Tokyo: Observing that infrastructure deficit was posing a major constraint to India's growth, prime minister Manmohan Singh today said an outlay of over $1 trillion was envisaged for infrastructure projects during the next Five Year Plan beginning 2012 and invited Japanese firms to play a greater role in this endeavour, reports PTI.
Mr Singh said his government was determined to continue the economic reforms to create a favourable investment environment and facilitate higher capital inflows and push the reform of both direct and indirect taxes with the aim of unifying indirect taxes into a single Goods and Services Tax (GST) in due course.
Addressing a business luncheon attended by top business leaders from India and Japan, he noted that India's growth, which fell to 6.5% in 2008-09 because of the global economic recession, recovered to 7.4% in 2009-10 and is projected to be 8.5% in 2010-11.
He hoped that India will return to 9% growth in 2011-12.
"I am confident that strong fundamentals of the Indian economy will enable us to achieve our objective of double-digit growth in the coming decades," Mr Singh said.
Underlining that he was not underestimating "many challenges" that are faced in achieving such high level of growth, he said "We need to close the infrastructure deficit, especially in the power, transport and communication sectors.
"This is a major constraint on our development and we will give high priority to infrastructure development in the years ahead."
Mr Singh said that India's investment needs will be at least $1 trillion, part of which will come from within but "we expect Japanese companies to also provide their support."
He said during India's next Five Year Plan from 2012 to 2017 "we envisage financial outlays of over one trillion US dollars on infrastructure projects."
Private investment will play a large role in achieving this target, Mr Singh said, while asking Japanese companies to play a much greater role in development of India's economy.
From India, Mukesh Ambani, Reliance Industries (RIL) chairman and managing director; Sunil Bharti Mittal, Bharti CMD; Fortis chairman Malvinder Singh and HDFC chairman Deepak Parekh were among those present at the luncheon.
Suspension of scrips, or delisting them, punishes investors and helps companies who want to ditch their retail shareholders after raising funds from them
After Moneylife wrote earlier about some 1,500 scrips being in suspended animation, even as the Securities and Exchange Board of India (SEBI) is set to tweak the takeover and delisting rules, intermediaries and investors are writing to protest the lack of action.
Suspension of scrips, or delisting them, punishes investors and helps companies who want to ditch their retail shareholders after raising funds from them. Companies merely need to violate the listing rules by refusing to pay the fees or making correct disclosures. Meanwhile, investors are stuck. They continue to pay the annual depository charges and cannot even close the DP account without transferring the shares; re-materialising them involves a further cost on what could be a worthless share.
An intermediary told Moneylife that, at present, of the 1,537 scrips suspended from trading, just 673 companies account for a combined equity capital of Rs14,119 crore. Virendra Jain of Midas Touch Investors Association says that nearly 800 companies file returns regularly. But, in most cases, investors are clueless.
Among the scrips that investors say they are clueless about are: Assambrook Ltd which was suspended on 3 July 2008 where around 8,000 investors, who hold 64% of the equity, are affected. While tea companies are doing well, shareholders of Assambrook are stuck with illiquid stock even though the shares were trading at Rs15 when it was suspended. Two others are: Delhi-based Talbros Engineering and Cochin-based Vysali Pharmaceuticals.
Interestingly, investors have repeatedly taken up this issue with CB Bhave, even when he headed the National Securities Depository Ltd (NSDL), but have not made much headway. One reason may be that most of these scrips are listed on the (older) Bombay Stock Exchange (BSE), whose turnover has steadily shrunk over the past 15 years to just under 4% of the total market, even though it has more than 3,000-odd shares listed on it with negligible trading. Clearly, it is unfair, and expensive, for the BSE to bear the cross for legacy issues. The regulator needs to step in on behalf of investors and make investor protection funds available to pursue these companies, initiate action against directors (one committee had suggested barring them from the boards of all companies) and file winding-up proceedings against the companies. Meanwhile, several investors and intermediaries have innovative ideas to revive trading in these scrips, if only the regulator would listen. One suggestion sent to Moneylife is to transfer these shares to one of the 20 defunct regional bourses which can provide an over-the-counter (OTC) platform to trade the shares and give them liquidity. These would be like the bulletin boards or pink-sheet exchanges that exist abroad, with lower regulatory requirements. Clearly, this and other suggestions need to be examined by the regulator to find a solution.
