Companies & Sectors
Defence deals worth Rs. 3.1 lakh crore cleared, but zero movement on ground
In the 17 months that the NDA government has been in power, the Defence Acquisition Committee (DAC) that vets all big-ticket deals has cleared projects worth a whopping Rs. 3.1 lakh crore ($47 billion), but none of these are anywhere near closure.
 
Against this, just Rs.1.8 lakh crore has been allocated in the budgets for 2014-15 and 2015-16 under the capital expenditure head for purchase of hardware.
 
Thus, it would seem that despite defence ministry's grandiose plans, money is yet to be allocated for a substantial portion of the acquisitons. But as is the case in most defence acquisitions, allocation is not enough.
 
Ironically, the only big ticket acquisition by the present government has been that of 22 Apache and 15 Chinook helicopters for Rs. 20,000 crore ($3.1 billion). The deal was signed during Prime Minister Narendra Modi's visit to the United States last month although the negotiations had been cleared by the previous UPA government in 2013.
 
The manufacturer, Boeing, as also the US administration, extended the validity of the price offer 13 times before the Cabinet Committee on Security (CCS) accorded its approval just before Modi left for the US.
 
This state of affairs doesn't surprise noted security expert C. Uday Bhaskar.
 
“Approval by the DAC is procedurally important but not very substantive. DAC is a case of approval in principle and the proposal is then taken to the CCS. Subject to availability of funds in the given fiscal, CCS approval is accorded. The track-record here is patchy and there have been many instances where the defence ministry has returned large sums of money from the capital head year after year despite a glaring inventory gap," Bhaskar, the director of the Society for Policy Studies (SPS), told IANS.
 
"This is a gray area that has existed for some 20-25 years. North Block (that houses the finance ministry) controls the purse strings and the PMO (Prime Minister's Office) decides the priority of funding. It is a reality that a low priority is accorded to to defence," he said. 
 
Bhasker, who was in the defence ministry for several years said: "I recall one raksha mantri (defence minister) saying at a meeting that he was helpless and had to surrender funds allocated to the ministry to the exchequer to balance the book," Bhaskar said, adding "Generally, there is a flurry apropos defence acquisitions before the election." 
 
According to him "everything is overwhelmingly arbitrary."
 
Often bureaucratic delays in finalising a deal lead to a situation where vast sums of money are returned, sometimes as high as Rs.8,000 crore, says Bhaskar. "There is no accountability for delays. Nine officials of varying seniority can delay or cancel an approval and not one has the conviction or domain expertise to accord approval," Bhaskar added.
 
Take the manner in which negotiations were conducted for 126 medium multi-role combat aircraft (MMRCAs) for the Indian Air Force (IAF).
 
The RfP (request for proposal) was floated in 2007 and six manufacturers responded. Six aircraft were put through a series of rigorous tests before it was announced in January 2012 that the French Rafale had got the nod.
 
Price negotiations proceeded at an agonisingly slow pace and finally stalled on the "ownership" factor - with whom would the buck stop for the 90 aircraft to be manufactured in India by Hindustan Aeronautics Limited (HAL). Thirtysix were to come in fly-away condition from France.
 
Then, during Modi's visit to France in April, it was announced that India would purchase 36 jets and that the MMRCA proposal had been dropped. It's been six months since then but no closure is in sight.
 
Simultaneously, the IAF has said it needs at least six more squadrons of MMRCAs to bolster its depleting fleet, which now consists of 35 squadrons against a sanctioned strength of 42.
 
Despite a flurry of activity, the following are still stuck in the pipeline:
 
*A Rs. 9,000 crore tender for five fleet support ships for the Indian Navy.
 
*The acquisition of six conventional submarines for Rs. 50,000 crore to augment the aging and depleted submarine fleet.
 
On submarines, a committee was formed soon after to identify the shipyard for production. While the committee's report was submitted to the ministry in July this year, a tender, which was supposed to be issued in a month, is yet to be issued. When submarines were cleared by the DAC, the aim was to make all of them in a year's time. However, a year since, even the tender is yet to be floated.
 
There are several other projects that have been discussed but await implementation:
 
*The replacement of Indian Air Force's fleet of aging Avro transport aircraft for Rs. 11,930 crore, where the Airbus-Tata consortium is involved.
 
*Russia's offer to build Kamov Ka-226T helicopters under the Make in India initiative.
 
*Replacing L70 and Zu 23mm guns of army's air defence under Buy-and-Make category. Army will get 428 guns for Rs. 16,900 crore.
 
*An upgrade of weapons and sensor suite of the Delhi and Talwar class ships during their mid-life refit for Rs. 2,900 crore. Six ships will see new surface-to-air missile system that would be bought from Russia, besides new radars.
 
Thus, while some private shipyards and private companies have been shortlisted for manufacturing warships, submarines and field guns, nothing can move till the CCS gives its approval after getting the finance ministry's nod. 
 
