📰 SC summons officials on firecracker pollution
Industries have to adhere to safety standards, says court
•The Supreme Court has pointed out a lack of clarity on the pollutive impact of explosive substances used in firecrackers and ordered officials from the Central Pollution Control Board (CPCB) and Firework Research and Development Centre at Sivakasi in Tamil Nadu to be present in court.
•“We are concerned with air pollution. Dussehra and Diwali are coming. Somebody has to regulate these industries. PESO [Petroleum and Explosives Safety Organisation] is saying they have some standards. Firecrackers industries have to adhere to it,” a Bench led by Justice Madan B. Lokur observed.
•The court asked the officials to be present on July 31.
Impact on air quality
•The apex court said it wanted to know from these bodies the impact of firecrackers on the environment, the extent of change in the air quality and the safety standards in place. “There appears to be a lack of clarity on environmental impact of pollution from firecrackers,” the court said.
•The court chided the CPCB, observing that it cannot shift its burden of protecting the environment and framing wholistic air pollution standards, covering firecrackers also. Additional Solicitor General P.S. Patwalia reasoned that firecracker industries function are under intense watch and strict regulations are in place.
•He said continuous monitoring was going on and random checks of firecrackers by PESO and the Controller of Explosives are done. But firecrackers manufacturers from Sivakasi countered that PESO should inform them prior to these checks.
•The CPCB had earlier filed a report indicating that most firecrackers contain a large amount of sulphur, a major cause of air pollution.
📰 Rs. 562 crore in black money seized last fiscal, says report
•Detection and reporting of suspicious transactions, fake notes and cross-border fund transfers in the country’s economic channels doubled in the last fiscal year, leading to the unearthing of over Rs. 560 crore in black money, a government report has said.
•The report of the Financial Intelligence Unit, the premier technical investigation wing under the Finance Ministry, said the financial year 2015-16 saw a “record increase” in the detection of such instances.
•All banks and financial intermediaries apprise the FIU of detections in compliance with anti-money laundering and counter-terror financing measures.
•The number of cash transaction reports (CTRs) doubled from 80 lakh in 2014-15 to over 1.6 crore in 2015-16 and that of suspicious transaction reports (STRs) rose from 58,646 to 1,05,973 during the period, it said.
•The report said that based on the STRs disseminated by the FIU, the CBDT had detected unaccounted income of Rs. 154.89 crore, the Enforcement Directorate nosed out proceeds of crime of Rs. 107.47 crore and the Directorate of Revenue Intelligence (DRI) came across assets worth Rs. 300 crore during 2015-16. The total value of money unearthed stands at Rs. 562.36 crore.
📰 Centre to share missing Bofors files
PAC asks Defence Ministry to trace them and notings related to the deal
•The Public Accounts Committee (PAC) of Parliament has asked the Defence Ministry to trace all missing files related to the Bofors scandal and share them with it.
•The six-member sub-committee on defence, headed by BJD MP Bhartruhari Mahtab, is looking into the long-pending non-compliance of certain aspects of the Comptroller and Auditor- General (CAG) report on the Bofors guns deal.
Strong objections
•The PAC strongly objected to the Ministry’s suggestion that certain paragraphs of the CAG report may be dropped as some files related to it are missing, according to the minutes of the parliamentary panel’s meeting, a copy of which is with PTI.
•The meeting was held earlier this month.
•During the meeting, Mr. Mahtab and BJP MP Nishikant Dubey stressed the need for top Ministry officials to trace and share missing files and notings related to the deal.
•According to the minutes of the meeting, top Defence Ministry officials agreed that the Ministry will share all the required details with the PAC.
•When contacted, two MPs who are members of the committee confirmed that the Ministry has agreed to share the details with them.
•The Bofors scandal relating to alleged payment of kickbacks in procurement of howitzer artillery guns had triggered a massive political storm and led to the fall of the Rajiv Gandhi government in 1989.
•The CAG report on Bofors is the oldest “pending” report before the PAC, which examines audit reports of the Comptroller and Auditor General of India after these are tabled in Parliament.
