December 10, 2010

life in financial markets & journalism: ratan tata needs to improve himself first

Rata Tata lives in an illusionary world of his own making where twisting and distorting the truth is a daily necessity. Its been many years since I could not but help to realise that this man, like many of his peers in Indian and world industry, does not merit the flattering write-ups by senior editors and journalists in Indian and world media (which, by the way, still continues shamelessly by some newspapers, magazines and television channels despite all the recent exposes as per the conscious decisions of their editor-in-chiefs).

As a journalist, I am amused when I see many media editors harp about integrity in journalism and then go on to practise insidious journalism, executed very cunningly. I have written about this a couple of times in my blog but it needs to be stated again: editor-in-chiefs in a majority of media organisations in India hold large amounts of power without any accountability to any one. Unfortunately, majority of the readers and viewers of Indian media choose not to notice this.

Anwyay, there is a good write-up by a columnist at Outlook magazine's website putting Rata Tata's recent statements to media in an insightful perspective. I share it below.

The Banana Sheiks

The Niira Radia tapes have firmly put the spotlight of adverse attention on politics and the media. But surprisingly, the loudest voice of protest—which is also a claim of innocence and a warning that the focus on the mud-smeared keeps attention off the real beasts in the 2G story—has come from India Inc. Ratan Tata, head of the Tata group and Radia’s foremost client, calls the leaked tapes “unauthorised” and their publication and the subsequent buzz “a smokescreen” for the real scam. He has asked the government to book those guilty in the 2G scam “but stop this banana republic kind of attack”.

For this paragon of propriety, rightly affronted by the breach of privacy, the whistle-blowing that brought the tapes into the open is symptomatic of a “banana republic”—never mind that it exposes the nexus between business, bureaucracy and the media. He has even enlightened us, in the course of a television interview, on what happens in banana republics: “Banana republics are run on cronyism. People of great power wield great power. People with less power, or those who are not in power, go to jail without adequate evidence or their bodies are found in the trunks of cars.” Sounds like one of the many cautionary notes wise men pronounce regarding the conditions the country could slide into if the rule of law is not upheld. But listen to those words, coming from a powerful industrialist, from the perspective of a whistle-blower, presumably someone with “less power”, and you would be forgiven for reading a threat between those lines.

Something good may come of it, after all, for the great man has helped us with the diagnosis by telling us how banana republics work—through cronyism, which has been on ample display in those very tapes he despises, though the more precise term for what the tapes reveal would be crony capitalism. What the cag report on 2G and the tapes reveal is the sale of spectrum at throwaway prices, changes in eligibility and procedural criteria to favour a few chosen ones, windfall gains through sale of equity and resale of spectrum, cartelisation through cross-holdings in supposedly rival companies, and lobbying for the appointment of a minister whose decisions made all that possible. They also hint at money-laundering, bribery and manipulation of policy, administration, the media and even the judiciary in matters like aviation and the quarrel over natural gas between the Ambani brothers. The primary driver in all this is capital: it is corporate houses that employ lobbyists to cozy up to politicians, bureaucrats and the media; it is corporate houses that cultivate and invest in these groups in order to corner windfalls. Corporate houses, therefore, cannot claim victimhood in a kleptocracy of their creation.

The diagnosis is for the UPA-2 government, professed champion of inclusive growth and the aam aadmi, to understand and act upon. For it’s crony capitalism that has driven the miracle growth rate of close to nine per cent. Rajeev Chandrashekhar, a Rajya Sabha MP and former FICCI president, has pointed out that agriculture has grown at a dismal one per cent and manufacturing at no more than three per cent. The so-called miracle has been achieved through phenomenal growth in mining, real estate, construction. Recent scams—Adarsh, CWG, the Bellary brothers’ many depredations, Yediyurappa’s land largesses to relatives, and not the least, the 2G scam itself—are strong enough indications of the profitable webs big business casts.

The public revulsion these scams have evoked should be a wake-up call. Pointing to bigger stains on the clothes of the opposition will not be enough to save this dispensation. Governments that were complacent about corruption were overthrown despite a decimated and vanquished opposition in the wake of the Jayaprakash Narayan movement in the 1970s and the Bofors disclosures in the late 1980s. The scale of robbery this time has been revealed to be so high, its execution so systematic, that it will take much more than window-dressing to save the government—and much more important—the poor who live in hope.

When the licence-permit raj was disbanded, ushering in liberalisation and globalisation and the promise of plenty, it was said cronyism would come to an end: anyone with initiative could compete on a level playing field. How mythical this is the robber barons of big capital have just driven home to us. The real smokescreen—one Ratan Tata is unlikely to warn against—is the neo-liberal rhetoric that shields crony capitalism and allows it to stealthily profit by influencing policy and leave India’s poor with empty bowls.

December 05, 2010

life in general: (part 1) 'unheard voices..' book written by harsh mander

There is one book that is very dear to me. It is Harsh Mander's 'Unheard Voices: Stories of Forgotten Lives' written by him some years back.

I share below excerpts from the book. It is one of the 20-odd stories of common Indian people that Mander has written about in the book.

Excerpts from the book:

Two decades after he was uprooted from the land of his ancestors, Nanhe Ram, still speaks little. Looking much older than his sixty years, he sits for long hours outside his dilapidated hut in the resettlement village of Aitma. He has no land, no cattle, no sons; his ageing wife labours all day in the forests or in the fields of the big farmers of the village, to keep the fires burning.

There is anguish but little recrimination, as he talks haltingly of the past. The first time they heard about the large dam that would submerge their village, he recalls, was when daily wages were twelve annas (which would probably be in the mid-1950s). Their village, as, indeed, the entire region, was hardly connected to the outside world, and until then they had encountered very few government officials. When men on bicycles, wearing trousers and shirts, rode into their villages to inform them about the dam, the tribal people living there had got scared and run away into the forests.

He did not know then that a gigantic thermal power complex was being planned in the neighbourhood of his village, at Korba, for which the two rivers that flowed there, the Hasdeo and Bango, were to be dammed. Fifty-nine tribal villages like his were to be submerged, twenty completely and the rest partially, along with 102 square kilometres of dense sal forest, to create a vast new reservoir of 213 square kilometres. No one consulted with the 2,721 families of these villages, condemned to become internal refugees in the cause of ‘national development’, profoundly and irrevocably. Some 2,318 of these families, who like Nanhe Ram were the least equipped because of their temperament, culture and lack of experience, to negotiate their new lives.

