country.

6) Non-participation of the US: The US has not committed to the CRS and instead is continuing with Foreign Account Tax Compliance Act (FATCA), its own agreement for information exchange. Unfortunately, FATCA has only limited reciprocity. In other words, while the US will get information about US residents from abroad, it will provide limited information to countries like India and others. Given its economic significance and the fact that a number of regions in the US, like Nevada and Delaware, are considered tax havens, the non-participation of the US can seriously undermine the success of the entire process.

7) Some tax havens not yet committed to sharing information: Out of 101 countries committed to CRS, only 40 have indicated that they will share information with India. The notable ones missing from the above list of 40 countries are Cyprus, Hong Kong, Macao, Mauritius, Panama, Singapore and Bahamas among others. A 2014 study by Gabriel Zucman, an economist working on the issues of international tax avoidance, found that signing of agreement with a tax haven results only in the shifting of funds to other non-signatory tax havens highlighting the need to bring all such potential destinations of IFFs under AEOI agreements.

By a coincidental turn of events, both globally and domestically, the fight against black money has gathered significant political momentum. Time has never been more appropriate to push for these changes. Allowing these loopholes to continue runs the serious risk of these initiatives being just another exercise in futility with the scourge of black money persisting.

(The author is with Centre for Budget and Governance Accountability, New Delhi. He can be reached at [email protected] Views expressed are personal.)

First Published On : Dec 26, 2016 17:09 IST

Demonetisation: Swipe machine shortage, security worries threaten to sour cashless dream

The government has a humongous task ahead driving transition into cashless economy as the public is forced to go cashless with inadequate infrastructure and security system in place. The lack of digital preparedness is already threatening to hit the consumption growth, data shows.

The data released in a State Bank of India report shows that value per card transaction has declined though the volume of transactions has increased post the surprise demonetisation of Rs 500 and Rs 1,000 notes on 8 November. India’s largest bank has pointed out that the reason for the decline could be the woeful shortage of PoS machines in the country. India has 15.1 lakh such machines, while it would need another 20 lakh to meet the demands of cashless transition, according to the report.

Another reason for the fall in transaction value is the general slowdown in spending as customers are holding on to whatever little cash they possess. If this trend continues, it is likely to hit the corporate earnings and in turn economic growth.



“Despite Government’s move to reduce the cash transactions in the economy, people are standing in queues to withdraw money from banks and ATMs. It is not easy to shift all the people to use digital mode in their day to day transaction, which may be due to a number of reasons like level of education, acceptability of technology, lack of infrastructure etc,” the SBI report has said.

The comment by the SBI  should come as an eye-opener for the government and RBI officials, who have been insisting that enough cash is being dispensed to meet the demand from the customers.

Forty-four days have passed after the demonetisation announcement. People are still thronging the ATMs and bank branches to withdraw cash. According to the RBI, from 10 November to 19 December, banks have given away Rs 5,92,613 crore worth notes to the public.

The central bank has issued a total of 22.6 billion pieces of notes, of which 20.4 billion belonged to small denominations of Rs 10, Rs 20, Rs 50 and Rs 100. As much as 2.2 billion were higher denominations of Rs 2,000 and Rs 500. However, the bank has not yet given the data on how many Rs 500 notes have been dispatched.

The value of currency the RBI has released into the system is just about one-third of the Rs 15.44 lakh crore that was in circulation when the move was announced. This wide gap is the reason for the present cash crunch. What is making matters worse is the shortfall of PoS machines in the country.

The SBI report notes that over the last 6 years the average withdrawal from an ATM was around Rs 3,000 in a month. The bank calculates that this would mean around Rs 8,000 crore is required per day for smooth functioning of ATMs.

“This translates into Rs 3.7 lakh cash requirement per ATM per day to meet the customers requirements. This may be the amount of cash required for the daily transactions, a part of which needs to shift to digital,” it notes.

However, the immediate transaction value that needs to be shifted from ATM to other digital channels is a whopping Rs 46,000 crore per month, until the limit of Rs 2,500 at ATMs remains imposed, it said.

By this calculation, the bank doesn’t expect the government to withdraw the limit until January. However, that seems to be a very conservative estimate.

Govt needs to step up

In order to facilitate such a huge volume of transaction to digital, the government needs to step up. As the report notes, first and foremost a better ecosystem of incentives for the banks to deploy swipe machines has to be put in place.

“Simultaneously, the objective of the government should be very quickly bring on-board new merchants, particularly small and marginal traders, grocery shops, etc. on digital platform,” the report has noted.

As noted earlier, India has just 15.1 lakh PoS machines. In order to shift over to cashless, there is a requirement of 20 lakh more – that is more than double. When will this be met is anybody’s guess.

Along with it, there is an urgent requirement to invest in IT security systems, which also needs to be incentivised by the government, says the report.

This is a big challenge given the country has just been witness to one of the biggest ATM security breaches, in which lakhs of debit cards of various banks were compromised. The banks were then advising the customers to not use ATMs of other banks. Post the demonetisation which happened in a few weeks’ time after the debit card scare, this advise, interestingly, suddenly saw a reversal with the government itself asking the public to go to any bank ATM that has cash to withdraw money.

Clearly, in passing such an order to banks and customers, the government has just ignored the safety aspect completely. And that too at a time when the technological advance has rendered financial frauds boundary-less.

In a survey of 309 top corporate executives in India, consultancy firm Deloitte found 70 percent of the respondents expected frauds to increase in the next two years. And the survey was held well before the demonetisation started – during 1 October to 30 November.

Post the demonetisation, which has quickened the pace of transition to cashless, the possibility of frauds must have just increased.

“SMEs are struggling to mitigate even well-known frauds such as bribery and corruption. Given the inherent limitations of these organisations, there is need for government intervention to help tackle fraud,” said Rohit Mahajan, Deloitte India Head (Forensic – Financial Advisory), after releasing the sruvey resultes on Wednesday. According to him, the government start creating awareness about frauds and security systems among the small firms, which are all the more vulnerable to frauds.

The government, however, seems to be busy changing rules on a daily basis and making unsubstantiated claims, ignoring the pain that the customers, banks and companies are going through. It is high time it pulled up its socks and dealt with the emerging situation which seems to be already spinning out of control at least in some pockets.

First Published On : Dec 22, 2016 13:11 IST

TCS EGM: Cyrus Mistry claims moral victory even as shareholders vote to oust him

Tata Consultancy Services Ltd (TCS) shareholders voted to remove Cyrus Mistry, the ousted chairman of Tata Sons, as a director, according to the results of an extraordinary general meeting on Tuesday.

About 93 percent of TCS shareholders, who cast their vote, were in favour of removing Mistry, TCS said in a regulatory filing.

Cyrus Mistry. ReutersCyrus Mistry. Reuters

Cyrus Mistry. Reuters

His ouster comes as no surprise given Tata Sons majority stake in the company, about 73 percent as of September end, according to Thomson Reuters data.

TCS, India’s biggest technology services firm by sales, contributes the bulk of the group’s revenue and profit.

About 43 percent of TCS’s institutional holders who voted were against the removal of Mistry, according to the filing. Interestingly, 78 percent of voting shareholders who were not promoters or institutional holders were against Mistry’s ouster.

The divisions within the minority shareholders on the contentious issue were out in the open with a few minority shareholders voicing support for Mistry. As many as 38 shareholders spoke at the 150-minute long EGM. Even though a bulk of them voiced support for Tata, those handful who affirmed their support to Mistry were applauded.

Mistry’s office, meanwhile, issued a statement late in the night, claiming moral victory.

“Almost 20 percent of shareholders of TCS that accounts for more than 70 percent of non promoter shareholders supported Cyrus by voting against the resolution or abstained (expressing their disapproval of the promoter actions),” said the statement.

In a bitter boardroom coup in October, Mistry was ousted as the chairman of Tata Sons, the holding firm for the $100 billion steel-to-software conglomerate, and group patriarch Ratan Tata returned to the helm temporarily.

A public power struggle has since ensued between the two sides. Mistry, however, still sits on the boards of several group companies. Tata Sons has called shareholder meetings at these companies over the next few days to vote on his removal.

Indian Hotels Co Ltd, Tata Steel and Tata Motors will hold their shareholder meetings next week.

“The fight is a matter of principle rather than facing the foregone outcome (of this meeting),” Mistry said ahead of the TCS shareholder meet in an indication that he had expected to be ousted given Tata Sons’ majority shareholding in TCS.

“The very future of TCS hinges on good governance and ethical practices. In the past several weeks, we have seen good governance being thrown to the wind in every sense of the term, replaced by whims, fancies and personal agenda,” he said.

Since his ouster from Tata Sons, Mistry has attacked the group’s corporate governance standards several times, saying that his efforts to establish stronger guidelines contributed to his removal.

“Whatever be the decibel level of the voice that would drown your vote, I call on you to vote with your conscience and send a signal that catalyses a larger discussion on governance reforms,” Mistry said.

Independent director Aman Mehta, who officiated the meeting after interim chairman Ishaat Hussain recused himself, said Mistry had lost “the trust and confidence” of the promoter group (Tata Sons and Tata Trusts) which had nominated him and it was in best interest of TCS that he leave now.

Asserting that the core issue goes far beyond the “performance or competence”, Mehta said, “It seems to me that the real issue here is one of trust and confidence of the promoter group in its nominated chairman.”

“Independent directors of TCS have met separately and have reviewed the whole issue in some details. It is clear to all of us that the current issue can have some materially negative effect on the functioning of the company,” he said.

With Reuters and PTI

First Published On : Dec 14, 2016 07:45 IST

Cyrus Mistry claims moral victory even as TCS shareholders vote to oust him

Tata Consultancy Services Ltd (TCS) shareholders voted to remove Cyrus Mistry, the ousted chairman of Tata Sons, as a director, according to the results of an extraordinary general meeting on Tuesday.

About 93 percent of TCS shareholders, who cast their vote, were in favour of removing Mistry, TCS said in a regulatory filing.

Cyrus Mistry. ReutersCyrus Mistry. Reuters

Cyrus Mistry. Reuters

His ouster comes as no surprise given Tata Sons majority stake in the company, about 73 percent as of September end, according to Thomson Reuters data.

TCS, India’s biggest technology services firm by sales, contributes the bulk of the group’s revenue and profit.

About 43 percent of TCS’s institutional holders who voted were against the removal of Mistry, according to the filing. Interestingly, 78 percent of voting shareholders who were not promoters or institutional holders were against Mistry’s ouster.

The divisions within the minority shareholders on the contentious issue were out in the open with a few minority shareholders voicing support for Mistry. As many as 38 shareholders spoke at the 150-minute long EGM. Even though a bulk of them voiced support for Tata, those handful who affirmed their support to Mistry were applauded.

Mistry’s office, meanwhile, issued a statement late in the night, claiming moral victory.

“Almost 20 percent of shareholders of TCS that accounts for more than 70 percent of non promoter shareholders supported Cyrus by voting against the resolution or abstained (expressing their disapproval of the promoter actions),” said the statement.

In a bitter boardroom coup in October, Mistry was ousted as the chairman of Tata Sons, the holding firm for the $100 billion steel-to-software conglomerate, and group patriarch Ratan Tata returned to the helm temporarily.

A public power struggle has since ensued between the two sides. Mistry, however, still sits on the boards of several group companies. Tata Sons has called shareholder meetings at these companies over the next few days to vote on his removal.

Indian Hotels Co Ltd, Tata Steel and Tata Motors will hold their shareholder meetings next week.

“The fight is a matter of principle rather than facing the foregone outcome (of this meeting),” Mistry said ahead of the TCS shareholder meet in an indication that he had expected to be ousted given Tata Sons’ majority shareholding in TCS.

“The very future of TCS hinges on good governance and ethical practices. In the past several weeks, we have seen good governance being thrown to the wind in every sense of the term, replaced by whims, fancies and personal agenda,” he said.

Since his ouster from Tata Sons, Mistry has attacked the group’s corporate governance standards several times, saying that his efforts to establish stronger guidelines contributed to his removal.

“Whatever be the decibel level of the voice that would drown your vote, I call on you to vote with your conscience and send a signal that catalyses a larger discussion on governance reforms,” Mistry said.

Independent director Aman Mehta, who officiated the meeting after interim chairman Ishaat Hussain recused himself, said Mistry had lost “the trust and confidence” of the promoter group (Tata Sons and Tata Trusts) which had nominated him and it was in best interest of TCS that he leave now.

Asserting that the core issue goes far beyond the “performance or competence”, Mehta said, “It seems to me that the real issue here is one of trust and confidence of the promoter group in its nominated chairman.”

“Independent directors of TCS have met separately and have reviewed the whole issue in some details. It is clear to all of us that the current issue can have some materially negative effect on the functioning of the company,” he said.

With Reuters and PTI

First Published On : Dec 14, 2016 07:45 IST

Ratan Tata-Cyrus Mistry battle: Here are key charges, counter charges of both camps

Shareholders of Tata Consultancy Services will today vote on a resolution to remove Cyrus
Mistry as the company’s director. The crucial voting is expected to happen around 3:30 pm.

The outcome of the extraordinary general meeting would influence the fate of Mistry, who was on Monday removed as director and chairman of Tata Industries following shareholders’ vote, first such instance of the embattled executive being ousted from the board since his removal as Tata Group chairman on 24 October.

The logo of Tata Motors is pictured at at the 37th Bangkok International Motor Show in Bangkok, Thailand, March 22, 2016. REUTERS/Chaiwat Subprasom/File Photo - RTX2QAB8The logo of Tata Motors is pictured at at the 37th Bangkok International Motor Show in Bangkok, Thailand, March 22, 2016. REUTERS/Chaiwat Subprasom/File Photo - RTX2QAB8


Today’s voting by TCS shareholders is the first of six such EGMs called by major listed firms of the Tata group — Indian Hotels Co Ltd (December 20), Tata Steel (December 21), Tata Motors
(December 22), Tata Chemicals (December 23) and Tata Power (December 26) — to seek Mistry’s ouster as director.

In the run-up to the EGMs, both Ratan Tata camp and Mistry camp have been preparing them selves for the big showdown.

Here’s a low-down on the key allegations and counters:

Mistry wanted to control the group: Tata Sons had first alleged that Mistry betrayed trust and tried to gain control of major operating firms of the group, concentrating powers and using free-hand given to him to weaken management structures of the Tata Group. Last week, in a letter to shareholders of the companies, Tata stated that the continued presence of Mistry in their respective boards was a serious “disruptive influence” and could make the companies “dysfunctional”.

The Mistry camp countered the last week’s letter saying Tata is repeating a lie a thousand times hoping to make it a truth. “The allegation of concentration of power is new-found wisdom being written after seven weeks of failure to come up with any reason for upstaging Mr. Mistry. On almost all Tata Boards there was Tata Group representation,” a statement from Mistry’s office said.

Tata wanted to sell TCS to IBM: The Mistry camp had earlier lashed out at his removal as Chairman of TCS on 17 November calling it as a reflection of “cloak and dagger” machinations that define “the angry strategy of the Ratan Tata camp”. He had even alleged that Tata once tried to sell the IT firm to IBM and his “ego” led to bad business decisions like Corus acquisition at double the original cost.

FC Kohli, the first chief executive of TCS, however, rebutted Mistry’s claim. “Mistry’s comments regarding the sale of TCS to IBM at some ‘unspecified point in time’ are not correct,” said Kohli, widely considered as father of Indian IT industry. “At no point at that time was there ever an intention of the Tata Group to sell TCS to IBM,” he said in a statement.

Mistry later changed his stance, stating his statement was based on “information from sources who were close to JRD Tata who informed him that it was Ratan Tata’s intention, and not the
group’s intention, to sell TCS”.

Charges on AugustaWestland scam: The Mistry camp over the last weekend alleged that Vijay Singh, a independent director on Tata Sons board, had a role in the AgustaWestland chopper scam as it happened when he was the Defence Secretary in 2010.

“As Defence Secretary, Singh was a key official involved in award of Rs 3600 crore VVIP helicopter contract to AugustaWestland in 2010,” Mistry’s office said in a statement.

However, Singh on Sunday vehemently denied the charge. “I was defence secretary from 2007-2009 and the present cases being prosecuted by CBI pertain to 2004-2005. The Augusta Westland acquisition was approved by the Cabinet well after my retirement,” he said.

With PTI

First Published On : Dec 13, 2016 13:33 IST

FCRA: Are political parties unique organisations, and thus above the law?

The past year-and-a-half or so has seen several instances of very prompt action having been taken against some civil society organisations (CSOs) based on suspicions and allegations of violations of the Foreign Contribution (Regulation) Act (FCRA). On the other hand, now we have a situation where a high court has held two organisations — which for all practical purposes, can be considered to be CSOs because these are neither government nor corporate business organisations — actually guilty of having violated the FCRA as far back as 28 March, 2014, and actually “directed” the Union of India to “take action as contemplated by law… within a period of six months”.

But, all the Ministry of Home Affairs — the administering authority for implementing FCRA and which took very prompt and stern action against other CSOs — did, as far as is known as a result of an RTI application, was (a) to write a letter to the Ministry of Corporate Affairs asking for “names of companies falling under the category of ‘foreign source’, who have donated to political parties, namely, Indian National Congress and Bharatiya Janata Party, during the years 2006-7, 2007-8, 2008-09 and 2009-10 and 2010-11,” and (b) forward the response of the Ministry of Corporate Affairs to the Election Commission of India.

If it sounds strange and mysterious, read on.

Having discovered that the BJP and the Congress had accepted donations from an electoral trust which, on removing the ‘corporate veil’ twice, was found to be actually controlled by a company registered in a foreign country, a CSO and a retired secretary to the Government of India, filed a public interest litigation in the Delhi High Court requesting that action under FCRA be taken against these two political parties since political parties are expressly banned from accepting donations from foreign sources by the FCRA. It was in response to this petition that the Delhi High Court pronounced its judgment on March 28, 2016, mentioned in the opening paragraph above.

Representational image. Reuters

Representational image. Reuters

Not having taken action commensurate with the offence, and after the two political parties had filed appeals in the Supreme Court, against the high court’s decision, the government of the day attempted, albeit unsuccessfully, to amend the FCRA to get the two parties off the hook. This has been described in this column earlier.

It was during the hearings of those appeals in the Supreme Court on 22 and 29 November that the lawyers appearing for the BJP and the Congress to withdraw their appeals against the High Court order. It was widely reported in the media that the senior counsel appearing for the BJP and the Congress said that their clients had obtained clarifications from the government in the light of the amendment made in 2010 to the FCRA. The parties did not intend to pursue their appeals in view of the government’s assurance, …It was further reported that “Under the 2010 amendment, the government had relaxed the norms for political parties for receiving donations from foreign companies wanting to discharge their corporate social responsibility.”

Let us look at the “amendments made in 2010 to the FCRA”.

The FCRA was first enacted in 1976. It came to be known as FCRA 1976. In 2010, it was replaced by a new Act the preamble to which said “An Act to consolidate the law to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilisation of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith or incidental thereto.” The Act passed in 2010 came to known as FCRA 2010.

The “amendments made in 2010 to the FCRA” referred to by the “senior counsel appearing for the BJP and the Congress” seems to be a misunderstanding or loose description. An exact rendition would most likely be amendments made “to the FCR Act of 2010 in 2016. There are two reasons for saying so. It is better to present them in the reverse chronological order.

The FCRA 2010 was amended as part of the Finance Bill 2016, surreptitiously, according to some commentators, and this amendment reads as follows:

“In the Foreign Contribution (Regulation) Act 2010, in section 2, in sub section(1), in clause (j), in sub-clause(vi), the following proviso shall be inserted with effect from 26 September, 2010, namely:

‘Provided that where the nominal value of share capital is within the limits specified for foreign investments under the Foreign Exchange Management Act, 1999, or the rules and regulations made thereunder, then, notwithstanding the nominal value of the share capital of a company being more than one half of such value at the time of making the contribution, such company shall not be deemed a foreign source’.”

The second reason explains why amendment of FCRA 2010 was considered so critical that it was made part of the Finance Bill 2016. A key paragraph of the Delhi High Court judgment of March 2014 says, “The interpretation of the term “foreign source” as defined under Section 2(1)(e) of the Act lies at the heart of the present controversy and begs for judicial consideration” (italics added).

It needs to be pointed out that Section 2(1)(e) of the 1976 Act became Section 2(1)(j) of the 2010 Act when the FCRA was revised in 2010, and that both these sections are identical. The reason for amending only one clause of this section is that it is this particular clause that qualifies Vedanta, Sterlite, and Sesa as “foreign sources” according to the Delhi High Court judgment.

It is important to note that what the “amendment” done in 2016 to the 2010 Act changes is “section 2, in sub section(1), in clause (j), in sub-clause(vi)” of the Foreign Contribution (Regulation) Act 2010. This is important because of what the very second paragraph of the Delhi High Court judgment of 28 March, 2014, which was challenged by the two parties, says. This is reproduced below:

“Since the writ petition drew attention to donations made to politicalparties for the period up to the year 2009, we record at the outset that ourconcern is not with the Foreign Contribution (Regulation) Act, 2010 which has come into force on September 26, 2010. Our discussion of the legalposition would be with respect to the Foreign Contribution (Regulation) Act,1976.”

The sagacity of the Delhi High Court judges has to be admired that they clarified this issue right in the beginning of the judgment, in 2014 itself when further amendment of the FCRA 2010 possibly could not have been predicted.

It should not be necessary to point this out to anyone that since FCRA 2010 did not exist in 2009 when the donations in question were made and accepted, the law in existence at the time of performance of the illegal action would apply and that was, and remains, FCRA 1976. Would it not be outrageous if an offence committed in 1980, for example, were to be tried under a law which came into force only in 2012? It is unbelievable that the senior lawyers representing the two parties had not read or were not conscious of the implications of the second paragraph of the Delhi High Court order that they were challenging. Why they chose to argue this way remains a mystery but it seems plausible that this may well have been the reason for withdrawal of the appeals.