📰 SC allows two firms to settle loan dispute
Court uses extraordinary powers in case admitted to NCLT
•In what may turn out to be a relief for corporate debtors facing insolvency proceedings, the Supreme Court used its extraordinary constitutional powers to allow two companies to withdraw from insolvency proceedings and settle their loan dispute, despite the case being admitted to the National Company Law Tribunal (NCLT).
•Once the NCLT admits a case for initiating corporate insolvency resolution process under the Insolvency and Bankruptcy Code of 2016, it cannot be withdrawn even if the parties decide to settle the dispute between t hem.
•However, a Bench of Justices Rohinton Nariman and S.K. Kaul used the Supreme Court’s powers to do “complete justice” under Article 142 of the Constitution to bring quietus to the financial dispute between Lokhandwala Kataria Construction Pvt. Ltd. and Nisus Finance and Investment Manager LLP, represented by Shiv Kumar Suri and Shikhil Suri.
•The court took on record the consent terms entered into by the companies and their undertaking to abide by them in settling the amounts due.
NCLAT finding
•The Bench’s decision came despite the National Company Law Appellate Tribunal (NCLAT) finding no merit in the appeal filed by Lokhandwala.
•The NCLAT Bench on July 13, 2017 recorded in its order that it was open for the financial creditor to withdraw the insolvency application under the Code only before a case was admitted and not after.
•The Supreme Court found that order prima facie correct. But this did not stop it from using its special powers to allow the parties a second chance to settle the dispute.
📰 U.S. prods India on Pyongyang
Wants diplomatic presence reduced
•India is facing increased pressure to reduce North Korea’s diplomatic presence in the country as Pyongyang flexes its military muscles.
•During talks with Indian officials last week, a U.S. State Department delegation took up the presence of a large number of North Korean diplomats in India, and urged New Delhi to “shrink” North Korea’s diplomatic footprint in South Asia.
•India has criticised recent North Korean missile launches and nuclear tests. However, bilateral political and diplomatic ties, though minimal, have remained on track.
Modi visit
•The western pressure is driven by the fact that India and the U.S. have held talks on the North Korean actions most recently during Prime Minister Narendra Modi’s visit to Washington on June 27 when both sides “condemned” Pyongyang’s actions.
•They also indicated that both sides would “work together to counter the DPRK’s weapons of mass destruction programmes”.
•The meeting between the U.S. State Department’s officials in New Delhi last week was the first such move after Mr. Modi’s visit.
•The Hindu has learnt that the U.S. officials have indicated that they would like to see “less” diplomatic courtesies extended to the North Korean officials present in India.
•India has maintained ties with North Korea since the birth of the nation following the Korean war in the 1950s, and North Korea had been an active member of the Non-Alignment movement during the Cold War.
•However, bilateral ties cooled in the 1990s when Pakistan extended support to the country’s nuclear programme.
•Officials pointed out that ties between Pakistan and North Korea were significant in the past, but it was no longer on the same scale.
Sanctions busted
•The main worries at the moment are the reclusive country’s ability to use global loopholes to bypass the UN-enforced sanctions. Recent reports from Sri Lanka and Pakistan have indicated that North Korea has exploited export rules to earn much-needed foreign remittances.
•Another issue is the North Korean ability to attack political or diplomatic opponents across the world. In February this year, a stepbrother of the North Korean leader Kim Jong-un was assassinated at an airport in Jakarta.
•The sensational incident highlighted the need to deter the country from carrying out similar attacks against international targets elsewhere.
•The Hindu has learnt that India has been asked to heighten watch in various South Asian locations to ward off any possible North Korean security or diplomatic operation.
📰 Talks begin to divest AI arm
National carrier has India’s largest MRO unit for engines, components overhaul
•Informal talks have begun to find potential buyers for Air India’s subsidiaries, including its maintenance, repair and overhaul (MRO) business — Air India Engineering Services Limited (AIESL) — even as airlines wait for clarity on the Centre’s next step on divesting its stake in indebted national carrier, Air India.
•An expression of interest from India’s oldest private sector MRO service provider, Air Works, has come as a shot in the arm for the Centre that is considering an option to split Air India’s different businesses and hive them off separately.
•“Air Works has expressed an interest in acquiring a stake in AIESL which has the largest MRO business in the country with a facility for component and engine overhaul,” sources aware of the development said.
