SEBI moots curbs on wilful defaulters

The Securities and Exchange Board of India (SEBI), on Monday, proposed to amend the SEBI Act for imposing restrictions on ‘wilful defaulters’ from accessing the capital market.

The proposed amendment suggests that no issuer would be allowed to make a public issue of equity and debt securities and non-convertible redeemable preference shares, “if the issuer, its promoter, group company or director of the issuer of such securities, is in the list of the wilful defaulters, published by the Reserve Bank of India (RBI).”

Wilful defaulters would also not be allowed to make public issue of debt securities and non-convertible redeemable preference shares if they are in default of payment of interest or repayment of principal amount in respect of debt instruments issued by them to the public, said the capital market regulator in a discussion paper published on Monday.

SEBI said to prevent access to the capital markets by the wilful defaulters, a copy of the list of wilful defaulters (non-suit filed accounts and suit filed accounts) are forwarded to SEBI by the RBI and the Credit Information Bureau (India) Ltd. (CIBIL).

However, it said that the existing listed companies/its promoter/group company/director of the issuer categorised as wilful defaulter may make a rights issue/private placement to qualified institutional buyers, with full disclosures in the offer document. Further, it recommended that listed companies/its promoter/group company/director of the issuer categorised as wilful defaulter should not be allowed to take control over other listed entity in accordance with SEBI (SAST) Regulations, 2011. “Existing listed companies/its promoter/group company/director of the issuer categorised as ‘wilful defaulter’ should be allowed to make counter offer in case of a hostile bid,” SEBI added.

SEBI requested the public to send their comments on these recommendations on or before January 23.

Source - The Hindu

Ordinance for mines auction gets nod

The Cabinet, on Monday, approved an ordinance for auction of iron ore and other minerals, yet again opting for the emergency route that was adopted for coal, insurance and land acquisition reforms.

“The Cabinet has approved promulgating an ordinance to auction iron ore and other minerals,” a government source said after the meeting of the Union Cabinet, chaired by the Prime Minister Narendra Modi here.

The ordinance would pave the way for introduction of competitive bidding for allocation of iron ore and other non-coal mines.

It will also enable creating District Mineral Funds for the welfare of the project-affected people.

The need for taking the ordinance route was felt as the government was finding it difficult to allocate mines, because the Mines Ministry could not table a Bill in the winter session of Parliament to amend the Mines and Minerals (Development and Regulation) Act, 1957.

Industry body Federation of Indian Mineral Industries, however, has been opposing the auction route, saying it would sound the ‘death knell’ for the industry, and might lead to cartelisation and waste.

While a draft Bill was put up on the Ministry’s website for public comments, the Mines and Minerals (Development and Regulation) (Amendment) Bill, 2014, could not be tabled during the session that ended last month. — PTI

Source - The Hindu

SC refuses to hear challenge to Rajasthan panchayat ordinance

Despite pleas that it infringes “grassroots democracy”, the Supreme Court on Monday refused to entertain a challenge against the Rajasthan Panchayati Raj (Second Amendment) Ordinance, 2014.

The ordinance, promulgated on December 20, 2014, prescribes minimum educational qualifications to contest in local body elections, and effectively keeps out illiterate persons from the democratic process.

In a brief hearing, a Bench led by Chief Justice of India H.L. Dattu asked the petitioners, led by social activist Aruna Roy, to approach the Rajasthan High Court and convince it of the urgency of the matter.

The last date for filing nominations for the panchayat polls is January 6. The first phase of the elections starts on January 16.

The ordinance stipulates that a member of a zila parishad or panchayat samiti should have acquired secondary education. While the panchayat sarpanch of a Scheduled area should have passed Class 5, his counterpart in Non-Scheduled areas should have cleared Class 8.

Appearing for various petitioners, senior advocates Raju Ramachandran, Anand Grover and Abhishek Manu Singhvi submitted that the ordinance was passed “strategically”, “knowing that the courts would be closed for vacations”.