It should not be hard to imagine what would have been the response of the home ministry if a CSO had been held guilty of having violated the FCRA. This is what shows that political parties, although neither government nor business organisations, are not being treated at par with other, mortal, CSOs, since no action is taken against them even after a high court has found them unambiguously guilty of having committed an offence against the law of the land.

Now that the high court judgment has, in a way, been reaffirmed, all eyes are on the home ministry to see what action does it take and when. A former secretary to the Government of India has already written to the home ministry to de-register the two parties.

Whether political parties are actually covered by the law of the land, like other CSOs, should be known soon.

First Published On : Dec 12, 2016 08:11 IST

RBI policy offers Urjit Patel a chance to clear air on demonetisation; will he live up to it?

That the Reserve Bank of India will most likely cut interest rate today is now almost a foregone conclusion. Economists are mostly betting on whether it will be 25 basis points or 50 bps.

The key reason being cited is that the central bank will have to cut rate to boost growth as the government’s demonetisation move is slowing down consumption and economy.

Two-thirds of the 60 economists polled by Reuters said they expected a cut, with 31 of 56 respondents expecting it to be 25 bps, while six predicted a deeper 50 bps reduction. One said the RBI would slash rates by 75 bps.

Urjit Patel, Reserve Bank of Governor. ReutersUrjit Patel, Reserve Bank of Governor. Reuters

Urjit Patel, Reserve Bank of Governor. Reuters

“Given the concerns about demonetisation and the slowdown it is likely to generate in sectors that have traditionally been cash dependant, such as consumption goods, the RBI will try to cushion the blow with a rate cut,” said Shilan Shah of Capital Economics in Singapore has been quoted as saying in the Reuters report.

A rate cut seems to be the only pill that the central bank can administer at present to boost the economic growth and the consumer confidence.

The government on 8 November announced its decision to demonetise Rs 500 and Rs 1,000 notes and replace them with new ones, in a bid to curb black money generation, fake currency usage and terror funding. The unexpected move resulted in a cash crunch as the RBI was not prepared to meet the demand for new notes. The demonetised notes formed 86 percent of the currency in circulation by value.

In this context, here are the key aspects you should watch out for in the policy statement today.

About demonetisation

Ever since the demonetisation, the central bank and governor Urjit Patel have both come under criticism for keeping mum about the steps taken. The two times Patel spoke – interviews to PTI and Quint – he just made a customary assurance that the central bank is doing everything to reduce genuine customers’ pain. That was hugely insufficient to calm given the difficulties faced by not just the general public but also the bank staff. Bank unions have written to the finance ministry explaining the various hardhsips faced by their members. According to the union, the central bank has been saying there is enough cash and it is being dispatched to the banks while banks are getting only limited cash. Due to repeated assurances given by the RBI, customers feel that the banks are rationing the cash to them for no reason and this is resulting in tension. Again, they also have raised a suspicion that the RBI is preferring private sector banks to public sector ones while disbursing cash. The policy review today is a chance for Patel to clear all these charges. Will he speak up? Will he reveal the status of currency printing in its presses? How much rupee notes have been printed? How much more have to be printed to completely replace the demonetised currency? When does he think the situation will normalise?

About deposit amount banks got

This number is important. In the absence of regular details from the central bank, there are many numbers doing the rounds. The RBI just twice put out releases on this data and the last one was on 8 November. According to the latest numbers available through sources, as much as Rs 12 lakh crore worth old currency has returned to the banking system as deposits. This is against the government’s estimate that it would get back Rs 10 lakh crore and the rest will be extinguished. There was expectation that this will result in a windfall for the central bank which could have been transferred to the government by way of special dividend. This is as of now a speculation. The government and the RBI have neither denied it nor have they clarified. So also the case of fake currency. A report in The Times of India has said 20 days after demonetisation only 3.4% of all notes returned were counterfeit. Both these, according to many, mean that the scheme has failed in its objective. Worse still is the speculation that the rich and wealthy have already laundered their money. A report in The Indian Express noted that from tiffin service to dental implants, everybody has tried to beat the system and swap old notes. What is the RBI’s thinking? Is the suspicion that the rich and wealthy are gaming the system that forced the authorities to change the rules every other day?


As of now, India is the fastest growing economy. It grew 7.3 percent in July-September, better than the previous quarter’s 7.1 percent. However, with demonetisation curbing the spending power

of the RBI, various agencies and brokerage houses have slashed their growth estimates. Former prime minister Manmohan Singh has said he expected the GDP to fall by 200 basis points. What is the RBI’s take? Its estimate for the current year is 7.6 percent. Most probably the central bank will give out a revised estimate for the current year. Watch out for that.

Inflation or deflation?

Inflation is already trending downwards due to the favourbale monsoon that has improved the productivity of food items. In October, the retail inflation was 4.21 percent, lower than 4.39 percent in September. The food inflation, meanwhile, stood at 3.32 percent compared with 3.96 percent in the previous month. The corresponding figure for July 2016 was a higher 8.35 percent. The slower demand induced by demonetisation is seen further pressuring the prices down. There is even a view that the entire process is deflationary. If it is indeed so, this would do more harm to the economy. The RBI is bound to give some clarity on this, including a revised estimate for inflation. Look out for the number.

One could easily argue that the central bank need not clarify all of these. But given the grand scale at which the demonetisation is being rolled out and the way it is impacting the general public, there is a need for more transparency on the workings of the central bank. But, ironically, the RBI has gone into the opaque mode.

This has seriously dented the image of the central bank. Bank officers’ confederation has even sought the resignation of Patel taking moral responsibility for the havoc in the financial system.

Today’s policy review is a chance for the central bank and its governor to clarify and bring back the integrity of a democratic institution, which has always refused to genuflect before the political bosses in Delhi. The question is will Patel live up?

First Published On : Dec 7, 2016 08:25 IST

Note ban: Just 2 day into launch, Paytm suspends ‘App POS’ on data security concerns

New Delhi: Mobile wallet company Paytm has suspended its app that allowed small shopkeepers to accept payment through cards amid ongoing cash crunch, citing risks to customer data and privacy.



The new feature was designed to eliminate the need for a physical point-of-sale (PoS) terminal or a card swipe machine, instead helping small shopkeepers use their smartphones to facilitate the transactions.

However, soon after launching ‘App POS’ with much fanfare this week, Paytm rolled back the initiative after concerns were raised over security of customer’s card details by the industry.

“Based on some suggestions from the industry, we have decided to add additional certifications and features before making it available to merchants. We will re-launch this product as soon as we have updated the product,” the Alibaba-backed company said in a blogpost.

It further said: “Nothing is more important to us than customer data and privacy. We will always put this above all without fail.”

In October, as many as 32.14 lakh debit cards of various public and private sector banks were reported to have been ‘compromised’ by cyber malware attack in some ATM systems.

Several banks, including state-owned SBI, had recalled a number of cards while many others blocked the ones suspected to have been compromised and asked their customers to change PIN (personal identification number) before use.

According to the National Payments Corporation of India, as many as 641 customers across 19 banks have been duped of Rs 1.3 crore using stolen debit card data.

In its blogpost, Paytm defended its product saying the company does not store any card details in the app or on its servers that are shared during the payment flow.

“The transaction is completed on the bank’s page and follows the 2-factor authentication guidelines mandated in India,” the post said adding that the company’s IT systems are audited periodically by certified independent auditors.

At the time of launch too, Paytm CEO and founder Vijay Shekhar Sharma had sought to allay privacy concerns saying the company is a “PCI DSS (Payment Cards industry Data Security Standard) certified company”.

After generating a bill for the item sold, the shopkeeper was to hand over his/her phone to the customer for entering card details.

The feature was introduced after the government scrapped old Rs 500 and Rs 1,000 currency notes that is forcing consumers to adopt digital payment and cashless transactions, to tide over the liquid cash crunch.

While there are 740 million cards in India at present, the number of card swiping machines is at a dismal 1.5 million.

Paytm had said it expects 10 million app POS to be downloaded before the weekend and as many as 15 million app POS merchants were expected by November-end.

First Published On : Nov 25, 2016 12:41 IST

Bansal suicide case, DIG Sanjeev Gautam relieves himself from case

<!– /11440465/Dna_Article_Middle_300x250_BTF –>Sanjiv Gautam, who was posted with the Central Bureau of Investigation as an DIG, will not be probing the corruption case against deceased Corporate Affairs Director General B K Bansal. The senior bureaucrat had committed suicide along with his family alleging that he was tortured by the DIG Gautam and some members of the probe team that was investigating him. An internal inquiry was launched by the CBI following the suicide of Bansal against Gautam and the members of the probe team mentioned in the suicide note.The agency however on Thursday informed that DIG Gautam had recused himself from probing the case against Bansal after his tenure with the CBI formally ended on November 10.Official sources said Gautam is also part of 2G scam probe hence the agency will seek permission of competent court to relieve him. Sources also told DNA that its sleuths are about to complete the internal probe looking into allegations of torture against Gautam levelled by Bansal in the suicide note.In the suicide note, Bansal made serious allegations against Gautam and his team members for torturing his wife and daughter and also threatening action against him and his son.Bansal’ wife and daughter had ended their lives in July, nearly three days after he was arrested by CBI for allegedly taking bribe. the agency had said that Bansal was caught red handed. Two months later, Bansal who was released on bail took similar decision to commit suicide along with his son.

Ratan Tata-Cyrus Mistry battle: War of words raises more questions on role of promoters

The Tata-Mistry spat has now escalated into a bitter feud of epic proportions, reminiscent of the Ambani Brothers schism that took place over a decade ago. Though the conflict has been overshadowed by recent global and domestic events, its relevance to the future of corporate governance in India has not diminished.

The deepening dispute threatens to prolong the turmoil roiling a $100 billion business empire that makes products ranging from table salt to Jaguar sports cars. The wrangling has also cost investors as Tata Group’s listed companies have lost more than $10 billion in market value, underperforming India’s benchmark index, since Mistry was abruptly ousted less than three weeks ago.

Ratan Tata, incumbent chairman, Tata Sons and Cyrus Mistry, ousted chairman. AFPRatan Tata, incumbent chairman, Tata Sons and Cyrus Mistry, ousted chairman. AFP

Ratan Tata, incumbent chairman, Tata Sons and Cyrus Mistry, ousted chairman. AFP

The Ratan Tata-led camp attempted to muscle Mistry out of the group’s largest subsidiary and issued a nine-page statement where it accused the erstwhile Chairman of being a poor leader. The statement is a labyrinth of tenuous accusations all of which can be refuted by the Companies’ financial records. A recent report by Bloomberg showed that insiders have said that the allegations are unsubstantiated.

The allegations under this Statement and the reasons the Tata Group has given to justify its actions prompt an exploration of the role of promoters under the Companies Act, 2013. So far as meaning of promoter is concerned, it means A person who involves in the promotion of the company.

A promoter is a person who does all necessary preliminary work, incidental to the formation or promotion of the company. To be a promoter, one need not necessarily be associated with the initial formation of the company; one who subsequently helps to arrange floating of its capital will equally be regarded as a promoter.

As per section 2(69) of the Act, 2013 defines the term ‘Promoter’, it means a person-

(a)  Who has been named as such in a prospectus or is identified by the company in the annual return to in section 92; or

(b)  Who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or

(c)  In accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act:

Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity.

In other words, we can define the expression ‘promoter’ to mean a promoter who is a party to the preparation of prospectus or of a portion thereof containing the untrue statement, but does not include any person by reason of his acting in a professional capacity in procuring the formation of the company. Certain attempts have been made by the Judiciary to elaborate on the meaning of the term ‘promoter’. Cockburn C.J., in the case of Twycross v. Grant, described a ‘Promoter’ as “one who undertakes to form a company with reference to a given project, and to set it going, and who takes the necessary steps to accomplish that purpose”.

In the USA, Securities Exchange Commission Rule 405(a) defines a promoter as a person who, acting alone or in conjunction with other persons directly or indirectly takes the initiative in founding or organizing the business enterprise.

The SEBI insider trading regulations are of particular relevance to the current conundrum.

As per regulation 2 (e) of the ‘Securities and Exchange Board of India Prohibition Of Insider Trading Regulations, 1999 insider means any person who, is or was connected with the company or is deemed to have been connected with the company, and who is reasonably expected to have access to unpublished price sensitive information in respect of securities of company, or who has received or has had access to such unpublished price sensitive information.

He could be a company promoter, director, executive, auditor, a lawyer, stock broker, a fund manager or even a newspaper correspondent who may be privy to a certain critical development in the company.

He may use this information to his own advantage. Price sensitive information means any information which relates directly or indirectly to a company and which if published is likely to materially affect the price of securities of company.

Examples of price sensitive information include, periodical financial results of the company, intended declaration of dividends (both interim and final), issue of securities or buy-back of securities, any major expansion plans or execution of new projects, amalgamation, mergers or takeovers, disposal of the whole or substantial part of the undertaking, and significant changes in policies, plans or operations of the company.

In its statement, the Tata Group has admitted to interfering with the operations of the Tata Sons Board. While Tata Sons is an unlisted holding company, it directly oversees the running of the group’s listed subsidiaries. By making this admission the Tata Group has inadvertently opened itself up to attack.

Mistry’s terse rebuttal to the Statement is reflective of a certain hubris that he will come out on top should the case go to Court. Indeed, the Tata Group’s excoriation of the independent directors at Tata Chemicals who supported Mistry makes Ratan Tata out to be a despot unable to come to terms with how poorly he has handled a situation. Hopefully, better sense will prevail before it is too late and the two parties will find a way to amicably resolve this prevailing discord.

(Dr.Kumar is the founder of Hammurabi & Solomon and a visiting fellow with Observer Research Foundation)

First Published On : Nov 15, 2016 09:55 IST

Ratan Tata-Cyrus Mistry row escalates, both camps gear up for no-holds-barred fight

Mumbai: The Rata Tata-Cyrus Mistry feud flared up on Sunday with the ousted chairman rebutting allegations of “drifting away” Tata companies during his tenure and hitting back at attempts to question integrity of independent directors who backed him, prompting the $102-billion group’s holding firm Tata Sons to assert it will do “whatever is required” to deal
with the situation.

Terming the Tata Sons’ contention that group companies were “drifting away” under him as “furthest from truth”, Mistry hit out first at Tata Sons calling its criticism of independent directors, revered names in India Inc, as “truly unfortunate”. This led the salt-to-software conglomerate to assert that it will do “whatever is required to deal with the situation”,
hinting at a no-holds-barred battle in the days ahead.

Cyrus Mistry, ousted chairman, Tata Sons and Ratan Tata, incumbent ChairmanCyrus Mistry, ousted chairman, Tata Sons and Ratan Tata, incumbent Chairman

Cyrus Mistry, ousted chairman, Tata Sons and Ratan Tata, incumbent Chairman

A day ahead of the crucial board meet of Tata Motors, the group also said it is “crucially important” for the boards, including the independent directors, to “consider their views
and positions ensure that the future of Tata companies is protected, taking into consideration the interest of all stakeholders”.

It can be noted that the independent directors of at least two big companies from the Group, including Indian Hotels Company (IHCL) and Tata Chemicals, have backed the ousted chairman leading the holding company to question their objectives in a 9-page letter sent last week. Mistry’s first statement was a part-rebuttal of the allegations levelled against him in the statement and in defence of the independent directors.

“To suggest that ‘ulterior objectives’ and ‘clever strategy’ can sway these eminent names in undertaking their fiduciary duties and in discharging the duties mandated by statute as independent directors is absolutely astonishing and really speaks of how low Tata Sons has unfortunately stooped in their public statements,” a statement from his office said, in a rebuttal to the recent actions of Tata Sons.

Stating that the independent directors whose conduct has been questioned include names like Deepak Parekh, Nusli Wadia and Nadir Godrej, among others, Mistry added that it is “truly unfortunate” that independence of “stalwarts of India Inc” is being questioned. The statement is a rebuttal to the 9-page open letter issued by the Tata Sons in which it had accused Mistry of
“trying to gain control of Indian Hotels Company, whose independent directors had sided with the former chairman of Tata Sons”.

“He (Mistry) has cleverly ensured over these years that he would be the only Tata Sons representative on the board of IHCL in order to frustrate Tata Sons’ ability to exercise influence and control on IHCL,” the Tata Sons letter had said.

Independent directors at Tata Chemicals have also backed Mistry, which has led Tata Sons to initiate action to expel Wadia from its company boards.

In its letter, Tata Sons had alleged that Mistry was trying to gain control of the group’s main companies and regretted its decision to appoint him as chairman four years ago. It had said the structure of the group has been “consciously dismantled so that now the operating companies are drifting farther away from the promoter company and their major shareholder”. Mistry retorted back at this today, saying these suggestions are “furthest from the truth” and added that changing the board structure was part of a plan to alter the corporate governance practices with an aim to make the salt-to-software group’s companies run independently.

“The corporate governance framework that was developed under Mistry’s leadership attempted to ensure that group companies would adhere to the group values, share best practices, enable movement of talent, exploit win-win synergies and do all of this without impinging on independence of the operating companies and the boards that they are ultimately responsible to,” he said. This was done to protect the interests of all stakeholders, employees, and minority shareholders, he said, adding that it was a case of placing responsibility “where it should lie”.

The Mistry statement also made a veiled but not fully elaborate reference to insider trading while explaining the need to have a new corporate governance framework. “… between Tata Trusts, Tata Sons, and the Tata operating companies, there was a need to be compliant with the law relating to insider trading by ensuring communication of unpublished price sensitive information strictly on a need to know basis,” Mistry said.

Listing out the names of the nine directors whose conduct has been questioned, it highlighted six of them were appointed during Ratan Tata‘s tenure that ended in 2012 and two of them serve as trustees on Tata Trusts. It said under the existing laws, the independent directors are required to bring “independent judgement” on issues of strategy, performance, risk management, resources, key appointments and standards of conduct, and safeguard the interests of all stakeholders, especially the minority shareholders. It acknowledged that in both IHCL and Tata Chemicals, the independent directors were unanimous in their support of him as the chairman and claimed that this is a “reflection of Mistry’s conduct as chairman in upholding the highest
standards of corporate governance”.

The statement also elaborated on the change in the board composition of companies under Tata’s leadership and the changes which Mistry introduced. As against the earlier practice of all the board members being internal members of the group, Mistry’s statement said now the requirement is to have 30 per cent Trust nominees and 30 per cent independent directors. “The corporate governance framework in India has considerably tightened in recent times with more stringent rules with respect to independence of directors, female directors, board evaluation, and so on. To meet this increased scrutiny, several new policies and frameworks were developed at the group centre and deployed across operating companies,” it said. These included refreshing the code of conduct, developing a board effective framework, LEAD programme to enhance gender diversity and provide TBEM feedback on company to the board, the statement said.

First Published On : Nov 14, 2016 08:50 IST

Rs 500, Rs 1,000 note ban: Amazon’s cash on delivery orders back on track

New Delhi: E-commerce giant Amazon today said it has resumed cash on delivery (CoD) service for customers, two days after it had halted the option following the government’s move to demonetise Rs 500 and Rs 1,000 notes. Apart from cash, Amazon India will allow customers to pay using credit and debit cards at the time of delivery of the order.



“As of November 11, we are re-introducing CoD to enable options to pay at the time of delivery. This accommodates customers who face challenges of paying online, but are still able to use electronic instruments at delivery,” an Amazon India spokesperson said.

The spokesperson added that the delivery agents have been trained to help customers who opt for card payments at the time of order delivery or valid currency notes, including the newly introduced Rs 500 and 2,000 notes.

About digital payments on the platform, the spokesperson said electronic payments at doorstep have gone up by a factor of 10x in the past two days.

“This clearly indicates that customers are able to adapt to electronic payment methods when cash is constrained. We continue to focus on incentivising and helping people shift to making payments electronically online, aligned with the government’s focus,” the spokesperson added.

The company has launched a new offer to incentivise customers to make cashless transactions. Customers can load their Amazon gift card balance and get an incentive of 15 percent/Rs 300 (maximum) discount at checkout.

Following the government’s decision to demonetise, firms like Amazon and Paytm temporarily halted the cash on delivery facility for customers.

Some companies like Uber and BigBasket have issued advisories urging customers to pay in lower denominations while others like Flipkart and Snapdeal set limits to the
value of orders that can be delivered through CoD. According to industry estimates, about 70 percent of the shoppers opt for cash while buying a product.

First Published On : Nov 11, 2016 17:19 IST

Rs 500, Rs 1,000 note ban: SBI gets Rs 53,000 crore deposits till mid-day

Mumbai: SBI today said it has received deposits worth Rs 53,000 crore after the government scrapped Rs 500/1,000 notes and has exchanged currency worth about Rs 1,500 crore so far.

SBI chairwoman Arundhati Bhattacharya. ReutersSBI chairwoman Arundhati Bhattacharya. Reuters

SBI chairwoman Arundhati Bhattacharya. Reuters

“The bank got deposits of Rs 31,000 crore yesterday… Today, till now, the amount of deposit is Rs 22,000 crore …The business is going well of demonetisation. We have additional counters,” SBI Chairperson Arundhati Bhattacharya said while announcing its quarterly result today.

SBI had yesterday replaced about Rs 750 crore worth of notes with the junked ones, while till mid-day today it had exchanged currency amounting to Rs 723 crore.

The bank has been able to press into service only about half of its ATM network nationwide.

