Companies & Sectors
UP Pollution Board shuts Coca-Cola plant

Coca-Cola's bottling plant has been shut down in Mehdiganj by the Uttar Pradesh Pollution Control Board following violation of certain norms and complaints of increase in water pollution

This article was updated on 21 June 2014 at 3pm

The Uttar Pradesh Pollution Control Board (UPPCB) has ordered Coca-Cola to shut down its bottling plant in Mehdiganj after the soft-drink company was found violating certain norms under the 'No Objection Certificate' (NOC). This action taken by the UPPCB was a result of Coca-Cola's failure to meet a key condition in the temporary license given to it, including to obtain a clearance to extract groundwater from the Central Ground Water Authority (CGWA), Lok Samiti, which has been fighting for the closure of Mehdiganj plant said in a release.


The groundwater in Mehdiganj, which was marked in the 'safe' category in 1999 when Coca-Cola first opened it's plant had gone to the 'critical' category in 2009. In its order on 6 June 2014, the Pollution Board, said, “Coca-Cola had increased its production capacity from 20,000 cases per day to 36,000 without the Board’s permission, and suggested that the company may have misled the Board about the actual amount of industrial waste discharge (which has remained constant, according to Coca-Cola, in spite of increasing production by 80%). The Board also cast doubt on Coca-Cola’s waste treatment plant, noting that the 'Treatment System/Plant' was not operating 'smoothly/properly'.”


In a release, Amit Srivastava from the international campaigning group, India Resource Center (IRC) said, “Coca-Cola’s thirst for profits in India have placed its business interests over the well-being of communities and the environment and this is not acceptable as the community of Mehdiganj has shown. We will ensure that Coca-Cola will face heightened scrutiny anywhere it plans to operate in India because the track record of the company is dismal”.


Coca-Cola had been seeking to expand the capacity of its existing plant in Mehdiganj five-fold as a part of its aggressive growth strategy of India. In 2012, they announced an additional $5 billion investment by 2020 as sales in industrialized countries decline or stagnate due to health concerns. The expanded facility in Mehdiganj has already been built but has not been able to begin commercial operations, the Lok Samiti said in a statement.


The closure of this bottling plant comes at the peak of Coca-Cola's sale in India. The company has approached National Green Tribunal (NGT), an environmental court in India appealing against the UPPCB decision, citing financial losses as a reason for re-opening the plant quickly. Post three hearings, NGT has so far refuted the re-opening.


Another major hurdle the company faces is about the land it acquired for its plant. According to the Lok Samiti, the land is community owned land and cannot be used for private purposes. In December 2013, local authorities passed an order to evict Coca-Cola from the illegally occupied land but the company had obtained a stay order from court.


However, this is not the first time that Coca-Cola's bottling plant has been cloed in India. Earlier in 2004, Coca-Cola's botteling plant at Plachimada in Kerala was shut down and the company still owes $47 million in damages as a result of it's operations there. Its plant in Kala Dera, Rajasthan is also in the news with locals demanding clsoures due to rapid depletion of groundwater levels.



In an email reply, an official from Coca-Cola said, its Mehdiganj plant is operating again as the NGT on 20th June has stayed the order passed by UPPCB.




2 years ago


SEBI unveils norms for public holding, OFS, ESOP and research analysts

SEBI's Board announced new norms for public shareholding for all listed companies including PSUs, ESOP scheme, offer for sale -OFS mechanism as well as research analysts

Market regulator Securities and Exchange Board of India (SEBI) on Thursday cleared a slew of reforms including a proposal to hike public holding in all state-run companies or public sector units (PSUs) to a minimum 25%. SEBI also announced new norms for research analysts and employee stock option/purchase scheme (ESOPs) given by listed companies.


The market regulator, in its board meeting at Delhi also decided to revamp the offer for sale (OFS) mechanism to allow non-promoters to use this route for selling shares and a provision of 10% reservation will be provided to retail investors.


"The Board undertook a review of the extant regulatory framework in the primary market and approved certain reforms to revitalize the market," SEBI said in a release.


Revisiting the minimum offer to public norm

In order to make regulatory requirements consistent across the companies, irrespective of post issue capitalisation, and to facilitate mid-sized issuers who may not be in need of large funds, SEBI said it decided to take up the following proposal with Ministry of Finance to carry out suitable amendments to Securities Contracts (Regulation) Rules, 1957 (SCRR).