•The government believes divesting Air India’s ground-handling, MRO and airline operations separately would make the deal more attractive for private players, Civil Aviation Ministry sources said. The Centre has already received a formal expression of interest from the country’s largest private carrier IndiGo for Air India’s airline operations.
‘Wait and watch’
•Vivek Gour, MD & CEO, Air Works, said: “I am watching the situation very carefully but it is too early to say anything because the government has to take a call on whether they will sell Air India as a whole or break up its subsidiaries and sell. Nothing is clear. We will wait and watch.”
•The Centre may also hold talks with foreign MRO players such as Jordan Aircraft Maintenance Limited (JorAMCo), Hong Kong Aircraft Engineering Company (HAECO) and Etihad Airways Engineering — which are keen to invest in the MRO business in India — to ascertain their interest in acquiring Air India’s subsidiary, sources said.
•On June 28, the Cabinet Committee on Economic Affairs, chaired by the Prime Minister, gave an in-principle nod for strategic divestment of Air India.
•It also approved strategic disinvestment in Air India’s subsidiaries, including AIESL, ground handling arm Air India Transport Services Ltd., Air India Charters Limited which operates Air India Express and Airline Allied Services Ltd., which operates Alliance Air.
•A group of Ministers under Finance Minister Arun Jaitley has been formed to decide on the modalities of Air India’s stake sale. “Whether subsidiaries should go as part of Air India, meaning whoever buys Air India automatically buys this, or whether they should be completely demerged and divested simultaneously but separately, will be decided,” Civil Aviation Secretary R.N. Choubey had said.
•AIESL has facilities at New Delhi, Mumbai, Hyderabad, Nagpur, Thiruvanantha-puram and Kolkata for carrying out maintenance, repair and overhaul on various types of Airbus and Boeing aircraft.
•AIESL has, however, been incurring losses since its inception in 2013 when it was carved out of Air India as a separate business unit. In 2016-17, AIESL’s losses rose 17% to Rs. 653 crore as per provisional estimates.
•“MRO is a capital-intensive industry with [a] highly competitive environment, with low returns and there is a long payback or cost absorption period in view of the fixed overheads on infrastructure facilities and high wage costs due to licensed manpower,” AIESL’s annual report for 2014-15 had said.
📰 RBI may cut key interest rate by 25 basis points
Expectation is mainly due to a fall in retail inflation, which eased to 1.54% in June — a record low
•The Reserve Bank of India (RBI) is expected to reduce the key policy rate or the repo rate by 25 basis points (bps) to 6% in its monetary policy review meeting scheduled for August 2 while maintaining neutral stance on interest rates.
•If the RBI does cut the repo rate, this could only be the second such instance by the monetary policy committee (MPC) since it was established in October 2016.
•The expectation of a rate cut is mainly due to a fall in retail inflation, which eased to 1.54% in June — a record low, after reading 2.18% in May.
•The benign consumer inflation reading for successive months has made economists believe that inflation may have fallen to 4% on a durable basis.
•Inflation for June was lower than the RBI’s target band of 2-6%.
•“India may have already become a 4% inflation economy,” said Pranjul Bhandari, chief India economist, HSBC. “We expect the RBI to cut the policy repo rate by 25 bps on 2 August to bring it down to 6%,” she said in a note to its clients.
•RBI had changed its stance to neutral from accomodative in its February which surprised market participants. However, during the last policy review in June, the central bank revised its inflation projection downwards to 2-3.5% in the first half of the year and 3.5-4.5% in the second half — opening up the possibility of a rate reduction.
•The earlier projection for retail inflation in the first half of the fiscal was 4.5% and 5% in the second half.
•Importantly, one of the members of the Monetary Policy Committee, R.H. Dholakia, voted for a 50 bps rate cut during the last policy meeting in June.
•“Considering this slippage in inflation, coupled with the fact that forward-looking factors that earlier had clouded the inflation outlook had also turned out to be relatively benign, we therefore expect the RBI to take up one more rate cut in the August meeting,” Morgan Stanley, which also expects a 25 bps cut, said in a report.
•While most economists expect a 25 bps rate cut on Wednesday, the RBI is likely to hold on to its neutral stance. Opinion is divided as to whether there would be further rate cuts.
