Former bureaucrat EAS Sarma learns that the land was regularised by the state revenue department despite the Lokayukta report which asked the revenue secretary to immediately take action on the matter
EAS Sarma, former power and finance secretary to Union government, has written to the Andhra Pradesh government, asking for permission to prosecute a minister and a bureaucrat who have allegedly sanctioned a building project in the coastal regulation zone (CRZ). Mr Sarma has asked the Andhra Pradesh Pollution Control Board (APPCB) authorities to cancel the government order and to take the guilty to task.
“I understand that the developer in this case, Clover Associates, has approached APPCB/ State Level Environment Appraisal Committee (SLEAC) for clearance for the illegal building complex. I request you not to consider the application for CRZ clearance as the land in question belonged to the government and is appropriated by the developer through fraudulent documentation. It is akin to the infamous Adarsh Housing Society scam of Mumbai in which the Maharashtra chief minister had to step down,” Mr Sarma wrote.
Citing a Lokayukta order, Mr Sarma has pointed out that the government has been warned about the inaction of the state principal secretary at the revenue department against taking action on the regularisation of two 2,700+sq mt plots in the CRZ area.
The Lokayukta report said, “The joint collector found that certain lands declared as surplus and vested with the government were fenced. On verification, it was found that the said lands were regularised by the revenue department relying upon the only document i.e., unattested photocopy of municipal tax passbook and it was referred to municipal commissioner, Greater Vishakha Municipal Corporation (GVMC) for authentication. On perusal of the connected records, he found that the said pass book; said to be issued in favour of Kasi Naga Kanaka Brahmam; was fake and fabricated and the remittance entries did not pertain to the abovesaid assessments.” Mr Venkatapathy Raju was the other person involved with Clover Associates in the scam.
The report also says that the director general of the anti-corruption bureau recommended initiating departmental action against P Yerraiah, a special officer who gave the NOC for sale of the surplus land in question. However, the revenue department dropped all charges against the officer and the builders, and instead, issued another order regularising the surplus land in favour of Mr Raju and Mr Brahmam. The matter was unsuccessfully contested in the high court by the authorities. However, no further action was taken against the builders, despite the Lokayukta report, which asked the revenue secretary to immediately take action on the matter.
Mr Sarma says that documents of correspondence available show that the senior officers of the revenue department, the state revenue minister and a Union minister and their kin were granted posh apartments for the regularisation. “The site in question falls within CRZ and since the value of the building property (Rs50 crore) exceeds the prescribed limit of the powers of the state government, prior clearance from the Union ministry of environment & forests (MOEF) should have been taken. The construction activity undertaken has therefore been illegal on that ground alone,” he said.
Mr Sarma wrote in his letter, “I hope APPCB and State Level Expert Appraisal Committee (SLEAC) will exercise prudence in not allowing to the application here, as the land on which the building stands has been occupied irregularly, through dubious means. In case APPCB fails to accede I will be constrained to proceed against you before the court of law in due course. I am marking a copy of this letter to the office of the CM, chief secretary and MOEF to forewarn the state and central governments on how the building developer has bought time from the local authorities to get further approvals on the basis of misrepresentation and suppression of the facts.”
According to industry experts, it is a game-changing decision for the Rs29.5 lakh crore retail market, which is dominated by neighbourhood stores
According to industry experts, foreign direct investment (FDI) in multi-brand retail can be a game changer, in making Indian agriculture more competitive by addressing infrastructural constraints and reducing losses across the value chain. "The limited experience of retail sales by private sector has shown that not only does the consumer stand to benefit by availability of good quality agricultural produce, but also that farmers have greatly benefited due to an assured market and extension support. Modern retailers procure in bulk and thrive on reducing the inefficiencies in the supply chain bringing down the cost substantially for the consumers and getting a better deal for the farmer," said Rakesh Bharti Mittal, vice chairman and managing director, Bharti Enterprises Ltd.
This is a signal from the United Progressive Alliance's (UPA) intention to move forward with major key reforms as the union cabinet decided to permit 51% FDI in multi-brand retail and also to remove the 51% cap on FDI in single brand retailers. According to experts, this move would benefit large retailers like Pantaloon, Bharti Retail as well as consumer, who can expect prices to come down by 10-15% in large format stores. Retail giants will play a significant role in improving supply and distribution systems in the country with economies of scale, superior expertise and trained staff, feel the experts.
B Muthuraman, president, Confederation of Indian Industry (CII), said, "The introduction of FDI in multi-brand retail would benefit the consumers, producers (farmers) and small and medium enterprises (SMEs) and generate significant employment. This would open up enormous opportunities in India for expansion of organized Retail and allow substantial investment in backend infrastructure like cold chains, warehousing and logistics."
According to a retail report authored by Boston Consulting Group (BCG) and CII, current size of organized retail in India stands at close to $28 billion or 6%–7% of total retail market. The total retail market is estimated to grow to $1,250 billion by 2020, of which 21% would be organized. With added capital investments from key overseas players, the sector would have the potential to significantly impact the Indian economy, the report said.
In the past, Indian retailers like Pantaloon, have indicated an interest in partnering with global retailers. Currently, international retailers are already present in India through their cash and carry model (selling to other retailers and business establishments), where 100% FDI is allowed. Wal-Mart runs its cash and carry business in partnership with Bharti Retail, Tesco runs its cash and carry business in partnership with Trent, owned by the Tata Group.
The decision will be a game-changer for the estimated $590 billion (Rs29.50 lakh crore) retail market dominated by neighbourhood stores. Owners of brands like Adidas, Gucci, Hermes, LVMH and Costa Coffee can have full ownership of business in India.
