Business standard updates

RBI to setaside funds forbuying illiquid gilts

BS REPORTER Mumbai, 16 October The Reserve Bank of India (RBI) is working with the government to set aside funds for buying illiquid gilts from the market. “Over a period of time we will have some budget where we will try to repair some of those securities in which volumes are low, and create volumes for those securities which have higher volumes,” said Harun Rashid Khan, deputy governor, RBI, on the sidelines of a banking summit organised by the Financial Times -YES Bank on Tuesday. According to Khan, there is a joint group between the RBI and the government where this has been discussed under cash and debt management. But it is difficult to say if immediately they will be in a position to do so, said Khan. Experts say this move should come in when liquidity tightens in the system. “In a scenario of tight liquidity, the RBI can announce this. If this happens, it will pump in liquidity into the system, and gilt yields will also fall,” said N S Venkatesh, chief general manager and head of treasury, IDBI Bank. This move will also help banks to get rid of illiquid securities. “Banks hold a lot of illiquid securities. The difference between the yield of liquid and illiquid securities of same maturity tenure is about 10-15 basis points. If these illiquid securities are bought by the RBI, the yield curve will get realigned,” said Debendra Kumar Dash, assistant vice-president (money markets) at Development Credit Bank. Khan says the fiscal deficit is a major concern and it should be handled by the government and the political system. “Fiscal deficit needed to be brought under control,” he said. The fiscal deficit for the current fiscal is budgeted at 5.1 per cent of the gross domestic product (GDP). However, many economists expect it will be higher than the budgeted estimate. “As we have articulated time and again, monetary policy has to be in tandem with the fiscal policy,” said Khan. It has to be a joint venture, not a solo play, according to Khan. “Fiscal deficit is a major concern in the macroeconomic scenario; so, that has to be handled. Supply-side response is also needed for inflation management,” said Khan. The rupee has been volatile against the dollar in the last oneand-a-half years. Khan assures if there is extreme volatility the RBI would intervene in the market. Khan is also of the view that Quantitative Easing 3 (QE3) is like adouble-edged weapon, and, hence, its impact needs to be balanced. It may put pressure on commodity prices. Experts say move should come when liquidity in system tightens BIG BOOST |RBI working with govt to set aside funds for buying illiquid gilts |Discussions between RBI and government under cash and debt management |Move to boost liquidity and will help banks get rid of illiquid papers |It will also help to bring down gilt yields

Land Bill comes to Cabinetin two weeks

BS REPORTER New Delhi, 16 October The group of ministers (GoM) on the land acquisition Bill today agreed to present the draft legislation before the Cabinet in two weeks. The GoM would go through some consultation and tying up of loose ends at ameeting this week between Rural Development Minister Jairam Ramesh and Agriculture Minister Sharad Pawar, who is also the GoM chairman. The minutes of the GoM would be released and views of all members will be taken. A meeting this week would finalise the draft, Pawar said after the meeting. He said there was no unanimity yet but the issues would be sorted. Ramesh called the Bill a progressive one at this stage and said there was general agreement on most issues, with just minor changes remaining to be done. One major difference of opinion was over acquisition for private projects meant for public purposes and for public-private partnerships. While the original draft wanted consent of 80 per cent of landowners before any acquisition, today it was decided to stick to consent of two-thirds. There was overwhelming consensus for a two-thirds consent, a minister said. Defence Minister A K Antony had in the last GoM expressed reservation against acquisition for any private project. He did not attend the GoM today. The ministers have also broadly agreed on the issue of when the new law would be effective. Finance Minister PChidambaram pointed out at the GoM that two laws should not be in operation simultaneously. So, it was decided to have a cut-off for the Land Acquisition Act to lapse and the new law to kick in, a member of the GoM said. The date would be decided at the Pawar-Ramesh meeting. The Bill would now no longer be effective in a retrospective way except from the cut-off date, sources said. Another important decision taken today was that the SEZ Act and two defence Acts —Cantonments Act and Works of Defence Act — mentioned in the draft Bill would come under the new law as soon as it came into force. At the same time, the remaining 13 central laws concerning land acquisition would be required to be at par with the relief and rehabilitation clauses of the new law within one or two years of its coming into force. A clause that again has been accepted by all concerned was regarding the acquisition of land in Scheduled V and VI areas. There was opposition initially to the requirement to seek approval of local bodies and the gram sabhas for this. Now it has been unanimously agreed to make it mandatory to get the approval of gram sabhas before any land is acquired, sources in the GoM said. The clauses pertaining to scheduled areas ensure that as far as possible, no acquisition will be made in these. And, where it is done, it must be only as a demonstrable last resort. The approval of the gram sabha and other local bodies would be required for such acquisitions. There was also agreement regarding retaining the compensation package. Compensation would comprise market rates in urban areas and twice the market rate up to 20 km. The decision in this matter was left to states. General agreement on most clauses; GoM to finalise loose ends in a few days HIGHLIGHTS OF THE DRAFT BILL |Consent of 2/3rd of owners needed for acquisition of land for private projects and PPP |Acquisition in scheduled areas with approval of gram sabha |R and R to be completed before six months of submergence in i rrigation projects |R&R to be completed before possession of other projects |Market rates in urban areas as compensation |Cutoff date to be decided when old Act would lapse and new Act would be effective |No clause on retrospective effect |SEZ Act not exempt, other central Acts to comply with R&R clause in two years According to the new agreement, compensation for the land will comprise market rates in urban areas and twice the market rate up to 20 km. The decision in this matter is left to states