The survey work continued for six or seven years, and it was in 1961 that the first phase of the project, for the construction of the barrage and major canal was sanctioned. Nanhe recalls their fear and excitement when a small plane flew in as part of the on-going survey work. However, it was only a decade and a half later, in 1977, that the first settlement, Nanhe’s village, was actually submerged. In the intervening years, construction continued apace, but no one from the government planned any steps for their rehabilitation or even as much as spoke with them about how they might rebuild their lives in the future. They were completely ignored.

In 1977, a few months before their homes were actually submerged, the farmers were packed into a truck and driven to the divisional headquarters of Bilaspur, located in the heart of the Chhatisgarh region of Madhya Pradesh. Nanhe recalls that they arrived at the imposing building housing the district office in the late afternoon, and were bundled into a courtyard. There they were addressed by an official, who informed them that their village would be lost to the dam reservoir in just a few months, during the net monsoon, and that the government was therefore paying them the first installment of their compensation. For Nanhe, this was a niggardly Rs 540.

When their truck returned to their village, it was morning. The inhabitants found that the local revenue officer, the tehsildar, was waiting for them. The tehsildar wanted to recover the land revenue due from Nanhe out of this compensation amount. Nanhe lost Rs 300 to him, and the remaining Rs 240 also disappeared before long merely in day-to-day survival.

During the meeting at the district office, someone had timidly asked, But where are we to go when our village goes under in the next monsoon? The official had replied tersely, How do I know? Why don’t you go to your relatives’ homes? But, some weeks later, a bank of activists held a series of meetings in their village. How can they ask you to go to the homes of your relatives, they thundered. Did your relatives build this dam? They organized demonstrations and rallies, in which many young tribals of the village also participated. Nanhe was confused and frightened, and he held himself aloof. Eventually, the government conceded that the tribal families that were being submerged would be given house-sites in a resettlement colony located in the forest uplands.

In the few months that remained, Nanhe made plans in his own way for the future. Where and how they would live, he did not know. He was worried first about his cow, whom they all loved. He knew that he would not be able to take care of her in the resettlement village, at a time when even keeping his wife and two daughters alive would be very hard. He also could not think of selling her, because she was like a member of the family. So he gave her to an Ahir cowherd, and promised to pay him Rs 150 each year for looking after her. Nanhe continued, despite all his subsequent tribulations, to save and send money for the upkeep of the cow for ten years, until the cow died.

Just a day before the monsoon broke, the trucks arrived. The people were given only a few hours to bundle their belongings into the trucks. They were then driven to the resettlement village, in which house plots of .05 acres each had been hurriedly cleared for them in the forest. The rains broke early, and Nanhe and his family spent the entire monsoon huddled with their few belongings under a mahua tree. In the dry spells, Nanhe struggled, trying to build a small hut, while his wife scoured the forests for food.

The remaining instalments of compensation were paid only fifteen years later, in 1992. Nanhe received a cheque of Rs 2,000, which he used to repay loans to the moneylender. Nanhe survived on occasional wage labour, but only barely. It was around then that for the first time, under pressure from activists, the government initiated a few livelihood programmes. Although the government has since spent some two crore rupeeds in the resettlement region in recent years to belatedly provide livelihoods to the displaced families, there has been little success. Fishing in the new reservoir is dominated by outside contractors. Forty lakh rupees were spent on a poultry farm, which ran for a few months, with twelve beneficiaries who were given 100 birds each. The birds suddenly died of some illness, and the farm closed down. The manager of the poultry farm departed after making a young tribal girl pregnant. Ambar charkhas or spinning looms were installed, but raw material supply and marketing were erratic. The looms provided wages in fits and starts, and that too only one rupee a day.

The resettlement villages are at the periphery of the large artificial reservoir, connected by earth roads that get submerged after the rains each year. In these inaccessible, remote, artificial settlements, not only are jobs hard to come by but life is very hard in other ways as well. Schools, health centres, credit cooperatives and ration shops rarely function. If someone is seriously ill during the rainy months, the only way to reach a hospital is by undertaking a perilous journey of three hours on a small leaking dinghy.

Not surprisingly, of the 208 families that had been resettled in Aitma, only sixty remain. The rest have migrated, either to the forests as encroachers, or to the city slums, in desperate search of means for bare survival.

Nanhe is among the few who remain, because he had neither the strength, nor the will to struggle and to start life anew one more time. He sits quietly outside his hut for most of the day. But sometimes when he speaks, he says softly to anyone who is willing to hear. When I am on a boat, in the middle of the reservoir, and I know that hundreds of feet beneath me, at that very point, lie my village and my home and my fields, all of which are lost forever, it is then that my chest rips apart, and I cannot bear the pain…

December 03, 2010

life in journalism: a welcome torchlight on unhealthy aspects of Indian journalism

Every once in a while the ugly facets of Indian media editors come out in the open. Last week, Outlook magazine published the tapes between Nira Radia and a few media editors and journalists. Everything about the issue and the tapes can be on Outlook's website here, here, here, here, here and here.

Nira Radia and her firms including Vaishanvi handle the public relations of all the companies of the Tata Group (whose chairman is Rata Tata) and the Reliance Industries Group (whose chairman is Mukesh Ambani).

Its good that the Radia tapes have been published by Outlook magazine. Such a torchlight was necessary, and I am sure other dirty aspects of Indian journalism would also not remain un-hidden forever.

The editors who feature in these tapes are not the only ones who subtly plugged Radia's clients in their publications and television channels or to political parties using their influence. There are a few other media editors too who do the plugging in their publications/channels but do so in a very cunning manner. I have no doubt that over time these editors would receive payback for their un-ethical and dangerous liaisons with large companies and their PR representatives.

I have written about the unhealthy practises in journalism in my blog a few times. In one of my blog post (29 September 2008 one) I even mentioned Vaishnavi company (owned and run by Radia) by name. I share below the contents of that blog post:

There is a slyness with which India Inc and their pubic relations (PR) companies treat the media. Partly, of course, it is the media's self-imposed cowardliness but it also due to the sophistication that the public relations companies (or in some cased the companies do it directly without hiring a public relations firm) deploy to discourage/intimidate/fool the editors and journalists that dare to ask even basic tough questions about their client-companies.
As a journalist, I have seen how some PR companies directly deal with the Editor-in-chief (or other senior editors) of a publication or a news channel and try to manipulate them if they perceive a junior-level editor/reporter probing the affairs of their clients a little deeper (such a journalist, in my view, would only be carrying out his/her journalistic duties more diligently).
The PR companies that try to aggressively wield a lot of influence on the top media editors include Genesis Burson-Marsteller, Vaishnavi PR, Perfect Relations and 2-3 more.
The media dare not even write about their PR companies as a part of the regular coverage of the role of all kinds of business entities in the economy and industry. But in June this year Tehelka magazine dared and wrote a story on them (you can read it here). It was a welcome torchlight on an evasive bunch of people although I still felt the story was soft.
There is a lot more to say about the techniques used by the PR companies that would do a Goebbels proud. The readers/viewers of Indian media do not adequately know the kind of insights/news/analysis they are missing out on due to such Goebbels'.

