Due to tightening of the foreign exchange situation in India, Iran decided not to accept more than 45% of the money in Indian rupees. The shipment has come down to 194,000 barrels per day of Iranian crude oil as against 324,000 barrels per day last year
Imports of Iranian crude, during 2011-12 amounted to 18.1 million tonnes (mt), which, during 2012-13 came down to 13.1 mt due to sanctions imposed on Teheran by the US and the European Union.
In order to meet our needs and to overcome the sanctions, Iran had agreed to receive its payments for oil in rupees which was credited to its account in UCO (United Commercial Bank) at Kolkata, upto 45% of its value and the balance paid in foreign currency through Halbank in Ankara, Turkey, in Euros. It may be recalled that petroleum minister Veerappa Moily had proposed that by importing Iranian crude and paying for it wholly in rupee account would have saved $8.5 billion for India.
Even this arrangement was plagued by the problem involving insurance coverage, and the proposal to set up an oil insurance pool fund, valued at Rs2,000 crore, has been collecting dust due to bureaucratic bungling. The Petroleum Ministry was to make a Rs1,000 crore contribution to the fund and the balance from General Insurance Corporation (GIC).
So far, even the first instalment, promised for Rs500 crore from Petroleum Ministry has not been received and the Finance Ministry is waiting for the same.
After the last Euros payment was recovered in February this year, Iran agreed to take the entire payment for crude in rupees to be credited it to the IRNOC (Iranian National Oil Company) account in UCO Bank. But, due to tightening of the foreign exchange situation, Iran decided not to accept more than 45% in rupees.
As the stalemate continues, the shipment has come down to 194,000 barrels per day as against 324,000 last year, before the sanctions were strictly enforced.
MRPL (Mangalore Refinery & Petroleum Ltd) has been the largest recipient of crude from Iran, where phase III of expansion plan is nearing completion. From the current processing capacity of 12 metric tonnes per annum (mtpa), MRPL will be able to handle 15 mtpa but this uncertainty looming large, arrangements have been made to obtain crude from Iraq, Venezuela and Oman. So far, 2 mtpa have been received from Iran and it is hoped that for the year 2013-14, India may still be able to obtain 13 mtpa from Iran.
The MRPL expansion in the next few months will be able to process cheaper heavier crude oil into high value end products. If we digress for a moment, this means, for those investing now in MRPL, at the current market price of Rs40 per share there are prospects for better returns in the months ahead.
Although Iran has declined to accept 100% payment in rupees for crude oil supplies to India and insisting on payment of 55% in free foreign exchange, to overcome US sanctions, is in India's interest to send a high-powered trade delegation to Iran to sort out this difficult and important issue.
There is no doubt that US sanctions, supported by European Union, are affecting Iran. India is under obligation to comply with UN sanctions only. If we tow the US line, it is due to political expediency rather than compulsion.
Why not, we turn around and demand from US that they compensate us for the loss of Iranian crude? This first round waiver, which also affects Japan and China, which depend heavily upon Iranian supplies, expires by the end of December, by which time, all the three are supposed to gradually reduce their dependence upon Iran. It is therefore, in our interest to watch what China and Japan propose to do when this deadline expires in December. Why not try to work out a joint strategy with them to tackle this issue?