Nationwide Aadhaar-based paymentlaunch on Saturday

SANTOSH TIWARI New Delhi, 16 October About two years after the allotment of the first set of Aadhaar numbers in September 2010, Prime Minister Manmohan Singh is slated to announce the national launch of a payment system based on these numbers. The function is at Jaipur on Saturday, with United Progressive Alliance (UPA) Chairperson Sonia Gandhi present. A senior government official in the know of the preparations told Business Standard the PM would also hand over the 210 millionth Aadhaar number. And, that Aadhaar-based pilot projects across the country would be connected through video conferencing. The Aadhaar-based system would be launched simultaneously at all these places, the official said. The official said the pilot projects were in Andhra Pradesh covering the Public Distribution System, in Maharashtra for pensions, in Mysore for cooking gas distribution and in Jharkhand for Mahatma Gandhi National Rural Employment Guarantee Scheme payments, beside other payments. The PM has already outlined a national architecture for Aadhaarbased payments. The government expects with the enrollment expansion and creation of the national system, it would spread speedily. On September 29, 2010, Prime Minister Singh and Gandhi together had inaugurated the rolling out of the project for providing unique identification Aadhaar numbers for all citizens, handing over the first set to 10 tribals in Tembhli, Maharashtra. The project, for targeting subsidies and entitlements to the real beneficiaries, has since passed through tumultuous phases with even opposition from the ministries of home and finance. However, The Unique Identification Authority of India (UIDAI) officials handling the project, led by chairman Nandan Nilekani, are confident the controversies and problems have been left behind and the assigned enrolment of the entire population with the National Population Registry (NPR) work would be completed by next year. The Union cabinet in January this year cleared a roadmap for coverage of Aadhaar numbers by allowing UIDAI to enroll 400 million additional people, over its earlier mandate of 200 million, in 16 states. The rest of the country would be covered by the NPR project of the home ministry. An Aadhaar-based payment system for subsidies and entitlements under various government schemes through the online biometric identification process is being seen as a major tool to reduce leakages in the payments, of ~2 lakh crore subsidy and ~1 lakh crore of entitlements in ayear. The scheme is being envisaged to cover all government payments for beneficiariesfor both central and state schemes. Prime Minister Manmohan Singh