November 17, 2010

life in financial markets: fuels on fire

Recently, I wrote an editorial for the publication I work for on the issue of diesel-run SUVs and cars. 

Here is what I wrote:

Fuels on fire
The car market in our country has been on a roll in recent years notwithstanding the intervening global depression period of 2008 and early 2009. While car manufacturers--Indian or foreign--selling cars, including SUVs (sports utility vehicles) to Indians have all the reason to be mightily pleased with such a trend there is an underlying unpleasant side-effect that India as an ecological landscape is experiencing. 
In the last few years, almost all the high-end cars sold in India have been diesel. These cars, that includes sedans and SUVs, have costed upwards of Rs 7-8 lakh. Advocates for a less-polluted environment have always opposed the dieselisation of the car fleet. They have associated the deteroriating air quality in the cities to the sharply rising levels of tiny particulates of size less than 2.5 microns and nitrogen oxides, both of which arise more out of diesel exhaust emissions than from petrol vehicles. 
So nothing new was being said by union environment minister, Jairam Ramesh when he told the delegates of a UN conference on environment last week that in view of the growing carbon emission levels of India's transportation sector it was criminal for diesel subsidies to be used up in increasing part by large-sized cars and SUVs. It is estimated that these passenger vehicles gobble up 20 to 25 per cent of all diesel sold in the country. 
As a concept, discouraging the use of diesel passenger cars is ideal for climate change mitigation purpose but there are practical difficulties. Particularly if the solution being touted is differential pricing of diesel -- higher for cars and normal rates for trucks, tractors, power generators, agricultural pumps, railway trains and industrial use. Enforcing differential diesel prices at the retail outlet would be extremely difficult. 
One viable alternative was spelled out by a section of a February 2010 report of a government-nominated expert group on a viable and sustainable system of pricing of petroleum products headed by Kirit Parikh. After commenting that there was no economic reason to subsidise diesel car and SUV owners it laid out a formula to collect the same level of tax that petrol car users pay from those who use a diesel vehicle for passenger transport. 
Illustrating through an example and use of discounted rate over a 10-year life of a vehicle, the group stated that a petrol car owner who drove 8000 km a year and got an average mileage of 13.5 km per litre was paying Rs 10,000 more excise duty per year than what he would if he drove a diesel car. The calculation culminated in a figure of Rs 80,000 additional excise duty diesel cars should be required to pay. While this figure may seem low to some, the assumptions of car usage, mileage and discount rate can always be updated and fine tuned to levels that truly reflect the average of the use of passenger cars in the country. 
Whatever be the challenges in finding a solution to the dieselisation of the car industry in India, one has to be found and soon. Even in the US, where governments and consumers are wary of paying more for fuel-efficient vehicles there is heightened awareness of harmful effects of fuel-guzzling SUVs. India is racing ahead on the way to become a consumerist society but it does not have the knowledge and the maturity to deal with the negative environmental side effects. 
Whether unwitting or not, the subsidy being enjoyed by rich diesel car and SUV owners is neither wise nor sustainable.

November 14, 2010

life in general & financial markets: (part 2) india's obsession with diesel cars

In my July 28 '10 post I had written about the ugly obsession of India's affluent car & SUV owners, automobile manufacturers and government policy makers with the use of diesel.

I share below the latest editorial written by Centre for Science and Environment on diesel cars and SUVs that throws additional light on the matter.

Here goes:

Press Release
CSE supports JairamRamesh on restraints on SUVs and dieselisation of personal cars

New Delhi, November 13, 2010: Centre for Science and Environment (CSE) commends minister of state for environment Jairam Ramesh for slamming the expanding fleet of SUVs and the rampant use of cheap and toxic diesel in personal cars putting public health at risk.

Says Anumita Roychoudhury, head of CSE’s air pollution and urban mobility team, “CSE has been campaigning against these fuel-guzzling polluters for many years, and we fully support Mr Ramesh’s views as reported in national media. While the expanding SUV fleet with large engines undermine the fuel savings in the transport sector, the plume of emissions from India’s diesel cars make the urban air more toxic.”

Reign in the big bully and the guzzler
• Big cars and SUVs are a threat to energy security, climate and public health: CSE is concerned that the Indian market, so far dominated by small cars, is steadily shifting towards the mid to large car segments. This segment already represents about 36 per cent of the total car sales in India. This trend is supported by on-road surveys carried out by RITES and the Delhi Transport Department that show that nearly 30 per cent of the cars on Delhi’s roads are already mid-size and large cars. With large cars that are much less fuel-efficient than smaller cars, the total fleet’s fuel economy will worsen.
• The costs of bigger vehicles can be enormous: This is evident from global studies such as that of the International Council on Clean transportation that show fuel economy of a car fleet declines for a given increase in large vehicle market. A 10 per cent increase in large vehicle sales can roughly result in 2 per cent deterioration in fleet fuel economy. This means roughly, an additional 17,500 barrels of oil will be consumed annually by those 10 per cent large vehicle sales. Why should the Indian government let the country and the climate bear this unacceptable cost on account of luxury consumption, asks Roychoudhury.
• Cost to the consumer: Consumers actually end up spending more on fuel during the life time of large cars. Moreover, considerable numbers of large cars are run mainly on diesel, which undermines air quality. SUVs particularly are captive users of diesel. This defeats the government’s objective of improving vehicle fuel economy to protect India’s energy security and meet its climate goals. Dirty air increases the medical bills of the consumer.
• Use of cheap diesel in big cars and SUVs leads to more oil guzzling in the rebound: Studies in Europe have shown how use of cheaper diesel used in bigger vehicles and SUVs that are also used for long distance driving undermines the efficiency gains of improved vehicle technology. The actual fuel consumption goes up. Other governments are increasing taxes on bigger cars, especially SUVs – most exemplary is the case of China – to minimise the energy and pollution impacts of these vehicles.

Diesel: the toxic trap
The current official policies are encouraging massive dieselisation of the car fleet when ‘clean’ diesel (with 10 ppm of sulphur used with advanced after-treatment systems) is not available in the country. The market share of diesel cars is already over 30 per cent of new sales and is expected to be 50 per cent of new car sales soon.

