Posco wants modification in draft MoU before renewal: Minister

Posco-India is not ready to accept the state government's proposal to exclude the swapping of iron ore clause in the original MoU. The provision of swapping of iron ore in the lapsed MoU had been opposed by many, including Jairam Ramesh, when he was the environment minister

Bhubaneswar: Ahead of the renewal of its memorandum of understanding (MoU) with the Orissa government for the 12 million tonne per annum (MTPA) greenfield steel plant in Orissa, Posco-India has sought certain modifications, reports PTI.

"Posco-India has accepted some of the suggestions made by the state government, but it wants certain modifications," state steel and mines minister Raghunath Mohanty told reporters here today.

Though the MoU with the South Korean steel major lapsed on 21 June 2010, it was yet to be renewed because of certain reasons including the iron ore swapping clause.

Sources in the know said that Posco-India was not ready to accept the state government's proposal to exclude the swapping of iron ore clause in the original MoU.

Under the lapsed MoU, iron ore high in alumina content not exceeding 30% of the total annual requirement for the Paradip plant could be swapped with an equal quantity of low alumina content iron ore or with better content imported for blending to produce better quality steel and conserve energy.

The provision of swapping of iron ore in the MoU had been opposed by many, including Jairam Ramesh, when he was the environment minister.

While according final forest clearance to the Posco project on 2nd May, Mr Ramesh as the minister for environment and forest had said: "The MoU had provision for export of iron ore which made me deeply uncomfortable with this project.

I would expect that the revised MoU between the state and Posco would be negotiated in such a manner that exports of raw material are completely avoided."

The government was examining Posco India's application for modification and certain in-principle decision would be taken, the minister said.

"We have almost finalised the draft of the MoU through consultation with Posco-India. Have patience, we will renew the MoU with Posco soon," chief secretary BK Patnaik said.


Danger ahoy! Questions arise on Indian naval safety after repeated shipping fiascos

Authorities appear clueless even after repeated incidents of ships grounding, colliding and sinking off the country’s coast. Now activists and citizens have raised some serious questions on the state of our naval security

The shipping authorities are all at sea about the ship MV Rak's long wait and subsequent sinking near Juhu. There seems to be little headway with the investigations, even though incidents of ships grounding, colliding and sinking at Mumbai have been repeated since a long time. Activists and citizens have raised serious questions about the state of our naval security.

"There is an urgent need for upgrading the surveillance system. How was it that the ship was anchored near the beach since 21st July and nobody took a note of it?", asked Captain Ashok Malkani, shipping veteran. The ship was on a voyage from Indonesia to Dahej in Gujarat, just 20 hours away from Mumbai.

"It is most strange for the vessel to stay at anchor off Mumbai, when it could have reached and docked at her intended port of discharge, received her provisions and spares, and unloaded all her cargo," Mr Malkani told Moneylife. "The vessel would have lain in good safety, instead of weathering rough monsoon sea conditions for 14 days."

A leading Marathi daily, quoting unnamed sources, revealed that before MV Rak was sunk, it was illegally provided with oil supply and a few Customs and Mumbai Port Trust officers were complicit in this activity.

What makes the case of Rak more intriguing is that it is not a standalone case. Equally strange is the case of MV Pavit, which was abandoned off the Oman coast on 29th July. It drifted off, grounded near the Juhu-Versova beach on 31st July and subsequently sank. The crew was rescued by a US naval ship before being brought to port by an Indian merchant vessel. Experts believe that the ship purposefully sank near Mumbai, because wind direction and other maritime factors indicated that it should have drifted off to the Gulf of Kutch. How it came to Mumbai remains a mystery.

There is the case of cargo vessel MV Wisdom, which was grounded near Juhu beach for almost a month this year. It became a tourist attraction, and was finally hauled back into the ocean on 2nd July after a salvage operation. Last year, MSC Chitra and MV Khalija collided off the Mumbai coast, which resulted in the oil spill that spread as far as Raigad and Elephanta. The captains of the ships kept blaming each other, and even now, little information is available as to how the collision happened.

"This is baffling," said EAS Sarma, former finance and power secretary, who is settled in Vishakhapatnam, the Eastern Naval Command base. He said, "The intelligence agencies and the authorities should look for patterns in these cases. All information must be collated centrally. And even if they say that they do not have enough resources or ships, what prevented them from making random checks? Usually, a lot of information comes out in such checks."

