The GoM felt that as a pre-condition for the nod, Cairn or its successor should consent to paying cess on the all important Rajasthan block as well as agree to cost-recovery of Rs18,000 crore in royalty that state-owned ONGC pays on the fields
New Delhi: Recommending conditional approval for the Cairn-Vedanta deal, a Group of Ministers (GoM) on Friday said the two companies must agree to treating royalty on the mainstay Rajasthan block as cost recoverable, and agree to pay cess, reports PTI.
Sources privy to the deliberations said the GoM felt that as a pre-condition for the nod, Cairn or its successor should consent to paying cess on the all important Rajasthan block as well as agree to cost-recovery of Rs18,000 crore in royalty that state-owned Oil and Natural Gas Corporation (ONGC) pays on the fields.
Cairn should also withdraw arbitration proceeding it has initiated, disputing its liability to pay Rs2,500 per ton cess on its 70% share in the Rajasthan block.
The recommendation of the GoM headed by finance minister Pranab Mukherjee will go to the Cabinet Committee on Economic Affairs (CCEA) in two weeks time, oil minister S Jaipal Reddy told reporters after the 75-minute long meeting.
“It (GoM) has looked at various aspects of the ($9.6 billion) deal. It has taken a view on the matter. This view will be presented to the CCEA. The GoM is not going to meet again,” he told reporters here. “The recommendation was unanimous.”
He refused to any details of deliberations at the GoM.
Cairn will also have to seek consent of ONGC, which holds stake in 8 out of the 10 properties held by Cairn India in the country.
Also, Vedanta will need a security clearance from the ministry of home affairs.
Cairn holds 70% interest in the Rajasthan block but does not pay any royalty. It is opposed to cost recovery of royalty payments that ONGC makes on its behalf.
Meanwhile, ahead of the GoM meet, London-listed mining group Vedanta Resources said it has raised $1.65 billion (Rs7,425 crore) through private placement of bonds to part-finance its $9.4 billion acquisition of Cairn India.
Vedanta had in August agreed to buy at least 40% stake in Cairn India from its parent Cairn Energy Plc.
Cairn has refused to accept the requirement of partner consent even though five oil blocks it won under New Exploration Licensing Policy (NELP) explicitly provides for obtaining no objection from partners in case of change of ownership.
It holds 70% interest in the Rajasthan block but does not pay any royalty. It is opposed to cost recovery of the Rs18,000 crore royalty payments that ONGC has to make on its 30%, as well as Cairn's share of production. ONGC made the demand a month prior to the announcement of the Cairn-Vedanta deal in August 2010.
The CCEA had on 6th April constituted a GoM to look into the issue of conditional or unconditional consent to the Cairn-Vedanta deal.
Friday was the first meeting of the GoM which also comprised law minister M Veerappa Moily, telecom minister Kapil Sibal, commerce minister Anand Sharma and Planning Commission deputy chairman Montek Singh Ahluwalia.
Mr Sharma was unable to attend the meeting.
“We have taken up the matter in right earnest. We have taken a view at our level. The decision has to be taken by CCEA,” Mr Reddy said.
Solicitor General Gopal Subramaniam had in March opined that the government should not give unconditional nod to the deal and reaffirmed its views in a second opinion on 6th April.
The MLM company promises five-star travel packages on joining and lucrative compensation fees up to Rs4.5 lakh on its direct selling model
Travel Ventures International (TVI) Express, a multi-level marketing (MLM) company, is growing its base in India. And like in the recent case of another MLM, Speak Asia Online that is being investigated, some people are questioning the big promises on its business model.
TVI Express claims to be in the home-based direct selling business, inviting those interested, to become members on a payment of Rs15,500. Members get a seven-nights-eight-days travel package in 3/5 star hotels of their choice, from about 4,000 hotels that the company has a tie-up with. A new member also gets a personal portal, which is primarily a booking website.
The company has a business model which, it says, is compensation-based. The member can sell the travel package to two new members. Those two new members would in turn sell the travel package to a further two members each. This goes on till level four, which is known as "Traveller Board". On completion of Traveller Board the top member is paid a compensation of Rs31,000.
Beyond this there is an "Express Board" level. Once the Traveller Board is completed, members can enter the "Express Board". Here too, the number of new entrants increases, taking the original members a step ahead. On completion of "Express Board", the top member gets Rs4.5 lakh as compensation fees.
Members also get a 5%-10% bonus for every new member joining after he/she "cycles out of Express board". It also rewards the members with incentives "ranging from luxury cars to private jets and splendid villas in exotic locations around the world."
However, contrary to the company's claims, members have alleged that it is not paying the promised compensation. According to complaints posted on consumer forums on the Internet, the TVI Express business model is a scam, as many members who have increased their down line have not been paid any compensation.
