World
Millions in UK 'struggling' financially: study

Some 32% of people surveyed by the consumer organisation Which? say they are finding it difficult to cope on their current level of income and nearly 10% of households have defaulted on a loan, bill or housing payment

London: Millions of British households are struggling to make both ends meet, a consumer organisation has claimed, reports PTI.

 

The research, based on a poll of 2,100 people in October, suggests nearly 10% of households have defaulted on a loan, bill or housing payment.

 

Some 32% of people surveyed by the consumer organisation Which? say they are finding it difficult to cope on their current level of income.

 

It comes as Chancellor George Osborne concludes work on the Autumn Statement, to be delivered on 5th December.

 

It found that 2.3 million households had defaulted on a loan, bill or housing payment. And 1.5 million households had taken out one or more unauthorised overdrafts or payday loans just to make ends meet, the BBC reported.

 

The Executive Director of Which?, Richard Lloyd, argues that people can become trapped in a vicious spiral.

 

"There are huge knock-on effects for people if they are not paying their loans, paying their bills, their housing costs on time. They often have to pay extra charges, pay extra interest where they are defaulting on debts, and they are unable to get access to credit," Lloyd said.

 

"People are having to turn to increasingly expensive ways to meet their costs. It's a real worry for many, many people getting in to debt."

 

Lloyd says the government "has a job on its hands to convince people that everything possible is being done to keep unavoidable costs like energy and food bills under control".

 

"We're looking for further progress in reforming the energy market, an end to misleading food price promotions, and more competition in banking to take some of the pressure off hard-pressed consumers," he said.

 

The study comes as the chancellor Osborne acknowledged that deficit reduction may take longer than he had planned.

 

He has called for people to "have the courage to stay the course" amid suggestions that the better-off could be required to contribute more.

 

However, Labour's shadow chancellor, Ed Balls, said it was time to "change the medicine - or change the doctor".

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All IPO disclosures legally binding on companies: SEBI

Noting that disclosures made in the IPO prospectus are significant from the point of view of investor protection, SEBI has said a company would be legally bound to comply with the matters stated in the prospectus, based on which it has raised money from the public

 
New Delhi: A listed company is legally bound to abide by commitments made in its public offer documents, even if they do not fall under mandatory requirements and post-initial public offering (IPO) are claimed to have been made inadvertently, Securities and Exchange Board of India (SEBI) has said, reports PTI.
 
Noting that disclosures made in the IPO prospectus are significant from the point of view of investor protection, SEBI has said "a company would be legally bound to comply with the matters stated in the prospectus, based on which it has raised money from the public."
 
"A Prospectus is a document with legal validity and the company is legally bound to abide by the disclosures made therein," the capital markets regulator has said.
 
The views have been expressed by SEBI in an "interpretive letter" sought by a company, which had demanded exemption from certain disclosure made in its IPO document and had said the same was made "inadvertently" and was not a mandatory requirement under the SEBI regulations.
 
The company, Rushil Decor Ltd, had sought the interpretive letter under SEBI's informal guidance scheme with regard to a disclosure made in its IPO document about lock-in of shares.
 
In its IPO prospectus, the company had made a disclosure that its entire pre-issue equity share capital other than the minimum promoters' contribution, which is locked in for a period of three years, shall be locked in for a period of one year from the date of commencement of commercial production or date of allotment in the public issue, whichever is later.
 
In its application to SEBI, it said this disclosure linked the lock-in period with commencement of commercial production and "the same was done inadvertently and is not in line with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 and intends to rectify the same".
 
The company had sought SEBI's "opinion/interpretation on whether shares, other than minimum promoters' contribution of 20%, can be released for transfer on the expiry of one year from the date of allotment".
 
Pursuant to the IPO process, the company had allotted shares on 2 July 2011.
 
SEBI, however, said that "the matter pertains to lock-in of pre-issue share capital, which is considered significant from the point of view of investor protection.
 
"Considering the above, a relaxation from additional lock- in requirements prescribed by the company through disclosures in prospectus will not be in compliance with the law."
 
As per SEBI norms, the promoters' minimum contribution needs to locked-in for three years from start of commercial production or the date of allotment, whichever is later.
 
