Authorities appear clueless even after repeated incidents of ships grounding, colliding and sinking off the country’s coast. Now activists and citizens have raised some serious questions on the state of our naval security
The shipping authorities are all at sea about the ship MV Rak's long wait and subsequent sinking near Juhu. There seems to be little headway with the investigations, even though incidents of ships grounding, colliding and sinking at Mumbai have been repeated since a long time. Activists and citizens have raised serious questions about the state of our naval security.
"There is an urgent need for upgrading the surveillance system. How was it that the ship was anchored near the beach since 21st July and nobody took a note of it?", asked Captain Ashok Malkani, shipping veteran. The ship was on a voyage from Indonesia to Dahej in Gujarat, just 20 hours away from Mumbai.
"It is most strange for the vessel to stay at anchor off Mumbai, when it could have reached and docked at her intended port of discharge, received her provisions and spares, and unloaded all her cargo," Mr Malkani told Moneylife. "The vessel would have lain in good safety, instead of weathering rough monsoon sea conditions for 14 days."
A leading Marathi daily, quoting unnamed sources, revealed that before MV Rak was sunk, it was illegally provided with oil supply and a few Customs and Mumbai Port Trust officers were complicit in this activity.
What makes the case of Rak more intriguing is that it is not a standalone case. Equally strange is the case of MV Pavit, which was abandoned off the Oman coast on 29th July. It drifted off, grounded near the Juhu-Versova beach on 31st July and subsequently sank. The crew was rescued by a US naval ship before being brought to port by an Indian merchant vessel. Experts believe that the ship purposefully sank near Mumbai, because wind direction and other maritime factors indicated that it should have drifted off to the Gulf of Kutch. How it came to Mumbai remains a mystery.
There is the case of cargo vessel MV Wisdom, which was grounded near Juhu beach for almost a month this year. It became a tourist attraction, and was finally hauled back into the ocean on 2nd July after a salvage operation. Last year, MSC Chitra and MV Khalija collided off the Mumbai coast, which resulted in the oil spill that spread as far as Raigad and Elephanta. The captains of the ships kept blaming each other, and even now, little information is available as to how the collision happened.
"This is baffling," said EAS Sarma, former finance and power secretary, who is settled in Vishakhapatnam, the Eastern Naval Command base. He said, "The intelligence agencies and the authorities should look for patterns in these cases. All information must be collated centrally. And even if they say that they do not have enough resources or ships, what prevented them from making random checks? Usually, a lot of information comes out in such checks."
Commenting on the obvious lack of intelligence inputs in such cases, Mr Sarma suggested that the coast guards should involve the local people and the fishermen for getting information. He said that since fishermen go off to the sea daily and interact with a lot of people, they are a valuable source of information. If the authorities give them identity cards, a strong network can be established.
The environmental impact of these fiascos is also a serious issue. Oil continues to leak from Rak at the rate of 8-10 tonnes per day, as per the latest review report by the director general of shipping. The director general has declared that the oil streak has stretched up to 5-6 kilometres along the Alibaug shoreline.
Environmental activist Sumaira Abdulali told Moneylife, "The government is paying lip service, and not doing anything concrete. Oil is still leaking, and they are not using the appropriate technology." The Khalija-Chitra collision last year damaged the mangrove belt in and around the city; contaminating shores and threatening fishing activity.
MV Rak was a 27-year-old ship. Indian merchant navy veteran Veeresh Malik has raised the question on how an overage ship with improper documents was allowed entry into Indian waters. Most of the Indian vessels are on the verge of breaking down, said Mr Malik. While Western countries spend a lot on coastal security, the Indian government rarely beefs up its arrangements.
Ships which are more than 20 years old are not allowed in European or American waters. As per USA's maritime rules, a ship must inform the coast guards four days in advance and wait 1,000 nautical miles away from the coast, show the documents and then enter.
Captain Malkani, however, thinks that the strength of the monsoon should not be underestimated. He pointed out that all these incidents happened during the monsoon. "When the ship is anchored, the waves in the monsoon keep hitting the bottom which damages it. Indian shipping companies know this phenomenon of the monsoon. Ships coming from other countries should first upgrade themselves and understand the monsoon first to avoid such accidents," he said.
ETFs combine the advantages of index funds and stocks. But because they are bought through a bourse, they are exposed to the mercy of the market’s liquidity
Exchange-traded funds (ETFs) are becoming increasingly popular. And yet, investors may be buying ETFs without fully realising the downside of them-low liquidity that can play havoc with the price at which you buy and sell when the market is volatile.
ETFs are supposed to combine the advantages of both index funds and stocks. They are easy to use and can be traded in any quantity, just like stocks. ETFs provide diversification, market tracking, transparency of an index-based mutual fund and come at low costs. Prices for ETFs are determined continuously in exchange trading. Orders are executed immediately. ETFs can be traded at any time while the stock market is functioning. It is like investing in shares where you can theoretically buy and sell on a daily basis. That leads us to the flip side of ETFs.
One of the biggest negatives is precisely that you have to buy them through an exchange-and, therefore, you are at the mercy of the market's liquidity.
Low trading volumes in particular ETFs can lead to low liquidity. If a particular market is not as efficient as it should be, it will take time to match an ETF seller with a buyer. The bid-ask spread will be wide.
You could end up buying it at a premium and selling it at a discount.
Until an ETF becomes widely popular, this is common in thinly-traded markets.