CSE challenges the industry folklore that the current Bharat Stage III and IV diesel car fleet meets public health benchmark:
• Bharat Stage III and IV emissions standards legally allow diesel cars to emit several times more NOx and PM than petrol cars. Auto industry claims that they are adopting common rail injection systems for diesel cars and therefore they are clean. But our emissions standards are not fuel neutral as they differentiate between petrol and diesel vehicles. The difference is evident in the emissions factors developed by the Automotive Research Association of India for Bharat Stage III diesel cars that are sold across the country. These diesel cars emit 7.5 times more toxic particulate matter than comparable petrol cars (see graphs on our website). This means, one diesel car is equal to adding 7.5 petrol cars to the car fleet in terms of PM emissions and three petrol cars in terms of NOx emissions. Total air toxics from a diesel car that are very harmful and carcinogenic are seven times higher than that from petrol cars.

• Diesel and petrol cars meeting the same level of emission norms have different toxicity levels that determine the cancer causing potential. Data from Europe shows that the diesel cars’ toxicity becomes comparable with petrol only when they are fuelled with near zero sulphur fuel and are fitted with particulate traps. The International Agency for Research of Cancer (IARC), WHO, United States Environmental Protection Agency, etc have all classified diesel emissions as carcinogenic. The European Commission has calculated the difference in lifetime pollution costs of Euro IV-compliant diesel car and petrol car -- and it shows a major difference. The total pollution cost of a Euro IV diesel car is 1,195 Euros vis a vis 846 Euros for a petrol car. This nullifies the marginal greenhouse gas reduction benefits of diesel car and costs higher to the society.

• Government is shouldering the burden of subsidy to the rich car owners: CSE had warned earlier that as the Union government earns much less from excise on a litre of diesel used by cars, as opposed to petrol; revenue losses per litre of diesel will be compounded with increase in diesel car sales. But diesel car owners recover their premium within a few years, given lower diesel prices. This perverse subsidy to the rich comes at an enormous cost to public health. In countries like Brazil, diesel cars are actively discouraged because of the policy to keep taxes lower on diesel. In Denmark, diesel cars are taxed higher to offset the lower prices of diesel fuel. In China, taxes do not differentiate between petrol and diesel.

• Even low carbon emissions and greater fuel efficiency advantages of diesel cars are shrouded in doubt. Diesel cars are popular for their greater fuel efficiency and lower heat-trapping carbon emissions. ARAI data shows Euro III Indian diesel cars emit 1.2 times less carbon dioxide compared to their petrol counterparts. But even this benefit is at risk of being negated as diesel fuel has more carbon content than petrol. If more diesel fuel is burnt, as is likely given its cheaper prices and rising number of cars and SUVs, the heat-trapping carbon emissions will increase. Moreover, even the carbon soot from diesel vehicles are now implicated for global warming.

• Diesel-related emissions are already very high in the air of Delhi and other cities. It is significant that the environment minister has raised the concern over use of cheap diesel in big cars and SUVs now when the air quality data from the Central Pollution Control Board shows that the average levels of tiny particulates, smaller than 2.5-micron size (PM2.5), that go deep inside lungs, have hit a dizzying height in Delhi. The WHO has said that there is no safe level for PM. Studies in the US show that even at very low concentrations and with an increase of only 10 microgram per cubic metre, PM2.5 is associated with significant increases in health risks like asthma, lung diseases, chronic bronchitis and heart damage. Long-term exposure can cause lung cancer. What’s worse, in Delhi, levels of nitrogen dioxides (NO2) are also spiraling adding to the problem of ozone. Both PM and NOx dominate diesel exhaust emissions.

It is time to act.
It is a myth that the diesel car technology that is available currently in India is clean and meets the public health objective. Immediate policy intervention is needed.

CSE proposes the following action plan:
• Discourage big cars and SUVs by linking taxation to the actual fuel consumption of the vehicles. More fuel a vehicle consumes, the more tax should it pay.
• Remove price incentive for diesel cars. Either equalise fuel taxes and prices or impose effectively high additional taxes on diesel cars to neutralize the current fuel price advantage that the cars enjoy.
• Introduce ‘clean’ diesel technology that runs on diesel fuel with sulphur content less than 10 ppm and is fitted with advanced emissions control devices like particulate traps. Otherwise, get off the diesel route.
• Fuel economy standards must not worsen the trade-off between fuel efficiency of diesel cars and their toxic emissions. Fuel economy standards currently in the making must have built-in safeguards against dieselization of car fleet.

November 01, 2010

life in financial markets: credit information bureaus should be accesible to borrowers too

Five months back, I wrote an editorial for the publication I work for on the issue of credit information bureaus in India and the latest developments with regard to them. I share it below.

By default
Credit information bureaus in the country can not only serve lenders better but also focus on empowering borrowers
You borrow first. Later you pay interest at regular intervals and sooner or later repay the principal. If you do not, you are declared a defaulter. Simple? Not exactly. The reasons behind your defaulting on your loan are as much important as the fact that you have defaulted on your interest or principal payments. But the credit information bureaus in the country are creating credit histories of borrowers based on a simplistic definition of defaults.
It is this rigidity that has now come back to haunt banks. The economic downturn in 2008 and early 2009, combined with poor credit assessment by banks and reckless spending behaviour by individuals has resulted in sharp rise of defaults in credit cards and personal loans.
No wonder then that currently banks' retail loans officers are coming across rising numbers of borrowers with low credit worthiness. They are finding it difficult to sift the chaff from the wheat so to speak. Unable to get behind the nature of defaults they are struggling to make sense of who is a genuine credit risk and who is not.
This is a sorry state of affairs after about seven years of a credit bureau system in the country involving collation and dissemination of credit histories of borrowers. The Credit Information Bureau (India), the first and the largest bureau in the country, has done a good job so far in connecting with lending banks and non-banking financial companies and collecting credit information of borrowers on a frequent basis, and making it available to other lenders. In November 2007, it even introduced the country's first generic credit scoring system in collaboration with TransUnion. For the first time a lending bank or company could get from Cibil a borrower's credit score that predicted his or her likelihood of becoming a defaulter in more than 91 days on credit lines such as credit cards, personal loans, home loans and auto loans.
Missing is the assignment of reasons to credit defaults. How many is not clear but there are cases which lending banks have considered as defaults but which are disputed by the borrowers. The Banking Ombudsman of the Reserve Bank of India is flooded with complaints from bank customers on wrongfully charged credit card dues. Could this be just the tip of the iceberg? There could very well many more cases that never reach the Ombudsman.
With Cibil now, albeit belatedly, working to identify disputed claims in credit histories, lending banks will be able to gauge the intensity of a borrower's default-related problems. But this may not be enough. The credit information system can be geared to service the requirements of not just the lenders but the borrowers as well. For instance, how many individual borrowers in the country have been adequately informed by the banks and NBFCs that they can access their credit report from Cibil? Even if some are aware, the problem of getting one's hands on one's own credit report is cumbersome. A demand draft of Rs 142 has to be made in favour of Cibil and physically mailed to Cibil's Mumbai address along with self-attested copies of address proof and identity proof documents. The credit report is then mailed to the individual's address.
In this day and age of internet-based financial transactions, it is a marvel that individuals are not offered the option to pay Rs 142 via Cibil's website and receive their credit reports by email. There are other missing elements too. Borrowers with good credit scores should get loans at a cheaper interest rate than others. There should be a transparent system that is visible to the borrowers, and not just the lenders, and which can empower the borrowers to seek better terms for themselves. Better still if banks themselves take a lead and advertise openly that they will charge, say 0.50 per cent, lower on a personal loan or a credit card if the borrower or card user has a credit score of a pre-specified higher level and above.
The time is ripe for credit information system to empower the borrowers.