The pre-issue shares held by non-promoters also need to be locked in for a one-year period from the IPO allotment date but need not be linked to commercial production.
 
"In the given case, the company has specified in the prospectus that the entire pre-issue share capital of the company, other than minimum promoters' contribution, shall be locked-in for a period of one year from the date of commencement of commercial production or date of allotment, whichever is later, akin to the lock-in clause applicable to minimum promoters' contribution," SEBI said.
 
"The said disclosure does not prima-facie violate any of the requirement of SEBI (Issue of Capital and Disclosure Requirements) Regulations and prescribes a stricter requirement than that provided under the said regulations.
 
"The said disclosure in the prospectus, on allotment of shares, has enforceability as in case of a contract. A Prospectus is a document with legal validity and the company is legally bound to abide by the disclosures made therein. Here, the matter pertains to lock-in of pre-issue share capital, which is considered significant from the point of view of investor protection," the regulator observed.
 
"Accordingly, any relaxation from lock-in requirements as stated in the prospectus shall not be permissible considering the fact that the company is legally bound to comply with the statements/disclosures made in the prospectus.
 
"Hence, the company shall ensure compliance with the disclosures made in the prospectus," SEBI said in its interpretive letter, while adding that the position is based on the representation in the matter under reference.
 

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Woes of LPG consumers: Result of our belief in free lunch

Unless we stop believing in free lunch and take the unpopular measure of eliminating LPG subsidy, as recommended by several government committees a day will come when LPG supplies will be as uncertain as the power supplies today

To supply domestic LPG (liquefied petroleum gas) as in the past without the newly announced quota of six cylinders the central government would have to allocate directly or indirectly as much as Rs45,000 crore per year to maintain the financial health of the public sector companies. Who have been the major beneficiaries of this government largesse? It is mostly the rich and the middle class. This amount of money can support many urgently needed projects in health, education, water and transportation sectors to benefit the poor. When the choice should be clear, why cannot we accept the new policy, leave alone eliminate LPG subsidy itself? It is because we all seem to believe in the much-discredited free lunch concept.

 

As the six cylinder quota drama is unravelling with politicians protesting as usual, LPG consumers are not sure when and if they will get their LPG cylinders and at what price. 

 

Our current demand for LPG is about 15 million tonnes. It is supplied from three sources. About 8 million tonnes are supplied by India’s refineries, which depend for their crude oil supplies on imports to the extent of 80%. They have to pay international prices. About 2 million tonnes are supplied from extracting liquids from natural gas supplies. Since natural gas prices are controlled, the cost of LPG to supply from this source is relatively low. But the remaining 5 million tonnes are imported paying international prices. Thus for 85% of LPG, OMCs (oil marketing companies) have to pay international market prices. If we expect the government to sell LPG at subsidized prices, whom can we depend upon to pay for these imports? Aren’t we fooling ourselves by pretending to believe that we can have free lunch all the time?

 

At the beginning of November, the cost to import one tonne of LPG from the Persian Gulf was $1,027 (or Rs772 per cylinder). When costs of transportation, bottling, commissions to the dealers and marketing are added, it costs about $1,158 (or Rs912 per cylinder). The current average selling price of LPG for the first six cylinders is $530 per tonne (Rs414 per cylinder). In other words OMCs lose $628 on each tonne of LPG (Rs498 per cylinder). If there are no limits on the purchase of residential LPG, then the oil marketing companies will lose about Rs45,000 crore per year. The government has to compensate OMCs for this loss since it is the government which has forced OMCs to sell LPG below their costs.

 

If the public sector OMCs are not compensated, they will go bankrupt which will be a big disaster. To keep them in sound financial condition, the government has been subsidizing them in a Taglakhian fashion. It has forced profitable companies like ONGC and Oil India to pay partly for their losses.

 

In short the “free lunch” to LPG consumers was provided at the cost of public sector oil companies and the tax revenues. However, as LPG subsidy burden was increasing, and fiscal deficit was getting worse, the government decided to impose the six cylinders limit. This has now opened Pandora’s Box with the cure being worse than the disease.

