Citizens' Issues
Internet search engines block info on sex determination tests
The government on Monday informed the Supreme Court that the three major search engines -- Microsoft, Google and Yahoo -- have agreed to block ads commercially promoting sex determination tests.
 
The government told the bench of Justice Dipak Misra and Justice C. Nagappan on Monday that in compliance with the provisions of the statue prohibiting pre-natal sex determination tests, the facility to access information on such tests by using certain keywords stands blocked.
 
The apex court was also given a list of the keywords, which can no more be used for accessing information on sex determination tests.
 
The bench said that the search engines would have an in-house mechanism to block access to advertisements on sex determination tests through keywords, and the same would be conveyed to it.
 
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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Unspent money for Dalits/ tribals, USD 42.6 bn = 8 times agri budget
It was raining heavily last monsoon when Heerabai's youngest child, Seshkumari, 4, collapsed with a fever. The family could only watch helplessly as her temperature soared and she turned delirious late night.
 
The nearest primary health centre for Pachkol, Heerabai's village in Chhindwara district in south-west Madhya Pradesh, is 25 km away. And every monsoon, the swollen Bhagbhel river floods the road linking the village to the health centre. If you fall sick, said residents, you have very little hope of finding any medical help.
 
"My daughter couldn't even recognise us as the fever got worse at two in the morning," recalled Heerabai, 30, lean and noticeably weak. That morning, she lost her daughter.
 
Heerabai and her three surviving children belong to Bhariya community, classified as a Particularly Vulnerable Tribal Group (PVTG). Her tragedy is the consequence of a 44% shortfall in the healthcare infrastructure in the tribal areas of Madhya Pradesh. This is despite the fact that, last year, the state government had left in hand Rs4,000 crore allocated for tribal welfare.
 
IndiaSpend's investigations, through a series of right-to-information (RTI) requests, reveal that over the last 35 years, Rs2.8 lakh crore ($42.6 billion) set aside to improve the lives of scheduled castes (SCs) and scheduled tribes (STs) by way of measures like mid-day meals, scholarships and crop insurance was simply not spent.
 
NITI Aayog, which monitors these funds, verified the figures calculated by IndiaSpend. However, CEO Amitabh Kant distanced the organisation from the issue of inadequate fund utilisation. "We are just (the) monitoring agency for the funds and it's the states and ministries that have to spend more. But we will step up the monitoring and the present government is working on it," he told IndiaSpend.
 
The unspent amount -- either lapsed or given back to the Centre -- is eight times larger than India's agriculture budget, enough to fund India's rural road construction projects for the next 15 years, and larger than the gross domestic product of Serbia, Nepal or Jordan. If India were to distribute the Rs 2.8 lakh crore among all of India's 250 million STs and SCs, each would get Rs 11,289.
 
The unspent Rs2.8 lakh crore falls under two funds: Tribal Sub Plan (TSP), started in 1974-75, and Scheduled Caste Sub Plan (SCSP), begun in 1979-80, to channelise funds from general budgets to STs and SCs.
 
As per guidelines, a part of the budget -- proportionate to at least the population of SCs and STs -- at both central and state levels is to be set aside for these marginalised sections. The current population of SCs and STs in India is 16.6 per cent and 8.6%. So, 16.6% and 8.6% of the Union budget should be allocated to SCSP and TSP, respectively. The same applies to the states too.
 
Not just that, each ministry, whether state or central, has to keep aside the same percentage of their total funds for SCSP and TSP to carry out individual, family or habitat development works and welfare schemes for SCs and STs.
 
For instance, the Human Resource Development Ministry has to set apart funds under the two strategies for building schools, providing nutritious meals and scholarships and other similar measures for SCs and STs. Similarly, the Agriculture Ministry has to set aside funds for providing subsidised seeds and fertilisers and crop insurance to SC and ST farmers.
 
The funds are "non-lapsable" as per the guidelines issued in 2006 and 2014 by the erstwhile Planning Commission, now NITI Aayog. But low spending has crippled the effort. Records show that no matter which party is in power, SCs and STs rarely benefit from these funds.
 
While Andhra Pradesh, Uttar Pradesh and Punjab top the list for SCSP funds remaining unspent for 2005-14, Jharkhand, Odisha and Andhra Pradesh lead in TSP.
 
Also, the percentage of unspent amount is alarmingly high. For instance, it is as high as 61% or Rs 4,643 crore for Telangana in 2014-15. The real unspent amount will be even higher, because data on expenditure are not available for many years with the various governments.
 