“We are only telling you to please go to the High Court and then come back to us,” Chief Justice Dattu observed.

Ms. Roy’s petition argued that the ordinance is a “punitive and disentitling measure” in a State where the Right to Education has seen the worst implementation.

It argued that the ordinance violated the inclusive spirit of the 73rd and 74th Amendments and served as an “exit for illiterate people”.

Mr. Grover submitted that the 2001 Census showed 82.5 percent of the people above 20 years of age in rural Rajasthan did not have formal education beyond class 5 or primary level.

Source - The Hindu

‘We lost an independent voice with abolition of Plan panel’

Planning Commission was a moderator, says Pronob Sen

“In the abolition of the Planning Commission, we have lost an independent voice,” National Statistical Commission Chairman Pronob Sen has said.

“The Government works in silos and the [Planning] Commission was a moderator… In inter-ministerial disputes, the Commission stepped in as it had both sides of the picture,” he said in an exclusive interview to The Hindu .

“In its absence, the silos are complete.”

The Commission’s most important function was not allocations, but checks and balances, according to Dr. Sen. “If a ministry said something, the Commission could contradict… It was an independent voice,” he said.

Dr. Sen said the fear over empowering the Finance Ministry to take on the Commission’s role of funds allocation was that it “tends to be interested in finance and deficits, not development… Its primary role of managing finances on a day-to-day basis does not let it take long-term views.”

Source - The Hindu

[Ed] Can India catch up with China?

In India’s noisy political democracy, the problems are compounded by the existence of multiple political parties with no coherent approach to development
The average Indian was slightly better off than the average Chinese in the initial years after Indian independence. But China’s approach to development has varied markedly over the last 40 years and has been so successful that it now ranks as the second most important economy in the world. India has made good progress but is still substantially behind China.

In the first decade of this century, India’s growth reached a take off stage that prompted many people to ask when India would catch up with its neighbour. It was also thought that democratic India may even overtake China. Will that dream come true?

China and India, despite being such large countries, accounted for only 4.5 per cent and 4.2 per cent of global GDP in 1950 in Purchasing Power Parity (PPP$) terms. The ratio of China’s GDP to India’s was 1.18 in 1913 ($241 billion/$204 billion); in 1950 it was 1.08 ($239 billion/$222 billion). Estimates of per capita income made by Angus Maddison and Dharma Kumar suggest that India might have had a higher per capita income. However, there was not a marked difference in the level of human development.

Both countries, in the course of history, have feared foreign domination, have considered the state as the driver of growth and have suspected the private sector’s initiatives. For India, the problems were achieving unity in diversity and accommodating various languages and religions in a democratic set up. On the contrary, China’s hard state enabled it to pursue a single goal with determination and mobilise maximum resources to achieve its goals.

Growth in China
China experienced many problems in initiating industrialisation, but after some hitches, it switched to an all-round emphasis on heavy and light industries, and had a more successful resource mobilisation strategy than India did. As a result, Chinese manufacturing grew at 9.5 per cent, twice as much as India’s rate, from 1965-80. Also, China managed its agrarian reform better than India did.

On the whole, estimates by Richard Herd and Sean Dougherty suggest that China grew at a much faster rate than India did during 1950-79, and Chinese per capita GDP was more than twice the rate of India’s. This is largely due to higher growth in Chinese labour productivity and capital deepening. By 1978, the per capita income of China was estimated at $979; India’s at $966. China had caught up with India over the 30 years, but not dramatically surpassed it.

Few people in 1978 could have imagined the monumental economic progress that China would make because of the economic reforms pushed by Deng Xiaoping. The reforms stressed the principle of “each according to his work” rather than “each according to his need,” professionalism and efficient economic management at all levels and the gradual introduction of policy changes to avoid problems in implementation.