Till then, the Make in India initiative in the military hardware sector will remain a distant dream.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Credai protests reach the ears of the government

Maharashtra chief minister Devendra Fadnavis has directed the state administration to implement an automated Development Control Regulation (DCR) permission system over the next two months

 

As planned, Confederation of Real Estate Developers' Association of India (CREDAI) carried out its protests in the aftermath of the suicide of Cosmos Group chief Suraj Parmar in Thane, Maharashtra. A large gathering of builders, contractors and members from allied industry marched to the Thane Municipal Corporation in memory of Parmar and to protest against administrative delays and the misuse of obsolete laws and the RTI Act. In Navi Mumbai, too, a delegation from the Builders Association of Navi Mumbai took a demonstration march to the offices of Cidco and the Navi Mumbai Municipal Corporation. A builder delegation from MCHI-CREDAI called on Maharashtra chief Minister Devendra Fadnavis and expressed concern over the administrative sanction process hitting the real estate sector.Housing minister Prakash Mehta was present at the meeting.

 

Fadnavis on Tuesday directed the state administration to evolve and implement an automated Development Control Regulation (DCR) permission system over the next two months. The system would not need human interventions and it would leave no scope for blackmailing of developers by politicians or officials.

 

A case of abetment and under the Prevention of Corruption Act has been registered against yet-to-be-identified political functionaries and civic officials in the suicide case of builder Suraj Parmar, according to Economic Times. The police have revised the accidental death report they had filed in the suicide case last Wednesday. Police claimed they have secured sizeable leads. Police have seized mobile phones, laptops and other gadgets used by Parmar.

 

Parmar, in his suicide note, has written that builders have no answers to customers' queries on completion of projects due to stays and notices issued to them by the civic body. He stated that local corporators, in nexus with civic officials, get notices sent to builders and in return, they have to pay at every turn. In the note, he has mentioned he was not under any kind of debt.

 

In Bengaluru, hundreds of personnel from the real estate industry took to the streets in protest. As part of an All-India protest against the “business environment” for real estate developers, CREDAI-Karnataka too closed their offices on Tuesday. The protestors marched to Vikasa Soudha, where a memorandum was submitted to Bengaluru district in-charge Minister Ramalinga Reddy. Among the demands presented in the memorandum was to improve “ease of business” for the developers and for faster approvals. With 30% of the sale price of flats going in taxes and cesses, realtors said they were put in a bind due to the inflating costs of constructions. Similarly, interference from various departments, officers and archaic by-laws was making development of land difficult, said the protestors.

 

In Pune also, there were extensive protests from the real estate industry.

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COMMENTS

Vikram Dhotre

1 year ago

Do hope the government also lends ears to the needs of buyers and implements the Real Estate (Regulation and Development) Act.

SAT Order Exposes SEBI’s continuous bungling with Osian’s Art Fund
From not being sure about the applicability of its own regulation to issuing bizarre order of refunding money with 10% interest, SEBI’s repeated bungling under three different chairmen is shocking
 
The Securities Appellate Tribunal (SAT) on Tuesday set aside part of an order of Securities and Exchange Board of India (SEBI) that directed Osian’s Connoisseurs of Art to refund the unpaid amount of Rs102 crore raised from investors along with interest at 10% per annum. The Osian’s Art Fund was a CIS (Collective Investment Scheme) promoted by Neville Tuli, an art dealer. CIS is any scheme made by any company under which the contributions by investors are pooled, to receive profits. 
 
The tribunal held that art funds came under the regulator’s (SEBI) jurisdiction and that Osian’s Art Fund was indeed a CIS. But the tribunal asked the regulator to re-examine its order to refund money. It said the regulator had not explained why Osian’s Connoisseurs of Art needed to return money to investors since the scheme neither offered guaranteed returns nor offered interest on invested amount. While passing this order, SAT has exposed how SEBI has repeatedly bungled in handling this case. Here is the sequence of events that shows how pathetic has been SEBI’s record in the Osian’s case.
 
Before the Scheme was launched: Osian’s Art Fund was launched in 2006. Osian claims in an affidavit that: “Prior to the launching of the scheme the appellant had formal meeting with SEBI’s Executive Director Pradeep Kar  on February 15, 2006 and also had informal discussions and correspondence with SEBI on the question as to whether the scheme would attract registration under any of the regulations framed by SEBI. However, no response was received by the appellant from SEBI in that behalf. The SEBI chairman at that time was M Damodaran.
 
After the Scheme was launched: SEBI had begun its investigation of Osian in 2007, issuing a show cause notice to Osian on 12 October 2007. However, shockingly, SEBI officials went to sleep after issuing this show cause notice. Even as the show cause notice was pending, on 13 February 2008 SEBI had issued a press release,  stating that Art Funds/Schemes were CIS and  that  floating  such  schemes  without  obtaining registration  from  SEBI  would  be  in  violation  of Section  12  of  SEBI  Act  read  with  Section  11  and Section  AA  of  SEBI  Act.  In spite of  the  press release  the  appellant, Osian,  has  failed  to  apply  for  and obtain registration under CIS Regulations. Once again SEBI kept quiet. Osian was allowed to operate as it is. M Damodaran was the SEBI chairman till 18th February 2008.
 