P.S. Krishnan, a bespectacled 83-year-old retired IAS officer and former Secretary to the Government of India, was the man behind the introduction of SCSP in 1980. He spoke animatedly about how former Prime Minister Indira Gandhi cut through red-tape by issuing a letter to roll out the strategy.
 
Krishnan's face darkened as he talked of its tardy implementation. "Politicians and bureaucrats have always remained apathetic to the most backward classes -- dalits and adivasis," he said.
 
In the letter announcing SCSP in 1980, Indira Gandhi wrote: "While they constitute 15% of the total population of the country, their proportion is much larger in the poverty groups of the country, most of the SCs are below the poverty line."
 
Thirty-six years on, the situation has not changed much.
 
Adivasis and dalits still matter the least when it comes to the provision of even basic facilities like household ownership, electricity, latrines and water connections. Where they do figure prominently are in statistics relating to child mortality, school dropouts and extreme poverty.
 
For instance, the child mortality rate among STs (35.8) is almost double in comparison to all social groups (18.4).
 
In the house next to Heera's two-room tenement, an electric bulb hangs from the roof, but it's filled with kerosene. It has a wick instead of a filament. Actually, Pachkol, with all its woes, is marginally better off than Jad, a village about a three-hour trek away. It has no electricity, water supply or roads.
 
How do the villagers travel? "We ride her and even take the ill to hospital on her," says teenager Sriram, pointing to Kalli, his bay mare. Jad also has rusty electric poles, over a decade old. They stand without any wiring, an election promise that was never fulfilled.
 
The National Democratic Alliance (NDA) has not changed the 35-year pattern of neglecting to spend the funds. 
 
As per the guidelines, the funds that remain unspent at the end of a financial year are supposed to be transferred to a non-lapsable central pool to be used later. But that, actually, is not what happens.
 
"The concept of transfer of unutilised TSP funds to NLCPTF (central pool of TSP funds) remained a non-starter," the Comptroller and Auditor General had noted in a 2015 audit report of TSP funds.
 
A senior NITI Aayog official, who spoke to IndiaSpend on condition of anonymity, confirmed that unspent funds are being "lapsed", not carried forward to the next year as per rules. "The committee is informed that there has been 'poor utilisation' of the allocated funds for welfare of SCs and STs," says NITI Aayog in its latest guidelines to the states.
 
In January 2016, with only three months left for the financial year to end, the Karnataka Chief Minister warned officials of strict action against some departments for keeping the expenditure as low as "0.87%".
 
Outside Heera's home, a group of villagers had gathered. They were reluctant to speak up about their lives. One man, however, disagreed with the silence: "We need to talk about our problems; only then, they will be solved."
 
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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COMMENTS

Hemant Chitale

2 months ago

Unbelievable. These fund could have, over the decades, benefited the lives of the underprivileged significantly, probably as much if not more than, reservations for education and jobs.

Deepak Narain

2 months ago

Facts speak for themselves. You should be satisfied with rising growth rates, let the poor and helpless go to hell. Funds allocated for their welfare remain unutilized, yet no responsibility, no accountability and no punishment. After all, ours is a democracy with freedom to loot as they like.

Asset reconstruction companies in India at an inflection point
Indian asset reconstruction companies (ARCs) present a bizarre mix of ageing and infancy. Fourteen out of 16 operating ARCs in the country have been in the business for over a decade. This period is sufficient for the industry to mature. However, the industry still displays infantile behaviour judging from an insignificant capital of Rs5,757 crore employed by the sector and assets under management of about Rs50,000 crore, relative to banking sector's non-performing assets (NPAs) of Rs3.10 lakh crore as March 2015, and low profitability vis-à-vis the underlying business risk (see Graph-1). The NPAs have galloped to Rs5.94 lakh crore as on March 2016, and this anomaly has only worsened. 
 
 
The recent guidelines issued by the Reserve Bank of India (RBI) are set to change the ARC business forever. Recently, three new ARCs have been added, and more are about to follow. Can the ARC business, which has languished for over a decade look up now?
 