Healthcare costs are galloping and health insurance, the supposed solution, is getting too expensive, erratic and unreliable. What should you be doing?
For middle-class Indians, the cost of decent healthcare has been galloping at the rate of 20% per annum, more than three times the general inflation level. Health insurance, which was seen as the answer to their problems, is getting too expensive, erratic and unreliable.
In recent months, public sector insurers have gone to war with expensive hospitals by scrapping cashless facilities on the grounds of massive overcharging. They are also at loggerheads with their TPAs (third-party administrators) for allegedly colluding in the cost escalation. Higher repudiation of claims has become another worry for the consumer. Squeezed by the pincers of poorly-sold group insurance and fraudulent hospitals and TPAs, insurance companies are bleeding. They are reacting by cutting down and withdrawing options and policies and rejecting claims. Worse, despite the best efforts of the regulator, the Insurance Regulatory and Development Authority (IRDA), the redressal of complaints has been slow and inadequate. Added to this confusion is a huge cloud of ignorance on the part of most people, making them perfect targets for mis-selling.
Your medical insurance options are becoming fewer. What should you do to safeguard your interest?
Moneylife talked to a wide cross-section of people to understand the issues - from the perspective of the insurers as well as the consumers. We find that there are no easy answers and the situation will remain chaotic for a while. You need to understand all the issues; have modest expectations; be careful about what you buy; and, most importantly, build safeguards outside the insurance system, because the system will continue to throw up nasty surprises. For starters, there is no option but to understand the current state of the insurance business to interpret the recent events and to know what's coming.
Insurers are bleeding. How will that affect you?
Rohan Dukle, director of Magus Corporate Advisors Pvt Ltd, an insurance claim consultancy firm, says, "The total de-tariffing of the non-life insurance post-2006 (from 1 January 2007) triggered major price wars in hitherto profitable segments such as fire, engineering (insurance), and so on. There is increased pressure on bottom lines; this, coupled with the lower ceding commissions, has forced insurers to reconsider pricing. This pressure is not expected to reduce anytime soon because of the constant influx of new entrants into the non-life segment."
Sudhir Sarnobat, co-founder and director of Medimanage Insurance Brokers, believes that, "Healthcare insurance costs will go up in the next three years because private insurers need to make profits." He also points out that the costs are increasing for healthcare providers, like the cost of land, the latest medical equipment and high-calibre manpower. He estimates a 15% increase in insurance premium every couple of years.
Cutthroat competition has led to insurers offering ridiculous terms to grab business volume (like group insurance from corporates) and this has resulted in losses. The extent of competition is evident from the reports of the Comptroller & Auditor General of India for 2006-09 which show that the four PSU insurance companies suffered a loss of Rs417 crore on individual portfolios and a loss of Rs622.49 crore on group policies. So aggressive was their pricing of group insurance that three top Tata group companies -TCS, Tata Motors and Tata Power - preferred to buy insurance from public sector providers rather than from their own group entity.
Finally, false and fraudulent claims were widespread, especially because of the industry practice of handing over claims processing to TPAs. "Insurance companies have been witnessing inflated, fraudulent, and unwarranted claims from some hospitals,"
M Ramadoss, CMD, New India Assurance, told Moneylife.
All this has led to a major backlash. Things have reached a point where there is no alternative to increasing premiums; simultaneously, appropriate solutions are also being worked out. Segar Sampathkumar, deputy general manager, New India Assurance, tells us that it is impossible to cross-subsidise the costs of group health insurance that are escalating at 30% to 40% per year. Insurers are also prescribing caps to certain specific covers and co-payments, leading to shrinkage in the overall cover. In short, be prepared to deal with insurance providers who are under a lot of pressure and who will, therefore, try to get away by being nasty.
Earlier, insurers followed the policy of "pay if you can, reject if you must"; they now have a policy of "pay if you must, reject if you can." Nagesh Kini, who has been an auditor of insurance companies, says, "The aam aadmi has no alternative but to fork out ever-increasing insurance premiums." He believes that all insurers have "resorted to grossly unfair practices, such as refusing covers, imposing unreasonable loads, hiking premium rates, withdrawing/reducing benefits, rejecting, delaying and/or resorting to ham-handed deductions, or disallowances from claims lodged without assigning valid reasons."
(This is the first part of a two-part series)