After the Scheme ended: The scheme closed in 2010 and Osian was paying back only a part of the money and only selectively. One of them was A. K. Muthuswamy, of Chennai. He complained about Osian to SEBI. In shocking reply, SEBI told him on 31 January 2011 that the scheme was not covered under CIS and therefore, the investors, who have invested in the scheme of the appellant, cannot seek redressal of their grievances from SEBI. Remember, a few years ago SEBI had issued a show cause notice and also issued a press release about Osian being an art fund! At this time, the SEBI chairman was CB Bhave who left office in February 2011.
 
The matter went to the SAT. On 29 November 2012 SAT said that SEBI’s 31 January 2011 communication to Muthuswamy was wrong and directed SEBI to re-examine the issue in accordance with law. By an order passed on 15 April 2013, SEBI held Osian guilty of sponsoring and managing a CIS without obtaining certificate of registration from SEBI, in contravention of Section 12(1B) of SEBI act and Regulation 3 of the SEBI’s (Collective Investment Schemes) Regulations, 1999.  By that order, Osian was directed to wind up the CIS and refund the monies collected but not paid to the investors. In addition, Osian was also directed to pay the amount of profits/income earned that is due to the investors as per the terms of its offer or pay interest at the rate of 10% per annum on the amount invested from the date of investment till the date of refund, whichever is higher. The SEBI chairman this time was UK Sinha, who is expected to end his term a little later from now.
 
Osian went to the SAT against this order arguing that it was not a CIS. SAT has now rejected this contention. “The scheme floated by Osian fulfils all the conditions set out Section 11AA(2) of SEBI Act and therefore, the decision of SEBI in holding that the scheme floated by SEBI falls within the scope of CIS cannot be faulted”, said the SAT Order.
 
However, the SAT Order also points out, “SEBI does not find fault with the scheme of Osian which neither offered guaranteed return nor offered interest on the amount invested. In such a case, on what basis Osian is directed to refund the amount invested with interest at the rate of 10% per annum is not set out in the impugned SEBI order.”
 
SAT goes on to say “…for the error committed by SEBI in misconstruing its own regulations and for the inordinate delay on part of SEBI in arriving at correct conclusion, whether Osian can be penalised by directing to refund the amount with interest at the rate of 10% from the date of investment needs consideration, especially when the scheme has come to an end in the year 2010 and the terms of the said scheme neither offered guaranteed return nor offered interest on the amount invested.”
 
SAT has said that although regulation 65 of CIS Regulations empower SEBI to direct refund with interest in appropriate cases, how in the facts of present case, directing refund of the amount invested with interest is justified, is not set out in the SEBI order of 2013.
 
Hence, the SAT ruled that it is setting aside the directions contained in the SEBI order, to the extent that it directs Osian to refund the monies at 10% interest per annum. Instead, the SAT Order has directed SEBI to decide those issues afresh after affording an opportunity of hearing to Osian and AK Muthuswamy.
 
You may also read the earlier articles on Osian:
 
 
 
 
 
 

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COMMENTS

Bosco Menezes

1 year ago

Thanks for the article link, VSwami

Rajendra M Ganatra

1 year ago

I am not surprised at this otherwise surprising gaffe from SEBI. Organisational culture often trickles down from the top. Trickle down effect from at least one SEBI name mentioned in the note could only lead to this muck!

vswami

1 year ago

OFFHAND
In a manner of critical viewing, the point of concern / bone of contention of a reader in his comment herein, as read and understood, rightly so, may be noted to be in -line /on the same wave length as of the posted comment @ http://feedproxy.google.com/~r/IndianCor... (SEBI’s order levying record penalty – some concerns) – also shared on Facebook.
A repeat instance of lack of proper vision. blatantly wanting wisdom in the proverbial "bark(ing) up the wrong tree", so to say the least.

Bosco Menezes

1 year ago

The Unitholders were in no way involved with the running of the fund. The people running the fund were supposed to be the experts, who understood how the Art Market functioned.
The Final NAV was thus declared by the Osians Art Fund without any involvement or input or pressure from or consultation with the unitholders. It was solely decided by the Trustees & Unitholders had no say in it. If they had declared a negative Final NAV, unitholders would have been very disappointed no doubt, but would have had no alternative but to accept the same, as returns were not assured.
But after the fund declared the Final NAV entirely at their discretion, to not then pay it out to the unitholders is quite unforgivable.
I have heard some talk about buyers of the Art reneging on their commitments. To this I can only say that it is for these experts who were running the fund to have known that it was conceivable that buyers of the Art might renege on their agreements, and if so, they could have withheld the declaration of the Final NAV till all payments were received. They , in all their wisdom & expertise declared the Final NAV, it is their responsibility therefore to see that the NAV is paid to the unitholders (with some interest for the delay).

Vaibhav Dhoka

1 year ago

SEBI Chairman are bureaucrats and they function in typical style as seen in all three bosses tenure.They have nothing to loose.It is investor who is always on receiving end.SEBI and both exchanges should give details of individual complaint and their settlement ration month wise.Then one can judge SEBI's actions.The general belief is ordinary investor never gets relief from SEBI and stock exchanges.

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