Sluggish business
Indian ARCs are the by-product of tardy and inefficient legal system characterised by clogged and inefficient Debt Recovery Tribunals (DRTs), Debt Recovery Appellate Tribunals (DRATs) and higher courts, and public sector banks' high and growing NPAs. The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act, 2002 introduced ARCs as intermediaries to buy NPAs from bank on payment of a part of acquisition cost in cash with the remaining cost being deferred. The NPA acquisition and management by ARC is done through a trust, which issues security receipts (SRs) to the ARCs for the cash payment and to the seller banks for the deferred part. The SRs are redeemed out of the recovery from NPAs, and the unredeemed SRs due to recovery shortfall are written off without recourse to the ARC. The management fee of ARCs as a fixed percentage of total SRs outstanding ensures high returns to ARCs in case of low SR investment even with significant SR write off. In the initial years, low SR subscription and issue of senior SRs to ARCs led to NPA acquisition at bloated book values and gave high returns to the ARCs despite significant SR write off in the later years, which impacted the seller banks adversely. Hence, in September 2006, RBI made at least 5% SR subscription by the ARCs mandatory (5:95 structure). Having suffered due to SR write offs, banks continued to insist on all-cash or major-cash NPA sales during 2007-2013, with the result that 5:95 sales during this period remained sporadic.
 
The banks returned with 5:95 sales in FY-2014. The 5:95 structure based on management fee of 1.5% per annum could deliver to ARCs around 18-20% return over a five-year horizon even with just one-third recovery ratio (total recovery as percentage of acquisition cost). This led to highly aggressive bidding for NPA acquisition by some ARCs, which led to introduction of 15:85 structure in August 2014, mandating a minimum of 15% SR subscription by ARCs. The management fee was also linked to the NAV of SRs. The 15:85 structure with the prevalent management fee of 1.5% pa contributed 10% to the ARCs' yearly return as against 30% in 5:95 structure. Thus, for say five-year horizon and 20% return under the 15:85 structure, the ARCs not only had to achieve full SR redemption, but also earn upside income from the surplus after full SR redemption. Hence, the 15:85 structure induced efficient NPA bid pricing, which was substantially lower than in 5:95 structure, and did not enhance ARC's cash commitment with 15% SR subscription (see table below).
 
 
The banks did not accept 15:85 bid prices, which were fraction of 5:95 bid prices, and the NPA sales dried up, barring exceptions for consolidation and strategic reasons. To generate higher bid prices, the banks permitted high management fee of up to 3% per annum, and recovery incentives. However, these could not mimic 5:95 bid prices and the NPA sales remained muted as expected. (Read: RBI restores sanity
 
RBI’s September 2016 Guidelines
Banks' major incentive for sale of NPAs to ARCs was the end of further provisioning since the SRs were treated as investment, and needed to be marked down only if the net asset value (NAV) of SRs dipped below the issue price. According to the new guidelines, from FY2018, the banks holding more than 50% SRs will have to make provisions on the SRs treating these as loans, or to the extent of NAV shortfall if it exceeds normal provisioning. From FY2019, this guideline will apply even where ARCs hold 10% SRs. The new provisioning is meant to achieve true sale presumably through all-cash sales of NPAs. The moot point is when sales under 15:85 structure nose-dived due to low pricing, will the lower all-cash pricing fire the NPA sales?
 
The new guidelines permit "other banks, non-banking financial companies (NBFCs) and financial institutions (FIs) etc." also to bid for NPAs for "better price discovery" and at the same time require two external valuations of NPAs with a bank's exposure of Rs50 crore and above. For valuation, the banks are required to adopt cost of equity or average cost of funds or opportunity cost or some other relevant rate, subject to a floor of the contracted interest rate and penalty, if any as discount rate for arriving at reasonable realizable value of the NPA. The valuation principles dictate that the discount rate should relate to the cost of capital of the target asset for acquisition. For a risk proven target NPA, the discount rate should capture the risk profile of the NPA, and this is best left to the competing acquirers. The bank's cost of capital as discount rate implicit in the guideline and the seller's valuation bias will continue to overstate the asset value and the reserve price which does not leave any margin for the intermediary buyers, and perpetuate the valuation mismatch which has stunted 15:85 sales.  
 
 RBI has prescribed number of schemes for restructuring of stressed assets, and the banks invariably adopt those for financially distressed accounts, and sell only the left overs to ARCs. Hence ARCs' bid prices are at a significant discount to the loans outstanding consistent with the asset risk profile. This has also emerged from RBI statistics according to which the ARCs acquired NPAs at prices varying from 17.2% to 20.8% of loans outstanding during FY2010 to FY2013, when the acquisitions were largely cash based (see Graph-2). These deals at low percentage of loans outstanding happened as they were purely market determined. Interestingly, acquisition at these prices has not enriched the ARCs as is evident in graph-1.
 