October 25, 2010

life in financial markets: regressive impact of sebi raising retail investor limit from rs 1 lakh to rs 2 lakh

Sebi chairman, C.B. Bhave, does not always understand the real technicalities operating in the securities market and the regulatory institution he heads, Sebi, obnoxiously relies on the lobbying pressure from the large intermediaries.

The board of Sebi today modified the definition of retail investor in the process of public issue of securities. Earlier, investors putting in application, in an initial public offer (IPO) or follow on public offer (FPO) upto an amount of Rs 1 lakh was considered as a retail investor and a 35% reservation was applied for retail investors. Today, the Sebi board has amended the public issue norms to define retail investor as one who invests upto Rs 2 lakh in an IPO or FPO.

In the press conference held today, Bhave said the move was due to incidents of public issues where retail quota was not fully subscribed. I find that a bad justification. If the retail quota is not fully subscribed and other quotas of HNI (high networth investors), QIB (qualified institutional buyers or institutional investors) are getting oversubscribed then the solution simply lies in transfering the un-subscribed retail quota portion to HNI and QIB. If the latter two also sees no full subscription then whether the retail investor definition if that of Rs 1 lakh or Rs 2 lakh does not matter anyway.

Bhave and Sebi can be really un-wise at times.

Here is also what Prithvi Haldea, managing director-cum-owner of Prime Database, a public issue data specialist had to say about today's Sebi move:

"This decision will surely lead to edging out the small investors. First-time investors typically  enter in a testing mode with  small amounts. This is also true for  lakhs of existing  small investors. With the investment limit  increased  to Rs 2 lakh, the richer individual investors, courtesy proportionate allotment, will further eat into the allocation to the small investors, resulting in huge disappointment due small or nil allotments. If the regulator is keen to  increase the retail investor base,  it should rather increase the reservation for retail investors from 35% to 60-70%, with a provision to allot unsubscribed portion to the QIBs.If the retail investor definition is indeed upped, the least we we should then have is full allotments in this category from bottom up.
This policy is wrongly based around the concern that large IPOs may not elicit sufficient retail response, and upping the cap would ensure richer individuals fulfill the quota. Coal India IPO has yet again demolished this myth. Good companies with right price will always see phenomenal response from the retail.Why should any one be bothered if the retail portion goes undersubscribed in bad issues; it should actually make every one happy.
Inflation as a reason for increasing the limit is also not tenable. As the investible income has not grown in the same proportion as the inflation, it actually means lesser monies available in the hands of the small investors, and not the other way around."

September 23, 2010

life in financial markets: can't have cake & eat it too, at least not for long!

Can't have cake & eat it too!

Time and again, the government ministries and industry bodies forget that they can not sustain the attitude of having the cake and wanting to eat it too. It might be easy to manoeuvre the system in our country but not when you trade with other countries. This is particularly in the area of imports and exports where India trades with the world at large.

The commerce ministry is seriously concerned about the widening gap between a fast-rising imports and stagnating exports. This is the same ministry that had gone to almost obscene level to create the Special Economic Zones Act (SEZ Act) and provide SEZs  with massive tax waivers. So, despite the large amount of cash saved in the form of tax waiver, the SEZs have not been able to increase the total exports of the country.

The government statistics tell us that India's imports is expected to shoot up by 16.20 per cent from $288.3 billion in FY 2009-10 to $335 billion in FY 2010-11 while exports will likely grow by a lesser quantum, 11.92 per cent, from $178.7 billion to $200 billion. This will raise the trade deficit (imports minus exports) from $109.6 billion to $135 billion. A
sharp rise in crude oil imports is the reason behind the total import increase in the above figures.

So, lets come back to SEZs that are supposed to be export hubs and particularly those which use imported raw material in their production. The classic example is that of Reliance Industries (RIL). Its super-large petroleum refinery in Jamnagar, Gujarat is a SEZ and income earned from the sales from this SEZ is perhaps not taxed. This SEZ processes crude oil most of which is imported. We do not know the exact import and export figures of this SEZ but we do know the total raw material imports by RIL and its total exports of refined petroleum products.

In FY 2009-10, the company imported raw materials worth Rs 152,083 crore \, or in US dollar terms roughly around $33 billion But its total exports of refined products was lower, at $20.9 billion as per its annual report for FY 2009-10. Exports don't match imports. Unsold inventory might be the reason.

This is just for one company which though contributes to about 10 per cent of the country's total imports and total exports. The commerce ministry not only worries about the deficit but along with the finance ministry it also worries about a stronger rupee hurting exporters or a weaker rupee hurting importers. They have to realise that they can not have it both ways. Someone will benefit, someone will hurt. But in the long term the market forces will even things out.

September 12, 2010

life in general & financial markets: insightful analysis of indian government

"....The first step towards reimagining a world gone terribly wrong would be to stop the annihilation of those who have a different imagination—an imagination that is outside of capitalism as well as communism. An imagination which has an altogether different understanding of what constitutes happiness and fulfilment. To gain this philosophical space, it is necessary to concede some physical space for the survival of those who may look like the keepers of our past, but who may really be the guides to our future. To do this, we have to ask our rulers: Can you leave the water in the rivers? The trees in the forest? Can you leave the bauxite in the mountain? If they say they cannot, then perhaps they should stop preaching morality to the victims of their wars."

... is how Arundhati Roy concludes her insightful write-up in the latest issue of Outlook magazine.