“We have also been able to put up 29,000 ATMs and Cash Deposit Machines today. Of these, 21,000 ATMs and rest are CDMs,” she said.

People across the country thronged to branches and ATMs across the country to replace their old high value currencies as Prime Minister Narendra Modi on Tuesday night announced withdrawal of 500 and 1,000 rupee notes from circulation in a bid to flush out black money.

Only a maximum of Rs 4,000 per person in cash irrespective of the size of tender was being given per person after submission of valid identity proof. Anything over and above this value was credited to bank account.

Banks set up additional counters to change cash as also allow withdrawal from bank accounts through cheque or withdrawal slips with a ceiling of Rs 10,000 in a day within an overall limit of Rs 20,000 in a week (including withdrawals from ATMs) for the first fortnight i.e. up to November 24.

First Published On : Nov 11, 2016 16:11 IST

Delhi pollution: Leaving city no solution; residents, corporates should take steps for long term

New Delhi – Delhi residents continue to gasp for breath but at least one mini celebrity has decided to leave the city until the air becomes breathable again. News reports suggest that PayTM founder Vijay Shekhar Sharma has left the city. And these reports go on to talk of expats and some others who are also shortening their stay in the National Capital Region to avoid health hazards which arise from the toxic air.

The only trouble is, in a city of over 2.5 crore people (Delhi NCR), not even a fraction can afford to just abandon their livelihoods and leave for another, less polluted city. The vast majority of residents of Delhi, Noida and Gurgaon must remain the region and carry on with their lives.

This ET report announcing Sharma’s departure from Delhi with family also says that in 2014 the entrepreneur had contemplated shifting to Bengaluru due to the poor air quality in Delhi NCR, “but abandoned that plan because of traffic problems and pollen in the hi-tech city’s air”. So leaving Delhi NCR is the easiest solution for the rich, for those who do not have regular jobs to go. But for crores of people who call this region home, the only solution is to be involved in cleaning up the air.



At a major automobile company which has a long standing collaboration with another Asian firm, executives from the partner country carry on with their daily job wearing masks, taking the usual precautions, but not one has spoken of leaving the country yet. A company official recalls how the top man of the foreign partner wears protective masks even for common cold when in India but makes no changes in the work schedule here due to the extremely poor air quality in Delhi NCR.

Of course, since this is an automobile company, its officials also dismiss concerns over vehicle emissions being the predominant cause of the current pollution spell, saying emissions from private cars account for a negligible portion of the total harmful emissions in Dellhi NCR.

Not just large companies, the week-long haze over Delhi’s skies has also affected daily wagers, marketing executives and many other professionals including journalists and salesmen who continue to breathe in cancer causing particles while carrying on with their jobs.

A study by business chamber Assocham has found that the severe pollution in Delhi NCR has started taking a toll on people’s health, hampering their ability to do their jobs efficiently. The Social Development arm of Assocham spoke to human resource professionals in about 150 companies working in different industries, in public and private sectors, in and around Delhi for this survey. The aim was to find out how the current severe spell of pollution is impacting companies’ financial health. The survey was conducted during the course of past one week.

Most HR people Assocham spoke to said they are facing staff crunch, with 5-10 percent employees calling in sick. Persistent cough, burning eyes, itchy throat and respiratory/ lung-related problems like asthma and bronchitis are the main reasons for this state of affairs.

“Environment and air pollution related issues might hurt brand India and hit sectors like tourism, outdoor recreation as people tend to stay away from polluted areas so as not to breathe in dense and toxic air,” Secretary General D S Rawat said.

Aditya Birla group company Idea Cellular says it has introduced flexi time for employees and is also offering them face masks. “In view of the present weather condition and the poor air quality in Delhi NCR, Idea Cellular, which has operations facilities in Noida, looking after Delhi NCR and the UP West region, is taking all necessary steps in the interest of the health of its employees. Flexi timing is being enabled to convenience employees and face masks are being distributed to assist them in reducing their exposure to pollutants in the air. Special buses will be plied to pick and drop employees from key locations and car pools are being planned so that vehicular movement is reduced. These facilities have been enabled for this entire week.”

This report in in the Business Standard says one of the PSUs has also deployed air purifiers on office premises.

“At SAIL (Steel Authority of India)’s various offices in Delhi, the employees have been advised to take precautionary measures including wearing masks. They also have been advised to limit their out-of-office assignments and conduct the work through telephone and e-mails. SAIL has already deployed air purifiers at various locations in its office premises,” said a spokesperson.

So who is to blame for the current haze over Delhi NCR? Delhi-based TERI’s latest study shows the following contributing sources of PM 2.5 (the worst culprit as far as health hazards go in the current spell of pollution) in Delhi:

1) In-Delhi sources – 35% of pollution. Transport (tail-pipe, road dust), construction, refuse burning main culprits.

2) Rest of NCR – 25% of pollution. Domestic biomass burning for cooking, industries, transport, DG sets

3) Beyond NCR regions – 40% of pollution. Crop residue burning, domestic biomass burning, industries.

So going by TERI’s estimates, almost two-thirds of the pollution enveloping Delhi-NCR is due to activities which the region itself has not been able to control. Farm fires, being touted as the major reason for unbreathable Delhi air, are shown to account for only 40% of the current spell of deadly haze.

Delhi pollution: Paytm chief moves out temporarily; gives staff option to work from home

Delhi pollution: Paytm chief moves out temporarily; gives staff option to work from home

Updated: Nov 8, 2016 11:16 IST

#Delhi Pollution #Paytm #Vijay Shekhar Sharma


Paytm founder Vijay Shekhar Sharma has left New Delhi to escape the pollution that has paralysed the normal life in the capital city, according to a report in The Economic Times.

He left on Sunday with family for Mumbai and plans to stay put there until the air clears in Delhi, says the report.

Vijay Shekhar Sharma. PTIVijay Shekhar Sharma. PTI

Vijay Shekhar Sharma. PTI file photo

“I couldn’t have waited till Monday. Air is really bad in Delhi and I’m allergic to dust,” he has been quoted as saying in the report.

In an indication that the pollution may be impacting the businesses, Sharma has also reportedly cancelled a slew of meetings that was scheduled to take place in the Noida office. He has even asked his staff to work from home if required.

As pollution levels worsened in Delhi, the government had two days back announced a raft of “emergency” measures, including shutting schools until Wednesday, banning construction and demolition activities for five days and temporary closure of Badarpur Power Plant.

Chief minister Arvind Kejriwal also appealed to people to stay indoors and if possible work from home considering the situation, adding that strict action will be taken against those found burning garbage.

According to the ET report, Sharma had earlier too considered shifting the base to Bengaluru due to pollution issues. However, he decided to continue in Delhi due to the  better global connectivity the city offers.

Cyrus Mistry imbroglio: No learning from IHCL; big failure awaits Tatas?

Each day the quagmire the Tatas have got themselves into with the dismissal of the 48-year-old Cyrus Mistry, the former chairman of Tata Sons, is sinking further eroding the name and honour that was synonymous with the Tatas and the 148-year-old group.

According to media reports, a slew of developments over the weekend has further proved that the mess is only getting stickier for the Tatas and independent directors of various group companies are likely to hold the key to the issue in the coming days.

An indication of this came last week when independent directors of the group’s hospitality arm, Indian Hotels Co (IHCL) endorsed Mistry’s leadership while expressing unanimously full confidence in him.

Ratan Tata, incumbent chairman, Tata Sons and Cyrus Mistry, ousted chairman. AFPRatan Tata, incumbent chairman, Tata Sons and Cyrus Mistry, ousted chairman. AFP

Ratan Tata, incumbent chairman, Tata Sons and Cyrus Mistry, ousted chairman. AFP

The independent directors, including banker Deepak Parekh and Nadir Godrej, met ahead of the Tata group’s loss-making company’s board meeting and reposed faith in Mistry, who had been ousted as chairman of holding company Tata Sons on October 24.

The development is important as this comes even as Rata Tata is trying his best to oust Mistry from his positions in the operating group firms, including IHCL and Tata Motors.

“The independent directors unanimously expressed their full confidence in Chairman Cyrus Mistry and praised steps taken by him in providing strategic direction and leadership to the company,” Indian Hotels Co Ltd (IHCL) said in a BSE filing.

IHCL’s independent directors also include Gautam Banerjee, Keki Dadiseth, Vibha Rishi and Ireena Vittal. The board of IHCL met after the meeting of the independent directors and approved the financial results for the second quarter ended September. The meeting was chaired by Mistry.

However, a report in The Times of India, has said that the Tatas may even question the independence of some IHCL directors.

“While praising performance under Mistry, we wonder if they asked themselves what would happen if the Tatas withdrew all the guarantees executed in favour of IHCL. Will it be the same if IHCL were to become a Mistry group company?” a Bombay House insider has been quoted as saying in the ToI report.

The insider remark in the report is quite unlike the Tatas. “When a decision is taken that goes against Tata Sons, then the independence of independent directors will be questoned. Is that how they see a panel of eminent people in their own right having come to a decision,” asked an analyst. He said that saying that, `what would happen if the Tatas withdraw all the guaranteed executed in favour of IHCL is tantamount to issuing a threat. I thought only politicians had foot-in-the-mouth syndrome,” he said.

When a majority of Tata Sons voted in favour of ousting Mistry, questions were raised on their action. Mistry referred to the same in his letter to the board when he pointed out that a few members of the board had `lauded and commended’ his performance recently. “No independent director wants to face that again,” said the analyst.

Meanwhile, a report in the Business Standard, has said that the happenings at the IHCL board meeting has given hopes to the Mistry camp that they can replicate the success at other board meetings that are pending now.

Mistry is chairman of six other listed Tata companies, with the board meetings of Tata Chemicals and Tata Steel slated for 10 and 11 November, according to the BS report.

Tata Chemicals has four independent directors and Tata Steel has six, says the report, listing out them as follows: Nusli N Wadia (Tata Chemicals, Tata Motors, Tata Steel), Mallika Srinivasan (Tata Global, Tata Steel), OP Bhatt (Tata Steel, TCS), Sbubodh Bharagava (Tata Motors, Tata Steel), Nasser Munjee (Tata Chemicals, Tata Motors), Ireena Vittal (Indian Hotels, Tata Global) and Vibha Paul Rishi (Indian Hotels, Tata Chemicals).

A report in Times of India today points out that Wadia, chairman of Britannia Industries Bombay Dyeing, is likely to the key driver in shaping the opinion of the independent directors. The report says while Wadia and Ratan Tata have been friends for long, the Tata group’s entry into aviation through Vistara and Air Asia India may have spoilt their good equations. Wadias have a presence in aviation through GoAir.

Manoj Kumar, founder of Hammurabi & Solomon and a visiting fellow with the Observer Research Foundation, is of the opinion for Tatas to get the independent directors to vote in their favour is possible only if they are able to present critical issues that can affect business interests if Mistry continues to remain the chairman.

Independent directors are not pre-committed to a view of either side – the Tatas or the Mistrys.

“The voting pattern of each board would be different. The pressure is far more on the Tatas. They have to raise the issues and recalibrate them in the commercial domain. The Mistrys have to only rebut what is being raised by the Tatas. However, the independent directors have to listen to the issue and come out with reasonable views as this could be tested in a court of law, if it is taken to court,” said Kumar.

However, chances are that the Tatas could lose their case with the independent directors. The IHCL board meeting is a learning curve for the Tatas to raise issues that affect stakeholders, promoters and company interests, added Kumar.

“The Tatas could lose this battle,” says J N Gupta, former ED, Sebi. “If they are able to point out critical reasons that the boards of companies on which Mistry is currently chairman will be affected because of his presence, they will not be able to win this battle.”

Is the Tatas up for this? Remember, communication has been a weak link for the Tatas. And if a report in the Mint newspaper today is to be believed, the Tatas have not yet informed the independent directors about the reasons why Mistry has been sacked from Tata Sons.

One of the independent directors has told the newspaper: “We too are groping in the dark.”

Clearly, if the Tatas do not change the way they function, the present mess is going to tarnish their image for many years to come.

BJP MP Subramanian Swamy asks PM to form multi-agency SIT to probe Tatas

BJP MP Subramanian Swamy asks PM to form multi-agency SIT to probe Tatas


New Delhi: BJP MP Subramanian Swamy has demanded constitution of a multi-agency SIT to probe allegations of “certain fraudulent transactions” in Air Asia levelled by Cyrus Mistry following his removal as chairman of the Tata Group.



Swamy, in a letter to Prime Minister Narendra Modi, has said the SIT should comprise officials from CBI, Enforcement Directorate and SEBI as the charges involved a gamut of offences.

The Rajya Sabha MP recalled that he had in an earlier letter to Modi questioned Ratan Tata‘s role as Indian partner in Air Asia and Vistara Airlines “in complete violation” of the laws of the country.

Hot on the heels of Mistry’s ouster alleging fraudulent transactions at AirAsia India, the Aviation Ministry had said all issues would be looked into and “law of the land will have to be followed” in case of any violation.

Ratan Tata wants to buy out Shapoorji Pallonji Mistry stake in Tata Sons; high hopes?

Ratan Tata is exploring options to buy out the 18.4 percent stake the Shapoorji Pallonji group has in Tata Sons, according to a report in Bloomberg. Tata Sons is the holding company for the Tata group and Tata Trusts hold 66 percent stake.

The move comes at a time when the tension between both business groups have arisen after the ouster of Cyrus Mistry, son of Shapoorji Pallonji Mistry, as chairman of Tata Sons earlier this week in a boardroom coup.

The new name board at Bombay House, headquarters of Tata Group, in Mumbai. ReutersThe new name board at Bombay House, headquarters of Tata Group, in Mumbai. Reuters

The new name board at Bombay House, headquarters of Tata Group, in Mumbai. Reuters

The report further says that the Tata group has begun talks with sovereign wealth funds and other long-term investors to explore possibility of tie-ups for a buyout.

The talks are part of the Tata group’s efforts to prepare for “various scenarios”, said the report.

Anyways, it remains to be seen whether the Shapoorji Pallonji group would want to sell their stake in the Tata Group, at all.

The same Bloomberg report quotes Paras Bothra, vice president of equity research, Ashika Stock Broking, as saying: “It’s not going to happen so easily as Mistry may not give in without a fight.” Bothra nonetheless says that if such a deal can be worked out, it would be a good move as that will end the uncertainty surrounding the group.

However, this move by the Tatas to reach out to sovereign wealth funds is based on the assumption that Mistry and the Shapoorji Pallonji family would want to sell off their stake in the Group, says Seema Mahajan, Director, Centre of Family Business and Entrepreneurship, Narsee Monjee Institute of Management Studies (NMIMS).

With no credible reason give out yet by the Tata Group for the ouster of Cyrus Mistry as the chairman, the handling of the Mistry issue is `unprofessional’ and `not in keeping with the standards’ everyone has expected from the Tata Group, said Mahajan. She said that when the Tata Trust decided to appoint Mistry as the chairman, they had to allow for new ideas and new approaches to business and not expect the old tried-and-tested methods to continue under a new head. “What is the difference between a family-owned business and Tata Sons? By wanting someone at the helm to continue what the business decisions of Ratan Tata, inspite of the Nano being a failed venture, for instance, the Tata Sons board want the Group to be run like a family-owned business. This decision by the Board and Ratan Tata just goes to show that they are not receptive to changes,” said Mahajan.

With both sides levelling allegations and counter allegations, the two groups have already queered the pitch for a high profile battle.

The problems started with the first move on part of Tata Sons board to oust Cyrus Mistry in a sudden move on Monday in a full-strength board meeting at Bombay House. According to media reports, a discussion about the chairman was not even listed in the agenda.

A terse statement from Tata Sons said Cyrus Mistry had been replaced with Ratan Tata, who had in 2012 stepped down after he turned 75 years old, a retirement age that Tata himself set up and adhered to.

Predictably, the action of throwing out Mistry led to a bitter war of words with Mistry shooting off a letter to the board terming his ouster ‘unique in the annals of corporate history’.

Mistry also hit out the Tatas where it hurts the most by listing out the failures of Ratan Tata in the capacity as his predecessor of the Group.

Mistry said much of the problems of the group had been inherited and not of his own making. He said the loss-making Nano project is being kept alive only for emotional reasons. He also revealed a few fraudulent transactions that may come to haunt the Tatas for some time now.

The Tatas hit back saying Mistry was sacked since he had lost the confidence of the Tata Trusts. They also defended the business decisions taken by Ratan Tata.

Both the camps have also arranged lawyers in anticipation of a long-running legal battle.

Given the escalation of tensions, the stage seems to be set for a discordant solution but for a big corporate battle.

Tata Sons hits back; burden of proof is on Cyrus Mistry to back the charges

The Ratan TataCyrus Mistry fracas has spiraled quickly, with both camps airing a fair amount of their dirty laundry out in public. Many are anticipating an historic legal clash to take place between the two titans of Indian industry soon.

While Cyrus Mistry has a number of legal options at his disposal under the extant legal framework as well as the Company’s Articles of Association, his best bet would be to go through his father’s company, Shapoorji Pallonji, a principal shareholder in Tata Sons, and file a petition for oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956.

The Tata Group, however, also seems to have enough evidence but Mistry’s claims put up a strong defence in front of the National Company Law Tribunal (NCLT).

Cyrus Mistry. APCyrus Mistry. AP

Cyrus Mistry. AP

Tata’s strategy predicates on being able to show that Mistry’s removal was in the best interest of the company and its shareholders. Let us explore what legal defences are open to Tata Sons under the Act.

As stated in an earlier article published by Firstpost, Section 397 provides for relief if the affairs of a company are conducted in a manner which is prejudicial to public interest or oppressive to any members. Section 398 provides that members of the company may apply to the Tribunal if a material change has taken place in the management or control of the Company, including but not limited to an alteration in its Board of directors, and that such a change will result in prejudice to public interest or the interests of the company.

Under this Section the Tribunal may pass orders to rectify the situation. Under the Act, Shapoorji Pallonji would have to establish that Mistry’s removal is an action that is detrimental to the interests of the Tata group.

For one, Mistry’s ouster was completely legal as per the Company’s Articles of Association. The Articles require the board of directors to vote on bringing a new chairman in and the same procedure is to be followed when removing the chairman of the board. This was the procedure followed when Mistry was brought in and when he was removed. Courts have established that bona fide decisions consistent with the company’s memorandum and articles are not to be equated with mismanagement even if they turn out to be erroneous or cause temporary losses.

The change in the control and management of the company and the appointment of new executives as a result thereof cannot be questioned under Section 398, and the court will not interfere with the affairs of a company in a case where the act complained of is within the realm of the company’s powers under its articles and memorandum.

In terms of Mistry’s email and the allegations he has levelled in it, specifically the losses that the salt-to-steel conglomerate incurred in certain business deals such as NTT Docomo, are not necessarily instances of mismanagement when viewed through the prism of recent court rulings. In fact, Mistry’s improper handling of the DoCoMo arbitration and the subsequent $1.2 billion that was awarded against Tata will certainly not bode in his favour in front of the NCLT.

The NCLT has a wide range of powers when disposing of a petition under Section 397 or 398 of the Act. These powers are enumerated in Section 402 and they include the ability to pass orders to regulate the company’s conduct in the future, termination of agreements between the company and directors, and any other matter in which it thinks a just and equitable provision should be made.

The expansive nature of the powers granted to the NCLT under the Act imposes a strict burden of proof on Shapoorji Pallonji and Cyrus Mistry to back their allegations against Tata.

The Tata group has already issued a response to Mistry’s email, stating that the allegations in his correspondence are baseless and that he was not hindered in any way when running the conglomerate. It will be interesting to see how Mistry attempts to take on an organization that has been around since the time of the American Civil War.

(The author is the founder of Hammurabi & Solomon and a visiting fellow with the Observer Research Foundation)

‘Shocked’ Cyrus Mistry’s scathing mail to Tata Sons: I was not given a chance to defend

In a scathing e-mail to the Tata group board, former Tata Sons chairman Cyrus Mistry has attacked the way he was sacked saying the move was “unparalleled in the annals of corporate history”, according to media reports.

According to report, Mistry has said in the email that he was “shocked” at the manner the board has conducted itself in ousting him. He has said the “board has not covered itself with glory” as he was not “given a chance to defend himself”

Cyrus Mistry. APCyrus Mistry. AP

Cyrus Mistry. AP

In the email, according to a report in The Economic Times, he has also alleged that he was not given freedom to act at his own will as the group made changes to the articles of associations.

This charge actually proves to a large extent that at least one of the major speculations about the reasons behind the sacking of Mistry is true.

Most experts have been saying that the decision to affect a sudden change of guard at the group was the hard decisions being taken by Mistry to set the house in order. The group has taken up a lot of debt as part of its global expansion over the last few years under Ratan Tata‘s chairmanship.

Explaining his plans for the group, Mistry had said in an interview to its in-house magazine, which has mysteriously disappeared from the site now, he said: “It was clear to me relatively early that one needed to confront the challenging situations facing some of our businesses, and ultimately this would entail hard decisions on pruning the portfolio.”

After removal of Mistry, many analysts had said these words may have been one reason for the Tata Sons decision.

“Tata group has taken a very tough decision..may be Cyrus Mistry‘s way of functioning did not gel with the group’s overall decision makers. Cyrus had taken some tough decision in the past like hiving off some non-profitable businesses and setting goal towards making the group a more profitable venture,” A K Prabhakar, head of research, IDBI Capital Market, had told Firstpost.

According to the ET report, Mistry has said in the mail: “To “replace” your chairman without so much as a word of explanation and without affording him an opportunity to defend himself…must be unique in the annals of corporate history,” Mistry said in the email.”

In the press release announcing the removal of Mistry, the group just said Mistry is being replaced as chairman of Tata Sons with Ratan Tata. It did not even have a customary thank you note.