Deng transformed agriculture first and then took on the industrial sector. He opened up the latter to foreign capital while making room for the growth of village and local enterprises. Jiang Zemin, Hu Jintao and now Xi Jinping have continued to follow Deng’s principles, but with some adjustments. China’s economic growth was also made possible by a very large net inflow of foreign direct investment, a sign of confidence in the Chinese economy by outside investors. China is the leading nation in exports and the second largest economy in the world. The country’s per capita income more than quadrupled, ($5,720 equivalent to about PPP $13,000) and abject poverty was completely eliminated (though income inequality increased). China’s Human Development Index has also risen from .423 in 1980 to .719 in 2013, according to the United Nations Development Programme 2014.

Against China’s success, India’s achievement, though significant compared to what it was before independence, is modest. India also took tentative steps to modernise its economy in the early 1980s, but these petered out. Freed from the constraint of food grain availability thanks to the Green Revolution, India did not manage to apply to its industrial sector the lessons it learnt in its agricultural revolution — using foreign knowledge, relying on the private sector and deploying subsidies selectively. Instead, foreign borrowing was used to ease the consumption constraint in the public sector and to cushion loss-making public enterprises.

Indian policy underwent directional changes in 1991. Prime Minister Narasimha Rao ushered in reforms which were implemented well by his Finance Minister Manmohan Singh, who then became the second-longest serving Prime Minister of India. Indian economic growth accelerated during the period 1995-2008, but could not maintain the momentum due to political paralysis of policies that were necessary for economic growth. Gross national income per capita in 2013 was $1,550 and India’s HDI increased from 0.369 in 1980 to 0.586 in 2013.

Primary difference
The primary difference between the performance of the Indian and Chinese economy has been the faster growth of capital stock in China. With only a slight difference in the growth of employment, this translated into a more rapid growth of capital intensity. The growth of total factor productivity has also been faster in China. This appears to reflect a greater ease for labour to move out of agriculture into higher productivity sectors in China than in India. China has outdistanced India in every area of economic endeavour in the last 35 years, except in computer software industry and agricultural research.

Despite international border issues that still exist between India and China, the two countries are trying to create a cooperative relationship — China has become India’s largest trading partner in 2013, India’s trade deficit with China is about $38 billion, President Xi has offered $20 billion for investment in Indian infrastructure and other industries, and a 100-person delegation of Zhejiang province has signed MoUs with India totalling about $2.46 billion.

India will most probably overtake China as the most populous country in the world in 2030. China is better placed structurally than India for a good economic performance, but it is most likely to be much lower than its recent average performance of about 10 per cent a year. How much lower it would be would depend on its ability to maintain current labour productivity levels and the benefits likely to flow from its proposed trans-continental rail system and other transport-related activities. Troubles in China’s financial markets, a declining young and increasing older population as a proportion of the working age population, increasing wages in general and export industries in particular, costs associated with cleaning up serious environmental pollution, increasing competition from other countries in export industries using low-skill and semi-skill labour, lower savings rate and a possibly lower investment rate will have a negative effect on its growth.

India has an excellent chance of catching up with China if it can increase its labour force participation rate (particularly women), increase the average level of education, improve the quality of its labour force through special training programmes, reduce impediments to let foreign capital participate in its development process, design policies to cultivate a culture of entrepreneurship, and reduce corruption at all levels.

The problem in India has always been implementation. In a noisy political democracy, problems are compounded by the existence of multiple political parties with no coherent approach to development.

Prime Minister Modi, with his majority in Parliament, has an opportunity to reignite the engines of economic growth. Even if the Indian economy were to grow at 10 per cent a year, its GDP at 2011 PPP$ will reach only about 26 trillion in 2030; China can easily reach this by 2022. I don’t see India catching up with China in the next 25 years unless, of course, there is a massive failure of sorts in China.

(M.C. Madhavan is professor emeritus, Economics and Asian Studies, San Diego State University.)
China has outrun India in every area of economic endeavour in the last 35 years, except in computer software industry and agricultural research.