Arundhati Roy has articulated very well and very firmly the thoughts that are concerning any just-minded Indian today. Here are some more excerpts from her write-up:

The Trickledown Revolution
The answer lies not in the excesses of capitalism or communism. It could well spring from our subaltern depths.
Arundhati Roy

In his seven years in office, Manmohan Singh has allowed himself to be cast as Sonia Gandhi’s tentative, mild-mannered underling. It’s an excellent disguise for a man who, for the last 20 years, first as finance minister and then as prime minister, has powered through a regime of new economic policies that has brought India into the situation in which it finds itself now. This is not to suggest that Manmohan Singh is not an underling. Only that all his orders don’t come from Sonia Gandhi.

Over the years, he has stacked his cabinet and the bureaucracy with people who are evangelically committed to the corporate takeover of everything—water, electricity, minerals, agriculture, land, telecommunications, education, health—no matter what the consequences.
Sonia Gandhi and her son play an important part in all of this. Their job is to run the Department of Compassion and Charisma and to win elections. They are allowed to make (and also to take credit for) decisions which appear progressive but are actually tactical and symbolic, meant to take the edge off popular anger and allow the big ship to keep on rolling. (The best example of this is the rally that was organised for Rahul Gandhi to claim victory for the cancellation of Vedanta’s permission to mine Niyamgiri for bauxite—a battle that the Dongria Kondh tribe and a coalition of activists, local as well as international, have been fighting for years. At the rally, Rahul Gandhi announced that he was “a soldier for the tribal people”. He didn’t mention that the economic policies of his party are predicated on the mass displacement of tribal people. Or that every other bauxite “giri”—hill—in the neighbourhood was having the hell mined out of it, while this “soldier for the tribal people” looked away. Rahul Gandhi may be a decent man. But for him to go around talking about the two Indias—the “Rich India” and the “Poor India”—as though the party he represents has nothing to do with it, is an insult to everybody’s intelligence, including his own.)
The division of labour between politicians who have a mass base and win elections, and those who actually run the country but either do not need to (judges and bureaucrats) or have been freed of the constraint of winning elections (like the prime minister) is a brilliant subversion of democratic practice. To imagine that Sonia and Rahul Gandhi are in charge of the government would be a mistake. The real power has passed into the hands of a coven of oligarchs—judges, bureaucrats and politicians. They in turn are run like prize race-horses by the few corporations who more or less own everything in the country. They may belong to different political parties and put up a great show of being political rivals, but that’s just subterfuge for public consumption. The only real rivalry is the business rivalry between corporations.
A senior member of the coven is P. Chidambaram, who some say is so popular with the Opposition that he may continue to be home minister even if the Congress were to lose the next election. That’s probably just as well. He may need a few extra years in office to complete the task he has been assigned. But it doesn’t matter if he stays or goes. The die has been rolled.
In a lecture at Harvard, his old university, in October 2007, Chidambaram outlined that task. The lecture was called ‘Poor Rich Countries: The Challenges of Development’. He called the three decades after Independence “the lost years” and exulted about the GDP growth rate which rose from 6.9 per cent in 2002 to 9.4 per cent by 2007. What he said is important enough for me to inflict a chunk of his charmless prose on you:
“One would have thought that the challenge of development—in a democracy—will become less formidable as the economy cruises on a high growth path. The reality is the opposite. Democracy—rather, the institutions of democracy—and the legacy of the socialist era have actually added to the challenge of development. Let me explain with some examples. India’s mineral resources include coal—the fourth-largest reserves in the world—iron ore, manganese, mica, bauxite, titanium ore, chromite, diamonds, natural gas, petroleum and limestone. Common sense tells us that we should mine these resources quickly and efficiently. That requires huge capital, efficient organisations and a policy environment that will allow market forces to operate. None of these factors is present today in the mining sector. The laws in this behalf are outdated and Parliament has been able to only tinker at the margins. Our efforts to attract private investment in prospecting and mining have, by and large, failed. Meanwhile, the sector remains virtually captive in the hands of the state governments. Opposing any change in the status quo are groups that espouse—quite legitimately—the cause of the forests or the environment or the tribal population. There are also political parties that regard mining as a natural monopoly of the State and have ideological objections to the entry of the private sector. They garner support from the established trade unions. Behind the unions—either known or unknown to them—stand the trading mafia. The result: actual investment is low, the mining sector grows at a tardy pace and it acts as a drag on the economy. I shall give you another example. Vast extent of land is required for locating industries. Mineral-based industries such as steel and aluminium require large tracts of land for mining, processing and production. Infrastructure projects like airports, seaports, dams and power stations need very large extents of land so that they can provide road and rail connectivity and the ancillary and support facilities. Hitherto, land was acquired by the governments in exercise of the power of eminent domain. The only issue was payment of adequate compensation. That situation has changed. There are new stakeholders in every project, and their claims have to be recognised. We are now obliged to address issues such as environmental impact assessment, justification for compulsory acquisition, right compensation, solatium, rehabilitation and resettlement of the displaced persons, alternative house sites and farmland, and one job for each affected family....”
Allowing “market forces” to mine resources “quickly and efficiently” is what colonisers did to their colonies, what Spain and North America did to South America, what Europe did (and continues to do) in Africa. It’s what the Apartheid regime did in South Africa. What puppet dictators in small countries do to bleed their people. It’s a formula for growth and development, but for someone else. It’s an old, old, old, old story—must we really go over that ground again?
Now that mining licences have been issued with the urgency you’d associate with a knockdown distress sale, and the scams that are emerging have run into billions of dollars, now that mining companies have polluted rivers, mined away state borders, wrecked ecosystems and unleashed civil war, the consequence of what the coven has set into motion is playing out. Like an ancient lament over ruined landscapes and the bodies of the poor.