E-governance initiatives boostcivic life in Bangalore PRAVEEN BOSE Bangalore, 16 October Sarat from Bangalore has not been able to find time to pick up his ration card. But, he keep getting SMSes from the department concerned reminding him to do so. Jumped a traffic signal? You can check if you have any traffic violation case pending against you on the BangaloreOne website. If you discover that you do, you can make an online fine payment. There is no chance of paying a smaller bribe to a traffic constable and getting away with it this time. While Karnataka has been embroiled in some of the biggest corruption scams in the country— such as the mining debacle in Bellary — a wave of internet-based initiatives is succeeding in adding some lustre to state’s reputation for good governance. Wave of initiatives Sakala, BangaloreOne, Bhoomi, and Nemmadi are all e-governance initiatives spearheaded by the Karnataka government that have slowly begun to change the nature of transparency and governance in the state, and are beginning to make an impact on ordinary citizens. “E-procurement and e-tender have cut out political interference in the procurement process and there’s no intervention from MLAs that used to be seen earlier. This should ensure better quality of public works,” said I S N Prasad, principal secretary, information technology, bio-technology and science & technology, Karnataka. There’s a sense of urgency on the corridors of power and government offices today. Not long ago, people habitually chased officials and files. Now, it’s the other way around, with officials chasing people. Sakala, or the Karnataka Guarantee of Services to Citizens Act (2011), which was kick-started in April this year, has begun to check corruption and harassment of citizens by officials across departments, and has even managed to root out touts outside government offices who promise to get your job done for you for a fee. Since its inception, the Sakala helpline has received over 100,000 queries. You can call to find out the procedural queries or delay in the delivery of services of the government under the Sakala scheme. Here’s how it works: Whenever arequest for a particular service is made under Sakala, the applicant first receives an acknowledgement slip with a unique number. This ensures that the request for service will be processed within specified period. Sakala currently takes care of 151 services of 11 departments. Just last month, the government decided to add 118 new services to its existing ones. Transparency and accountability Today, if someone doesn’t get the service one has requested for, one can demand compensation from the official responsible for not delivering it within a certain time frame. It has made officials very alert about being monitored, reinforcing the notion that they are accountable to a time-bound approach, with a defaulter liable to be pulled up at the highest level. “Any official can be pulled up. The system monitors it so closely and all are made to feel accountable. Till now, there was only democratisation of governance through voting; People had no say in the administration. Now, there is a democratisation of administration,” said Shalini Rajneesh Goyal, secretary, department of administrative reforms, and Sakala mission director. The ultimate challenge, though, according to an official who did not want to be named, is adding medical services under it. “The chief reason for this is the reluctance of doctors to feed data on to the network,” says an official in the department. Sakala is now the flagship of the Karnataka government’s e-governance initiative. While 22 states have passed similar acts, Karnataka has been among the most successful in implementing it. “We were able to do it because we had the information techonogy-enabled environment. We are already where others are yet to reach. Since most departments were computerised, it was easier to build on the infrastructure and, hence, easier to implement,” said Goyal. The second phase of the programme has started with SMS services commencing on October 10. However, the most visible symbol of e-governance initiatives in Bangalore is BangaloreOne. The service, launched in April 2005, now allows one to file job applications, pay life insurance premia, or even check online if one has any fine outstanding for traffic violations. This means no more waiting in long queues multiple times in a month for paying bills. The project has now been extended to nine additional cities in the state under Karnataka One. The earliest of these e-governance initiatives, which started in the late 1990s, is Bhoomi (meaning land), which deals with the crucial area of land records. Transparency in land record management takes away discretion from civil servants at operating levels. Bhoomi allows for online delivery and management of land records in Karnataka. The Revenue Department in Karnataka, with the technical assistance from the National Informatics Centre (NIC), Bangalore, has built and operationalised the Bhoomi system throughout the state. Bhoomi has computerised 20 million records of land ownership of 6.7 million farmers in the state and has reduced the power of public officials by introducing provisions for recording a mutation request online. Farmers can now access the database and are empowered to follow up. In the Bhoomi project, a printed copy of the record of Rights, Tenacy and Crop (RTC) expand can be obtained online by providing the name of the owner or plot number at computerised land record kiosks in 177 taluk offices, for a fee of ~15. A second computer screen faces the clients to enable them to see the transaction being performed. A farmer can check the status of a mutation application on touch-screen kiosks. If the revenue inspector does not complete the mutation within 45 days, a farmer can approach a senior officer with his grievance. Old habits die hard These are all impressive strides in e-governance, but if there is one complaint, it is that Sakala is yet to gain large-scale traction. People are still to be completely familiarised with the system. Currently, government departments aggressively monitor and chase documents or applications through the SMS system. There are many instances, particularly in cases involving driving licences and the transport department, where people are repeatedly intimated via