And the more volatile the market, the wider is the bid-ask spread. Also remember, even the spread that does not look so wide in a normal market can widen dramatically in a volatile, especially a sharply falling, market. Let's look at some examples of thinly-traded ETFs.
The first Indian exchange traded fund-Nifty BeES from Benchmark Mutual Fund- tracks the S&P CNX Nifty Index, and is structured as an open-ended fund but unlike ordinary mutual funds, is listed on the NSE (National Stock Exchange) and trades like a stock. Each Nifty BeES unit is 1/10th of the S&P CNX Nifty Index value. Apart from NIFTY BeES, there is also Junior BeES (Nifty Junior Index) and Bank BeES (Bank Index), and yes, Liquid BeES (the world's first liquid ETF) and Gold BeES also.
But one of the most popular ETFs, Nifty BeES, is wide off the value of the Nifty index on which it is based. In the past two weeks, it has been off the Nifty by 2%-3% on an average.
Let's look at some more examples of thinly-traded ETFs.
The Hang Seng Benchmark Exchange Traded Scheme (Hang Seng BeES) is now traded on the NSE, brought to you by Benchmark Mutual Fund. If you try to buy it, you will find yourself to be a loner. There is hardly anybody buying and selling and so there is a huge gap between the bid-ask spreads. The impact cost will be high as indicated by the bid-ask spread of Rs36.28 (on an average). Similarly, Reliance Mutual Fund-Banking ETF (RELBANK), has a bid-ask spread of Rs20.08 (on an average). The average traded quantity for the past 10 days was just 113 units. UTI Mutual Fund's (UTI-Sunder) average traded quantity in the same period was just 82 units, with bid-ask spread of Rs135.65 (on an average).
Gold ETFs are very popular among fund companies. Every fund company is launching one. Beware of buying gold through ETFs. Many are thinly-traded. Religare Gold ETF's average bid-ask spread was Rs11.57 on the underlying value of 1gm of gold which was Rs2,429 at that time. For ICICI Prudential Mutual Fund's ICICI Prudential Gold ETF (IPGETF), the average traded quantity for the past 10 days was 626.7 units (average bid-ask spread was Rs23.54); for Axis Gold ETF (average traded quantity was 595 units for the past 10 days), the average bid-ask spread was Rs 29.8. Among the more liquid ETFs is Gold BeES from Benchmark Mutual Fund-Gold ETF.
As a result of the above scenario, if a buyer wants to buy some thousand units than he has to wait for a long time to get his buying price, or else he has to buy at a significantly high price. Conversely, if a seller wants to sell some thousand units than he has to wait for a long time to get his selling price while the market may fall further-or else he has to sell at a significantly low price.
"We had projected 9.5% (growth) for the 12th Plan and then we scaled in down to 9%... But we will definitely move to 8.5%, 8.6% or 8.7%," minister of state for planning Ashwani Kumar informed newspersons
New Delhi: Amid worsening of the global financial problems, the Planning Commission today said it may settle for a modest growth target of 8.5% to 8.7% during the 12th Plan period as against 9% contemplated earlier, reports PTI.
"We had projected 9.5% (growth) for the 12th Plan and then we scaled in down to 9%... But today I don't feel it will be 9%... But we will definitely move to 8.5%, 8.6% or 8.7%," minister of state for planning Ashwani Kumar told reporters here.
He was replying to a query on the likely impact of the current financial meltdown due to the downgrade of the US' sovereign rating by Standard and Poor's (S&P) and slowdown in major economies and their effect on India's growth target.
Though the government is yet to finalise growth targets for the 12th Plan period, the Planning Commission was contemplating to raise the economic growth target to 9% during the five-year period, up from 8.2% likely in the current Plan.
The Planning Commission is slated to finalise the draft Approach Paper to the 12th Five Year (2012-2017) plan during the month and send it to Union Cabinet for vetting.
Asked about the government's preparedness to deal with the spill-over of the US rating downgrade into the economy, Mr Kumar said: "The situation is being watched. The finance ministry is in constant touch with the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) and they are prepared to deal with the situation as it emerges. There is no reason to panic."
Mr Kumar said that despite problems in the US and the Eurozone, India's economic fundamentals remain strong.
He cited three factors-high savings and investments ratio, demographic dividend with India having the world's largest population of youngsters and the massive $1 trillion infrastructure development programme during the 12th Plan-and said they will ensure that the country's growth rate remain strong.
"There may be a little pressure on exports but India's real growth story is driven by internal demand and consumption and this will compensate for any decline in exports," he said.
The minister added that the fall in commodity prices as a result of the US rating downgrade could help India's fiscal deficit target.
"A very important factor of the situation in the global economy is the sharp decline in the oil and commodity prices, which will ease the pressure of our import bill, thereby enabling us to reduce the country's fiscal deficit to about 4.6% this year," he said.
The reduction in fiscal deficit, from 4.7% in the last fiscal would help the government to leverage capacity for mopping up resources for various projects, Mr Kumar said.
He said yesterday's announcement by the government to allow Qualified Foreign Investors to invest in mutual funds' equity and debt schemes would facilitate in increasing investments from overseas.
The minister further said that foreign investors are expected to make a beeline for India considering the economic downturn in the US and Europe.
Mr Kumar added that the government has taken a number of steps-including awarding 56 road projects worth over Rs63,000 crore in last two years-as part of its financial reform programme.
He, however, said that frequent disruption of Parliament by opposition parties and lack of consensus among the parties has prevented it from fulfilling others.