In the wake of apprehensions that the decision would affect farmers and kirana shops, the government has added tough riders on the entry of multi-national companies in 53 cities with population of over 10 lakh. The big retailers would bring in minimum investment of $100 million, of which half should be in the back-end infrastructure like cold chains, processing and packaging. These players would have to source at least 30% of manufactured and processed products from small-scale units.
As per the BCG-CII study, farmers in India today receive a relatively small share of the end consumer price. As an example for tomatoes, farmers in India earn only 30% of consumer price while in more developed markets, this is in the 50%–70% range.
Govind Shrikhande, customer care associate and managing director, Shoppers Stop, said, "According to me this should not impact the small retailers as globally it has been proven that modern retail and self organized- mom and pop stores can co-exist in a growing economy."
In spite of favourable responses from the industry, the existing small traders are apprehensive of being pushed out of business by the retail giants. Nearly one million traders in Kerala will down shutters on 29 November 2011 to protest against the decision to allow 51% FDI in the multi-brand retail sector.
Allaying the fears of small players, Raj Jain, chief executive and MD of Bharti Walmart, said, "Organized retail and kiranas can very easily co-exist, as they do in both developed and developing economies around the world. In fact, our wholesale cash-and-carry stores 'best price modern wholesale' allows literally thousands of kiranas to flourish through access to quality, low-priced merchandise and produce, business training and much more."
Harsh Mariwala, president, Federation of Indian Chambers of Commerce and Industry (FICCI), said this is just the first step. He said, "Seeds have been sown but the fruits will be seen only if other policy initiatives are implemented immediately like adoption of Model APMC Act by all the states, and timely implementation of GST."
Confederation of All India Traders (CAIT), however, criticised the move terming it as ‘unfortunate’ and will prove to be much detrimental to Indian economy and trade. “The decision smacks of the unflinching love of the government towards the domestic corporates and MNCs. It can be termed as a bailout package for the domestic corporate houses,” CAIT secretary general Praveen Khandelwal said.
There are a host of global brands, including Adidas, Reebok, Gucci, LVMH, Hermes, Zara, Mango, Jimmy Choo, Salvatore Ferragamo, Jimmy Choo, Hamleys (toys), Marks & Spencer, OVS and Benetton, in India.
According to FICCI estimates, the Indian retail market is estimated to be around $600 billion, with the organised sector accounting for about 5%.
On an average, 8-9% of the promoter’s holding has been pledged during June 2009-September 2011 aggregating to 5.1% to total equity in September 2011, says ICICI Direct
On an average, 8-9% of the promoter’s holding has been pledged during June 2009-September 2011 aggregating to 5.1% to total equity in September 2011: ICICI Direct
On an average, 8%-9% of the promoter’s holding has been pledged during June 2009-September 2011, according to a report from ICICI Direct. In the quarter ended September 2011, the percentage of promoter holding pledged has increased to 9.5% from 9.1% in June 2011, whereas the percentage of total equity pledged has increased from 5% in June 2011 to 5.1% in September 2011. According to a Crisil report on the same subject, around 31% companies out of 1,214 listed ones have actually pledged shares of more than 50% of their paid-up capital.
While ICICI Direct has focussed on the increasing trend of pledged shares among promoters, Crisil has prepared a table on promoters who have pledged up to 80% of their holdings. Further, Crisil says that promoters of 31% of the 1,214 listed companies and with a market capitalisation of Rs100 crore, or more, have pledged substantial portion of their shareholding. The total pledge works out to Rs1.1 lakh crore worth of market capitalisation as on 18 November 2011.
In a falling market, pledging shares is disastrous both for promoters and investors. When market conditions are favourable, the method of pledging shares appears beneficial for promoters as well as lenders. The promoters get access to quick short-term financing, whereas lenders charge premium rates for this short-term financing arrangement. On the other hand, lenders have about twice the value of the loan as pledge of shares with a right to sell the shares if the promoter defaults in repayment, or if the value of pledged securities goes down.
The Sensex has corrected by about 20% in the last three quarters, resulting in an erosion of market capitalisation of stocks and, hence, the value of shares pledged for securing loans. In 2011, the capital markets have been highly volatile due to looming concerns of high domestic inflation, rising interest rates and tepid global economic environment. These concerns have triggered a fall in the stock prices creating pressure on the promoters who have pledged shares to make good the loss in the value of the collateral. However, investors, especially retail investors, are generally oblivious of such details, and eventually lose because of sharp fall in prices.
The ICICI Direct report gives a table of current market prices of such companies as on 22 November 2011, and investors have borne the brunt of the falling share prices and erosion in market capitalisation. Some promoters have decreased their percentage of pledged shares and have tried to solve the problem at their end and these companies have shown an improvement in three-month stock returns.
Hatsun AgroProd, where promoters have decreased their percentage of pledged shares by 4.1% quarter-on-quarter, has improved its three-month stock return to 10.4%. Strides Arcolab has improved its three-month stock return to 45.7%, after decreasing its pledged shares percentage by 1.5%. In contrast, Raj Oil Mills, where the promoters pledged shares percentage has increased by 58% quarter-on-quarter, has shown a negative three-month stock return of 45.3%.
The Crisil report has also given sector-wise data on companies with promoters, who pledge their shares, and it is observed that power generation, IT and ITeS, infrastructure, and pharma and healthcare companies have seen higher levels of pledging. ICICI Direct is silent on the sectoral distribution.