Source - The Hindu

[Ed] Resolving the nuclear liability deadlock

By putting in place a comprehensive, fair and pragmatic legislation on civil nuclear liability, there is no reason why India cannot reap the long-term benefits of civilian nuclear energy and resolve a prickly foreign policy issue

On January 26, Barack Obama will become the first U.S. President to attend India’s Republic Day celebrations. It will also mark nearly 10 years since the first announcement on the India-U.S. civil nuclear agreement. In contrast to those heady days when the promise of nuclear power meeting India’s gargantuan energy needs was in the air, the present situation is bleak. A target of installing 63 Gigawatts of nuclear capacity by 2032 has been reduced to 27.5 Gigawatts and none of the landmark deals envisaged has been struck. The Civil Liability for Nuclear Damage (CLND) Act, 2010 which contains a speedy compensation mechanism for victims of a nuclear accident has been deemed responsible for this deadlock. Specifically, provisions on recourse liability on suppliers (Section 17(b)) and concurrent, potentially unlimited liability under other laws (Section 46) have been viewed as major obstacles in operationalising nuclear energy in India and bilateral relations with key supplier countries.

A question of recourseUnder Section 17(b), a liable operator can recover compensation from suppliers of nuclear material in the event of a nuclear accident if the damage is caused by the provision of substandard services or patent or latent defects in equipment or material. This is contrary to the practice of recourse in international civil nuclear liability conventions, which channel liability exclusively to the operator. Specifically, it contradicts Article 10 of the Annex to the Convention on Supplementary Compensation for Nuclear Damage (CSC), an international treaty which India has signed.

“U.S. President Barack Obama’s visit is an opportunity to address misgivings over the nuclear liability law and to also meet foreign governments and the supplier community halfway on the issue.”
That Section 17(b) is contrary to the global norm is undeniable. However when the global norm itself is inequitable, there are justifiable reasons to depart from it. The inclusion of Section 17(b) recognises historical incidents such as the Bhopal gas tragedy in 1984 for which defective parts were partly responsible. The paltry compensation paid to the victims was facilitated by gaps in legislation and an extraordinarily recalcitrant state machinery. This is not a peculiarly Indian phenomenon — accidents such as Three Mile Island occurred partially due to lapses on the part of suppliers. More recently, forged quality certificates were detected for parts supplied to nuclear plants in South Korea. That Section 17(b) incentivises supplier safety and reduces the probability of a recurrence of such instances is equally undeniable.

A step too farIndia can retain Section 17(b) while ensuring compliance with its international legal obligations in two ways. First, the CSC allows countries to make reservations to certain provisions in treaties despite being signatories to them. India could make a reservation to Article 10 of the Annex to the CSC since it satisfies the requisite criteria for making a valid reservation under the Vienna Convention on the Law of Treaties, thereby excluding its application. Second, Article XV of the CSC implies that the rights and obligations of States under general rules of public international law are exempt from the application of the CSC. One such principle of international law is the “polluter pays principle” — applicable both to the state and private entities. The principle comes into operation via the mechanism through which compensation can be recovered from a polluting entity for the environmental harm it causes. Exercising either of these options will allow India to retain Section 17(b) without violating the international treaty regime.

However in pursuing the safety of supply, Section 17(b) goes too far in keeping liability for suppliers entirely open-ended. If liability on suppliers is unlimited in time and quantum, the possibility of getting adequate insurance cover will reduce. Even if such insurance is available, it could make nuclear energy economically unviable. To address this, Rule 24 of the CLND Rules dilutes the right of recourse conferred by Section 17(b) by limiting compensation payable by suppliers to a specified amount and for a specified time period. Both these are made standard terms of the contract entered into between the supplier and operator.