Commenting on the obvious lack of intelligence inputs in such cases, Mr Sarma suggested that the coast guards should involve the local people and the fishermen for getting information. He said that since fishermen go off to the sea daily and interact with a lot of people, they are a valuable source of information. If the authorities give them identity cards, a strong network can be established.

The environmental impact of these fiascos is also a serious issue. Oil continues to leak from Rak at the rate of 8-10 tonnes per day, as per the latest review report by the director general of shipping. The director general has declared that the oil streak has stretched up to 5-6 kilometres along the Alibaug shoreline.

Environmental activist Sumaira Abdulali told Moneylife, "The government is paying lip service, and not doing anything concrete. Oil is still leaking, and they are not using the appropriate technology." The Khalija-Chitra collision last year damaged the mangrove belt in and around the city; contaminating shores and threatening fishing activity.

MV Rak was a 27-year-old ship. Indian merchant navy veteran Veeresh Malik has raised the question on how an overage ship with improper documents was allowed entry into Indian waters. Most of the Indian vessels are on the verge of breaking down, said Mr Malik. While Western countries spend a lot on coastal security, the Indian government rarely beefs up its arrangements.

Ships which are more than 20 years old are not allowed in European or American waters. As per USA's maritime rules, a ship must inform the coast guards four days in advance and wait 1,000 nautical miles away from the coast, show the documents and then enter.

Captain Malkani, however, thinks that the strength of the monsoon should not be underestimated. He pointed out that all these incidents happened during the monsoon. "When the ship is anchored, the waves in the monsoon keep hitting the bottom which damages it. Indian shipping companies know this phenomenon of the monsoon. Ships coming from other countries should first upgrade themselves and understand the monsoon first to avoid such accidents," he said.




5 years ago

Our authorities are simply incompetent. They are unable to comprehend what is happening and what must be done about it. It is beyond their ability, because this requires alertness, imagination, intelligence and PRIDE, qualities our quota-based democracy does not inculcate or cherish. No, all that will be demanded from them is a delayed, rubbishy, post-facto report on what went wrong. Then it will be back to business as usual.

Dr Nilesh Baxi

5 years ago

Right from the time Kasab & company landed in Mumbai, I have been finding out why these boats ans ships are able to reach the shores of Mumbai. Most shocking finding is that our coastal radars are so weak they can not detect boats which are small or small to medium!!!!!!!!!!!
In absence of sensitive radars, our navy and coast guard should be very vigilant. Unfortunately they are found wanting.
Even that case of six people in black dress in a dingy when challenged by 2 fisherman, proceeded to distant island, cut the dingy to pieces and 6 of them fled. Police after 3 days of search came out with an idiotic statement that probably they were policemen!!! Have you ever seen policemen in black dress? When challenged by fisherman, why they fled? and above all, why did they cut the dingy and throw it in the sea? Why they have not been identified?
One day we are going to pay a heavy price for our inefficiency and "I care two hoots" attitude
An Activist

Market volatility exposes perils of Exchange Traded Funds

ETFs combine the advantages of index funds and stocks. But because they are bought through a bourse, they are exposed to the mercy of the market’s liquidity

Exchange-traded funds (ETFs) are becoming increasingly popular. And yet, investors may be buying ETFs without fully realising the downside of them-low liquidity that can play havoc with the price at which you buy and sell when the market is volatile.

ETFs are supposed to combine the advantages of both index funds and stocks. They are easy to use and can be traded in any quantity, just like stocks. ETFs provide diversification, market tracking, transparency of an index-based mutual fund and come at low costs. Prices for ETFs are determined continuously in exchange trading. Orders are executed immediately. ETFs can be traded at any time while the stock market is functioning. It is like investing in shares where you can theoretically buy and sell on a daily basis. That leads us to the flip side of ETFs.

One of the biggest negatives is precisely that you have to buy them through an exchange-and, therefore, you are at the mercy of the market's liquidity.

Low trading volumes in particular ETFs can lead to low liquidity. If a particular market is not as efficient as it should be, it will take time to match an ETF seller with a buyer. The bid-ask spread will be wide.