As we start to resolve this issue, with a few weeks to go, what needs to be done immediately is to ensure insurance cover for the cargo that needs to come. Without the cover, Indian refineries cannot take the risk of getting Iranian crude, lest the tankers are subject unilateral military action, or are being even hijacked on the high seas? Both of these actions are unlikely, but we need to find a workable solution to get the Iranian crude. With the thawing of US-Iran relations, as a sequel to Iranian president's overtures to USA, it is possible that an amicable solution may be worked out.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
Market regulator Securities and Exchange Board of India (SEBI) has issued a show cause notice to HSBC for allegedly using fraudulent and unfair trade practices with its client, singer and actor Suchitra Krishnamoorthi. This case was first exposed by Moneylife way back in April in 2012
In a strongly-worded notice issued by the market regulator, the Securities and Exchange Board of India (SEBI) on 1st November has asked Hong Kong and Shanghai Banking Corporation (HSBC) to explain why its acts in handling the portfolio of Suchitra Krishnamoorthi are not in violation of its regulations governing fraudulent and unfair trade practices and violation of the code of conduct governing mutual fund distributors. After an extensive investigation of her complaint, SEBI found out that:
SEBI argues that this is in violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 and SEBI circular MFD/CIR/06/210/2002 dated 26 June 2002 prescribed under Regulation 77 of the SEBI(Mutual Funds) Regulations, 1996 read with Clauses 1,9 and 13 of the Code of Conduct of Intermediaries of Mutual Funds.
Warning HSBC of a strong action, including but not limited to barring the lender from markets, SEBI called upon the Bank “to show cause as to why suitable directions under sections 11, 11(4) and 11B of the SEBI Act, 1992 read with regulation 11 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 should not be passed against you for the violations specified above, which may include but not limited to disgorgement of the commission earned by you from the complainant while executing transactions in her name, directing all the fund houses not to allow you to act as a mutual fund distributor for their funds, debarring you from accessing the securities market and prohibiting you from buying, selling or otherwise dealing in securities for an appropriate period of time and/or any suitable direction deem fit by the Board in the facts and circumstances of this case under the aforesaid provisions.”
As Moneylife reported in April 2012, Ms Krishnamoorthi, a well-known singer and actor, was taken for a ride by HSBC Bank for over five years by promising an extravagant assured return of 24% from mutual funds as well as insurance.
Whenever she complained about losses in her account, the standard reply from HSBC Bank was that the relationship manager has been fired and that the bank will make up for the losses with judicious investments. Needless to say, the losses were never made good. The one-way road for the customer was downhill. If a well-known celebrity could be cheated with such impunity, it is surely happening routinely with others.
The modus operandi for HSBC in this case had been a combination of toxic churning of the portfolio management system (2% entry load on every purchase made by it on behalf of client), insurance products promising 24% returns, insisting on her taking a loan instead of withdrawing funds without even disclosing that the client was entitled for a smart loan.
The officers of HSBC Bank also informed her that “portfolio management is one of the prime businesses of HSBC Bank other than banking” and assured her “a minimum of 24% pa return” on her investments. However, following her complaint to the officials of the bank, she said that “HSBC Bank now claims that they have not acted as portfolio managers but merely advised me on the management of my wealth.”
Ms Krishnmoorthi refutes this saying, “This is a false claim as they have clearly performed the duties of portfolio managers as stated by law and as per the power of attorney obtained from me in 2004.”
Moneylife reviewed Ms Krishnamoorthi’s mutual fund transactions and found massive malpractices by HSBC
• Her mutual fund portfolio was continuously churned resulting in high transaction costs in the form of entry loads and exit loads. While several transactions led to huge losses for her, HSBC was the gainer of commissions.
• Out of the 75 transactions made, nearly 60% of the transactions were in equity schemes kept for a period less than one year. Here investments were made in schemes like HSBC India Opportunity Fund and HSBC Mid-cap Equity Fund, both of which have been underperformers. Apart from these, majority of the investments were made in balanced schemes of HDFC Mutual Fund, ICICI Mutual Fund and Sundaram Mutual Fund.
• The worst part of the transactions came around the market peak in November 2007 where nearly Rs3 crore was invested across five schemes on a single day which included over Rs1.67 crore invested in three sector schemes—ICICI Prudential Infrastructure Fund, Sundaram CAPEX Opportunities and Reliance Diversified Power Sector. Nearly Rs50 lakh was invested in Sundaram CAPEX Opportunities which has a current corpus Rs200 crore.