Though the end that Rule 24 seeks to achieve is justifiable, the means adopted are questionable. Rule 24 arguably violates Article 14 of the Constitution of India because there is no specific power in the CLND Act to limit liability in the manner that Rule 24 does. Further, the terms of the contract potentially dilute Section 17(b), which gives operators an untrammelled right to proceed against the supplier by way of recourse. It is a basic principle of law that a contract cannot violate the provision of a statute — if it does so, it is opposed to public policy. For these reasons, Rule 24 should be deleted. The limitation on time during which the supplier can be held liable should be inserted by means of a provision in the main Act. This will ensure that not just the end but also the means of limiting liability are legally tenable.

As far as the limitation on the amount is concerned, without Rule 24, the liability for each supplier potentially extends to the general liability cap of Rs.1,500 crore. If all suppliers have to be insured up to this value, insurance costs will be unnecessarily pyramided. To address this, countries with a history of nuclear power have in place mechanisms to provide for insurance coverage through international insurance pools where insurers, operators and states share the risks of an accident, providing access to a wide pool of compensation. There are about 26 such pools in existence, which also provide reinsurance to each other. Insurance pools typically require members to be signatories to an international convention (such as CSC), and to allow reasonable inspections of their nuclear installations.

While provisions for the creation of a domestic insurance pool for operators exist in Sections 7 and 8 of the Act and Rule 3, they need to be made explicit and amended to include suppliers in order to prevent the pyramiding of insurance premiums. This is particularly relevant to India’s domestic nuclear suppliers who would otherwise need to individually take out coverage, which would be prohibitively expensive. In order to access international reinsurance pools, the Central government could utilise the provisions in Section 43 and 44 of the CLND Act (Power to Call for Information from Operators) to establish a satisfactory inspections regime.

Sanctity of a special mechanism
Finally, Section 46 of the CLND Act contradicts the Act’s central purpose of serving as a special mechanism enforcing the channelling of liability to the operator to ensure prompt compensation for victims.

Section 46 provides that nothing would prevent proceedings other than those which can be brought under the Act, to be brought against the operator. This is not uncommon, as it allows criminal liability to be pursued where applicable. However, in the absence of a comprehensive definition of the types of ‘nuclear damage’ being notified by the Central Government, Section 46 potentially also allows civil liability claims to be brought against the operator and suppliers through other civil law such as the law of tort. While liability for operators is capped by the CLND Act, this exposes suppliers to unlimited amounts of liability. Obtaining insurance coverage for any future liability costs on account of claims by victims in such a case would be next to impossible.

Section 46 should thus be limited to criminal liability, and should clarify that victims who suffer on account of ‘nuclear damage’ can institute claims for compensation only under the CLND Act and not by recourse to other legislations or Courts. A clarification issued by the Attorney General’s office, if not an amendment to the law itself, will provide much needed assurance to suppliers while furthering national interest.

The issue of the liability law has, for far too long, been a thorn in India’s bilateral relations especially with the United States. Mr. Obama’s visit provides a historic opportunity to address these misgivings and meet foreign governments, as well as the entire supplier community, Indian and foreign, halfway on the issue. This will signal the seriousness of the Government of India in setting its own house in order and put the ball firmly in the court of the supplier community. By putting in place such a comprehensive, fair and pragmatic legislation on civil nuclear liability, there is no reason why India cannot reap the long-term benefits of civilian nuclear energy and resolve a prickly foreign policy issue, the time for whose resolution has come.

(Anupama Sen is Senior Research Fellow, Oxford Institute for Energy Studies and Arghya Sengupta is Research Director, Vidhi Centre for Legal Policy. They are co-authors of a report, “Operationalising India’s Nuclear Agreements: Issues and Solutions on Nuclear Liability”.)