You could end up buying it at a premium and selling it at a discount.

Until an ETF becomes widely popular, this is common in thinly-traded markets.

And the more volatile the market, the wider is the bid-ask spread. Also remember, even the spread that does not look so wide in a normal market can widen dramatically in a volatile, especially a sharply falling, market. Let's look at some examples of thinly-traded ETFs.

The first Indian exchange traded fund-Nifty BeES from Benchmark Mutual Fund- tracks the S&P CNX Nifty Index, and is structured as an open-ended fund but unlike ordinary mutual funds, is listed on the NSE (National Stock Exchange) and trades like a stock. Each Nifty BeES unit is 1/10th of the S&P CNX Nifty Index value. Apart from NIFTY BeES, there is also Junior BeES (Nifty Junior Index) and Bank BeES (Bank Index), and yes, Liquid BeES (the world's first liquid ETF) and Gold BeES also.

But one of the most popular ETFs, Nifty BeES, is wide off the value of the Nifty index on which it is based. In the past two weeks, it has been off the Nifty by 2%-3% on an average.

Let's look at some more examples of thinly-traded ETFs.

The Hang Seng Benchmark Exchange Traded Scheme (Hang Seng BeES) is now traded on the NSE, brought to you by Benchmark Mutual Fund. If you try to buy it, you will find yourself to be a loner. There is hardly anybody buying and selling and so there is a huge gap between the bid-ask spreads. The impact cost will be high as indicated by the bid-ask spread of Rs36.28 (on an average). Similarly, Reliance Mutual Fund-Banking ETF (RELBANK), has a bid-ask spread of Rs20.08 (on an average). The average traded quantity for the past 10 days was just 113 units. UTI Mutual Fund's (UTI-Sunder) average traded quantity in the same period was just 82 units, with bid-ask spread of Rs135.65 (on an average).

Gold ETFs are very popular among fund companies. Every fund company is launching one. Beware of buying gold through ETFs. Many are thinly-traded. Religare Gold ETF's average bid-ask spread was Rs11.57 on the underlying value of 1gm of gold which was Rs2,429 at that time. For ICICI Prudential Mutual Fund's ICICI Prudential Gold ETF (IPGETF), the average traded quantity for the past 10 days was 626.7 units (average bid-ask spread was Rs23.54); for Axis Gold ETF (average traded quantity was 595 units for the past 10 days), the average bid-ask spread was Rs 29.8. Among the more liquid ETFs is Gold BeES from Benchmark Mutual Fund-Gold ETF.

As a result of the above scenario, if a buyer wants to buy some thousand units than he has to wait for a long time to get his buying price, or else he has to buy at a significantly high price. Conversely, if a seller wants to sell some thousand units than he has to wait for a long time to get his selling price while the market may fall further-or else he has to sell at a significantly low price.




5 years ago

Your (ML) Comment : "But one of the most popular ETFs, Nifty BeES, is wide off the value of the Nifty index on which it is based. In the past two weeks, it has been off the Nifty by 2%-3% on an average"

Comment : Nifty spot index is a price index & does not account for dividend.ETF is priced considering dividend received from underlying securities, e.g. in case of Nifty ETF invest in Nifty 50 companies. Many of these company gives dividend which is accounted in NAV of ETF. Because of this there is difference of NAV & Spot Nifty Index. So investors investing in Index ETFs are getting benefits of index movement & at same time benefits of dividend also."


5 years ago

your(ML) comment - "One of the biggest negatives is precisely that you have to buy them through an exchange-and, therefore, you are at the mercy of the market's liquidity"

Comment : "Investors are not at all at the mercy of market's liquidity. There is a concept of Authorized Participants, who manages & provides the liquidity at all the time. In normal share trading there is fix number of shares that are available in the market for trading (buying & selling). However as ETFs are mutual fund units, traded on exchange, any number of units can be created or redeemed on real time basis. Generally AMCs who are providing ETFs & market leader in ETF space, monitors the liquidity, bid-ask spared etc., on real time basis & manage the liquidity. So as an investors no one should worry about liquidity. "

Pradeep N

5 years ago

Are there no market makers for these?

I remember asking this to question to Ajit Dayal of Quantum, he said, please call us, we will ensure the liquidity is ensured via a Market maker.

Does the above works in India?

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