Note the regret with which the minister in his lecture talks about democracy and the obligations it entails: “Democracy—rather, the institutions of democracy—and the legacy of the socialist era have actually added to the challenge of development.” He follows that up with the standard-issue clutch of lies about compensation, rehabilitation and jobs. WhatWhat solatium? What rehabilitation? And what “job for each family”? (Sixty years of industrialisation in India has created employment for 6 per cent of the workforce.) As for being “obliged” to provide “justification” for the “compulsory acquisition” of land, a cabinet minister surely knows that to compulsorily acquire tribal land (which is where most of the minerals are) and turn it over to private mining corporations is illegal and unconstitutional under the Panchayat (Extension to Scheduled Areas) Act or PESA. Passed in 1996, PESA is an amendment that attempts to right some of the wrongs done to tribal people by the Indian Constitution when it was adopted by Parliament in 1950. It overrides all existing laws that may be in conflict with it. It is a law that acknowledges the deepening marginalisation of tribal communities and is meant to radically recast the balance of power. As a piece of legislation, it is unique because it makes the community—the collective—a legal entity and it confers on tribal societies who live in scheduled areas the right to self-governance. Under PESA, “compulsory acquisition” of tribal land cannot be justified on any count. So, ironically, those who are being called “Maoists” (which includes everyone who is resisting land acquisition) are actually fighting to uphold the Constitution. While the government is doing its best to vandalise it. compensation?
Between 2008 and 2009, the ministry of panchayati raj (village administration) commissioned two researchers to write a chapter for a report on the progress of panchayati raj in the country. The chapter is called ‘PESA, Left-Wing Extremism and Governance: Concerns and Challenges in India’s Tribal Districts’. Its authors are Ajay Dandekar and Chitrangada Choudhury. Here are some extracts:
“The Central Land Acquisition Act of 1894 has till date not been amended to bring it in line with the provisions of PESA.... At the moment, this colonial-era law is being widely misused on the ground to forcibly acquire individual and community land for private industry. In several cases, the practice of the state government is to sign high-profile MoUs with corporate houses and then proceed to deploy the Acquisition Act to ostensibly acquire the land for the state industrial corporation. This body then simply leases the land to the private corporation—a complete travesty of the term ‘acquisition for a public purpose’, as sanctioned by the act....
There are cases where the formal resolutions of gram sabhas expressing dissent have been destroyed and substituted by forged documents. What is worse, no action has been taken by the state against concerned officials even after the facts got established. The message is clear and ominous. There is collusion in these deals at numerous levels....
The sale of tribal lands to non-tribals in the Schedule Five areas is prohibited in all these states. However, transfers continue to take place and have become more perceptible in the post-liberalisation era. The principal reasons are—transfer through fraudulent means, unrecorded transfers on the basis of oral transactions, transfers by misrepresentation of facts and mis-stating the purpose, forcible occupation of tribal lands, transfer through illegal marriages, collusive title suits, incorrect recording at the time of the survey, land acquisition process, eviction of encroachments and in the name of exploitation of timber and forest produce and even on the pretext of development of welfarism.”
In their concluding section, they say:
“The Memorandums of Understanding signed by the state governments with industrial houses, including mining companies, should be re-examined in a public exercise, with gram sabhas at the centre of this inquiry.”
Here it is then—not troublesome activists, not the Maoists, but a government report calling for the mining MoUs to be re-examined. What does the government do with this document? How does it respond? On April 24, 2010, at a formal ceremony, the prime minster released the report. Brave of him, you would think. Except, this chapter wasn’t in it. It was dropped.

Justice, that grand, beautiful idea, has been whittled down to mean human rights. Equality is a utopian fantasy. The word has, more or less, been evicted from our vocabulary. The poor have been pushed to the wall. From fighting for land for the landless, revolutionary parties and resistance movements have had to lower their sights to fighting for people’s rights to hold on to what little land they have. The only kind of land redistribution that seems to be on the cards is land being grabbed from the poor and redistributed to the rich, for their landbanks which go by the name of SEZs


During the Emergency, the saying goes, when Mrs Gandhi asked the press to bend, it crawled. And yet, in those days, there were instances when national dailies defiantly published blank editorials to protest censorship


This time around, in the undeclared emergency, there’s not much scope for defiance because the media is the government. Nobody, except the corporations which control them, can tell it what to do. Senior politicians, ministers and officers of the security establishment vie to appear on TV, feebly imploring Arnab Goswami or Barkha Dutt for permission to interrupt the day’s sermon. Several TV channels and newspapers are overtly manning Operation Green Hunt’s war room and its disinformation campaign. There was the identically worded story about the “1,500-crore Maoist industry” filed under the byline of different reporters in several different papers. Almost all newspapers and TV channels ran stories blaming the pcapa (used interchangeably with “Maoists”) for the horrific train derailment near Jhargram in West Bengal in May 2010 in which 140 people died. Two of the main suspects have been shot down by the police in “encounters”, even though the mystery around that train accident is still unravelling. The Press Trust of India put out several untruthful stories, faithfully showcased by the Indian Express, including one about Maoists mutilating the bodies of policemen they had killed. (The denial, which came from the police themselves, was published postage-stamp size hidden in the middle pages.) There are the several identical interviews, all of them billed as “exclusive”, with a female guerrilla about how she had been “raped and re-raped” by Maoist leaders. She was supposed to have recently escaped from the forests, and the clutches of the Maoists, to tell the world her tale. Now it turns out that she has been in police custody for months.
The atrocity-based analyses shouted out at us from our TV screens is designed to smoke up the mirrors, and hustle us into thinking: “Yes, the tribals have been neglected and are having a very bad time; yes, they need development; yes, it’s the government’s fault, but right now there is a crisis. We need to get rid of the Maoists, secure the land and then we can help the tribals.”

Not many analysts and commentators who were pained by the Maoist killing of civilians in Dantewada noticed that at exactly the same time as the bus was blown up by the Maoists in Dantewada, the police had surrounded several villages in Kalinganagar in Orissa, and in Balitutha and Potko in Jharkhand, and had fired on thousands of protesters resisting the takeover of their lands by the Tatas, the Jindals and Posco. Even now, the siege continues. The wounded cannot be taken to hospital because of the police cordons. Videos uploaded on YouTube show armed riot police massing in the hundreds, confronted by ordinary villagers, some of whom are armed with bows and arrows.
The one favour Operation Green Hunt has done ordinary people is that it has clarified things to them. Even the children in the villages know that the police works for the “companies” and that Operation Green Hunt isn’t a war against Maoists. It’s a war against the poor.
There’s nothing small about what’s going on. We are watching a democracy turning on itself, trying to eat its own limbs. We’re watching incredulously as those limbs refuse to be eaten.

In Orissa, for instance, there are a number of diverse struggles being waged by unarmed resistance movements which often have sharp differences with each other. And yet between them all, they have managed to temporarily stop some major corporations from being able to proceed with their projects—the Tatas in Kalinganagar, Posco in Jagatsinghpur, Vedanta in Niyamgiri. Unlike in Bastar, where they control territory and are well-entrenched, the Maoists tend to use Orissa only as a corridor for their squads to pass through. As the security forces are closing in on people and ratcheting up the repression, they have to think very seriously about the pros and cons of involving the Maoists into their struggles. Will its armed squads stay and fight the State repression that will inevitably follow a Maoist “action”? Or will they retreat and leave unarmed people to deal with police terror? Activists and ordinary people, falsely accused of being Maoists, are already being jailed. Many have been killed in cold blood. But a tense uneasy dance continues between the unarmed resistance movements and the CPI (Maoist).


