The move would facilitate business relationship between non-residents and local businessmen
Mumbai: The Reserve Bank of India has allowed non-residents to provide guarantee for non-fund based activities to residents, a move that would facilitate business relationship between non-residents and local businessmen, reports PTI.
Earlier, this facility of providing guarantee by non-residents was available for rupee loans only.
"...it has been decided to extend the facility of non-resident guarantee under the general permission for non-fund based facilities (such as Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) ) entered into between two persons resident in India," RBI said in a notification.
It said there would be no change in method of discharge of liability by the non-resident guarantor under the guarantee and the subsequent repayment of the liability by the principal debtor.
The notification further said that a new reporting format would be introduced to capture such guarantees issued and invoked. The banks would be required to furnish the details of such transactions by 10th day of the following month.
The suit said Citigroup masked losses on its holdings of CDOs in 2006 and 2007 as the property market was collapsing, which helped it keep its share price high, above $47 in October 2007, before it plunged to below $2.00 in early 2009 after some $50 billion in asset writedowns
Instead of chasing the rainbow and coal abroad, CIL would do well to persuade the environment ministry for expeditious clearance of a few out of the 45 pending cases and endeavour to comply with as many conditions that have hindered the progress
As already reported in the press, when the Comptroller & Auditor General of India (CAG) presents his report to the PAC (Public Accounts Committee) and to the Parliament, he
is most likely to recommend that the entire coal block allocation be scrapped, declared null and void, except for the solitary unit that went truthfully to operate the mines. In fact, chances are that he may go one step further and suggest the relevant sections of the law and point out the loopholes under which such a move would be possible without further hassle or legal complications!
The opposition will, then, wholeheartedly support this move and the UPA will have no alternative but to concede to this legitimate demand.
Also, as more and more details of the allocation data emerge, there is no doubt that for a great number of unexplained reasons, no action was initiated or taken when the allottees did not commence production in 36 to 48 months time. Everyone concerned has more than one tangible excuse that they are still “awaiting clearances” from the state and the MOEF (ministry of environment and forests) so that they can proceed with the ‘spade’ work.
In the meanwhile, Coal India (CIL), the world’s largest coal producer by virtue of being a government undertaking has other plans on the anvil, and that of exploiting the overseas assets!
In a separate report published in the Mint, CIL chairman, Narasing Rao has reiterated its plans to acquire mining assets in South Africa and Mozambique. After all, CIL is flush with funds and has a large cash reserve.
This move may temporarily distract our attention from the drama of Coalgate in progress, but the fact remains that CIL’s earlier attempts, a decade ago, did not succeed, comes to our mind.
Generally, red tapism, bureaucratic controls and other stumbling blocks have always come in the way of most government undertakings. They do not have the enterprising skill and spirit of private firms; and by the time someone really succeeds in a job like this, it will be the most inappropriate time for his transfer for another posting.
Under the present circumstances what should Coal India really do?
In an earlier report, (Moneylife issue dated 17th August: http://www.moneylife.in/article/needed-a-single-window-clearance-to-attract-foreign-investments/27825.html) we had stated that Coal India itself was awaiting various clearances, both from the state and the MOEF for it to work on. Some 158 of their applications were in process, at various stages, out of which 133 were pending at the state levels and 45 with the MOEF.
Therefore, instead of chasing the rainbow and the pot of gold, err coal abroad, CIL will do well to persuade the MOEF for expeditious clearance of a few out of the 45 pending cases and endeavour to comply with as many conditions that have hindered the progress. Surely, it is not a herculean task for one PSU to convince the MOEF of its ability and willingness to comply with the stipulated terms, but seek at least interim clearance to start the ‘spade’ work. Even then, it would be at least another two to three years before CIL can start mining coal, assuming of course, it does the job itself or even give it to a qualified contractor with proven track record.
For the time being, Coal India should divert its attention and energy to develop indigenous resources, obtain the best mining equipment, plan dedicated corridors, use its cash reserve to finance such an operation, instead of scouting for overseas mines.
CIL must consolidate its position at home first. Or be smart enough to sign up a lease agreement with a clear option to buy the mines within a stipulated period. This way, it would know the quality of coal mined in terms of calorific value, experience the local conditions and get exposed to onward transmission to India.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was 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. He can be contacted at [email protected].)