The group has set up a committee to select a permanent leader and final decision is expected in four months.

Meanwhile, the Tata group has filed caveats in the Supreme Court, the Bombay High Court and National Company Law Board Tribunal in an attempt to pre-empt any litigation by the Shapoorji Pallonji group.

Mistry’s father, Shapoorji Pallonji Mistry, is the single largest individual shareholder in Tata Sons with 18.4 percent stake. Tata Trusts hold about 66 percent.

Cyrus Mistry ouster: It looks Machiavellian but major impact on Tata brand unlikely

The news of the removal of Cyrus P Mistry as chairman of Tata Sons has left many confused and bewildered because the manner in which it was done is very unusual and unexpected of a group of the Tatas’ stature.

Ratan Tata. PTIRatan Tata. PTI

Ratan Tata. PTI

Will the sudden sacking without giving any reason affect the group’s brand? It is to be remembered that it has a highly respected image both locally and internationally. Or will it be seen as a minor aberration of the mostly transparent, honest and trustworthy image the group has cultivated painstakingly over a century?

Would a consumer worry about the image or go by the trust factor attached to the group before buying its products?

Harish Bijoor, chief executive officer of brand and business strategy firm Harish Bijoor Consults Inc, says that the consumer would not be unduly bothered about the rumblings at the Tata Sons board as the trust factor has been deeply associated and ingrained in his or her mind. “You would still buy the Titan watch or check into a Tata group hotel because of the trust factor. That won’t change,” he says.

However, ranking of the trust factor of the Tata Group has been steadily going down over the last few years. A report by brands insights company TRA Research, formerly Trust Research Advisory, found that the trust factor of the group stood at the second position among top 5 brands in the country in the year Mistry was offered the chairmanship of Tata Sons. It held on to that position in 2011, too. After Mistry took over, the ranking slipped to fifth position.

The ranking is done on 61 parameters of trust and includes 425 questions. 

TRA CEO N Chandramouli says, “The brand had a tumultuous ranking on account of the fact that Ratan Tata had left. He had taken the group to a new level from the time he took over till he retired. Mistry was seen as benign and not doing anything similar to what Tata did. Also, it was strange not to have any communication from the chair of India’s largest business conglomerate for a year and a half.”

The group’s ranking went up a notch at 3rd position in 2014 but slipped to 4th in 2015 and is at 5th position in 2016. Incidentally, it still remains the only Indian company in the top five rankings.

The current situation where the group is in the news for the sacking of Mistry will erode the brand image, says Chandramouli.

“Each one of us feel a sense of ownership about the brand. We associate truth and honesty and transparency with the Tata image and brand. Trust is a dynamic entity and unless you cajole and take care of it well, it will slip out,” he says.

According to him, the group does great things operationally. However, if there is one count on which it slips drastically it is in the area of communication.

“Whenever something major happens at the group – the Radia tapes, deaths and suicides of its key employees – the group’s communication on these fronts are poorly done and this is what causes apathy. People’s trust in the brand erodes when its communication is poor,” he says.

In the case of Mistry sacking too, there is speculation that it is orchestrated simply by Tata Sons only because the group is keeping quiet about the reason, he says.

“There might be very good reasons for taking that decision, but since communication is poor, the act of letting Mistry go seems Machiavellian at one point,” says Chandramouli. He feels the brand has been tarnished to some extent by the recent happenings at Bombay house.

However, there are other experts with differing views on the issue.

Alpana Parida, managing director, DY Works, a Mumbai-based brand strategy and brand design firm, feels that the current storm that is brewing at the Bombay House will go away without causing any damage to the brand.

She reasons that the Tata brand is too strong to be impacted. “It is like Raghuram Rajan and his not being given an extension as the head of the RBI. It has died down. Similarly, this too will die down,” she says.

The Tata brand image is one of solidity and honesty. It cannot be jolted by incidents like the change of guard, says Harish Bijoor.

“Brand Tata is very old and is respected not only in the country but also internationally. It is an image that has consumer trust vested in it. Tatas have always been seen doing the right thing by its employees, the Taj attack or the Singur incident, for instance. The feeling is when you are a Tata, you cannot do wrong. It is a company that is blessed with a benign brand umbrella which no other brand in India has. That is what insulates the brand from any negative impact about what happened on Monday when the management took a decision to bring back Ratan Tata.”

Chandramouli and Parida aver that the new incumbent at Tata Sons will be watched. “How that move pans out will be watched carefully and that can send out a strong message about the group,” says Parida.

BK Bansal suicide: CBI to soon submit its report to NHRC

<!– /11440465/Dna_Article_Middle_300x250_BTF –>CBI will soon be submitting the report of its internal probe in the suicide case of former Corporate Affairs Director General B K Bansal and his family members to National Human Rights Commission (NHRC). The agency has also sought clarification from the Centre whether Delhi Commission for Women (DCW), a body constituted under state law, has authority to summon its officials.DCW had last week asked the Assistant Inspector General (P) of CBI to present himself on Tuesday before the Commission in connection with the suicide of Bansal’s wife and daughter in July this year.CBI sources said while they had responded to the summons issued by the DCW, whether the panel can summon officials of a central government investigation agency needs to be clarified. CBI is conducting an internal probe under a Joint Director who is not in a chain of command and its report will soon be submitted to NHRC, they said.The agency is ready to respond to questions raised by statutory bodies but needs clarification on sending its officials on the summons issued by a body created under state government law, they added. 60-year-old Bansal was arrested on July 16 for allegedly accepting bribe from a prominent pharma company. Three days later, his wife Satyabala and daughter Neha committed suicide.Barely two months after their deaths, Bansal allegedly hanged himself along with his son Yogesh at their residence on September 27 with a purported suicide note claiming “harassment” by CBI in the alleged corruption case.

Ratan Tata not keen on Cyrus Mistry from the beginning? Seeds of Tatas-Pallonjis discord sown years back

New Delhi – The morning after initiating a boardroom coup and returning to Tata Sons as Chairman, Ratan Tata is chairing a meeting with CEOs of all group companies at Bombay House on Tuesday. At this meeting, three prominent people are conspicuous by their absence. Sources close to the Tatas told Firstpost N S Rajan, Nirmalya Kumar and Madhu Kannan, members of the erstwhile Group Executive Council (GEC), have not been invited.

Cyrus Mistry.AP.Cyrus Mistry.AP.

Cyrus Mistry.AP.

Remember, these three gentlemen were the nominees of ousted chairman Cyrus Mistry on GEC and seen to be close to him – the remaining two GEC members, Mukund Rajan and Harish Bhat – are participants in Tuesday’s meeting with Tata. Now that the GEC has been disbanded and Mistry ousted unceremoniously, these two Tata loyalists are expected to be given new roles in the group.

The finesse with which the entire boardroom drama was engineered on Monday has caught the attention of everyone at home and abroad. According to sources, Ratan Tata met each member of the Tata Sons’ board individually prior to Monday’s momentous board meeting. Though there had been murmurs about Tata being unhappy with Mistry’s style of functioning, no one really anticipated such a devastating strike by Tata, known to be a courteous man and one who upholds the principle of fairness. Why was Cyrus Mistry not given the mandatory 15-day notice period before resigning, and sacked instead, is still a matter of debate in India Inc this morning.

From what we have been able to piece together from Tata group veterans, a clash of ideologies seems to be the primary reason for deep unhappiness within the Tata group over Mistry’s style of functioning. It seems the GEC which Mistry formed after taking over the reins from Ratan Tata in 2012, had been under constant fire from Ratan Tata himself over the last few months.

Some of the most critical decisions for the group like the NTT DoCoMo fiasco or the acquisition of Welspun by Tata Power were seen as poor choices by Mistry and his men.

“To put it simply, the GEC was witnessing a severe clash between the working styles of the old and the new generation. Many recent decisions taken were questionable,” said a group veteran.

But recent business decisions apart, it seems the two sides – the Tata family and the Shapoorji Pallonji family – had little trust between them. The Shapoorji Pallonji family holds about 18% stake in Tata Sons and scion Cyrus was chosen as the first non-Tata chairman of the group in 2012. A Tata Group veteran went so far as to allege that Mistry’s appointment itself was a cleverly orchestrated event and that even then, Tata was more in favour of appointing half brother Noel Tata as Chairman. There is no way of checking out these assertions though.

“The choice even then was between appointing two members of the Shapoorji Pallonji family – Cyrus was the son, Noel the son-in-law. Not much of a choice really,” said this Tata group veteran. It is another matter that the selection of chairman took months, was done by a selection committee where Mistry and Ratan Tata were both members.

Anyway, this mistrust between the two most significant shareholders of Tata Sons, sources say, dates back to the 1920s when FE Dinshaw lent about Rs 2 crore to bail out Tata Steel and Tata Hydro. By 1930s, Dinshaw’s debt got converted to equity of 12.5% in Tata Sons, according to this graphic published in the Business Standard newspaper.

“This conversion of loan into equity is what nailed the coffin. No one expected the debt to be actually converted into equity since it was given in good faith. Shapoorji Pallonji later bought Dinshaw’s 12.5% stake from his heirs”.

And the share steadily climbed to about 18% now. The BS story says “the weight and might of the 18 per cent stake in Tata Sons inherited by Cyrus Mistry’s father Pallonji Shapoorji played a key role in him trumping international competition to take up the corner office in Bombay House. This stake will come into play again if things turn less friendly between the Mistrys and their fellow shareholders”.

Sir Dorabji Tata Trust and Sir Ratan Tata Trust, which between them own 66 percent in Tata Sons, are headed by Ratan Tata.

A Tata group veteran pointed out that a lot of what was being pinned to Cyrus Mistry as his failures was actually legacy. “Look at the Corus buyout and the fracas with NTT DoCoMo or even the underwhelming performance of Tata Teleservices. All these were inherited by Mistry, not his creation. So it would be wrong to pin the blame entirely on him for all that was going wrong with the Tata group,” he said.

This widely quoted article in The Economist, which seems prescient now, aptly counted out Mistry’s challenges and also wondered when he will get off the “lumbering pachyderm”.

But it also comments on the “expansionist” strategy of Ratan Tata, which increased the group’s revenues from around $6 billion to $100 billion over two decades but also dented returns in some parts of its business. And notes that just one jewel in the Tata crown, TCS, accounted for over 80% of the group’s total profits last year.

There is much that is not right with the Tata group, be it complicated cross holdings, the bureaucratic structure which permeates group companies and struggling companies such as Tata Teleservices, the domestic automobile business etc. Not all has been due to Mistry’s four-year stint and not all of this will be corrected in any short time span, who ever succeeds Mistry to the corner office at Bombay House.

Cyrus Mistry’s sudden sacking from Tata Sons proves Indian corporates are a feudal fiefdom still

Cyrus Mistry‘s ouster from Tata Sons has once again proved that Indian croporates mostly function like feudal fiefdoms rather than professionally run organisations.

The news about the sacking of Mistry, who was appointed as chairman of the Tata group only in November 2011 after a 14-month intricate selection process, was announced in a terse press release on Monday after market hours.

“Tata Sons today announced that its Board has replaced Cyrus P. Mistry as Chairman of Tata Sons. The decision was taken at a Board meeting held here today.

Ratan Tata. IBN LiveRatan Tata. IBN Live

Ratan Tata. IBN Live

The Board has named Ratan N. Tata as interim chairman of Tata Sons. The Board has constituted a selection committee to choose a new Chairman. The committee comprises of Ratan N. Tata, Venu Srinivasan, Amit Chandra, Ronen Sen and Lord Kumar Bhattacharyya, as per the criteria in the Articles of Association of Tata Sons. The committee has been mandated to complete the selection process in four months.”

The tata.com website has removed every vestige of Mistry — including the interview he gave to the in-house magazine, which by and large explained his philosophy of governing the large group, and even the details of the Group Executive Council, a council he had set up.

Definitely, a very unceremonious exit for the 48-year-young chairman of the $108 billion salt-to-software conglomerate.

And there are clear indications that a boardroom battle could be brewing between the Tatas and Shapoorji Pallonji Mistry, father of Cyrus Mistry and also the largest individual shareholder of the group.

The news took India Inc and experts by surprise. There were no visible strains in the recent past between the board of Tata Sons and Mistry. So nobody seems to have expected such a sudden development.

“It is surprising and worrisome,” is what Swaminathan Aiyar, consulting editor, at The Economic Times, said about the event.

True, it is worrisome for the simple reason that it shows 25 years into economic liberalisation and embracing of market economy, Indian corporates still continue to behave as if they are in the pre-liberalisation era. Professionalism is yet to be the way of governance for many of them.

According to media reports and sources Firstpost spoke to, there have been differences of opinion between the chairman and the board over many matters, including the style of functioning.

A source told Firstpost that Mistry’s micro-management was unlike the manner of functioning of his predecessor, Ratan Tata.

Ratan Tata is a visionary and he has elevated senior people to the level of Managing Directors of various groups simply because he was able to see they were competent and could do the job. Once he gave them the job, he did not interfere. He empowered his men,” said the source. But Mistry did not favour this style, the source said.

According to a report in The Economic Times, recently there were even important decisions that were taken without consulting the former chairman, Mistry. One such, says the report, was the appointment of Piramal Enterprises’ Ajay Piramal and TVS Motor’s Venu Srinivasan on board, which is seen as a step towards tightening Tatas’ grip on the group’s functioning. This reflected “simmering discontent”, says the report.

But these happened “behind the scenes“. Nobody is privy to this.

The sacking has to be seen in the context of governance philosophies Mistry revealed in his now-removed interview on the group website.

Mistry had said that “challenging situations” confronted by some of the group’s businesses require hard and bolder decisions on pruning portfolios.

“It was clear to me relatively early that one needed to confront the challenging situations facing some of our businesses, and ultimately this would entail hard decisions on pruning the portfolio,” he said in an interview to the group’s in-house magazine.

There is a view that Mistry’s move to take hard decisions may have increased the tension between the board and the chairman, which snowballed into his unceremonious ouster.

It is said the old guard at the group did not see Mistry’ move as a good strategy.

If, indeed, this is the reason behind the ouster, it contradicts all written and unwritten norms of decency, corporate governance and professional management.

For one, the towering shadows of Ratan Tata and Tata Trusts were always there in the board room.

As an analyst told Firstpost, Ratan Tata is a colossus in the Tata Group. “His shadow looms at Bombay House even in his absence. As chairman emeritus, he is watching over Mistry and that could have been unsettling for him (Mistry),” said the analyst.

So also, the Tata Trusts representatives on the board.

As Rajiv Kumar of Centre for Policy Research says in this article in The Economic Times, “A besieged Mistry, closeted by satraps on one side and the Trust on the other, could well have given the classic CEO ultimatum of ‘my way or the highway’.”

A report in The Times of India says in the nine-member board, six voted against Mistry and two abstained. Clearly, the Trusts ruled.

So much for the free market and liberal business that Indian corporates demand.

As Rajiv Kumar says, “Even the Japanese Zaibatsus (the pre-World War 2 industrial and financial business conglomerates) or the South Korean chaebols (large family-owned business conglomerates) have changed their functioning to be in sync with globalisation trends and requirements. It is time that Tatas did so as well.”

Until then, the Tatas, despite their reputation of being the great torch-bearer of governance, will continue to act like feudal chieftains.

And if Tatas fall off, there is not much hope left for other Indian corporates. And that is indeed worrisome.

Debit card scare: By demanding SBI chief’s resignation, Congress is politicising a big problem

As the scare of bigger debit card frauds is spreading fast after last week’s ATM security breach, the Congress has released a statement demanding the resignation of State Bank of India (SBI) chief Arundhati Bhattacharya. One of the worst hit, the country’s largest bank has blocked or is in the process of replacing about six lakh debit cards that it suspects may have been compromised.

Congress party spokesman Tom Vadakkan has expressed concern as about 70 lakh cards have been affected in the “massive data breach”, which he feels is “one of the biggest scams”. Alleging that SBI was the “mothership” of the scam, he has sought the resignation of Bhattacharya.



The party, however, seems to have jumped the gun with the demand for more reasons than one.

First and foremost, the ATM security breach is only unfolding. There is a probe ordered by the government. National Payments Corporation of India, an umbrella organisation for all retail payments system in India, has been told to investigate and find out how the breach happened. A report along with steps to be taken to prevent any future occurrence will be submitted. As the probe is on, it is too early to lay the blame on any one bank.

Secondly, SBI is not the only bank that is hit. According to NPCI, 19 banks are at the receiving end. As many as 641 customers have been affected and Rs 1.3 crore has been siphoned off. The SBI will definitely be the most impacted because it has the largest customer base in the industry.

Thirdly, the reason for the breach is not SBI. According to media reports, the breach happened due to a malware infestation of the systems of Hitachi Payment Services. This possibly impacted YES Bank ATMs, which witnessed a lot of third-party transactions. This is likely to have exposed cards of other banks. YES Bank has consistently maintained that it “has proactively undertaken a comprehensive review of its ATMs”, and that “there is no evidence of a breach or compromise on YES BANK ATMs”.

“It was suspected that a compromise was at the switch level which is PCI-DSS certified. Hence, subsequently PCI Council (the international body which sets standards on for PCI–DSS) was persuaded to conduct a forensic audit of the switch of one bank which is likely to be the point of compromise. The forensic study is in progress and NPCI is in touch with relevant stakeholders,” NPCI too said in a statement.

Clearly, there is nothing here to blame, leave alone SBI or Bhattacharya, yet.

Fourthly, experts aver that cyber theft is a global issue. As more and more banking transactions go digital, the threat increases too.

In India too, digitisation is catching up big time in keeping with the government’s thrust on moving to a cashless economy. As of now, there are many experts who believe that the RBI is on top of security measures. The one-time password (OTP) system put in place by the central bank is a tight security measure, they say.

Indian banks are following the RBI guideline on cyber security. SBI is no different. So why single out SBI and Bhattacharya?

This is not to say that the banks are not at fault. They definitely are. As cyber security expert Sanjay Pandey argues in this Firstpost column, “negligence in safekeeping of citizen’s money surely is criminal and needs to be investigated”. The criminality needs to fixed to prevent any repetition in the future.

But the Congress’s demand for Bhattacharya’s head is misplaced. It will at the most politicise a major problem that the cyber world is facing.

By making such a demand, the Congress is blindly replicating the BJP’s pre-election strategy – of politicising anything and everything. Such a strategy is not the right way to deal with a looming danger like cyber security threat.

30 lakh cards compromised: Why were banks lenient in dealing with ATM security breach?

About 30 lakh bank debit cards issued in India by various banks, including the largest State Bank of India, have come under threat of potential financial fraud after reportedly the systems of Hitachi Payments Services were infested of a malware.

According to media reports, the malware infestation is likely to have started with YES Bank ATMs, which are managed by Hitachi. However, the bank has issued a statement saying it has proactively undertaken a comprehensive review of its ATMs. “There is no evidence of a breach or compromise on YES BANK ATMs,” the bank has said. Hitachi too is reportedly conducting an audit of its systems.

However, the reported ATM security breach has sent shock waves across the country as it reveals the risks the consumers face in a world where digitisation is gathering momentum.

In this backdrop, a pertinent question to ask here is whether the banks concerned have dealt with the evolving scary situation with utmost care, sense of responsibility and urgency. Prima facie, the answer seems to be a ‘no’.



For sure, the number of debit cards suspected to be compromised now is not proportionately large – just half a percent of the total debit cards issued. But that doesn’t make it a smaller issue.

Reports say the security breach could have taken place sometime during May-July period. Banks have been issuing emails and text messages to consumers urging them to change their ATM PIN. But why did it take three months for the suspected security breach to become a major issue?

According to this ToI report, there are no RBI rules as of now that stipulate banks should announce to the public any security breach that happens in its network.

So, technically, one cannot accuse the banks of any mis-management. But isn’t it the responsibility of the banks to be open about such events for the
larger public good?

“Going by reports of security being compromised of 30 lakh accounts, this large number of accounts would not be infected in one swift action at the same time. It would have started off sporadically and this is where both the banks and customers could have helped stem the large scale damage that it has turned out to be now,” said a cyber security analyst with one of the reputed foreign consultancy and audit firms.

He was also also of the opinion had that been done, the issue would not have snowballed to such a large scale as it is now.

He further feels banks should put in place a detection capability and not be solely dependent on prevention.

It is also to be noted that banks’ public comments or clarification have come in with a delay. State Bank of India, the country’s largest lender which is reportedly looking to block and replace about 6.25 lakh cards, released a statement today – more than a day after the potential threat was reported in the ToI.

“Card network companies NPCI, Mastercard and Visa had informed various banks in India about a potential risk to some cards in India owing to a data breach. Accordingly, State Bank of India (SBI) has taken precautionary measures and have blocked cards of certain customers identified by the networks. This has been a proactive measure to protect our customers from any potential fraud, once we came to know of some data breach outside our Bank. We’d like to inform that SBI’ robust systems are absolutely secure and no security breach has happened. Customers can continue to use their Debit Cards securely. This is a cards industry incident (not only SBI),” it has said.

“SBI is in the process of issuing new cards at no cost to the customers whose cards have been blocked. The Cardholders can generate the PIN through SMS/IVRS/internet banking without visiting the branch. Alternatively, the cardholders can collect the physical PIN mailer from their home branch,” it has added.

Interestingly, some of the customers were in the dark about the bank’s move to block their cards. The ToI report quotes customers who were caught off guard when they tried to pay for a transaction.

This only underscores the suspicion that the banks were lenient in dealing with the situation.

Vijay Mukhi, one of the pioneers of the Internet revolution in India, is furious about the banks attitude.

