NCDEX doesn't come under RTI, says CIC

The CIC has said that NCDEX, which trades in agricultural commodity futures, does not come under the ambit of the RTI Act and is not liable to provide any information under this legislation

The National Commodity and Derivative Exchange Ltd (NCDEX), which trades in agricultural commodity futures, does not come under the ambit of the Right to Information (RTI) Act and is not liable to provide any information under it, the Central Information Commission (CIC) has held, reports PTI.

The Commission said that NCDEX does not receive any direct or indirect funding by the government, one of the mandatory requirements to bring an organisation under the transparency law.

"Despite the fact that 46% of the equity capital of NCDEX is held by public sector undertakings (PSUs), NCDEX cannot be said to be a 'public authority' as there is no direct or indirect funding by an 'appropriate government'."

"We, therefore, hold that NCDEX is not a public authority and is, therefore, not liable to provide any information under the RTI Act," information commissioner ML Sharma said in a recent order.

The case pertains to Jodhpur-based RTI applicant Indubala Agrawal who sought details of some records from the exchange, which in turn rejected the request, saying it was not a public authority as per the RTI Act.

Anil Agrawal, who was representing Indubala during the hearing, pleaded before the Commission that the exchange has been "notified" vide notification under the Forward Contracts (Regulation Act), 1952.

Mr Agrawal said since NCDEX has been created by a government notification, it fulfils one of the mandatory criteria for bringing an organisation under the Act and hence it should provide all the information to him.

NCDEX, which commenced futures trading in agricultural commodities from December 2003, was 'recognised' by the government of India on the recommendation of the Future Markets Commission.

Mr Agrawal said that equity participation by public sector companies amounts to indirect government financing as its money is channelized through these companies.

Even if it is held that equity participation of PSUs is only 46%, this may be reasonably interpreted to mean "substantial financing" as mentioned in the RTI Act, the counsel said.

The CIC did not consider the argument that the exchange is created by a government notification and drew parallels with the case of Infrastructure Leasing and Financial Services Ltd (IL&FS), which was earlier exempted from disclosure under the RTI Act by it.
 

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COMMENTS

Narayan Varma

7 years ago

Happy and got informed about CIC decision, Where can one get full copy of the order, Pl give citation and number and date of the order.

Madan Kumar Rajan

7 years ago

I would say that all publicly traded companies should be liable to provide information under RTI act. Even if the government hasn't funded the organization, it is more or less public as it has been funded by public. Being funders we the people deserve to know all details that can be disclosed (those which comes under RTI)

Poor retail response to IPOs rings alarm bells

DB Realty’s IPO received just 23,000 applications after the company spent Rs13.50 crore for its ads in The Times of India alone. NTPC’s FPO received just 80,000 applications. This has set the alarm bells ringing for decision makers

Retail investors continue to shun public issues. This has at last created panic among decision makers. The pride of the nation, National Thermal Power Corp (NTPC), managed to get an overall subscription of 1.2 times for its follow-on offer (FPO) with a retail participation of just 16% of the total 42.8 million shares reserved for the retail investors’ category. For its total shares on offer, NTPC received a dismal 80,000 applications from retail investors all over the country. This will be no surprise to the readers of this website. On the day NTPC opened, Moneylife had written that the NTPC issue will not attract retail participation thanks to a variety of reasons (see here). The issue opened on 3rd February.

More than NTPC, the high-profile DB Realty’s initial public offering (IPO) has failed miserably. After spending a whopping Rs13.50 crore for advertisements in the Times of India (ToI) group alone, the DB Realty IPO, which opened on 29th January, received just 23,000 applications for its Rs1,500-crore issue. It received a pathetic 457 applications from high net-worth individuals (HNIs). It is a different matter that even the ToI group advised its readers to stay away from the DB Realty IPO! (http://economictimes.indiatimes.com/features/investors-guide/DB-Realty-IPO-Investors-are-advised-to-stay-away/articleshow/5521419.cms)
The gross and continuous failure of issues to attract retail subscriptions has started ringing alarm bells among decision makers. If this continues, the government’s disinvestment programme will be badly affected. Poor retail participation is the result of years of poor regulation and malpractices by market participants, which have caused equity products to perform very poorly. “It is a crisis situation,” says an IPO expert.

The crisis has been building up over a period of time. Godrej Properties received 18,300 retail applications and 50 from HNI investors for its IPO. JSW Energy received 86,559 retail applications and just 97 from HNIs. MBL Infrastructures received just 3,616 retail applications and only 29 applications from HNIs. Den Networks (Rs195), an associate of Network18, received 3,916 retail applications and 50 from HNIs at the end of October 2009. Aqua Logistics, which was to close on 2nd February, revised its price band downwards and extended the date after failing to attract investors.

The disinterest of employees is another feature of many IPOs. The employee segment of MBL Infrastructures received only 26 applications (0.12% subscription); Astec LifeSciences received 55 employee applications (0.5% subscription), while Euro Multivision had an embarrassing 16 employee applications (0.3% subscription). Even in the case of NTPC, out of the total 42,73,220 shares reserved for the employee category, only 43%(18,73,807) of the shares were subscribed. If employees are unconvinced about a company’s pricing and prospects, how can it attract others?