•While Morgan Stanley ruled out further rate cuts beyond August, Ms. Bhandari of HSBC expected another rate cut if inflation remained well below 4% in the second half of the financial year.
•“We see a risk of another 25 bps rate cut if inflation remains well below 4% in 2HFY18,” she said.
•Economists said the market will react positively if, on August 2, the central bank says further monetary policy action would be data dependent. “If RBI delivers a 25 bps rate cut next week and says that future policy action will depend on how data evolves in the next few months, this should be supportive for market sentiments, as it will signal that the central bank is not ruling out possibility of further rate cuts in the period ahead, as long as the data supports such a stance,” said Kaushik Das, India chief economist of Deutsche Bank.
📰 Housing prices are alive and kicking
A new index shows prices across most cities have risen, despite stories of over supply and dull demand
•Can the selling price rise when a market is over-supplied and demand is dull? Economics tells us that it can’t, but the Indian housing market seems to be defying this rule.
•Earlier this month, the Ministry of Housing flagged off a new index — the NHB Residex — designed to track housing price trends in 50 cities across India. Releasing the data, the Ministry claimed that the new index offered proof that demonetisation hadn’t dealt a big blow to the housing market.
•Trends in the Residex certainly support this claim. According to lenders’ data compiled by the NHB Residex, as many as 32 of the 50 cities tracked registered rising housing prices and 13 recorded stable trends, in the twelve months to March 2017. Only 5 cities saw declines.
•Large markets also exhibited very positive long-term trends. The Residex noted a 44% rise in home prices in Pune, 41% in Mumbai, 37% in Bengaluru and 33% in Chennai, from FY13 to the first quarter of FY17.
•But this trend of resilient prices sits rather oddly with the tales of woe about the residential market doing the rounds in the last couple of years, which talk of slower sales and a stockpile of unsold homes.
A perfect storm
•The year 2016-17 saw a perfect storm of events come together to dampen demand for housing in India. First came demonetisation and the resulting purge of the cash component in real estate transactions. Then the Budget delivered a rude shock by capping the tax break from ‘loss on house property’ at Rs. 2 lakh a year, for second and subsequent homes. This effectively put paid to the ‘investment’ buying of homes, a key source of housing demand in Tier 1 cities. Cloudy job prospects, stingy increments and layoffs for the IT sector dampened purchases by this crucial segment too.
•The last nail in the coffin was the enactment of RERA (Real Estate Regulation Act) on May 1. The new law, which forces developers to segregate buyer advances and deploy it only in specific projects, was expected to result in a working capital crunch for developers. The industry was in go-slow mode in the run up to this event.
•Reports show that these events did, in fact, shake up the housing market. Consulting firm Knight Frank India noted in a recent review that,the sales of residential homes in the top eight cities fell by a precipitous 48% in the second half of 2016, compared with the previous year. In January-June 2017, they climbed from that abyss, but home sales in these cities were still 11% below 2016 levels.
•Slowing sales saddled developers with large unsold inventory.
•Industry researcher Liases Foras estimated that, at an all-India level, builders sat on about 46 months of housing inventory in September 2016. In effect, even if they refrained from launches, it would take 4 years for them to liquidate their existing stock.
Why the price rise
•Such excess inventory in any business would normally lead to sellers resorting to fire sales. But the Residex tells us that home prices didn’t fall in a majority of cities. What could explain this?
•While one can only guess, there are three possibilities. One, given that home ownership is a big aspiration in India, new categories of buyers may have emerged to take up the slack.
•For instance, while ‘investment’ buying was muted, it is likely that lower interest rates induced more first-time home buyers to take home loans to acquire residential property. The 12% growth in bank home loan disbursements in FY17, as per RBI data, indicates this.
•Two, the lower demand for upmarket homes may have been made up by a surge in demand for affordable homes. In the last few years, much of the housing market activity in India was focussed on upmarket homes in the metros, costing upwards of Rs. 75 lakh. But there was a chronic shortage of affordable homes in the sub-Rs. 25 lakh segment. This past year, the Government launched a big stimulus package for affordable housing with an upfront subsidy, with the result that the supply of low-cost homes has jumped. The Knight Frank report notes that homes costing up to Rs. 25 lakh accounted for 36% of launches in H1 2017, compared with 17% a year earlier.