“I have lost faith in the banking system in the country where lakhs of debit cards have been compromised. If, for instance, opium is found in my office, the police would hold me responsible. By that same logic, if as an account holder of a bank, my account has been compromised, the concerned bank should be held responsible. You cannot palm it off with excuses such as third party ATM or other security-related issues,” he says.

Every ATM machine is connected to the other, irrespective of which bank uses it for its transactions. That is why customers are able to use ATMs that are not the ones of their bank. “When an ATM of one bank’s get infected, does another bank’s ATM have to suffer?” asks Mukhi.

If the banks are talking of virus infecting their computers, Mukhi says that it is a serious lapse of security as the banks need to answer how the virus got into the computer at all.

“No one is answering these questions and that is making this issue murkier. I feel there is more than what meets the eye,” he says.

A debit card is not secured by a chip and hence it is easier to clone it. Banks are aware of this technology, says Mukhi, and yet many have not updated debit cards with the chip. As he views it, banks are unwilling to spend money on upgrading technology or hiring hackers to be updated on technology.

“Banks don’t have a cyber security branch or system. Hacking into credit and debit cards is not a new thing and has been happening in the country and globally though not in the scale as reported by a few banks in the country now. What were they waiting for – to compromise with customer accounts before they are forced to take pro-active steps?”

True, the problem is not restricted to India.

“Malware can surface from any location in the world and can target any device or platform that customers may use – either an ATM, a full-fledged online banking platform or cloud-based services such as email providers where passwords and card details may be stored. In such a situation, fraud risk tends to get amplified,” says KV Karthik, partner, financial advisory services, Deloitte Touche Tohmatsu India LLP.

And that makes this all the more dangerous.

As the cyber analyst quoted earlier says, the issue cannot be resolved completely as this is a global phenomenon, but it does ring alarm bells.

To resolve the issue, banks and RBI have to come together.

“If the Reserve Bank of India makes it mandatory for banks to make security lapses public, banks will have to take a stand on security issues so that widespread damage does not take place,” he says.

Battle ground GST Council: Proposed additional cess may queer the pitch at meeting today

As the first day of its meeting concluded on Tuesday, the GST Council managed to arrive at a consensus on how to compensate the states for the losses they incur on account of the tax reform that subsumes various state and central levies.

However, the council has not yet arrived at a conclusion on the crucial GST rate structure. According to finance minister Arun Jaitley who briefed reporters, the proposal for a four-tier structure was discussed.

The discussion will continue today.



Here’s a round-up of what happened on day one and what lies ahead:

Consensus on compensation for states

This is definitely good news. The Council has decided on the issue of compensation for states. “One main issue in today’s (Tuesday) agenda was to calculate the compensation for states and this matter was concluded in the discussions held,” Jaitley told reporters.

The base year for calculating the compensation is 2015-16. One of the basis for calculating revenue in the first five years, which is the compensation period, will be the secular rate of growth in revenue. This has been arrived at as 14 percent, which would be treated as a possible growth rate. The Centre has promised to compensate the states for revenue losses for the first five years after the implementation of the GST if the states’ revenues come down under the new tax regime.

Commenting on the development, MS Mani, senior director – Indirect Tax, Deloitte Haskins & Sells LLP, said, “Now that consensus has been reached on the revenue compensation and the base year, states can focus more on the steps required to enable GST in each state, including stakeholders consultation.”

Rate structure

The basic structure: The Centre on Tuesday proposed a four-slab GST tax structure – 6 percent for essential goods, 12 percent for merit goods, 18 percent standard rate and 26 percent for demerit goods. However, there is also a proposal to impose an additional cess.

Food items will continue to be exempt from tax. As much as 50 percent of the common use goods will either be in the exempt category or lower band. Also, 70 percent of the items is proposed to be governed by 18 percent of lower GST rate. However, ultra-luxury items such as high-end cars and demerit goods like tobacco, cigarettes, aerated drinks, luxury car and polluting items would attract an additional cess on top of the 26 percent GST rate.

On gold, the GST rate suggested was 4 percent. FMCG and consumer durable products would attract 26 percent GST rate, against the current incidence of around 31 percent.

Taxation of services would, however, be only in the 6 percent, 12 percent and 18 percent range, with the higher rate being 18 percent.

The merits of the structure: The biggest thing could be that inflation is likely to be contained. Remember, one of the concerns many experts have raised with regards to GST implementation has been that the new tax reform may push up inflation rate as services are likely to get a higher tax. A report in The Indian Express, however, says the overall impact on the consumer price index is likely to be (-)0.6 percent. This is the claim made by the Centre at the GST Council meeting on Tuesday.

Estimate of inflation impact on health services is 0.56 percent, fuel and lighting 0.05 percent and clothing 0.23 percent, transport (-)0.65 percent, education (-)0.08 percent and housing (-)0.09 percent, according to the IE report. It also says the Centre’s estimated revenue collection is Rs 8.72 lakh crore as per this structure.

The proposal to impose a cess will help create a fund of Rs 50,000 crore, which can be used to compensate the states. At least that is what the Centre has said.

According to revenue secretary Hasmukh Adhia, the Rs 50,000 crore pool that would be created out of cess on demerit goods would be used to compensate the states for revenue loss. Of that, Rs 26,000 crore is expected to be garnered from clean energy cess and the remaining from tobacco and their items.

The demerits of the proposal: First of all, will the Congress agree to this kind of structure? The party has been arguing for capping the GST standard rate at 18 percent, which it says is the “appropriate rate”. With the new structure proposal capping the rate at 26 percent and also adding a cess on top of it, this is unlikely to pass the muster.

The cess is already attracting opposition.

A report in the Mint newspaper says the meeting today is likely to start off on a wrong note.

“It is likely to emerge as a key point of disagreement between the centre and the states as the latter have always opposed levy of central cesses that are excluded from the divisible pool of taxes,” the report says.

Not just politicians, experts also feel this is likely to add to the tax burden. Bipin Sapra, tax partner, EY, says, “The maximum rate of 26% for demerit or luxury goods may harbour more goods than initially envisaged which will make them costlier. Also since cesses would be outside the GST, the present cascading may continue raising the tax burden.”

Kerala’s Thomas Issac has also told PTI that his state wanted the highest rate to be fixed at 30 percent so that common man’s use of daily items can either be exempt or levied with lower rates.

Reacting to the proposal, the Federation of Indian Chambers of Commerce and Industry (Ficci) suggested that to check inflation and the tendency to evade taxes “the merit rate should be lower and the standard rate reasonable”.

“As per the current indications and reports, goods will be categorised as being subject to merit rates (12 per cent), standard rates (18 per cent) and de-merit rates (40 per cent),” FICCI said in a release following a meeting in New Delhi with the Empowered Committee of State Finance Ministers.

Given the likely sharp differences that are emerging, it is very unlikely that a final decision on rate will be taken today. Already, Jaitley has said there are five proposals on the table. Given the diverse problems each states face with the GST, an early resolution is doubtful.

(With inputs from PTI, IANS)

Make in India push: Samsung to invest Rs 1,970 cr in Noida unit to double capacity

Lucknow: Samsung will invest Rs 1,970 crore over the next three years to double manufacturing capacity of its Noida facility, a move that will help the Korean company start exporting from India.



The Uttar Pradesh government has approved Samsung’s investment under Super Mega A by the state’s Cabinet Committee in Lucknow today.

“In line with our commitment to ‘Make in India’, we are pleased to receive the UP government’s approval to invest in the state and expand our manufacturing base here in India,” Samsung India President and CEO HC Hong.

While the company did not disclose details, sources said the investment will help Samsung ramp up its manufacturing capacities across product lines like refrigerators, mobile phones and LED TVs.

They added that Samsung will get an additional 1.3 lakh sqm for the expansion, a move that will generate additional employment for 2,200 people.

Samsung’s mobile phone manufacturing capacity alone will be doubled from 6 million units a month now to 12 million over the course of time, Uttar Pradesh Chief Secretary Rahul Bhatnagar said.

“…we are witnessing an increase in the adoption of electronic devices, appliances and mobile phones. A bigger and more robust manufacturing facility will help us address the needs and demands of our growing customer base across the country and the region,” he said.

Interestingly, the announcement comes within week of Samsung permanently shutting production and sales of its flagship device, Galaxy Note 7, globally.

While the company had not started sales of the Note 7 but analysts expect its smartphone revenues in India to be hit. However, Samsung has has vehemently refuted the claims. Samsung started its Noida plant in 1996 and in 1997 the television was manufactured. The company has two factories, three R&D centres and a design centre, employing over 40,000 people in India.

“Today’s MoU is yet another step in converting Noida into the electronics hub of India. I am happy Samsung is pioneering this transformation yet again,” Uttar Pradesh Chief Minister Akhilesh Yadav said.

Essar Oil-Roseneft deal: Why it is a lost opportunity for Indian companies

India India’s debt-laden Essar Group confirmed on Saturday that it has agreed to sell a 98 percent interest in its Essar Oil unit to a consortium led by Russia’s Rosneft, giving the energy giant a gateway into the world’s fastest growing fuel market.

The deal will see Rosneft, along with its partners Trafigura and United Capital Partners (UCP), pay $10.9 billion for Essar’s refining and retail assets. Separately, $2 billion will be paid toward the acquisition of the Vadinar port in the western state of Gujarat, along with certain import and export facilities.

Here are all the key facts about the deal:

Representational image. ReutersRepresentational image. Reuters

Representational image. Reuters

What are the key aspects of the deal?

The deal will give Rosneft a 49 percent stake in Essar Oil, with 49 percent being split equally between Trafigura and UCP. It has been carefully structured to avoid falling foul of western sanctions against Russia over its role in the Ukraine crisis. According to a Reuters report, Rosneft will not get a controlling stake, partly because of sanctions.

The all-cash deal will give Rosneft and its partners control of Essar’s 20 million tonne refinery in Gujarat, and its retail fuel outlets in India, where growth for refined petroleum goods in the next five years is expected to be in the 5 percent to 7 percent range.

It is also the biggest foreign acquisition ever in India and Russia’s largest outbound deal, according to Thomson Reuters data.

How will the deal impact Rosneft and Trafigura?

According to Chief Executive Igor Sechin, the deal gives Rosneft entry into one of the most promising and fast-growing world markets. It gives “unique opportunities for synergies” with its existing assets. Separately, Rosneft said it would use Venezuelan crude to supply the Vadinar refinery.

According to Vandana Hari, energy sector analyst, the deals is a feather in the cap of Rosneft and Trafigura. “Given that the purchase gives them control of the entire downstream business of Essar Oil, the companies are getting a relatively new and sophisticated refinery and retail network, which will continue to play a critical role in serving a fast-growing captive market at home, besides being well-placed to compete in the export markets,” she said.

Hari reckons that at a Nelson complexity index of 11.8, the 20 million mt/ year Vadinar refinery is capable of turning the dirtiest of crudes into high-quality Euro IV and V-grade refined products, assuring it relatively healthy refining margins.

How will it impact Essar?

The Essar group, with a presence in oil and gas, steel, ports and power, has been under pressure from its lenders to reduce its debt burden. The group, according to this report in Baron’s Asia, has loans Rs 1.2 lakh crore debt. The deal will be help the group reduce its debt burden by Rs 75,000 crore, Essar director Prashant Ruia has told The Business Standard.

Apart from this, the group’s assets will reduce by 30 percent with this deal and revenue by $10 billion to $17 billion, Ruia has told the BS.

The group will now focus more on its other businesses such as steel and ports, says a report in The Economic Times.

Why are Indian banks happier than Ruias, Roseneft, Trafigura and UCP?

Indian banks’ stressed assets stands at Rs 8 lakh crore. Of this, five sectors, namely steel, power, teelcom, infrastructure and textiles, account for 61 percent. Banks have a mandate to clean up their balance sheets by March 2017 and have been pushing debt-laden companies to sell assets to repay loans.

Essar’s debt has been one of the highest and the development has to be seen in this context. Welcoming to the development, Chanda Kochhar of ICICI Bank said, “This deal is also a significant step in the process of deleveraging the balance sheets of Indian corporates. ICICI Bank has been closely working with various companies including the Essar Group to help them deleverage their stressed balance sheets. We will continue working towards this objective with others.”

However, IDBI Bank’s MD Kishor Kharat has been more measured in his reaction because as part of the deal the debt of Essar Oil will now become Trafigura or Roseneft’s. “That is why I am saying that we need to understand how they are going to structure it entirely because if it is all cash deal and they are going to settle the lenders, it will be a different situation but if it is only the equities taken and then all debts are going to be transferred to new buyers, promoters, perhaps the situation will be different,” he told CNBC-TV18 in an interview.

But did Indian Inc lose out?

As Kochhar of ICICI Bank says, the deal definitely means Indian energy sector is attractive. But that also means Indian companies lost out on a golden opportunity. “While the deal makes good sense for the buyers and the Ruias, who will now be able to pay off a substantial part of the Essar Group debt, I think India Inc. looses. The country is essentially going to allow some foreign companies to profit from its downstream oil industry growth story,” says Vandana Hari.

Why could that opportunity not have been exploited by the Indian refiners? she asks.

Data contribution by Kishor Kadam

With inputs from Reuters

When corporate honchos donned the chef’s cap for kids

<!– /11440465/Dna_Article_Middle_300x250_BTF –>It is the season to spread happiness and goodwill among the less fortunate. Corporate honchos from renowned MNCs and ambassadors came together on Saturday to organise a culinary event for children from the Smile Foundation. Bollywood actor John Abraham attended the event much to the joy and surprise of the little ones.Seven CEOs and directors from companies including Rio Tinto, Catai India, Way to Go Events WTG and diplomats from the Republics of Malawi and Taipei stepped out of their white collar roles to don a chef’s hat and take part in the Hyatt Culinary Challenge at Hyatt Regency. The third season of the Challenge, this event will be held in other Hyatt hotels in cities including Ahmedabad, Amritsar, Bangalore, Chandigarh, Chennai, Delhi, Goa, Hyderabad, Kolkata, Ludhiana, Mumbai, Pune and Raipur. The finals will be held in Chandigarh on November 19 where the winners will be flown by the NGO to participate.The Delhi event had Ryan Tanner, vice president of automobile company, famous for its high-end luxury cars, rustling up lemon and garlic linguine, Ambassador of Malawi Alfred Villi tossing roast chicken and baby potatoes as children in the age group of 8-15 years assisted the ‘chefs’, like pros, grinning from ear to ear, jumping with joy across the ball room. Director of Catai, India Amit Sharky who shared his personal favourite Moroccan style of fish told DNA, “I am extremely delighted to be a part of the event. It was a great experience teaming up with kids from Smile foundation and cooking together. The concept of ‘people cooking for people’ is remarkable.”Adding a dash of sweetness to the food was S Vijay Iyer, CEO, Rio Tinto who pampered the sweet tooth with Shahi Pongal while Vikram Khanna of WTG Events served mutton in golgappa shots.Explaining the idea behind this unique concept, Vikram Singh Verma, COO, Smile Foundation, said, “In order to bring some real and permanent changes in the lives of children across the nation, members of the civil society need to be involved proactively in the process of development. This annual event which we hold in collaboration with Hyatt India is a positive step to see the lasting impact in the upliftment of our local communities.” Chung Kwan Tien Ambassador, Taipei Economic and Cultural Center, who cooked a traditional Taiwanese dish of stuffed green peppers, said he was delighted to interact with the children on a personal level and engage in an activity that made them feel like a part of society.

Brics Summit in Goa: Russian state fund to co-invest $1 billion in India’s Infra Fund

The state-backed Russian Direct Investment Fund (RDIF) will work with an Indian fund to invest $1 billion in Asia’s third-largest economy, the head of the fund said before a bilateral summit expected to yield several big business deals.

The RDIF and India’s National Investment and Infrastructure Fund (NIIF) will each invest up to $500 million in the joint fund, replicating partnerships the Russian entity has with countries like China.



“We helped in the process of the NIIF being created,” RDIF CEO Kirill Dmitriev said in an interview with Reuters. “Now we will provide equity capital to joint Russian-Indian projects, mainly in India.”

The RDIF was set up by Dmitriev in 2011 with billions in Kremlin cash and has since made partial exits from bets in Russia, including the Moscow Stock Exchange, diamond miner Alrosa and Rostelekom .

It also worked with Indian infrastructure investor IDFC to invest $1 billion in power projects when President Vladimir Putin last visited India in late 2014.

India is courting international investors to help finance new roads, railways and power projects that the country needs.

Putin will meet Indian Prime Minister Narendra Modi in the tourist destination of Goa on Saturday for a summit at which major defense, oil and nuclear power agreements are expected to be signed.

The RDIF-NIIF partnership will also be sealed at the summit. It will address around 20 investment proposals and seek to strike its first deals in 2017, said Dmitriev.

Leaders of the BRICS caucus – Brazil, Russia, India, China and South Africa – will also gather in Goa this weekend. The bloc has founded its own New Development Bank that has co-invested in two RDIF-backed hydropower plants in Russia that have just broken ground.

Dmitriev said he hoped that the Russian fund would be able to draw on the platform of the BRICS bank to build similar small-scale hydro projects in India that are based on Russian technology.

RBI policy: Corporate India hails rate cut, now all eyes on banks

Corporate India cheered the first monetary policy review under new RBI governor Urjit Patel. The interest rate was cut by 25 bps to a six year low of 6.25 percent.

India Inc hopes that this rate cut would boost sentiment and reinvigorate growth impulses. More importantly, they hoped that banks would transmit the benefit to borrowers.

RBI governor Urjit Patel. ReutersRBI governor Urjit Patel. Reuters

RBI governor Urjit Patel. Reuters

Arundhati Bhattacharya, Chairman, SBI said, that the repo rate cut ws on `expected lines. “With benign inflation trajectory going forward, RBI’s policy stance is expected to remain accommodative. Banks will continue to transmit rates based on evolving liquidity scenario.”

“The cost of capital has to be more competitive to drive investments. Businesses need to see an urgent revival in
growth. Also, a moderate interest rate regime will lead to an uptick in interest sensitive sectors such as consumer
durables, automobiles and housing,” Ficci President Harshvardhan Neotia said.

“The maiden policy decision taken by RBI’s MPC is completely justified by the ongoing disinflation in the
economy. Today’s rate cut will boost sentiment and contribute towards reinvigorating growth impulses in the infrastructure, construction and manufacturing sectors. Backed by a healthy set of domestic macros and sustained global deflation, I expect 75 bps further easing in the coming months,” said Rana Kapoor, MD & CEO, Yes Bank.

The interest rate cut should change the rate scenario for FY’17 says George Alexander Muthoot, Managing Director, Muthoot Finance Ltd who feels it will help suppor the economy’s investment demand and uptick in credit environment. “A relief on the cost of funds is awaited eagerly by corporate India, which should help them to improve financial health and plan for the next leg of growth. With the pro-growth stance of the RBI, it gives a clear hint to India Inc to push for growth, take investment decisions as it can now foresee rates to soften further.”

For V S Parthasarathy, CFO, Mahindra Group, the cut of 25 bps serves as a signal from the RBI, anchoring future expectations.”This policy was a window into the thoughts of the Governor and the MPC. It is not only about the here and now, it is also about what the MPC thinks about risks and importantly it reveals the Governor’s thoughts on structural matters. The focus will be on NPAs, financial market reforms, and financial inclusion for MSME. The policy has however stuck to monetary aspects and we have to wait to see the Governor’s actions elsewhere. We trust he would continue to be vigilant, watching over the economic landscape with flexibility to act as the situation changes.”

Rajat Gandhi, Founder and CEO, Faircent on Monetary Policy says that the rate cut will benefit micro-SMEs. “Since large number of our borrowers are micro-SMEs or self-employed, the increased liquidity would definitely revitalise this key segment and boost the economy. As a leading alternative lending platform we have been witnessing higher lender interest over the last quarter, which is a pointer to increased supply… Improvement in the liquidity conditions would further help in boosting the credit scenario of the economy”.

N D Venkatesh, Executive Director, Lakshmi Vilas Bank has termed the policy ‘ “The first policy of the MPC committee under the new governor Dr. Urijit Patel has continued with the accommodative stance to foster growth in the economy. The inflation expectations have been well anchored. The smoothening of S4A guidelines will help the easier resolution of stressed assets and will be a relief to the banking system. Overall it is a pragmatic policy with focus on growth. “

Melwyn Rego MD and CEO, Bank of India said that this rate cut was expected. “This move was anticipated due to favorable domestic and global factors, viz, declining CPI inflation and an accommodative monetary stance by major Central Banks across the globe. Another notable aspect about the policy was total unanimity among all MPC members for a repo rate cut. More importantly, this was the first RBI policy announcement by an MPC. The rate cut could not have come at a more opportune time considering that US Federal Reserve stance has turned hawkish. Meanwhile, growth outlook has been retained at 7.6%. Overall, the stance of the policy is accommodative and pro-growth, while simultaneously acknowledging some upside risks to inflation.”

With Marginal Cost of funds based Lending Rates (MCLR) already stabilized, Ashwani Kumar, Chairman & Managing Director – Dena Bank hoped the pass through of the rate would be swift. “It is pertinent to note that the growth estimate of RBI for the year 2016-17 is constantly kept at the same level, thereby indicating that the risk factors to domestic growth is not substantial, probably due to the fact that growth is propelled by domestic factors than external factors. Since inflation is following the expected trajectory, the focus of RBI has now shifted to growth. One of the positives for the banking sector from the regulatory angle is the relaxation given on the treatment of sustainable debt under S4A.”

That all the six member of the Monetary Policy Committee supported the rate cut was the high point for Ms. Bekxy Kuriakose, Head – Fixed Income, Principal Pnb Asset Management. “The statement spoke about the slowing momentum of food inflation and reduction of small savings rate and felt that the upside risk to inflation was somewhat lower than last policy statement. In the post policy con-call RBI spoke about real interest rate around 1.25%, compared to 1.5%-2,0% earlier. We expect another 25 basis rate cut by March 2017.”