People who live in situations like this do not simply take instructions from a handful of ideologues who appear out of nowhere waving guns. Their decisions of what strategies to employ take into account a whole host of considerations: the history of the struggle, the nature of the repression, the urgency of the situation and the landscape in which their struggle is taking place. The decision of whether to be a Gandhian or a Maoist, militant or peaceful, or a bit of both (like in Nandigram), is not always a moral or ideological one. Quite often, it’s a tactical one. Gandhian satyagraha, for example, is a kind of political theatre. In order for it to be effective, it needs a sympathetic audience which villagers deep in the forest do not have. When a posse of 800 policemen lay a cordon around a forest village at night and begin to burn houses and shoot people, will a hunger strike help? (Can starving people go on a hunger strike? And do hunger strikes work when they are not on TV?) Equally, guerrilla warfare is a strategy that villages in the plains, with no cover for tactical retreat, cannot afford.


Since the government has expanded its definition of “Maoist” to include anybody who opposes it, it shouldn’t come as a surprise that the Maoists have moved to centrestage. However, their doctrinal inflexibility, their reputed inability to countenance dissent, to work with other political formations and, most of all, their single-minded, grim, military imagination makes them too small to fill the giant pair of boots that is currently on offer.

(When I met Comrade Roopi in the forest, the first thing the techie-whiz did after greeting me was to ask about an interview with me published soon after the Maoists had attacked Rani Bodili, a girls’ school in Dantewada which had turned into a police camp. More than 50 policemen and SPOs were killed. “We were glad,” she said, “that you refused to condemn our Rani Bodili attack, but then in the same interview you said that if the Maoists ever come to power, the first person we would hang would probably be you. Why did you say that? Why do you think we’re like that?” I was settling into my long answer but we were distracted. I would probably have started with Stalin’s purges—in which millions of ordinary people and almost half of the 75,000 Red Army officers were either jailed or shot and 98 out of 139 Central Committee members were arrested, gone on to the huge price people paid for China’s Great Leap Forward and the Cultural Revolution, and might have ended with the Pedamallapuram incident in Andhra Pradesh, when the Maoists, in its previous avatar as People’s War, killed the village sarpanch and assaulted women activists for refusing to obey their call to boycott elections).

September 09, 2010

life in financial markets: 7% of vodafone group's revenues are from india

Vodafone Group is in the news in India due to the Bombay High Court disallowing its petitition against the Indian Income Tax Department's claim of Rs 123 billion (Rs 12,300 crore) for capital gains tax on Vodafone's about Rs 900 billion (Rs 90,000 crore) cost of acquiring Hutchison Essar 2-3 years back.

How much does Vodafone earn from India? Vodafone Group, the London-listed company, had a total turnover of Rs 3,318 billion (Rs 331,800 crore) for four quarters up to the quarter-ended June this year, according to Bloomberg data. But how much of this is earned from Vodafone's operations in India is not known.

The Bloomberg data gave a geographical break-up of the revenues only for select quarters. The latest two quarters for which such a break-up was available were the quarters-ended December 2009 and June 2009. The analysis of the sum of these two quarters provides an interesting insight. In these two quarters, the global telecom revenues of Vodafone, across its voice, messaging and data businesses, aggregated to Rs 1,401 billion (Rs 140,100 crore). Of this, India contributed Rs 106.30 billion (Rs 10,630 crore), or 7.59 per cent.

September 08, 2010

life in journalism: many indian media editor-in-chiefs are under unhealthy influence of large Indian companies

I have written earlier (my blog post of 29 October 2008) and I will say it once more: Many editor-in-chiefs of Indian media organisations are often under an unhealthy influence of large Indian companies and large Public Relations companies. Whether they are aware about this facet about themselves, I can't say. But I know for sure that almost all of them claim that they are among the very best editors in Indian media.
The whole thing is highly unfortunate and an impediment to good journalists. But there is always a ray of hope. Like in every profession and every sphere of life, the unhealthy influences do not sustain continuously and indefinitely.

Here is a reproduction of my 29 October 2009 blog post:

{Update, 1 Nov '08: In the post below I wrote about elements in corporate India using some of the top media editors to plug their agenda. I just came to know that one of the Chandra brothers of Unitech is using 1/2/3 top editors through their obnoxiously close connection with a notorious PR agency (that handles accounts of the several companies of largest corporate group in India, and is now pitching for Unitech's account or already got Unitech's account) to pressurise Sebi to haul up the imaginary short sellers. Unitech, a real estate company, is in deep shit with regard to its finances. A large chunk of its properties are currently lying mortgaged with Indiabulls. There is much more going on in these connections. Its very very ugly. Its a shame on Indian media as well, particularly on these top editors who are batting for Unitech shamelessly}
Elements in India Inc are playing their dirty games in the financial marketplace yet again. This time they are on a witch hunt against sellers, including short sellers, in the market by attributing the motive of market manipulation to them. Unitech's promoters, the Chandras, have already complained to Sebi to probe the fall in their stock's prices. Others are doing it subtly and one of their tactics is to use some of the top media editors to play up their agenda.
With their market capitalisation down they are finding it difficult to raise funds to repay earlier debts or fund committed expansion plans. A brokerage firm official from UK called up his friend in an Indian brokerage firm to tell him that some of Tata Steels debt issues were going for an effective yield of above 20% per annum in the UK market. That meant Tata Steels is not able to raise debt without having to offer a 20% effective rate of interest to lenders.
Through their confederations/associations they made the finance and commerce ministries they even got Sebi to direct FIIs not to lend shares abroad, with effect from 20 October, through offshore derivative instruments that was otherwise not prohibited.
When excessive leverage and massive long buying took up the markets to unrealistic heights then these very companies were silent because they could tap funds from the market (through new issue of shares from the public in the primary market) at any price they deemed fit. The DLFs and Unitechs of the Indian corporate world raised capital at absurd valuations during the 2005-07 bull run.
Witch hunts, says this website, "According to American Heritage Dictionary, a witch hunt is a political campaign launched on the pretext of investigating activities subversive to the state." In the context of the Indian stock market, it is a corporate campaign launched on the pretext of investigating short sellers and other sellers of stocks in the equity market. It is similar to the McCarthyism in the 1950s in the US when almost every Tom, Dick and Harry in the US was alleged to be a communist and anti-American.
I did some analysis of (i) world markets movements that showed Indian market being in sync with others in the world, (ii) trading pattern of FIIs, domestic institutional investors (DIIs), brokers proprietary accounts and retail+NRIs+non-institutional corporate investors and it showed the dominance of FII selling but also showed the buying by DIIs and retail-plus category, and (iii) the amount of shares lent by FIIs abroad before they were stopped from doing so from 20 October and after they were made to disclose their lent shares positions from 10 October. The three visuals below bring these out. Click on each one of them to enlarge and see clearly.