•Three, it is also possible that, thanks to private equity or political funding, many sellers in the Indian real estate industry have staying power, allowing them to wait interminably for buyers to return.
•Such explanations apart, the price trends captured in the Residex could also have a lot to do with the strange nature of the real estate beast.
Nature of the beast
•One, unlike the market for shares, where all transactions take place on a national exchange and can be collated into a single ‘quote’, the housing market is fragmented into dozens of micro-markets.
•Housing prices can vary widely between cities in the same State, localities within the same city and even neighbourhoods within a locality. Transactions are negotiated one-on-one between buyers and sellers and then reported; deal values depend mainly on the negotiating power of each buyer vis a vis the seller.
•Two, for the prices in any market to realistically capture demand and supply, the number of reported transactions needs to be large. In the housing market, when prices are low, sellers are known to refrain from deals, leading to fewer transactions. Property deal-making was indeed at a low ebb across India this past year, with sellers unwilling to drop prices, buyers waiting for better bargains and new launches on hold. Therefore, it is quite plausible that the prices culled from the reported deals were not wholly representative of the market mood.
•All these issues, however, don’t detract from the usefulness of the NHB Residex as an indicator. So far, home buyers had no publicly available benchmark to go by, when assessing list prices quoted by developers in their cities. Policy makers and lenders had no means to gauge long-term trends in housing across India, for decisions about monetary policy or interest rate-setting.
•Investors weighing options had no means to compare real estate returns with those from asset classes such as shares or gold, to make sensible choices.
•The NHB Residex fulfils this crying need. Hopefully, as the index expands its coverage to more cities and broad-bases its sources, it will make the Indian housing market more transparent and empower the hapless home buyer.
📰 The autonomy façade
It is time for Prasar Bharati to shed its pretence and become officially ‘sarkari’
•The Prasar Bharati Corporation is neither fish nor fowl, as editorials and opinion articles have pointed out. This mix-up in identity is due to the peculiar existential crisis the corporation finds itself in. Called an autonomous corporation by an act passed in Parliament, it is so only in name as neither the employees — numbering around 27,000 — nor the government have wanted to let go of the ‘government’s premier broadcaster’ tag.
•A controversy surfaced again last week when media reports said that the corporation had issued an order to its news divisions asking them to subscribe to the Rashtriya Swayamsevak Sangh (RSS)-backed Hindustan Samachar news agency after terminating its long-standing subscriptions of PTI and UNI news services. This was subsequently denied.
‘No corporation’ movement
•A talk with its employees will reveal that they don’t want the corporation tag any more. It doesn’t mean anything. At the very least, a ‘ sarkari ’ tag ensured a government accommodation. The orders were clear. The director general was the boss and his boss was the Information and Broadcasting Minister. Orders flowed from here to Mandi House which housed Doordarshan. Then came the corporation tag in 1997 and it has since then become difficult for the once-formidable All India Radio and Doordarshan to shake the label off. However, it has meant very little on the ground.
•This is as good a time as any to debate whether the government needs a channel of its own. There are obstacles to that as recommendations from the Telecom Regulatory Authority of India (TRAI) have ruled that State governments cannot have channels of their own. Hence, rules have been flouted as the clamour for a ‘ sarkari ’ channel only increases. In this day and time when most media houses are only too willing to do the government’s bidding, what will another channel achieve?
Greater role clarity
•A ‘ sarkari ’ channel would leave the viewer under no illusion when it comes to the source of the news, its veracity and its presentation. A government channel would ensure that the Minister heading it would have the employees under her thumb. When in government, both the Congress and the Bharatiya Janata Party (BJP) have had problems adjusting to the ‘autonomous corporation’ status, not knowing where to draw the line. Governments headed by both the parties have had senior Indian Information Service officers appointed to keep a close watch on news and other programmes even after Prasar Bharati was declared autonomous. Further, the CEOs at the helm so far have been bureaucrats.
•Perhaps it’s time to drop the pretence of autonomy and restore the glory to the official broadcaster. Perhaps it’s time to bring back ‘Her Master’s Voice’ again.