N D Venkatesh, Executive Director, Lakshmi Vilas Bank says that the rate cut has `well anchored’ inflation expectations. “The first policy of the MPC committee under the new governor Dr. Urijit Patel has continued with the accommodative stance to foster growth in the economy… The smoothening of S4A guidelines will help the easier resolution of stressed assets and will be a relief to the banking system. Overall it is a pragmatic policy with focus on growth. “

“At the anvil of the busy credit season when the demand for bank credit is anticipated to go up, the RBI intervention to reduce interest rates and other welcome liquidity supporting measures would enable banks to transmit the cut to borrowers and thereby support the growth cycle,” CII Director General Chandrajit Banerjee said.

In a Facebook post, Union Minister for Power, Coal, New & Renewable Energy and Mines Piyush Goyal said the repo rate cut will ensure rapid growth and give a boost to Make in India, rapid infrastructure creation and affordable power.

“The industry expects a lot of value addition from the MPC and possibly another rate cut before March 2017, while
expecting the real transmission of the lower rates by the banks,” Assocham Secretary General D S Rawat said.

“The rate cut should spur growth and the corporate sector should see it as an encouraging move to foster investment. However, the speed of transmission of this rate cut would be an important determinant,” President of the Indian Merchants Chamber Deepak Premnarayen said.

Sterlite Power CEO Pratik Agarwal said: “It’s clear that India is determined to maintain a 1.5-2 per cent real rate of interest. This will satisfy the urgent need for growth and also encourage savings at the same time.”

The rate cut announced today shows that the central bank remains cautious in its monetary policies and is carefully monitoring the overall economic scenario before taking steps, said Anuj Puri, Chairman & Country Head, JLL India. He said, “the reason why housing sales have been sluggish is because of trust deficit between consumers and developers. Unless RERA and other pro-consumer policies come into play, buyers will continue to be wary. Therefore, we can expect only a marginal improvement in sentiment on the back of this rate cut. At this point, there is also no ready answer to the question of to what extent banks will actually pass on the benefit of the rate cut to borrowers.”

(With inputs from agencies)

DCW issues notice to Delhi Police in BK Bansal suicide case

<!– /11440465/Dna_Article_Middle_300x250_BTF –>Delhi Commission for Women (DCW) issued a notice to the Delhi Police asking whether an FIR of abetment of suicide has been registered against those named by tainted top government official BK Bansal and his son in their suicide notes.”The commission wants to know whether an FIR for abetment of suicide and other relevant provisions of law has been filed against those named in the suicide note. If not, please provide reasons for the same and the steps being undertaken by Delhi Police to ensure filing of the same,” said the notice issued to Joint Commissioner of Police Satish Golcha. Two months after his wife Satyabala and Neha committed suicide, Bansal, former Director General Corporate Affairs, and his son Yogesh had also allegedly hanged themselves on September 27.In their purported suicide note, Bansal had alleged that a CBI DIG, two women officers and a “fat” havaldar of the agency had tortured his wife and daughter to the extent that they ended their lives soon after his arrest on corruption charges in July. DCW had last week issued a notice to CBI director Anil Kumar Sinha asking about the steps being taken to conduct an “unbiased” inquiry in the matter.”CBI has replied to the notice stating that an internal enquiry has been set up under a Joint Director-rank officer. No other information has been provided. “The commission finds the reply inadequate and unsatisfactory and has asked for a point-wise reply within 48 hours,” a DCW official said.

Black money declaration window closes today: Will it amass more tax than Chidambaram’s scheme?

The NDA government’s Income Declaration Scheme (IDS), which opened a window for balck money hoarders to declare their ill-gotten wealth and come clean, is closing today.

The government, in order to further facilitate the filing of declarations, has extended the working hours of the Central Board of Direct Taxes (CBDT) until 8 pm on Thursday and Wednesday. The Income Tax Department offices will remain open all over the country until the midnight today.

Here’s a low down on the NDA government’s ambitious scheme aimed at battling black money:

Representational image. AFPRepresentational image. AFP

Representational image. AFP

What is the scheme all about?

The scheme, which came into effect for a period of four months starting from June 1 this year, was announced by the government with an aim of bringing out black money from the domestic economy. Those who declare their un-taxed wealth under the scheme can make their payments as follows:

i) a minimum amount of 25% of the tax, surcharge and penalty to be paid by 30 November 2016;

ii) a further amount of 25% of the tax, surcharge and penalty to be paid by 31 March 2017;

iii) the balance amount to be paid on or before 30 September 2017.

The time for making payments was extended considering the practical difficulties of the stakeholders, who feared they may have to resort to distress sale of assets.

Penalty against the tax evaders or those people do not declare their deposits and assets under the IDS would be 100 percent to 300 percent, besides jail terms ranging from three months to seven years, depending upon the severity of the fault and laxity.

The government hopes to collect taxes worth Rs 50,000 crore and declaration worth Rs 1 lakh crore.

How is the government facilitating income declaration?

The CBDT is leaving no stone unturned to ensure maximum declarations under the window.

The government has assured people that the information declared under the scheme would be kept confidential and not shared with any authority.

Further, the payments made under the scheme shall neither be reflected in the annual statement, which is the consolidated tax statement, nor can it be viewed by the assessing officer in the Online Tax Accounting System (OLTAS) of the department in the interest of confidentiality.

The I-T department has been directed to accept declarations without PAN under the black money compliance window, but ensure that the unique number is later obtained by the entity concerned.

The Central Board of Direct Taxes (CBDT) has asked tax sleuths to ask such declarants to attach a separate application in the IDS form for allotment of a fresh PAN to them quickly.

The decision was notified by CBDT as some field offices brought to its notice that they were encountering “few cases” where an entity wanted to make a declaration of black money under IDS, but had no PAN.

The extension of date to make payments was also part of this effort.

Separately, the Reserve Bank of India has instructed banks to accept cash deposits at the counter from people declaring unaccounted wealth under the scheme.

What are the criticisms against the scheme?

As the IDS deadline drew nearer, the I-T department started conducting raids across the country. Even the small businesses were not spared.

The opposition has accused the government of harassment.

Congress spokesperson Manish Tewari alleged that under the scheme, the total declaration made till 30 August was Rs 4,164 crore only and the total tax collected was only Rs 2,428 crore.

As against this, in 1997, the then United Front government’s voluntary disclosure of income scheme (VDIS), the total declaration made was Rs 33,000 crore and total tax collected Rs 10,000 crore. The scheme was devised by then finance minister P Chidambaram.

“if today we go to any trading hub in the country there are these horror stories of how the small trader, the honest businessman, the honest taxpayer is being literally coerced in order to make declaration to fulfil the target under this income declaration scheme,” Tewari said.

Will the scheme be a success?

The jury is still out. Media reports say the government hopes raise anywhere between Rs 35,000-50,000 crore from the scheme.

According to this Business Standard report, the declarations have picked up towards the close of the scheme, which the government has refused to extend.

The tax officials cited by the newspaper say that the scheme will be a success if the income declarations goes beyond Rs 50,000 crore. Even declarations worth Rs 40,000 crore is not bad, they say.

However, if, as the Congress alleged, the officials have been harassing the tax payers to meet targets, it may end up as a failure and is likely to backfire.

Embraer deal: $5.5 mn paid as commission to middleman, claim CBI sources

Embraer deal: $5.5 mn paid as commission to middleman, claim CBI sources

Sep 29, 2016 09:20 IST


New Delhi: Commission worth $5.5 million was allegedly paid to a middleman based abroad in the Embraer deal, the CBI has found in what it considers as a major breakthrough in its probe into allegations of kickbacks in the USD 208-million aircraft contract.

Representational image of Embraer jets. Wikimedia CommonsRepresentational image of Embraer jets. Wikimedia Commons

Representational image of Embraer jets. Wikimedia Commons

Without naming the middleman or location where the agent could be based, CBI sources said the agency is in touch with the law enforcement agencies of that country for further details in the matter.

The sources said the agency through its sources has found that $5.5 million (approx Rs 36 crore as per present exchange rate) was allegedly paid as commission to influence the deal in favour of Brazilian aircraft manufacturer Embraer.

They said the agency, which has registered only a preliminary enquiry in the matter, will soon be converting it into a regular FIR as enough prima facie material has been found by it to proceed in the case.

The deal of three aircraft which were to be used by Defence Research and Development Organisation (DRDO) for air-borne radar systems was inked in 2008 with Embraer.

A Brazilian newspaper recently alleged that that the company had taken the services of middlemen to clinch deals in Saudi Arabia and India.

According to defence procurement rules of India, middlemen are strictly barred in such deals.

Leading Brazilian newspaper Folha de Sao Paulo had reported that the company allegedly paid commissions to a UK-based defence agent to finalize the deal with India.

DRDO had purchased three aircraft from the company in 2008 and customized them for serving are air-borne radar system known as airborne early-warning and control systems or AWACS for the Indian Air Force.

The company has been under investigation by the US Justice Department since 2010 when a contract with the Dominican Republic raised the Americans suspicions, the report said.

Since then, the investigation has widened to examine business dealings with eight more countries.

Opec agrees modest oil output curbs in first deal since 2008; prices zoom more than 5%

Algiers – Opec agreed on Wednesday modest oil output cuts in the first such deal since 2008, with the group’s leader Saudi Arabia softening its stance on arch-rival Iran amid mounting pressure from low oil prices.

“Opec made an exceptional decision today … After two and a half years, Opec reached consensus to manage the market,” said Iranian Oil Minister Bijan Zanganeh, who had repeatedly clashed with Saudi Arabia during previous meetings.



He and other ministers said the Organization of the Petroleum Exporting Countries would reduce output to a range of 32.5-33.0 million barrels per day. Opec estimates its current output at 33.24 million bpd.

“We have decided to decrease the production around 700,000 bpd,” Zanganeh said.

The move would effectively re-establish Opec production ceilings abandoned a year ago.

However, how much each country will produce is to be decided at the next formal Opec meeting in November, when an invitation to join cuts could also be extended to non-Opec countries such as Russia.

Oil prices jumped more than 5 percent to trade above $48 per barrel as of 2015 GMT. Many traders said they were impressed Opec had managed to reach a compromise after years of wrangling but others said they wanted to see the details.

“This is the first Opec deal in eight years! The cartel proved that it still matters even in the age of shale! This is the end of the ‘production war’ and Opec claims victory,” said Phil Flynn, senior energy analyst at Price Futures Group.

Jeff Quigley, director of energy markets at Houston-based Stratas Advisors, said the market had yet to discover who would produce what: “I want to hear from the mouth of the Iranian oil minister that he’s not going to go back to pre-sanction levels. For the Saudis, it just goes against the conventional wisdom of what they’ve been saying.”.

Saudi Energy Minister Khalid al-Falih said on Tuesday that Iran, Nigeria and Libya would be allowed to produce “at maximum levels that make sense” as part of any output limits.

That represents a strategy shift for Riyadh, which had said it would reduce output to ease a global glut only if every other Opec and non-Opec producer followed suit. Iran has argued it should be exempt from such limits as its production recovers after the lifting of EU sanctions earlier this year.

The Saudi and Iranian economies depend heavily on oil but in a post-sanctions environment, Iran is suffering less pressure from the halving in crude prices since 2014 and its economy could expand by almost 4 percent this year, according to the International Monetary Fund.

Riyadh, on the other hand, faces a second year of budget deficits after a record gap of $98 billion last year, a stagnating economy and is being forced to cut the salaries of government employees.


Saudi Arabia is by far the largest OPEC producer with output of more than 10.7 million bpd, on par with Russia and the United States. Together, the three largest global producers extract a third of the world’s oil.

Iran’s production has been stagnant at 3.6 million bpd in the past three months, close to pre-sanctions levels although Tehran says it wants to ramp up output to more than 4 million bpd when foreign investments in its fields kick in.

Saudi oil revenue has halved over the past two years, forcing Riyadh to liquidate billions of dollars of overseas assets every month to pay bills and cut domestic fuel and utility subsidies last year.

“The Iranians have lived with a very tough macro backdrop for many years…” said Raza Agha, chief Middle East economist at investment bank VTB Capital. “So a sustained drop in oil prices has a more difficult social impact on Saudi.”

However, with unemployment in double digits, Tehran is also facing calls to maximize oil revenues and President Hassan Rouhani is under pressure from conservative opponents to deliver a faster economic recovery.

Oil prices are well below the budget requirements of most Opec nations. But attempts to reach an output deal have also been complicated by political rivalry between Iran and Saudi Arabia, which are fighting several proxy-wars in the Middle East, including in Syria and Yemen.

Opec sources have said Saudi Arabia offered to reduce its output from summer peaks of 10.7 million bpd to around 10.2 million if Iran agreed to freeze production at around current levels of 3.6-3.7 million bpd.

Riyadh has raised production in recent years to compete for market share while Iran’s output was limited by sanctions. Minister Zanganeh has said Iran wanted an output cap of close to 4 million bpd. Saudi output drops in winter when it needs less fuel than during summer, when cooling requirements spike.

Why were my wife, daughter tortured for no reason: BK Bansal asked in suicide note

<!– /11440465/Dna_Article_Middle_300x250_BTF –>The CBI is facing allegations of torturing and abusing the wife and daughter of BK Bansal, former Director General (DG) in the Ministry of Corporate Affairs. Bansal, who was being probed by the agency in a graft case, had, along with his son Yogesh, committed suicide at their East Delhi residence on Tuesday.In a detailed suicide note found at his home, Bansal named senior DIG officer Sanjeev Gautam, along with two female officers and another officer, who, he claimed, had played a pivotal role in torturing his family. It also alleged that Gautam also dropped the name of a top BJP leader to intimidate him during questioning.Following the allegations, the agency has begun an internal probe. In a statement to the media it said, “We have examined the matter and decided to probe the allegations. If any violation is established during the probe, strict action will be taken against the CBI officials concerned. The competent court will be informed.”Bansal’s wife Satyabala and daughter Neha had committed suicide on July 19 soon after his arrest. In his suicide note, Bansal had written, “On July 18 and 19, 2016 two CBI female officers, named Amrita Kaur and Rekha Sangwan, slapped my wife, scratched her and then abused her. DIG Gautam later asked one of the lady officers to torture my wife and daughter to an extent that both of them were just left to die.”Bansal’s suicide note also mentions that he had pleaded with the DIG to show leniency towards his family, but he did not listen. Instead, his note alleged that the DIG said that he would make the lives of Bansal’s wife and daughter like that of a “living corpse”. It also alleged that the other officer, whose name was not mentioned, misbehaved and tortured his wife and daughter.Such behaviour, wrote Bansal, ensured that the death of his wife and daughter was murder and not suicide. “If it was my fault then why were my wife and daughter tortured for no reason. This is a murder and not a suicide. Gautam, the lady officers and another officer should undergo a lie detector test for the ultimate truth to come out. He said he is a close aide of a prominent BJP leader and nothing can be done against him,” wrote Bansal.”I had heard that the CBI was a tough agency but did not know that the conduct of officers like DIG Sanjeev Gautam, two lady officers and another officer could be such that it could end someone’s life The CBI has murdered my wife and daughter and therefore the will to live has died within me,” wrote Bansal.”Goodbye, Bharat Mata ki Jai” were the concluding lines in the note. Bansal’s allegations were not the first time CBI officials had been put in the dock for their poor handling of the case. On July 19, DIG Gautam had been pulled up by a special court hearing the matter at Patiala House district court for his insensitive handling of the situation after Bansal’s wife and daughter had killed themselves.Sources at court state that till five in the evening on July 19, Bansal had remained unaware of the fact that his wife Satyabala and his daughter Neha had committed suicide. Furthermore, when the court made further inquiries on whether a family member of the accused or his counsel was present, Bansal stated that despite repeated requests, CBI officers were not permitting him to talk to anybody in his family.When asked to respond, Sitanshu Sharma, the Investigation Officer (IO) of the case said that Bansal was allowed one phone call to his daughter at six the previous evening on July 18. Little did Bansal know though that it would be his last conversation with her.Sources present during the proceedings claim that the court was of the opinion that the interest of justice could wait and that it would be inappropriate to send Bansal to jail at this point, as per the CBI’s request. Instead, the court called upon the CBI to take custody of Bansal and directed the agency to extend all help warranted in this special situation to help him deal with the loss he had suffered.

BK Bansal blames CBI of ‘harassing’ his family, alleges that led to their ‘murder’

<!– /11440465/Dna_Article_Middle_300x250_BTF –>A tainted top government official, who committed suicide along with his son on Tuesday, blamed CBI officials probing the corruption case against him for the decision to end their lives. In the wake of the allegations against its officials, CBI constituted an internal inquiry to look into them on Wednesday.In suicide notes purportedly written by former Corporate Affairs Director General BK Bansal and his son Yogesh, the official has alleged that a CBI DIG, two women officers and a “fat” Havaldar of the agency had tortured his wife and daughter after which both had committed suicide in July. Two suicide notes were received, a seven-page note purportedly written by Bansal and a two-page note purportedly written by Yogesh dated September 26, 2016, a day before their bodies were discovered in their flat in New Delhi.CBI Spokesperson RK Gaur said the agency has received a communication from Delhi Police in which the suicide notes have been attached. He said an inquiry has been ordered to look into the allegations and the court will be informed. In the note purportedly signed by Bansal, it is alleged that that his wife and daughter had shared the details of “torture” with friends and neighbours before taking the extreme step.
ALSO READ Graft case accused, ex-Corporate Affairs DG, commits suicide along with sonHe alleged that the CBI DIG also claimed that he was close to a politician of the ruling party and dared Bansal to do whatever he wanted. Bansal alleged that the women officers slapped his wife even as the DIG abused her over phone and threatened to torture Bansal who was in CBI custody.He said, “even if I was at fault in the case, why were my wife and daughter pushed to suicide by CBI officials.” “This cannot be termed as suicide. It is a murder of two ladies,” he said, adding that the DIG and the “fat” Havaldar should be subjected to lie detector test to know the truth.Bansal also urged the Director CBI to probe the matter as the DIG had threatened him before the suicide of his wife and daughter that “they will be subjected to such a torture that they will ask for death but won’t get it”. Bansal, however, appreciated the investigating officer, saying he always assured him that no harm will come to him.His son Yogesh, in his purported suicide note, has identified one more officer in addition to four officers already named by his father. Yogesh alleged that he was “unofficially” subjected to “mental and physical” torture to an extent that he is forced to take such a step. He alleged that the five CBI officers including the DIG had “unofficially and off the record tortured him, his mother and his sister. “My mother and my sister were against suicide but they were tortured to such an extent that they took the step,” he alleged, adding that they were “murdered” by CBI officers and supported by a neighbour who made fun of their situation.Bansal allegedly hanged himself along with his son at their residence with a purported suicide note claiming “harassment” by CBI, barely two months after his wife and daughter ended their lives following his arrest in the alleged corruption case. The additional secretary-rank officer in the Ministry of Corporate Affairs, Bansal was arrested by CBI on July 16 for allegedly accepting bribe from a prominent pharmaceutical company.CBI had carried out searches at eight locations in connection with the case during which the agency had claimed to have made cash recoveries. “We have today received communication from Delhi Police enclosing therewith the purported hand written notes of BK Bansal, then DG (Ministry of Corporate Affairs), Government of India and his son Yogesh Bansal,” Gaur said.He said it contains allegations against certain CBI officials in connection with the on-going bribery investigation against Bansal and others. “We have examined the matter and decided to probe the allegations. CBI is fully committed to conduct investigation in a fair and professional manner without harassment to any one and strictly within the parameters of law. If any violation is established during the probe, strict action will be taken against the CBI officials concerned. The Competent Court will be informed,” he said.

Will Walmart provide money power for Flipkart to take on Amazon? A win-win deal may be in making

Faced with rising competition from the online retail giant Amazon at home and other global markets, US-based multi-billion dollar retail czar Walmart Stores Inc has been steadily ramping up its presence in the online retail business through minority stake buys in etail companies of late.

While having a presence in India for quite some time through its Wholesale Best Price stores, Walmart is evaluating its strategy to team up with the country’s largest ecommerce company Flipkart to counter Amazon’s growing influence here.



According to a report in The Economic Times, Walmart is looking at buying a small equity stake in Flipkart for which both the companies are likely to hold talks later this week.

However, both Walmart and Flipkart have termed the news as speculative.

The likely talk comes close on the heels of the US retailer entering into a deal with China’s second-largest ecommerce firm JD.com in June amid growing competition from Alibaba Group Holding. As per the terms of the deal, Walmart will get a 5 percent stake in JD.com worth $1.5 billion in exchange for selling its online grocery store to the Chinese ecommerce firm. Two months later the US retail major announced up a deal to acquire Jet.com for $3.3 billion to spruce up its ecommerce business.

Although Walmart remains undisputed leader in the US retail market, its ecommerce business has been facing challenging times in recent years. In 2015, Walmart’s ecommerce sales stood at $15 billion as against a whopping $99 billion revenue posted by Amazon from its online sales, the ET report said.

Back home, there is no clarity on the percentage holding and total value Walmart could negotiate with Flipkart. But the deal could be win-win situation for both. For Flipkart, a minority stake sale could bring in fresh funds into the company and help further compete with Amazon. Also, Flipkart can leverage Walmart’s global supply chain and use the latter’s wholesale stores in Jammu, Chandigarh etc. among other locations for pickup and delivery points.