 
The World Bank and IFC's 2014 Doing Business Report states that, "in India, resolving insolvency takes 4.3 years on average and costs 9.0% of the debtor's estate, with the most likely outcome being that the company will be sold as piecemeal sale. The average recovery rate is 25.6 cents on the dollar" (page 206). This is indicative of asset overstatement by the borrowers, which can only compound the banks' valuation bias and impede NPA sales. In the circumstances, will the new entrants fire up the market? We will examine that tomorrow.
 
(Rajendra M Ganatra, PhD is Managing Director & CEO of India SME Asset Reconstruction Co Ltd-ISARC. He had over 26 years of experience in project finance, asset reconstruction and financial restructuring. The views expressed in above article are personal)
 

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COMMENTS

Chaturvedi Vn Govind Baba

2 months ago

A VERY FAIR ANALYSIS AFTER A LONG TIME...LOOKS VERY UPTO DATE...INFO

Sunil Karunakaran

2 months ago

Superb article which brings out the present status and concerns of ARCs so lucidly and comprehensively. Really liked the views expressed regarding valuation and the fact that the increasing number of new ARCs assumes banks perennially churning out NPAs which is not good news for the banking sector. Hence the other issue raised regarding overstatement of assets needs to be appreciated and addressed urgently.

Satish Sharma

2 months ago

I think ARC 's should seriously look into the accounts which became NPA due to transient financial stress.I am at the affected end trying to request them to solve the issue but unable to do so.àll accounts should not necessarily end up with sale of assets customer needs to given a opportunity to rectify and come on to regular business especially if professionals are involved. I hope the arc understands the efforts put in to start a good venture and it is stuck due to administrative issues of the government. Looking at the above article they should support revivalbe projects and help them to come out of the NPA tag

Gopalakrishnan K B

2 months ago

Very Nice article with precise but informative description. Excellent presentation. Keep up Ganatra. Look forward to more incisive writings from you. Thanks and Regards

Baiju Mathew

2 months ago

Excellent article explains the subject, current status and issues going forward very well

Baiju Mathew

2 months ago

Excellent article explains the subject, current status and issues going forward very well

Arunava Ghosh

2 months ago

In addition to slow movements of DRTs, intervention of High Courts in debt recovery and SARFAESI matters has made the recovery process sticky and time consuming. Defaulters prefer to knock the door of High Courts against SARFAESI procedure to lengthen the legal process.

Sameer Kakar

2 months ago

Good article on present status and prospects of ARC'S. Pricing of NPA a big challenge for all stakeholders somehow the puzzle has not been solved.
On the recovery front the overburdened legal system is squeezing the blood...
Pl through some light on the New insolvency law's - whether you feel it will help ARC'S in light of the fact that u will have to approach DRT again for non corporate borrowers.

Sameer Kakar

2 months ago

Good article on present status and prospects of ARC'S. Pricing of NPA a big challenge for all stakeholders somehow the puzzle has not been solved.
On the recovery front the overburdened legal system is squeezing the blood...
Pl through some light on the New insolvency law's - whether you feel it will help ARC'S in light of the fact that u will have to approach DRT again for non corporate borrowers.

Sameer Kakar

2 months ago

Good article on present status and prospects of ARC'S. Pricing of NPA a big challenge for all stakeholders somehow the puzzle has not been solved.
On the recovery front the overburdened legal system is squeezing the blood...
Pl through some light on the New insolvency law's - whether you feel it will help ARC'S in light of the fact that u will have to approach DRT again for non corporate borrowers.

Sameer Kakar

2 months ago

Good article on present status and prospects of ARC'S. Pricing of NPA a big challenge for all stakeholders somehow the puzzle has not been solved.
On the recovery front the overburdened legal system is squeezing the blood...
Pl through some light on the New insolvency law's - whether you feel it will help ARC'S in light of the fact that u will have to approach DRT again for non corporate borrowers.

Sameer Kakar

2 months ago

Good article on present status and prospects of ARC'S. Pricing of NPA a big challenge for all stakeholders somehow the puzzle has not been solved.
On the recovery front the overburdened legal system is squeezing the blood...
Pl through some light on the New insolvency law's - whether you feel it will help ARC'S in light of the fact that u will have to approach DRT again for non corporate borrowers.

Kashif Mohammed

2 months ago

Could not agree more. Nicely put into words!

Kashif Mohammed

2 months ago

Could not agree more. Nicely put into words!

Kashif Mohammed

2 months ago

Could not agree more. Nicely put into words!

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