The finance ministry last evening had issued draft guidelines on GAAR but the PM, who now holds the finance portfolio, is yet to see the guidelines. They will be finalised only after the PM’s approval, the PMO said
New Delhi: Within 24 hours of the finance ministry issuing the draft guidelines on controversial General Anti-Avoidance Tax Rules (GAAR), the PMO appears to have distanced itself from the proposal saying that were not seen by prime minister Manmohan Singh and would be finalised only after his approval, reports PTI.
"These (draft guidelines) have not been seen by the prime minister and will be finalised with the approval of the prime minister, who holds the finance portfolio, only after considering the feedback received", the Prime Minister's Office (PMO) said in a release.
The finance ministry last evening had issued draft guidelines on GAAR-a budgetary proposal to check tax evasion-to seek feed back of the stake holders.
The draft guidelines seek to address the concerns of the investors over misuse of the tax proposal. Besides other things, it said that there would be a threshold limit for invocation of GAAR and it would apply on income accruing after 1 April 2013.
In view of the widespread protest against the proposal, former finance minister Pranab Mukherjee postponed its implementation by a year to April 2013.
IRDA’s action in slapping stringent penalties on two of the biggest names in the sector has gladdened the hearts of consumers battling misselling and escalating costs. Record penalties should deter insurers straying from their responsibilities
The Insurance Regulatory and Development Authority (IRDA) order against HDFC Life makes it the highest penalty of Rs1.47 crore imposed on any insurnace company and is significantly higher than the Rs1.18 crore fine imposed on ICICI Pru Life a few weeks ago. Both are substantially higher than the penalties in the past, which used to be in the range of Rs5 lakh to Rs20 lakh, which were not even a slap on the wrist for large companies.
On 28th June, IRDA imposed a penalty of Rs1.05 crore on HDFC Life for unfairly rejecting 21 death claims based on a 90 day waiting period clause. The regulator has imposed a penalty of Rs5 lakh for each of the 21 death claims that had been wrongly rejected on the grounds of it having occurred in the 90 day waiting period. IRDA has pointed out that the clause had no business to exist as per its directive for "file and use" clearances of insurance products.
The IRDA action signals that high penalties will be a significant deterrant to companies that have been ignoring consumer complaints about wrongful rejection of claims. IRDA's policy of considering each death claim or each corporate agent related violation as separate case and make the insurer pay for each has allowed it to aggregate the fines to a significant number. And this may be just the beginning.
At Moneylife Foundation's seminar in May 2012, IRDA chairman J Hari Narayan had stated that "The malpractice is reducing and penalties are increasing. The level of penalty IRDA can levy is minimal and, hence, there is need for amendment to arm us with sharper teeth." Moneylife itself has forwarded several glaring examples to the regulator, some of them have even featured as our cover stories (How you can get ripped off by the staff of insurance company themselves!).
In HDFC Life's case, another breach for which it paid dearly was the heavy payment to corporate agents like HDFC Bank and HDFC Securities in the name of "skill building programme" and 'training'. This infraction resulted in penalty of Rs5 lakh per incidence amounting to a total of Rs35 lakhs. IRDA order states-"As could be noticed that the actual expenses on advertisement and publicity, etc incurred by those entities, is far less than the marketing expenses paid by insurer in case of HDFC Bank in all the years and HDFC Securities for the years 2009-10 and 2010-11. The submission of the insurer that taking into account only the marketing expenses incurred by these four corporate agents may not be a correct comparison and that the expenses under various other heads like printing and stationery, postage and telegram shall also be considered as these entities book the costs of acquisition under different heads is considered totally untenable."
A fine of Rs5 lakh was levied for availing services of individuals and corporate which were not licensed by IRDA for solicitation or procuring insurance business. Many charges were let-off with or without warning after hearing the insurer side.
Insurance customers know that this is only a way of rewarding their parent entities in order to hard-sell products to bank customers. In many case, it leads to mis-selling of products that are neither needed nor beneficial for customers, only so that the bank earns a high fee.
In fact, Moneylife Foundation, at an interaction with the IRDA chairman had recommended that the regulator should consider a ban on sale of insurance through banks and their relationship managers. While Mr Narayan was unwilling to consider such an extreme step, he did assure the Foundation that stringent deterrent penalties would certainly be considered. It is heartening to see that Mr Narayan has followed this up with a steep increase in penalties on two of the biggest names in the industry - there cannot be a bigger detterent than this.
Incidentally, Mr Narayan has also been the rare regulator who agreed to interact with consumers and listen to their issues, as well as those of insurance agents, first hand. This positive beginning promises better days for insurance customers in India.
Following the state of CSD canteens, ex-servicemen has decided to boycott the canteens on 15th July in protest
Canteen Stores Department (CSD), a unit of the Indian armed forces, runs canteen stores all over the country with an objective of providing consumer goods to serving soldiers and ex-servicemen at a price cheaper than prevailing market price. However, ex-servicemen (ESM) say that the quality of service provided by these canteens has gone down over the last two years. To highlight the deplorable state of CSD canteens, a boycott is being planned on 15 July 2012.
Cdr Ravindra Pathak (Retd) laments the current service levels of CSD canteen which has forced many ex-servicemen, who have served the country for a long time, to buy various goods from the open market, without any concessions. According to Cdr Pathak, canteen services are shifted now from Army (QMG Branch) to Ministry of Defence (MoD), which often ignore ESM community. As per new CSD Policy the ESM community is being alienated. This problem is not only for the veterans and the ESM, but also for the serving soldiers and canteen employees as well. Cdr Pathak highlighted and described the sad state of affairs of CSD below:
" Car sales through CSD Canteen have been stopped since last more than one year. There are only very few special cases which are accepted at MoD level by its civilian staff (as per MoD/QMG L/dt 22/2/12). A common ESM has no access to this facility (of scooter/ motor cycle), due to the problematic CSD Depot system. Similarly, there has been difficulty in procuring electronics items like TV, fridge, air-conditioners, etc.
" Against Firm Demand (AFD) purchase facilities are also choked up and facing the same CSD Depots system. Even though an ESM pays in advance for each item they purchase, the CSD Depots cites funds, or lack of it, as the main excuse. Thus, the ESM community is being forced to buy these items from the open market.
" The CSD General Store's purchase, stocking and sale has been clamped down financially at CSD Depot level and at URCs (Unit Run Canteens) as well. As a result, most of the URCs stock level has come down tremendously. The CSD often gives a deserted look after two-three days' sale. Most of the ESM do not reach their purchase quota ceiling limits. ESM strength is increasing but facilities level is decreasing day by day.
" ESM Welfare Dept (EWD) in MoD rarely proved useful to ESM community. It always opposes AFP in each and every case. To deny few hundred rupees concession to the ESM community, the MoD is spending lakh of rupees to contest in the Supreme Court. EWD plays no positive role on their Grievances and appeals.
Cdr Pathak says that the bureaucracy is in the habit of blaming the ESM community for misusing the facilities. However, he notes that the staff of MoD sits in Delhi and enjoys all CSD/liquor facilities, while a braving soldier posted in Siachen is also entitled to the same facilities. He feels that the Armed Forces Personnel (AFP) are one of the most dedicated lot but are still dependent on others for their most deserving welfare measures, and the same would apply to the ESM community. A letter had been sent to the Joint Chairman, Chief of Staff Committee residing in South Block, to restore the sanctity of CSD and bring back the hassle-free service available to the ESM, and put their operations into the hands of the army, particularly ESM rather than the MoD.