In case of Walmart, holding a minority stake in Flipkart will help it to have a presence in the country’s growing ecommerce market besides allowing it to sell goods through multiple channels, the ET report added. The US-based retailer can also eye the home-grown etailer’s rising user base. Last week, Flipkart said it has crossed the 100-million registered users mark, becoming the first e-commerce company in the country to hit the milestone. The Bengaluru-based company has also doubled its user base over the last year and added 25 million users in the past six months alone.

The company is engaged in a battle for supremacy with Amazon and another domestic challenger Snapdeal, where all three are slugging it out to notch up robust volumes in the forthcoming festival sales offer starting later this week.

The Jeff Bezos-controlled Amazon has already announced big plans for India. The Seattle-based online giant had last year announced a plan infuse $3 billion in Indian operations, taking its total investment commitment for the country to $5 billion.

Expanding into other verticals of the online segment, Amazon is on the verge of launching Prime Video in India, and has partnered with Karan Johar’s Dharma Productions and Vishesh Films, which will give the company access to about 80 blockbustres.

The teaming up with the Dharma and Vishesh is also aimed at gaining more customers and fighting Flipkart.

A recent Bank of America Merrill Lynch report had said Amazon is improving its foothold in India and it could be the second biggest player after Flipkart in the online retail market by 2019.

The country could also become Amazon’s second largest market (after the US) as it plans to invest $5 billion here.

“For last couple of months, Amazon India gross sales are higher than that of Flipkart standalone (excluding Myntra)… We now expect Amazon’s GMV (gross merchandise value) market share to improve to 37 per cent by 2019 from 21 per cent in 2015 and expect it to be close No 2 behind Flipkart,” the report said.

While revenues are relatively small to Amazon’s global scale, Amazon India could generate $81 billion in GMV and $2.2 billion in operating profit by 2025.

Most of Amazon’s gains have come at the expense of Snapdeal and other sellers, not Flipkart, according to the report. Flipkart still remains the market leader in India and “even in terms of customer satisfaction, reports indicate that it remains the leader, ahead of both Amazon and Snapdeal”, according to the report.

Whoever wins the battle in the end, one thing is for sure there are interesting times ahead for e-commerce customers in India.


Graft case accused, ex-Corporate Affairs DG, commits suicide along with son

<!– /11440465/Dna_Article_Middle_300x250_BTF –>Former Director General Corporate Affairs B K Bansal, who was facing a CBI probe in a corruption case, allegedly committed suicide along with his son at their residence in East Delhi.The incident comes two months after the suicide of Bansal’s wife Satyabala (57) and daughter Neha (27).Both the women left separate suicide notes, saying the CBI raid had caused “great humiliation” and they did not want to live after that. They, however, held nobody responsible for their deaths.Bansal, an additional secretary-rank officer in the Ministry of Corporate Affairs, was arrested by CBI on July 16 for allegedly accepting bribe from a prominent pharmaceutical company.CBI had carried out searches at eight locations in connection with the case during which the agency had claimed to have made cash recoveries.Bansal, Senior Administrative Grade officer of Indian Corporate Law Service (ICLS) was promoted to the post of Director General of Corporate Affairs (DGCA) last year.

Budget overhaul: Modi govt just took the first step to privatise Indian Railways

Theere are reasons to believe that the Narendra Modi government’s decision to merge the railway budget with the general budget is part of the government’s larger strategy to privatise Railways, India’s largest public carrier.

But, it is important to understand that unlike other public sector units, privatisation of the railway is not going to be an easy task for the government. To under stand this, let’s look at the larger context. The proposed scrapping of the railway budget is part of the reforms for which the NITI Ayog stands for. Budget is part of ‘Planned Development’. The government has to put money to run its various schemes. This rationale will apply to the railway’s as well. The railways operates independently and it has multiple linkages with rural and urban economy of India. Its earning is higher than any other ministry in the government, with the figure standing at Rs 1.68 lakh crore in 2015-16.

The department also provides employment to 13.2 lakh and being an employer in itself, needs its own financial management. Scrapping the railway budget makes railway dependent on the general capital support system of the government, which will also result in the department losing financial autonomy. The fiscal responsibility and budget management act and other regulatory mechanisms will then apply to the railways as well.

Representational image. ReutersRepresentational image. Reuters

Representational image. Reuters

But, the problem is that the railways cannot be treated as any other public sector companies in India. It is not only one of the largest employers; the railway owns the huge infrastructure and land. For this reasons, the NITI Aayog proposal is not considered as a well thought out plan to improve the efficiency of the railway.

If one looks closely, it is apparent that NITI Ayog has been after the Indian Railways since it is formed. The NITI Ayog’s report titled, Reviewing the Impact of “Social Service Obligations” by the Indian Railways offers a clear indication of the direction in which NITI Ayog wants to look at the future course of the railways. The report has noted that the Railways has consistently incurred losses in its passenger transport business.

Why the Railways matters to economy?

The railways is critical since its services complement many other sectors and the broader economy. It commutes workers with less charge, transport of goods and food materials. Hence, lack of functional or capital autonomy would affect other sectors too which are dependent on the railways. Scrapping rail budget restricts the organisation’s capacity and finally leads to the privatisation of services. The impact will not just be on the cost of travel, it will also affect the price of raw materials and food security of millions. NITI Ayog is not keen on the larger support system which the railways offers to the economy and it sees only the government spending on the railways and not even the warnings.

In the past too, there have been opinions that the “social service” orientation of the passenger transport business has impacted the railways’ flexibility to operate on commercial principles. This NITI Aayog report notes that guiding the railways with the social service obligations has, in some manner, resulted in pushing the railways into losses. The question is how to assess the railways contribution to the economy and society? Beyond numbers what one should look at is how crucial is the department for the Indian economy, primarily due to its connectivity and affordability. It is the cheapest travel and freight option for the millions of Indians and contributes  about one percent to the GDP.

According to press note by the Railway Board chairman the railways accounts for 6 percent of the total employment in the organised sector directly and an additional 2.5 percent indirectly through its dependent organisations. It has invested significantly in health, education, housing and sanitation. With its vast network of schools and investment in training, the railways plays an important role in human resource development. Its nearly 63,000 route kilometres fulfills the country’s transport needs, particularly, in respect of long distance transport of goods.

Freight trains carry nearly 1.2 million tonnes of originating goods and 7,500 passenger trains carry nearly 12 million passengers every day. Besides, it plays a major role in controlling the price of essential commodities country. The railways, coupled with Food Corporation of India (FCI), is the best supply chain management in India. FCI operates only because of railways ensure low cost transport.

The Indian Railways has a history of its own. Bogart and Chaudhary (2013) explains in their paper titled ‘Engines of Growth: The Productivity Advance of Indian Railways, 1874-1912,’ that its growth rate during 1913 was larger than both developed and developing economies put together. One can attribute this to the colonial government’s interest but it indicates its importance even during the colonial period.

The proposed idea of scrapping the railway budget has to be analysed in this context.

The author works with the Tata Institute of Social Sciences.

Cabinet to consider Budget presentation on February 1

New Delhi – Breaking from tradition, the general budget of the union government is likely to be presented on February 1 instead of the last day of the month, as part of an overhaul that would also scrap the practice of a separate railway budget.

The proposal for advancing of the budget and the merger of the railway budget with it will be considered on Wednesday at a meeting of the union Cabinet to be chaired by prime minister Narendra Modi, who has been pushing for it.



The cabinet will also consider the proposal for doing away with the distinction between plan and non-plan expenditure.

According to the proposal, the entire Budget-making exercise will be advanced by 3-4 weeks so as to complete the legislative part of financial business before 1 April, the start of a financial year.

Sources said the government plans to convene the Budget Session of Parliament before 25 January 2017, present the pre-Budget Economic Survey a day or two before the finance minister reads out the Budget on 1 February.

Towards that end, the advance estimates for GDP will now be made on 7 January instead of 7 February and mid-year review of expenditure by various ministries is proposed to be completed by November 15.

The idea, sources said, is to get the Budget passed by Parliament along with Appropriation Bill and the Finance Bill before 24 March as this would ensure implementation of the Budget proposals from April 1.

According to the proposal moved by the ministry of finance, Parliament would take a three-week break — from February 10/15 to March 10/15 to complete ministerial or departmental scrutiny by various parliamentary committees.

Once the rail and general Budgets are merged and the date of presentation is advanced, there will be no requirement of separate Appropriation Bills as well as Vote on Account, as is the current practice.

Even after the separate railway budget is scrapped and its proposals clubbed in the general Budget, the Railways would continue to maintain its distinct entity status as a departmentally-run commercial undertaking as at present.

Also, the Railways would be allowed to retain its functional autonomy with delegation of financial power rules to continue as is the case now, sources said.

After the merger, the Railways would not have to pay dividend to the central government and its capital at charge would stand to be wiped off.

Like for other departments, the ministry of finance will provide gross budgetary support to the Railways for incurring its capital expenditure.

As regards removing the Plan and non-Plan classification of accounts, it has already been announced by Finance Minister Arun Jaitley in his Budget for 2016-17.

According to the proposal, to ensure better targeting of benefits, all concessional railway passes provided to various categories of concessionaires will be linked to Aadhar number.

Also, the Railway Convention Committee, which reviews the rate of dividend payable by the railways to the government, will be disbanded. Currently, the panel also suggests the level of appropriation to various funds of the railways such as depreciation reserve funds, development fund and pension

Sources said advancement of presentation of the budget by a month and completion of budget related legislative business before March 31 would pave the way for early completion of budget cycle and enable ministries and departments to ensure better planning and execution of schemes from the beginning of the financial year.

Accordingly, the budget calendar would be advanced by about 3 weeks from the current schedule of it starting from the last week of October.

Pre-budget consultations with various stakeholders are proposed to be completed by December 25. Ministries and departments would be asked to present their detailed Demand for Grants to Parliament by February 7, 2017.

After the merger of railway budget with the general budget, one single Appropriation Bill will be presented to Parliament for consideration and voting on or before 24 March 2017.

With the rollout of the goods and services tax (GST), the changes in excise and service tax, which are normally proposed in the general budget, would shift to the GST Council and hence, there would be less onerous Finance Bill for Parliament to debate, sources said.

FTIL promoter Jignesh Shah arrested by CBI in MCX-SX licence case on charges of cheating

New Delhi: CBI on Tuesday arrested promoter of FTIL and commodity bourse MCX Jignesh Shah in a case of alleged cheating and suppression of facts in getting SEBI extension to MCX-SX to continue as a private stock exchange in violation of norms.

“The Central Bureau of Investigation has today arrested a promoter of two private companies and conducted searches at nine places in Mumbai, including the residence and office premises of the said promoter of Mumbai-based two private companies,” said CBI spokesperson R K Gaur on Tuesday.

Jigensh Shah. ReutersJigensh Shah. Reuters

Jigensh Shah. Reuters

The move came after CBI searches at nine locations, including the premises of Shah, FTIL, MCX, senior SEBI officials — Executive Director Muralidhar Rao, DGM Rajesh Dangeti and AGM Vishakha More — and a former Executive Director of SEBI, J N Gupta, in connection with the case registered two years ago, the sources said.

MCX-SX had started functioning as a stock exchange in 2013 after a long legal battle with SEBI.

Meanwhile, 63 moons (formerly known as FTIL), said in a statement, “Pursuant to the applicable regulations of SEBI (LODR), Regulations 2015, please be informed that Central Bureau of Investigation, Economic Offence Wing, Mumbai, is conducting search in connection with FIR … relating to
recognition granted by SEBI to MCX-SX (now Metropolitan Stock Exchange of India Limited).”

MCX also gave a statement to BSE, saying the CBI search is going on in respect of recognition granted by SEBI to Metropolitan Stock Exchange of India Limited (formerly known as MCX Stock Exchange Limited) for starting its stock exchange in trading in currency and other segments in respect of case
no. RC 9/E/2014″.

CBI had filed the FIR in the case under IPC sections related to criminal conspiracy and cheating besides provisions of Prevention of Corruption Act for alleged abuse of official position.

The agency had alleged that the promoters of MCX-SX had entered into a buy back arrangement with a nationalised bank in violation of Securities Contract Regulation Act, 1956 and Securities Contract (Regulation) (Manner of Increasing and Maintaining Public Shareholdings in Recognised Stock
Exchanges) Regulation, 2006.

CBI had alleged that Shah, in connivance with SEBI officials, deliberately suppressed this material fact while applying for extension of recognition of the stock exchange, to conduct trade in currency derivatives, and fraudulently obtained the extension of recognition of the exchange in the
year 2009 by cheating SEBI.

The agency further alleged that the SEBI officials deliberately did not issue notice to the stock exchange for cancellation of its recognition in the currency derivatives, when SEBI had already rejected request of the same stock exchange for trading in other segments.

Gaur said incriminating documents, including transfer of shares by private companies, FDR, purchase of assets, etc were recovered during searches which are being scrutinised for further investigation.

He said the case was registered on the allegations of connivance of the SEBI officials with private company/stock exchange (MCX-SX) of Mumbai in fraudulently allowing renewal of recognition of said company/stock exchange to conduct trade in currency derivatives in 2009-2010.

The SEBI allegedly rejected the request of private company/stock exchange for trading in other segments in 2010, but renewed the registration granted to said company/stock exchange even though it was not compliant to SEBI MIMPS Regulations.

In a statement, FTIL said the CBI Mumbai has taken Jignesh Shah, Promoter & Chairman Emeritus of 63 Moons Technologies Limited (formerly, Financial Technologies (India) Ltd) into custody relating to investigation in the matter of recognition granted by SEBI to MCX-SX.

Urjit Patel as RBI chief: Why Subramanian Swamy is forced to befriend PM Modi’s pick

Subramanian Swamy and his 3-million strong Twitter army seem to have made peace with the Reserve Bank of India (RBI) reckoning a friend, not an adversary, in Raghuram Rajan’s successor Urjit Patel. The Twitter exchanges between the maverick BJP MP and his supporters/ followers suggest that Swamy is in approval of Patel’s appointment. This proves that Swamy’s issue with Rajan (Swamy ran a campaign against Rajan to oust him) was more on account of the fact that he was a UPA-appointee, and mainly because of that, rather than differences on the governor’s interest rate policies.

New RBI chief Urjit PatelNew RBI chief Urjit Patel

New RBI chief Urjit Patel

After the Narendra Modi government announced Patel as Rajan’s successor, Swamy said it would be ‘idiotic’ to criticise Patel. Swamy finds Patel  ‘desi’ enough despite he being born in a foreign country (Kenya), assignments with foreign organisations and his stints with some of the prominent corporate houses in India and abroad (Reliance Industries, Boston Consulting Group, IDFC). Patel, according to Swamy, is unlike ‘mentally not fully Indian’ Rajan who was born here but lost his Indian-ness eventually when he continued to be a US green card holder.

The interesting fact is that Swamy has even better reasons to target Patel if high interest rates are the point of contention. This is because it was Patel’s proposal that laid the foundation of Rajan’s inflation battle in 2013-14.

The central bank began focussing on CPI (consumer price inflation) as the core price indicator for the purpose of monetary policy formulation and kept the interest rates high and unchanged till January, 2015 ignoring the loud noises from the pro-growth lobby of economists, industrialists and politicians. Even after that, a significant reason why the central bank went slow in reducing rates (it cut rates by a total 150 basis points since then) was the caution exercised by the central bank’s monetary policy team on the inflation front. Here again, Patel, the deputy governor in charge of monetary policy played a crucial role to form that assessment.

The central bank’s inflation target with a 4 percent (plus or minus 2 percent) in the medium term was later duly endorsed by the government. Unless ‘RBI governor’ Patel drastically changes his policy stance so far, we would see a more hawkish central bank than Rajan in the days ahead. Future interest rate cuts will be a rarity then till the time the inflation genie is bottled and sealed forever. That would mean Swamy’s major problem with Rajan (wrecking the Indian economy with high interest rates and causing unemployment) apply equally to Patel also. But, Swamy is fine with that. Why?

It’s simple politics. If Swamy launches a missile against a Modi-appointed RBI governor candidate, it will most certainly take the shape of a lethal boomerang that can shake his position in the party circles further and affect his future prospects in the government significantly. Already, Swamy’s experience in messing with NDA-appointees in crucial posts (chief economic advisor Arvind Subramanian and economic affairs secretary Shakti Kanta Das) wasn’t a pleasant one. At the very beginning itself, Swamy was restrained by his arch rival the Finance Minister Arun Jaitely and top brass in the BJP forcing the economist-turned-politician-turned Hinduvta icon to significantly soften his stance on both Subramanian and Das.  Swamy wasn’t happy with this but had to fall in line. On Sunday, the MP launched a fresh attack on CEA saying “Arvind S called Namo a mediocre leader, efficient in riots & asked US to grill India in WTO for drug cos mkt access, is CEA! Tolerance!! (Sic).”

Once can link Swamy’s public attacks and the subsequent embarrassment caused to the government to him being sidelined during the recent cabinet reshuffle despite having decades of experience in the areas of finance, commerce and academia. Swamy would be shooting himself in the foot if he targets Patel. Hence it isn’t hard to figure out the origin of the white flag Swamy is waving towards Patel.

For the Modi government, Patel is the safest bet at this point. The deputy governor’s elevation to the RBI governor’s post has been welcomed by economists and industry patrons like NR Narayana Murthy. A soft-spoken, hardworking individual, who wouldn’t bother to talk on issues beyond his pay grade, is precisely what this government wanted in a RBI governor.

By appointing Patel, the Centre has smartly hedged a slew of potential problems of discontinuity in the central bank’s policy course a new governor may have faced, issue of preparedness when huge foreign currency deposit redemptions are due in the next few months, likely volatility in the international markets if Brexit, China and US conditions turn bad for emerging markets and, most importantly, the criticism of not having a credible and internationally accepted face to succeed the ‘rock star’ economist Raghuram Rajan.

Some have praised Patel’s past stints with private organisations and proximity to Modi. But no one can dispute Patel’s commitment after he took over his job at the RBI and his impressive academic credentials — not even his enemies.

Patel has been around in India in various roles for one-and-a-half decades and has gained an image of a hardworking, visionary economist who gives his best to his job. In this context, any attack from Swamy against Patel would have been self-destructing for the BJP leader.

Seen in this perspective, Swamy’s instant approval of PM Modi’s pick is least surprising.

(Disclosure: Reliance Industries owns Network18 that runs Firstpost.)

Tourism can support 46 mn jobs in India by 2025, says US ambassador Richard Verma

New Delhi: Travel and tourism sector in India has the potential to grow much faster and support 46 million jobs by 2025, provided the right investments and policies continue to be implemented, US Ambassador Richard Verma said on Wednesday.


Goa tourism. Reuters

According to the World Travel and Tourism Council (WTTC), the travel and tourism sector contributed USD 120 billion or 6.3 per cent to the country’s GDP, which supported approximately 37 million jobs in 2015.

“If the right investments are made, tourism has the potential to support 46 million jobs in India by 2025,” Verma said. His remarks came while delivering the keynote address at a conference organised by Indo-American Chamber of Commerce (IACC) on the theme ‘Travel and Tourism as a means to achieve USD 500 billion trade between India and USA’.

“… India’s tourism industry is growing, but it has the potential to grow even faster if the right investments and policies continue to be implemented,” Verma said. One of the areas that will help increase this potential is “timely and efficient” air connectivity, which is vital to any strong tourism relationship, he added.

Highlighting the close ties between the two countries, Verma said, “In 2015, the US was India’s largest source of foreign tourists. Over 1.2 million American visitors came to India, accounting for 15 per cent of the total foreign travelers.”

On the other hand, the US last year welcomed more than one million Indian visitors, who contributed nearly USD 11 billion to the American economy, he added.

Verma also welcomed the recently announced National Civil Aviation Policy and the 100 per cent FDI in the civil aviation sector. “We look forward to increasing passenger traffic between our countries as India takes steps to facilitate greater regional connectivity and implement growth enabling measures,” he said.

In 2015, for the first time in history, the US Mission in India processed more than 1 million non-immigrant visa applications in a single year, Verma noted.

Highlighting the role of tourism in economic development, NITI Aayog CEO Amitabh Kant said, “Tourism is very, very critical for India because India needs to create more jobs and there is no other sector which has multiplier effect of creating jobs.”

The tourism and travel sector has huge potential to grow if the country further opens up the civil aviation sector, improves civic governance, enhances communication strategy and focusses on consistency of policies, capacity building and community participation, he added.

RBI governor: Why Arundhati Bhattacharya may not be a good choice

It is now an accepted fact that Raghuram Rajan decided not to seek extension at the Reserve Bank of India (RBI) top job because he could not live up to the expectations of the government besides the differences on the way he conducted monetary policy. All holders of the key positions in the government are supposed to toe the government line without without questioning.

Raghuram Rajan and Arundhati BhattacharyaRaghuram Rajan and Arundhati Bhattacharya

Raghuram Rajan and Arundhati Bhattacharya

Rajan clearly did not fit the bill.

An IIT, IIM and MIT alumnus, a former chief economist at the IMF and a professor at the prestigious Booth School in Chicago University, could not be expected to behave like Pahlaj Nihalanis or Gajendra Chauhans who have called themselves self-professed sycophants of the prime minister. Rajan’s persona, his international reputation and powerful articulation as a public intellectual only added to his halo and increasingly pit him at odds with the government. So Rajan had to go.

There is a lot of speculation now about who would be a pliant successor to Rajan. The government sources have revealed to the media some names – names of economists, bureaucrats and even some bankers as prospective Rajan successor.

Any of them could eventually make it; it would be, however, truly a sad day if someone who has messed around with thousands of crores of taxpayers’ money as a top banker and is now seeking to institutionalize the process by creating a ‘bad bank’ is rewarded with the job of the regulator of the banking industry.

Let us not mince words.