 

Even before the new policy of six cylinders quota, there were three prices for selling the same commodity—subsidized residential prices, commercial prices and automotive prices. This was a perfect environment for all those involved in the LPG business to mint money by diverting subsidized LPG to those sectors like commercial and automotive sectors where LPG attracted as much as three times the subsidized prices. Research has shown that more than 30% of residential LPG is diverted to generate black money to the extent of 20 to 25 thousands of crores per year.

 

You may also like to read the Never-ending woes of LPG consumers.

 

Instead of taking steps to streamline the sale of LPG by reducing the price differential, the government has introduced at least two more prices now—non subsidized domestic prices for those buying more than six cylinders and also non-domestic prices.

 

Currently LPG prices range from Rs29.2 per kg for residential LPG consumers for the first six cylinders to Rs63.7 per kg for residential consumers beyond six cylinders to Rs81.8 per kg for non-domestic prices to Rs86.3 per kg for commercial to Rs98.1 per kg for the auto sector.

 

One of the reasons for the LPG quota might have been the embarrassment caused to the government when the media gave wide publicity to the well-known VIPs consuming more than the legally allowed 17 subsidized cylinders per year. The VIP list was headed by the family of industrialist Jindal which consumed 369 cylinders in a year. Some other VIPs whose LPG consumption exceeded the limit of 17 were Kalmadi (63 cylinders), Mayawati (45), A Raja (47), KPS Gill (79), and Jaipal Reddy (26).

 

On the other hand, according to OMCs, the average consumption of typical family is 7.15 per cylinder per year.  Only about 40% of the families consume less than six cylinders in a year. As a result only 60% of Indian families will be affected by LPG quota. Also among the rural population, less than 9% depend on LPG for cooking, and among the urban it is only about 57% with most of the poor depend on firewood and kerosene according to the Parikh Committee report. Thus the LPG subsidy has indeed been a subsidy to the rich and the middle class for a very long time. It is only in recent years, a small percentage of the poor have been able to get access to LPG.

 

One strategy that is being discussed by the government to reduce diversion is to sell LPG only at non-subsidized price using the Aadhaar platform and bank cash transfer. This looks fine on paper. However, when many have no UID numbers and may also not have bank accounts, how can this system be implemented?

 

There is already a race started by different state governments now to gain cheap popularity by declaring to give additional LPG cylinders at subsidized prices. This was actually started by the Congress party president Sonia Gandhi. She asked her chief minsters to give two additional cylinders. How this will be administered is still not known. This LPG subsidy race may become like a populist measure of giving free power to win elections. It is such a policy which has resulted in power companies going insolvent. More than likely the profitability of OMCs will also be affected in the future even though their shares are traded on the stock markets.

 

Unless we stop believing in free lunch and take the unpopular measure of eliminating LPG subsidy as recommended by several government committees, a day will come when LPG supplies will be as uncertain as the power supplies today.

 

Also read: How to use your subsidized LPG cylinders wisely?

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COMMENTS

Anil Agashe

4 years ago

Well written bringing out all facts of the matter. this is what has to be told to people.

Rajan Manchanda

4 years ago

It cost's OMC's Rs.912 per cylinder.Subsidy can definitely be abolished.According to THE PLANNING COMMISSION a income of Rs.32 per day suffices to survive.
Rs 32 X 30 days generates Rs.960 per month.Even if a person uses one cylinder per month he is still left with Rs.48 per month.He can always live on GAS !

We all forget,how difficult life is for the common man.

Vaidya Dattatraya Vasudeo

4 years ago

It means if you are citizen rich enough and better placed to use LPG, Government will give you a gift of subsidy of 6 cylinders. And if you are poor, you do not get that. If at all, Government wants to continue the subsidy, it should be given to an individual as a unit and not by family as a unit. A rich person having residential premised in number of states gets more benefit, without ever getting detected. It should be given to every individual, even if he is using wood, kerosene or newspapers. With the present policy,it is advisable to get registered for the cylinders, whether you need it or not. Those who can not afford to do that either, there will be agencies who will help them do it and get the subsidy credited to their account rgularly. This will be done, of course, for a fee. Alternatively just get registered, borrow some money for buying a cylinder and sell it for cash immediately. Indian are very innovative, particularly when it is a matter of getting undue advantage. Government will not mind turning a nelson's eye to these activities, for a price. Bhrashtachar Zindabad.

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