TVI Express has a presence in many countries, among them the United Kingdom, South Africa, Canada, France, Germany and China.
Interestingly, according to a news report, The Bank of Namibia had warned people about investing in TVI Express and Holiday and Cash because they were operating in Namibia in violation of the laws.
When Moneylife called TVI Express, a company official said: "We abide by the laws. We follow all the rules and regulations. Ours is not an investment scheme; our business works on compensation fees which we pay to our members, who generate business for us. Those who work, earn. All these complaints are posted by our competitors who are jealous of our business growth."
Meanwhile, it has been reported that bank accounts in Singapore of Speak Asia, the online survey company which is being investigated, have been frozen, disrupting payouts to vendors, clients and staff.
Moneylife has consistently exposed the dubious claims made by such MLM companies that are promising high returns in a short span. (Read, "Stay on guard: Need to regulate MLM firms, websites, so investors don't suffer".)
The Reserve Bank of India has written letters to several banks because they have crossed the limit of instruments dishonoured under the Electronic Clearing Service (ECS); 3%-5% is the acceptable apex bank norm—in a few cases, the percentage of dishonoured instruments under ECS has been as high as 30% to 40%. However, this move is a warning, and may not lead to punitive action
The RBI (Reserve Bank of India) keeps a track on the percentage of dishonoured instruments cleared under the ECS of all banks.
The ECS allows paperless direct credit and debit transactions for all banks. However, if a bank crosses the limit of instruments dishonoured under the ECS, the RBI asks the respective bank for an explanation.
According to the apex bank, "3%-5% is the tolerance level on a daily basis. At times when it goes up to 30%-40%, we ask the bank to find out about the particular accountholders whose instruments are not being honoured under ECS." Often, banks are not aware about the accountholders who are repeatedly dishonouring their financial instruments as ECS is transmitted in bulk to the clearing house.
The main problem is that even if one of the ECS instruments bounces, then it affects two or three banks at a time. It affects the ECS user bank, the ECS beneficiary bank and the destination bank to which the amount has to finally get transferred.
In a letter addressed to ICICI Bank, a copy of which is with Moneylife, the RBI has said: "Please refer to paragraph 2 of the Minutes of the General Body Meeting of the Chennai Bankers Clearing House (CBCH) held on August 2, 2010 and our letter dated October 28, 2010 relating to return clearing discipline. In pursuance of the instructions contained therein, it has been decided to invoke penalty @Rs. 1000.00 per return for the month of January.
The number of MICR and as well as RECS (Dr) returns of your banks has since been generated from the system and the details are been given in annexure. After deducting the tolerance of 4% and 5% on MICR and RECS returns respectively, a penalty of Rs 39821000.00 (Rupees Three Crore Ninety Eight Lakh twenty One Thousand only) is proposed to be imposed on your bank for non-adherence to the return discipline. You are hereby advised to put forward your case as to why Rs 39821000.00 (Rupees Three Crore Ninety Eight Lakh twenty One Thousand only) shall not be imposed on your bank. Your response should reach this office on or before 15 days from the issue of this letter, failing which it shall construed that you have nothing to report and accordingly the Bank shall proceed with a suitable action."
We gather that several other banks have been pulled up in a similar fashion. Thus, the RBI has defined a definite tolerance level beyond which it would charge a bank a certain fine on each rejection. That is why the RBI has threatened to charge a Rs3.98 crore fine for ECS dishonour beyond acceptable limits on ICICI Bank.
Moneylife spoke to the RBI for clarification. The central bank spokesperson said, "There were several banks that were not adhering to what we call 'return discipline' in Chennai and the notice was issued to all of them. The fine amount, though, varied. The purpose of the show-cause notice was to shake the banks out of complacence and to ensure that the rate of 'returns' fell within our comfort zone (and not really to collect fine amounts from them). There is significant improvement in the position now and we are not pursuing the penalties with the banks."
It was only after receiving the letter from the central bank that banks started screening accounts and transactions and are stopping all ECS debits.
ECS is a mode of electronic funds transfer from one bank account to another using the services of a clearing house. This is normally utilised for bulk transfers from one account to many accounts or vice-versa. This facility can be used both for making payments like distribution of dividend, interest, salary, pension, etc. by institutions or for collection of amounts for purposes such as payments to utility companies (telephone, electricity), or charges (house tax, water tax), etc or for loan instalments of financial institutions/banks or regular investments of individuals.
The ECS user bank is called the 'sponsor' bank under the scheme and the ECS beneficiary accountholder is called the ECS 'beneficiary' bank. The destination account holder's bank or the beneficiary's bank is called the 'destination' bank.
The beneficiaries of regular or repetitive payments can also request the paying institution to make use of the ECS (Credit) mechanism for effecting payment.