Source - The Hindu

[Ed] Moderation warranted

The recent narrow defeat of a resolution in the United Nations Security Council on Palestinian statehood should be read in the context of resistance from the United States and Israel to the territory’s bid for UN membership. In 2012, Washington and Tel Aviv opposed a landmark UN General Assembly vote by 138 countries to upgrade Palestine’s status from Observer to Non-Member Observer State in the world body. Introduced by Jordan, the resolution last week called for the withdrawal of Israeli forces from the West Bank by 2017 and the creation of a capital in East Jerusalem — territories captured by Israel besides Gaza Strip in the so-called Six-Day War in 1967. Against the backdrop of the failure of peace talks, the Palestinian Authority (PA) under President Mahmoud Abbas has pinned its hopes for any meaningful progress on taking recourse to international legal instruments. Accordingly, Mr. Abbas has moved swiftly to accede to the Rome Statute of the International Criminal Court (ICC) once the UNSC resolution was defeated in December. Earlier in the month, Palestine was invited as an observer at the annual meeting of states that have joined the ICC.

The Palestinians expect the step would eventually lead to the trial of certain Israeli leaders for war crimes in The Hague court. But a determination has yet to be made on whether its jurisdiction would commence from 2012, when the status of Palestine was revised at the UN, or after its accession to the Rome treaty is completed. It is also uncertain whether the nature of the violence during the conflict would qualify for prosecution by the ICC. What is clear, however, is that the activities of both the PA and the Islamic militant group Hamas would also come under scrutiny should the court deem it fit to investigate Israel. But paradoxically, the U.S. and Israel continue to regard any attempt by the PA to gain international recognition as confrontational, insisting that direct negotiations are the only possible avenue to find a lasting solution. Both have threatened retaliation in the form of severe economic sanctions against Palestine and travel restrictions on their leaders. Such a stance is unhelpful considering the PA is the main moderate voice wedded to a two-state solution, unlike Hamas that refuses to recognise the state of Israel. But international opinion in support of Palestinian self-determination is growing, as is evident from the overwhelming backing accorded to the European Parliament resolution. The Palestinian bid to join the ICC is expected to strengthen Israel’s hardliners in the elections in March. The larger interests of peace in the Middle East warrant moderation.

Source - The Hindu

[Ed] Mythology and science

The 102nd Indian Science Congress being held in Mumbai will be remembered for a very long time to come, but for all the wrong reasons. For the first time, the science congress had a session on “Ancient Sciences through Sanskrit”. If the Indian Science Congress had long lost its eminence as a forum where results of serious science being done in the country are presented and discussed in most sessions, the inclusion of Ancient Sciences through Sanskrit has only lowered its standing further. Even as a public session, there is no real reason whatsoever for it to have been included in the proceedings. At best, a session could have been devoted to the history of Indian science which has real and substantial achievements to celebrate, with serious scholars working on the subject presenting papers. With Prime Minister Narendra Modi setting the tone for this antiquity frenzy with his implausible claims that cosmetic surgery was practised thousands of years ago and in-vitro fertilisation-like procedure was resorted to long back, and different political leaders following it up with several other incredulous claims well before the start of the national event, the reason for the inclusion of the session becomes supremely clear. Instead of fostering scientific temper, the congress has provided a forum to seed the minds of young people with pseudoscience. Some of the papers presented were about Indians’ “knowledge of making aeroplanes” that could undertake interplanetary travel, between 7000 and 6000 BC, and “radars” that worked on the principle of detecting energy given out by animate and inanimate objects and finding out if a body was dead or alive.

Science is grounded on the principle of reproducibility of results. The claims of advanced science and technology in the ancient world are based on some references in ancient scripts that may be wholly imaginary. Flying, for instance, has caught humankind’s imagination across cultures right from ancient times. Such references should be taken for the myths they are, not as scientific facts. Scientists have been able to create animal chimeras that have cells/organs of different species, much as what Greek mythology describes. Should the Greeks then be taken as pioneers in the science of chimera production? Thanks to our understanding of genetics and the ability to fertilise eggs outside the body, producing designer babies is no longer in the realm of science fiction. Should the creators of the science fiction then be credited with devising the procedures? Compare this with how Sir Arthur C. Clarke documented his idea of communications satellites in a concept paper published in 1945. Dozens of geosynchronous satellites launched each year do precisely what Sir Arthur had visualised there.

Source - The Hindu