SMS. Pay your fee and avail of your service, say government officials today, but sometimes citizens find it hard to adapt to this new world. Laments Goyal: “They (people) take their own sweet time. It’s applicable to us and not to citizens. Chase is now in the reverse manner.” With 118 additions to its latest governance initiative, Karnataka officials are now more accountable to people. So, why is it that citizens are not becoming proactive? E-governance initiatives now allow Bangaloreans to avail of basic services without having to deal with an unwieldy bureaucracy POWER TO THE PEOPLE |While Karnataka has become famous for corruption, a wave of e-initiatives is enhancing governance |From ordering a ration card to requesting a birth certificate to paying a traffic fine, citizens can do all of these online |Sakala, or the Karnataka Guarantee of Services to Citizens System, an Act introduced this year, has begun to check corruption and harassment of citizens by officials across departments |BangaloreOne allows a citizen to fill out job applications, pay life insurance premia as well as traffic fines online |Bhoomi is another service that deals with the transparency in land-record management |Bhoomi has computerised 20 million records of land ownership of 6.7 million farmers in the state |Officials are liable to be asked for compensation for delayed services, thus increasing accountability |Interestingly, citizens are not reacting to these services as quickly as the government would have liked Ex-banker’s girlfriends doubled money on insider trading BLOOMBERG London, 16 October Two girlfriends of former Mizuho International Plc investment banker Thomas Ammann reaped returns of more than £2 million ($3.2 million) trading on illegal tips about Canon Inc’s acquisition of OCE NV, prosecutors said. Christina Weckwerth took in nearly £2 million after investing ^1 million ($1.3 million) before the deal in 2009, Amanda Pinto, a lawyer for the UK Financial Services Authority, said in opening arguments at a London criminal court today. Jessica Mang, aBritish chiropractor, made £65,000 on a £39,000- stake. “These two women managed to almost double their money by trading on just one stock,” Pinto told the jury. “Each of the girlfriends considered Thomas Ammann to be their boyfriend, and neither knew of the other.” Both paid half the profits they made to Ammann, Pinto said. Weckwerth was charged with one count of insider trading between April and November 2009, and Mang with one count of insider trading in November of that year. They have pleaded not guilty. Insider trading in the UK can be punished by as much as seven years in prison. Canon, the Tokyo-based maker of cameras and photocopiers, agreed to buy OCE in a^730-million deal in November 2009. Ammann, who worked for the Mizuho mergers and acquisitions team that advised Canon on the deal, pleaded guilty earlier this year to insider trading and encouraging both women to commit insider trading, Pinto said. The banker was in financial difficulties and was living beyond his means, Pinto said. Weckwerth, a single mother living off a “very generous divorce settlement” of ^1.7 million, met him in 2008 on a dating website, the prosecutor said. “He had the inside information, they had the money,” she said. Weckwerth and Mang “provided the distance and made it harder to trace where or from whom the insider information came from.” Weckwerth, who has dual Cypriot and British citizenship and was training to be a psychotherapist during 2008 and 2009, had “invested conservatively” before meeting Ammann, Pinto said. Her trading in OCE shares “was quite exceptional” in comparison, she said. Mang, who now owns a chiropractic clinic in Surrey, England, met Ammann at a nightclub in July 2009, Pinto said. When he first asked her to invest, she didn’t have the money or a trading account. He told her she would get returns as high as 80 per cent, so she borrowed money from her mother and on credit cards and opened a brokerage account. Mang bought OCE shares and then sold them five days later for almost twice what she invested, Pinto said. She wrote in her personal diary that Ammann advised her to invest, according to the prosecutor. Two girlfriends of former investment banker Thomas Ammann ( above )reaped returns of more than $3.2 million trading on illegal tips about Canon Inc’s acquisition of OCE NV. PHOTO: BLOOMBERG NSE chief to head world bourses panel BS REPORTER Mumbai, 16 October Ravi Narain, managing director and chief executive officer (CEO) of the National Stock Exchange, is set to take charge as chairman of the working committee of the World Federation of Exchanges (WFE). At its annual meeting in Taipei yesterday, WFE elected Andreas Preuss, Deutsche Börse AG’s deputy CEO, as WFE chairman. Thomas A Kloet, chief executive of TMX Group, would be vice-chairman of WFE’s working committee. Preuss, who would succeed Hong Kong Exchanges and Clearing’s Ronald Arculli, would hold the post for two years. He takes charge at a time when the business model of stock exchanges across the world is seeing structural changes — competition has intensified and the regulatory framework is swiftly evolving. Key strategies global exchanges are pursuing include bringing the over-thecounter (OTC) market on their platforms. The Singapore Stock Exchange has already cleared OTC derivative products. Other priorities for exchanges include partnerships on various fronts like cross listing of products and technology. “Changes to regulatory frameworks around the world have led to considerable structural changes in our business. As exchange organisations, we can further improve how we articulate our roles as market organisers and communicate our importance for the real economy,” Preuss said. “Close consultation and cooperation between regulated exchanges is essential if our voice is to be heard by policymakers and regulators. I am, therefore, looking forward to working with the WFE as a globally recognised and influential exchange organisation,” he added. Hüseyin Erkan, chairman of the Istanbul Stock Exchange, would take charge as CEO of WFE, while Peter Clifford would be chief operating officer. The WFE plans to use its vast network of exchanges to promote a consistent and engaging dialogue on pressing market issues across the world. Ravi Narain, MD and CEO, National Stock Exchange