• The investments from all sector schemes were withdrawn between June and August 2010 at a loss of nearly Rs40 lakh, almost half her initial investment. The schemes from ICICI Mutual Fund and Sundaram Mutual Fund went down by nearly 50%. The other schemes were also withdrawn at a value 15%-30% lower resulting in a total loss of Rs86 lakh. These schemes included JP Morgan India Equity Fund (a poorly-performing scheme) and IDFC Premier Equity Fund.
• Surprisingly, in the whole portfolio there was not a single debt scheme and just one liquid scheme— HSBC Cash Fund. Ironically, commissions paid on debt schemes and liquid schemes are much lower.
• Ms Krishnamoorthi says an entry load amounting to over Rs29 lakh was deducted from her investments. If the bank had opted to only invest her amount of Rs3.60 crore in performing equity schemes for the long term, without any further buying or selling, the entry load of 2% at that time would have worked out to just Rs7.20 lakh.
The end result after five years was Rs83 lakh—direct loss from investment, about Rs28 lakh in commission to HSBC, Rs8 lakh (50% of investment) lost from an insurance policy, Rs10 lakh (again, 50% of investment) valuation decline in insurance policy still in force, Rs4.5 lakh tax paid on redemption of short-term mutual funds (including Rs1.85 lakh penalty to the Income Tax department due to non-disclosure of gain by HSBC to the client) and Rs58 lakh interest on home loan earned by the bank.
When Ms Krishnamoorthi wished to surrender her insurance policies, HSBC refused to act for her by contending that they no longer had any tie-up with Tata AIG and that it was not their business to get client’s money back that they had recommended in the first place.
“It took my chartered accountant six months to authenticate the figures of losses—as not only was the HSBC team adept at covering its paper trail. They also very conveniently refused/ evaded furnishing me the documents to which I am legally entitled for over a year—giving me one silly excuse after another like mismatch of signature/officers being on leave,” she told Moneylife.
Unfortunately, in several such cases, banks tend to get away scot-free because the consumer is conned into signing a number of documents based on misplaced trust in their bankers. For instance when Ms Krishnamoorthi took her issue up with the Banking Ombudsman, the bank replied stating that she had signed on all the letter of instructions (LoIs) to carry out the transactions in her account. The manner in which bank officials discharge their fiduciary duties was not even taken into account.
On 18 April 2013 Moneylife Foundation had presented a memorandum to RBI Governor on unchecked mis-selling by bank relationship managers. It says, “Banks’ relationship managers have been particularly brazen in recommending financial products to their customers while completely disregarding their financial situation. It is commonplace to hear of a senior citizen being conned into investing in a mutual fund, unit-linked insurance plan or a hybrid-derivative product on the promise of higher returns. In many cases, private bank executives go over to their homes and persuade them to break secure fixed deposits and invest the money in Unit Linked Insurance Products (ULIPs) with the false assurance that these are as safe as fixed deposits and offer a higher return and security.”
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Over the past nine years, just 48% of the new buildings in Mumbai were able to get occupation certificate, raising serious questions on the monitoring system of the BMC
Brihan Mumbai Municipal Corp (BMC), the country's richest local body with a Budget of about Rs27,000 crore does not have any system or infrastructure to keep an eye on builders. The BMC does not even know the exact number of buildings that do not have the occupation certificate (OC) in the city.
According to information procured by Anil Galgali through Right to Information (RTI) Act, over the past nine years, the BMC on an average received 1,597 new proposals from builders to construct buildings each year. However, out of this only 48% or 766 buildings were issued OC by the Municipal Corp, says Galgali.
During 2003-04 to 2012-13, the BMC received 14,370 new proposals. Out of this 9,841 were issued the intimation of disapproval (IOD) and 13,313 were issued the commencement certificate (CC). While 6,888 buildings received OCs, just 1,146 were able to get the building completion certificate (BCC) from the authorities.
Obtaining OC is an essential requirement under the MOFA (Maharashtra Ownership Flat Act) and the flat buyers cannot legally occupy the same, unless the developer or builder gets the OC. If the flats are occupied by the buyers without occupancy certificate, the Municipal authority can ask for eviction of their flats or have heavy penalties levied on them.