As the government gets ready to raise Rs30,000 crore through disinvestment of PSU shares, its biggest worry ought to be the vanished retail investor. But regulators and officials are busy fighting turf battles or protecting personal interests. Meanwhile, India's investor population has plummeted from the claimed 20 million (probably exaggerated) in the 1990s to eight million (according to the Swarup Committee report of 2009), and is probably even smaller in reality.
 

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COMMENTS

Vandana Gupta

7 years ago

Mybe SEBI and HLCC on Financial Matters chairperson Mr. D. Swarup should recommed to the Govt. that like in Mutual Funds, Merchant Bankers be asked to charge fees from IPO subscribers based on the service and advice they render.

This seems to be the in thing today.

Also, they would convince the Govt. that ultimately what is happening in India based on their advice and recommendations will be followed in other parts of the world.

Shibaji Dash

7 years ago

Based on the experience about the juristic veil being used/abused as a device for laundering unaccounted money in the garb of equity ( recall the mushrooming of ' investment companies' in the early eighties as a prelude to the Harshad Mehta bust and also the Rupal Ben Panchal scam in 2006?), one can not dismiss the overpricing of the non-PSU IPOs as a deliberate pre-meditated two pronged strategy to (i) roll in as much money as can be seduced from the unconnected retail investors and (ii) also simultaneously have the promoters-controlled conduits like their investment companies/other entities like trusts and individuals to subscribe to the IPOs/FPOs and thus such unaccounted money transmuting as equity of the Company that made the IPOs or FPOs.To maximise the kill in case of the FPOs the market is rigged well ahead of the opening date to raise the average rate prior to that date. The PSU IPOs/FPOs appear to have fallen victims of such nexus driven manipulations of the ( private ) corporates nd the (merchant) bankers- in a repeat of the Harshad phenomenon. It is for the investing authorities of the Income Tax Dept. to take a call, much less the regulatory authorities.

Shibaji Dash

7 years ago

Pity the Govt. , hungry for money to bridge the deficit or for may be other unknown reasons, is using the PSU IPOS/FPOS like merchant bankers not factoring that the merchant bankers in the perception of the investors are a thoroughly discredited lot. Not that the retail investor/common man perceives the political masters any differently. Bankruptcy of thought all over in those in power of any genre.

Pankaj Namdharani

7 years ago

Do consider the application figures of recent IPO i.e. Infinite Computer Solutions (121000 retail app) and Jubiliant Foods which got good response from Retail. I believe it is more to do with pricing of the IPO and what is left for the investors. Most of the IPO were Overpriced be it NHPC, NTPC, JSW, Adani, pipav, so is the punishment

Tax code may foil vessel phase-out plans

Shipping companies plan to replace old vessels with newer ones. But these moves may be affected due to the tonnage tax code and the additional tax on capital gains earned from such phased-out vessels

With the decline in asset prices for new ships, many shipping companies are planning to replace their fleet with newer vessels. However, the tonnage tax and the additional capital gains tax charged on earnings from phased-out or sold vessels could be a stumbling block, says a tax expert.

“As per the tonnage tax code, shipping companies have to pay tax as per their total tonnage and not on a profit or loss basis. When you sell a ship, you realise a certain amount and when you realise more than the depreciated value, it is a capital gain, which is not covered in the tonnage tax code. Thus, the company has to pay an additional tax on this capital gain,” said Samir Kanabar, partner for tax and regulatory services, Ernst and Young.

Talking about the likely effect of this tax on the balance sheets of shipping companies, he said, “For the phasing-out of single-hull vessels, a 9-12 month window is available. In this period, people will either be upgrading or selling (their fleet). This will thus start reflecting in the next two to three quarters in their books.”
 
Typically, companies which are actively buying new ships, also have a considerable number of vessels to be phased out. Shipping Corp of India (SCI) has recently placed an advertisement for two more new ships. Moneylife had earlier reported that SCI had 10 single-hull vessels to be phased out, out of which it has already sold five ships. It plans to sell the remaining five by 2010.

GE Shipping is planning to sell five single-hull ships for scrapping. “We may not necessarily phase out all the vessels by 2010. We will plan the phase-out as per the opportunities available and will consider fixing a fleet-age limit of 25 years,” said Anjali Kumar, head of corporate communications, GE Shipping.

Mercator Lines also plans to phase out three of its existing single-hull vessels ahead of the implementation of the International Maritime Organisation (IMO) guidelines on phasing out of single-hull vessels.

Apart from the phase-out, the tax expert pointed out that shipping companies are buying new ships and selling old ones even if it is not mandatory, in order to have a younger fleet. “In terms of buying a new ship, the tax code does not matter, other than the added tonnage tax. However, you have to pay an added tax on the capital gains from the old ship sale,” Mr Kanabar said.

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COMMENTS

Krishnaraj

7 years ago

While I appreciate the article, frankly there is nothing new. Anyone with industry knowledge knows that there is no tonnage tax on sale of ships and capital gains needs to be paid.

In my view the ticking bomb - if you will - is the arrival of MAT on gross assets in the new Tax Code. It will create such a large hole in the already struggling businesses that most players will be tempted to register their ships outside India....a coverage of that would be interesting

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