Just Ponder over the name of Arundhati Bhattacharya, the chairperson and managing director of the State Bank of India (SBI), India’s biggest public sector bank. It is true Bhattacharya made waves when she broke the glass ceiling of a male bastion and occupied the top job of this public sector behemoth.

But then look at the state of affairs at the State Bank of India which she has served for more than three decades in various managerial positions before ascending to the top job.

First, let us look at the non-performing assets (NPAs) – the current buzz of the banking sector. The SBI has written off Rs 41,640 crore in the last 10 years – public money virtually going down the drain, though the bank maintains the fig leaf that even as it is cleaning up its account books, it would continue its efforts to recover the money over the years.

It is left to one’s imagination as to what proportion of the lost money which stood as an eye sore in the account books for decades (but could not be salvaged) would be recovered when the bank has removed it from the account books to present a rosy picture about its profitability.

Bhattacharya has been hailed as a doer who turned around the fortunes of the SBI as its helms-woman – she made it to the Forbes’ coveted list of women leaders who have transformed the enterprises they led.

Let us take a look at the bad loan management during Bhattacharya’s tenure so far. In the last three years, she has been at the top job at the SBI, the write-offs at the bank have grown at a faster pace. In 2014-15, whereas 14 other public sector banks together wrote off Rs 8,883 crore of bad loan, the SBI alone cleaned up Rs 15,509 crore of public money from its accounts as lost. Mind you, in 2011-12, the SBI had written off just Rs 982 crore.

Clearly, Bhattacharya proved to be a past master in dressing up the bank account – to make it look honourable. Not surprising that she won plaudits when she declared that the bank’s profit had soared under her dynamic leadership. To be sure, SBI’s case should be seen in the context of RBI’s prodding to clean up bank balance sheets. Also, in relation to other larger PSB banks, SBI has done well in terms of absorbing bad loan shocks and maintaining profitability.

When information was sought under an RTI application as to who allowed such large-scale write-offs in 2014-15, the bank only responded that the discretionary power was vested in a committee but refused to divulge the names of the members of the committee.

Bhattacharya successfully maintained the impression of a hands-on top banker – but this impression was just a charade. It was stupefying how many academically trained economists endorsed this charade. Of course, some of her shenanigans were exposed when Raghuram Rajan asked the banks to make Asset Quality Review and make provisions for their distressed assets. All window-dressing fell apart – SBI’s profitability dipped significantly.

SBI’s portfolio quality in December 2015 had declined with gross NPA at 5.1 percent of gross advances as against 4.25 percent a year ago (in December 2014). In absolute terms, the gross NPA stood at about Rs 73,000 crore as against Rs 62,000 crore during the same period. However, in March 2016 quarter, gross NPA jumped to a whopping 6.5 percent of the gross advances. Again, this should be seen in the context of industry NPAs.

But, the big question to Bhattacharya is the logic of proposing the creation of a ‘bad bank’ or an entity where the bad loans of the bank will be hived off to. This was an idea that failed from the Day 1.

The idea of creating a bad bank was to make SBI free of its debt burden and it could concentrate on core banking services. It wants to house Rs 1.37 lakh crore of NPA or 9 per cent of total advances in the Bad Bank. As per the larger contours of this plan, as and when further loans go bad, that would be transferred to this Bad Bank so that bankers would continue to lend recklessly without any personal responsibility; and lakhs of crores of public money would continue to be siphoned off, without a finger raised at the lenders and receivers of the booty.

This was clearly a bad idea since PSBs lack the expertise to revive bad loan accounts especially in an economic downturn.

If Bhattacharya is catapulted to the position of the chief regulator, she would be in a position to transform the Bad Bank idea into a reality. Bankers and business class will, therefore, have reasons to applaud her elevation; and, of course, the taxpayer will continue to pick up the tab for this extended session of merry-making.

But, the bottomline is that this may not be a good news for the banking system in the long term. One could question Bhattacharya’s candidature for the RBI governor post for this single reason.

FDI reform: Why single brand retail may not see a single dollar of fresh money

The devil has always been in the detail. And it was no different in the case of liberal FDI norms, which the government announced with much fanfare across nine sectors last week.

A government press release promised the moon that Monday afternoon but now, when the changes have been notified, the picture does not seem quite as rosy. The notified changes fall short of what was actually promised.

For India’s airlines, initial euphoria over 100% foreign investment permission has been tempered by the revelation that such airlines may not be able to fly overseas at all. Basically, the reforms at least for airline ownership have been merely on paper. Now, it seems the single brand retail reform is also being panned as experts question several clauses in the explanatory Press Note 5, which notified the new FDI regime over the weekend.


The changes notified by the govt fall short of what was promised

For one, though the government seems confident of its meaning, the industry has largely been left confused over what exactly is meant by “state of the art / cutting edge technology” companies.

“There is no definition of state-of-the-art/cutting edge technology. These terms anyway cannot be defined, leaving any such proposals for investment from foreign players subject to different interpretations,” says Arvind Singhal of Technopak.

This means opening up single brand retail store by Apple, for example, may not happen despite the new FDI norms. Lack of clarity on simple terms which are crucial to avail relaxed sourcing norms, could be the undoing of this policy.

Kartick Maheshwari, Partner at Khaitan & Co, points out that the press release which was issued by the government on June 20 and the Press Note which notified these changes later give out different interpretations.

“There is no 3-year blanket waiver from local sourcing norms (as promised in Monday’s press release). The sourcing exemption for single brand retailers whose product line-up is ‘state of the art / cutting edge technology’ and where local sourcing is not possible has been reflected as 3 years (not 5 years as promised in the press release). As such, the press note undoes the significant relaxations announced for this sector by the Union Government.”

He says the implementation of the initial announcement needs to be revisited or there will be little improvement in investments in the single brand retail sector. The confusion over whether the earlier, mandatory local sourcing for single brand retail firms has been relaxed for all, those which fall under the cutting-edge/state-of-the-art category only or none prevails. Doubts also remain over the extent of this exemption.

Not just definition of which brands fall under these relaxed norms, the interpretation of how relaxed the norms are also vary. Anil Talreja, Partner at Deloitte in India says a definition of what is state-of-the-art/cutting edge is there in the Press Note. He also interprets the note to mean that such companies will now be exempt from 30% local sourcing norms for three years after they set up their first store. And they can subsequently comply with this norm for the next five years by sticking to it through cumulative sourcing instead of complying with an annual sourcing amount.

“The government has recognised difficulties being faced by foreign investors due to sourcing requirements… This is not a big bang change though. The government will have to see the effects of these baby steps before making further changes,” he said.

A third point which has created confusion among the industry watchers is about total opening up of the food retail sector on which multiple restrictions on multi-brand retail also apply.

A BigBasket or any other food retailer also sells FMCG, other non-food products. To get FDI, what should such retailers do now?

“While 100% FDI is permitted in food products sector, most of the retailers trading food products also sell non-food household items; thus leading to challenges in implementation,” said Subrata Ray and Kinjal Shah of rating agency ICRA noted this in their report.

Non-food retail entails a host of conditions for FDI which include retailing only in one million-plus cities, mandatory investment size, 30% sourcing from micros and SMEs etc. To bypass these restrictions, will food retailers then separate their food and non-food businesses, set up separate arms and further complicate matters?

One industry expert pointed out that with these confused signals, not a single dollar of foreign investment may actually arrive in India’s single brand retail stores.

According to an analysis in the Business Standard, the sectors that saw liberalisation in FDI last week account for a small share of overall FDI inflows into India.

Trading (including retail) and pharmaceuticals together account for just 4% share of total overseas equity inflows in the last 16 years. With the complete dissonance between what the government promises and what it delivers, the share of retail trade in overall FDI inflow is unlikely to rise anytime soon.

Nokia elevates Sanjay Malik to lead its India business

New Delhi: Nokia on Friday announced the elevation of Sanjay Malik as the new Head of India market, effective from August 1. He takes over from Sandeep Girotra, who will oversee the Asia-Pacific and Japan markets.



“In his new role, Sanjay will lead customer operations, drive the business growth strategy and superior customer engagement services for the India market. He will be based in Gurgaon,” a company statement said.

Malik is currently Head of Network Implementation at Nokia Global Services and is credited with efficiently driving growth and delivering strong performance both in terms of revenue and operational efficiency.

Girotra had been heading the Indian market since 2011.

Spectrum bids may not surpass Rs 80,000 cr due to stressed balance sheet: HSBC

New Delhi: Bids for the upcoming spectrum auction may not exceed Rs 80,000 crore due to stressed balancesheet of telecom operators and lack of ecosystem to encash premium airwaves in 700 Mhz band, an analysis by HSBC
Global Research shows.



“Our initial analysis suggests that total proceeds from spectrum auction are unlikely to exceed USD 10-12 billion  (about Rs 80,000 crore) and we believe a lot of spectrum might remain unsold in 700, 2300, 2500 MHz bands. We see good demand for 1800 MHz, selective demand for 2100 and 700 Mhz bands,” the report said.

In the last auction, the government had received bids worth Rs 1.1 lakh crore. The telecom sector is staring at a debt load of close to Rs 3 lakh crore.

Leading operators have sought deferring the sale of 700 MHz spectrum, saying ecosystem for providing services in this band is not developed and would lead to underutilisation of the spectrum for several years, blocking industry’s funds.

“Further ecosystem for 700 MHz band from an Indian context could be at least 3-4 years away. To sum up, we see limited and selective demand for spectrum in 700 MHz band,” it noted.

The government plans to raise USD 83 billion (about Rs 5.56 lakh crore) from the upcoming spectrum auction, which will be potentially 2.8 times current revenues from the sector with an average net and debt Ebitda ratio of 4 times, the report said.

“Total spectrum to be sold in the upcoming auction exceeds 2,200 MHz, which is significantly above historical amounts sold and we don’t see a case for it,” it added.

The Cabinet on Wednesday approved the mega spectrum auction plan, in which airwaves worth Rs 5.66 lakh crore for mobile services will be put up for auction.

In the bidding, all airwaves available with the government for mobile services at present will be auctioned. It includes airwave frequencies in 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz.

Trai had recommended a pan-India reserve price of Rs 11,485 crore for 700 MHz, Rs 5,819 crore for 800 MHz, Rs 3,341 crore for 900 MHz, Rs 2,873 crore for 1800 MHz, Rs 3,746 crore for 2100 MHz, and Rs 817 crore each for 2300 MHz and 2500 MHz bands.

The premium 700 Mhz band worth Rs 4 lakh crore is to be auctioned at a reserve or base price of Rs 11,485 crore per
Mhz. The cost of delivering mobile services in this band is estimated to be around 70 per cent lower than 2100 Mhz band, which is used for providing 3G services.

“700 MHz spectrum in high subscriber density/large coverage markets like Bihar, UP, Rajasthan and West Bengal is
cheaper than 900 MHz and incumbent telcos have the option to add 700 MHz spectrum selectively,” the report said.

Wanted: An independent RBI chief to champion reforms

As India seeks a new Reserve Bank of India (RBI) chief, many investors are pushing a clear message: the successor to Raghuram Rajan may lack his gravitas, but must defend the Reserve Bank of India’s autonomy at a critical juncture in its history.

RBI governor Raghuram Rajan. AP

RBI governor Raghuram Rajan. AP

Under Rajan, who unexpectedly announced on Saturday he would step down when his tenure ends in September, the RBI has started to institutionalise its decision-making and reduce the power of the governor, including through the introduction of an inflation target that will guide monetary policy decisions.

But Rajan’s announcement, in a letter to staff, has spread confusion and stunned RBI and government officials.

It also follows strident criticism of Rajan from right-wing members of Prime Minister Narendra Modi‘s Bharatiya Janata Party, prompting investors to ask whether politics played a role in his departure.

That is putting the question of the RBI’s autonomy front and centre, especially as Rajan may not get to see through the next plank of his reform plan – the creation of a monetary policy committee to set interest rates, which was passed into law last month but whose final composition has yet to be announced.

The RBI is not statutorily independent from the government but has long enjoyed wide latitude.

“The choice of successor must be based on finding a leader that will continue the new monetary project, targeting lower inflation,” said the head of portfolio management for emerging Asia at PIMCO, Luke Spajic, who sees finding the right mix of experience, deft thought leadership and personal charisma that satisfies all camps as a daunting challenge.

India can ill afford to pick wrong or drag its feet on a replacement. It has attracted more than $60 billion in foreign portfolio investments since Rajan’s appointment in September 2013 and some investors could start getting skittish.

“Investors abhor vacuums, especially at central banks,” said Spajic.

Policy continuity

Deputy Governor Urjit Patel is currently seen as a top contender, a decision that would likely mollify investors because he penned the report that laid out recommendations for the new monetary policy framework adopted by Rajan.

The final decision is expected to be taken by Modi himself, and a source close to the Prime Minister said an independent successor would be picked.

“He (Modi) does not want to give the job to a conservative economist, and clearly wants an independent thinker. The new governor will not be a puppet in the hands of the government,” he told Reuters.

Nonetheless, questions linger as India transitions to letting a new monetary policy committee set rates.

Under the current six-member structure agreed by Rajan and the government and written into law, three members would come from the RBI, including the Governor. The other three will be nominated by a government panel although the Governor would have a say in the selection.

However, the Governor would have the tie-casting vote in monetary policy decisions, meaning Rajan’s successor would face more pulls and pressures.

Still, a senior policy maker who works closely with Rajan said all RBI governors have ultimately proven to be independent as they conform to an institution that has long taken pride in its autonomy.

“It is the chair (of the RBI Governor) which is the prime driver, not who employs you,” he said.

Companies asked to take up cleanliness drive as ‘Swachhata Pakhwada’ by Corporate Affairs Ministry

Taking forward its agenda for Swachh Bharat, government has asked corporates to carry out cleanliness drive for a fortnight as well as take pledge in this regard.Corporate Affairs Ministry, which is implementing the Companies Act, has asked firms and other stakeholders to carry out activities related to cleanliness for a fortnight as part of the ‘Swachhata Pakhwada’. Officials associated with the initiative said it is a voluntary exercise aimed at promoting cleanliness.<!– /11440465/Dna_Article_Middle_300x250_BTF –>’Swachhata Pakhwada’, started on June 16, would be on till June 30. Each day, the Ministry is suggesting a particular activity like ‘always keep your table clean’ to ensure cleanliness. The three apex institutes of chartered accountants, cost accountants and company secretaries along with industry bodies — FICCI, CII and Assocham — are part of the ‘Swachhata Pakhwada’. The Indian Institute of Corporate Affairs and National Foundation for Corporate Governance (NFCG) have also joined hands with the Ministry for the initiative.
ALSO READ Swachh Bharat Mission: Govt plans to come up with 100 model ‘Swachh Tourist Destinations”Swachhata Pakhwada’ is based on the theme ‘corporate volunteering by private organisations and corporate entities’ and coincides with the United Nations Public Service Day on June 23. Interestingly, users now have to take the Swachh Bharat pledge online to access the Corporate Affairs Ministry website. ‘I will devote 100 hours per year that is two hours per week to voluntary work for cleanliness’ and ‘I will neither litter nor let others litter’ are part of the pledge.In 2014-15, companies shelled out more than Rs 42 crore towards ‘Swachh Bharat Kosh’ as part of their corporate social responsibility (CSR) activities. The funds were used for achieving the objective of improving cleanliness levels in rural and urban areas, including schools.
ALSO READ After Swachh Bharat, PM Modi’s ‘Make In India’ initiative faces numerous challenges: BMI ResearchUnder the new companies law, certain class of entities are required to spent at least 2% of their three-year annual average net profit towards CSR activities. As many as 460 companies spent a little over Rs 6,337 crore for CSR activities in 2014-15. This included 51 PSUs which spent Rs 2,386.60 crore.Swachh Bharat is a pet project of the Narendra Modi-led government, which has been making various efforts to improve cleanliness as well as sensitise people about it.

Here are a few hurdles to be taken care of for smooth rollout of GST

The country may have taken a step closer to the speedy implementation of the goods and services tax (GST), with the state finance ministers coming to a broad agreement on most contentious issues, but will it also mean a smooth implementation of GST?

The jury is still out on that one, since not only is the revenue neutral rate (RNR) (the rate at which states will not lose revenue on implementation of GST) still to be decided upon, but the draft model GST law is also yet to get the green signal from all states. The draft was released in the public domain by the finance ministry on Tuesday. Both these matters will get taken up at the next meeting of the empowered committee of chief ministers scheduled for late July.


Industry will seek clarity on whether there will be single or dual administration

The draft law certainly provides clarity on a lot of issues – the threshold for firms to register for GST, the point of taxation, whether and how e-commerce transactions will be taxed, processes, penalties and the like. This draft, says Pratik P Jain, leader, indirect tax, PwC India, is a significant improvement over an earlier one (this, however, was not in the public domain).

Among the positive points, according to Jain, is the fact that all intangibles, including software, will be considered a service. This, he says, will put an end to the goods versus service debate. The fact that works contracts will be treated as service will, he notes, simplify things for the infrastructure sector.

But there may not be consensus on all the issues in the latest draft. It may get revised based not just on what states have to say but also feedback from industry.

Industry will certainly be seeking further clarity on one issue – whether there will be a single or dual administration. In the debate on GST, there has been a general perception that transactions below Rs 1.5 crore will be audited by the state, but there has been a question mark over whether transactions above that will be audited only by the Centre or by both the Centre and the states. That question mark continues. The dual control will also give rise to adjudication issues.

R. Kavita Rao, professor at NIPFP who has been closely involved with the GST design process, has repeatedly pointed out the need for clarity on this. “From the taxpayer’s point of view, this is an important issue; this will determine whether GST will succeed or not,” a senior official of the Federation of Indian Chambers of Commerce and Industry (Ficci) said.

There’s something that industry is certainly not happy about – the threshold level of Rs 10 lakh turnover (Rs 5 lakh for the northeastern states and Sikkim) to come into the GST net; it had been rooting for a threshold of Rs 25 lakh, though some traders bodies had been pressing for Rs 50 lakh. The Ficci official points out that the Rs 25 lakh turnover threshold would have covered 7 crore units; while the Rs 10 lakh threshold will cover an additional 10 crore units. A low threshold will mean a lot of smaller firms will be burdened with huge compliance costs, which they may not be capable of bearing, he argues.

M. Govind Rao, member of the Fourteenth Finance Commission and former director of the National Institute of Public Finance and Policy (NIPFP), feels this should not be a major source of opposition. In a large number of states, the threshold for coming into the VAT net is Rs 10 lakh turnover (it is lower in some states and much higher in others); the threshold for service tax is also Rs 10 lakh.

The draft law makes up for the low threshold, Rao points out, by allowing a kind of presumptive taxation (called composition levy) – firms with a turnover of up to Rs 50 lakh (and no inter-state supplies) have the option of paying 1 percent of turnover in lieu of GST. But they cannot claim input credit on this. This will vastly bring down the paperwork they will need to do.

The senior Ficci official points out that 80 percent of tax comes from 15 per cent of units and the government is not likely to gain huge revenues by casting the net wider; it will likely increase its own administrative costs as well as increase the burden on smaller firms. It would be best, therefore, for the government to focus on larger firms.

Equally crucial to the success of GST will be the rate that is fixed. Chief economic adviser Arvind Subramaniam is scheduled to make a presentation on this to the empowered committee in July. It will be interesting to see if he sticks to the recommendations in his earlier committee report last year. That report had suggested a standard rate of 17-18 per cent, a low rate of 12 per cent for essential goods and 40 per cent for luxury goods. The assumptions behind those numbers had been questioned by experts, as this report pointed out.

The committee report had also said advised against having a band of rates, which states have been rooting for. Public finance experts have argued in favour of a band, but industry is not keen on this. A band, the Ficci official points out, will be a nightmare for assesses.

All eyes now will be on the July meeting of the empowered committee which will go into these issues. With the passage of the Constitution amendment Bill paving the way for GST more or less given (unless the Congress proves more obdurate than expected), how these issues are resolved will determine how soon and how smoothly GST will roll out.

Special status under article 370 our strength, says Mehbooba Mufti

Putting all speculations to rest, Jammu and Kashmir chief minister Mehbooba Mufti on Thursday said nobody will be allowed to tamper with the special status of the state enshrined in the Indian constitution under article 370.”Nobody will be allowed to fiddle with J&K’s Special Status. Article-370 is our strength and honour. We enter this august House by swearing on the State Constitution and it is empowering for all irrespective of the party groupings,” Mehbooba said while intervening during the reply of a question on New Industrial Policy in the Legislative Council.<!– /11440465/Dna_Article_Middle_300x250_BTF –>Mehbooba said new Industrial Policy is completely in tune with the Industrial Policy promulgated by the then chief minister, Sheikh Mohammad Abdullah in 1975.”Nobody should harbour any misconception that there is any threat to J&K’s special status by the industrial policy. We have decided to review the policy to remove any misconceptions in this regard,” she said.Under the special status enshrined in the Indian constitution under article 370, Jammu and Kashmir is the only state in the country which has a separate constitution, flag and penal code.Earlier in December last year Justice (retd) Hasnain Masoodi of Jammu and Kashmir high court had ruled that Article 370 enshrined in the Constitution of India cannot be abrogated, repealed or even amended, and observed that replacing post of ‘Sadar-e-Riyasat’ (president of state) by Governor (in 1965) was “not within the amending power of the state legislature”.Opposition parties have been gunning for the Mehbooba-led government for what they said was diluting the article 370 by introducing industrial policy which could pave way for non-state subjects to own land in the state.”Corporate houses like NHPC and various cellular companies operating in Jammu and Kashmir have been asked to adopt at least one ITI or polytechnic to train the local youth in specific trades so that they get employment locally. We want to partner with the industry to train people, certify them and offer them jobs,” Mehbooba said.

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