(i) Minimum dilution to public in an IPO shall be 25% or Rs400 crore, whichever is lower, for companies with post capitalisation of less than Rs4,000 crore. This will remove the anomaly that a company just short of Rs4,000 crore market capitalisation, was required to dilute about Rs1,000 crore while another company at Rs4,000 crore market capitalisation was required to dilute only Rs400 crore.


(ii) In case of dilution of less than 25%, minimum public shareholding of 25% to be achieved within three years of listing, where required under the rules.


Minimum public shareholding for PSUs

SEBI said it believes that rules for the market should be uniform across all the companies and should be promoter neutral. Under the current rule, while non-PSUs are required to have minimum 25% public shareholding, PSUs are required to have only 10%, which is discriminatory and inconsistent with the broader market design.


SEBI has now decided to recommend to Ministry of Finance that SCRR should be amended so that all the listed companies including PSUs shall be required to achieve and maintain minimum public shareholding of 25% of the total number of issued shares, within three years.


Increasing the investment bucket for anchor investor

In order to increase the share of serious, committed investors, SEBI has decided to increase the anchor investor’s bucket to 60% from the current requirement of 30% of the institutional bucket.


Eligibility of shares for Offer for Sale-OFS in an IPO

The SEBI Board also approved the proposal to permit bonus shares issued one year prior to filing of the draft offer document to be offered for sale, provided that these bonus shares were issued out of the free reserves or share premium.


Amendments in preferential issue norms

The market regulator said, to bring consistency between various regulations and to clarify certain regulations governing the preferential issue norms, it decided to make some amendments in the regulations. These include:


(i) Replace 'closing price' with 'volume weighted average price' in the pricing formula for preferential issues


(ii) The regulations concerning pricing of QIPs take into account the effect of stock split, bonus, etc. However, this has not been explicitly provided for in the regulations concerning preferential issues. SEBI has decided to extend the same treatment to preferential issues also.


(iii) The regulations concerning preferential issues do not provide specifically for pricing of infrequently traded shares. However, SEBI (SAST) Regulations explicitly specifies the pricing methodology in case of infrequently traded shares. It has been decided to extend similar treatment to preferential issues also.


Review of ESOP guidelines

SEBI Board also approved the proposals to review the existing regulatory framework on employee stock option scheme (ESOS) and employee stock purchase scheme (ESPS) for listed entities and frame regulations for employee benefit schemes involving shares of the company, replacing the existing SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.


Such schemes would also be permitted to acquire shares from secondary market under certain conditions so as to avoid forced dilution of capital, SEBI said.


To improve governance and transparency of the schemes and also address concerns regarding potential market abuse, the market regulator has put in place some safeguards. These include requirement of shareholders' approval through special resolution for undertaking secondary market acquisitions, certain limits on secondary market acquisitions, a limit of 10% of the assets held by general employee benefit schemes other than ESOS type of schemes on owning shares of the company / listed holding company, trusts to undertake only delivery based transactions and not deal in derivatives, restrictions on sale of shares by the Trusts, a minimum six month holding period for shares acquired from secondary market, classifying shareholding of such Trusts separately from 'promoter' and 'public' category, and stricter disclosure and other regulatory obligations.


SEBI said existing ESOP schemes would be provided one year to comply with the new regualtory framework. A longer transition period of five years is also provided for re-classifying shareholding of existing employee benefit schemes separately from 'promoter' and 'public' category, bringing down the level of shares acquired from secondary market within the permissible limits and reducing own share component to 10% of the total assets of general employee benefit schemes.


Qualified Audit Reports

SEBI said its Qualified Audit Report Review Committee (QARC) has reviewed 713 audit reports filed by listed companies between 1 January 2013 to 31 December 2013. The QARC referred 397 audit reports for audit qualifications and 186 to Financial Reporting Review Board - ICAI (FRRB) for its opinion on restatement. For the remaining 130, there was no need to seek rectification or restatement, SEBI said.


OFS of shares through stock exchange mechanism

The SEBI Board approved following modifications to the existing offer for sale (OFS) mechanism to encourage retail participation and to enable large shareholding including promoters to use the mechanism. At present the OFS mechanism is available to top 100 companies only.

Here are the modifications in OFS mechanism:


(1) Reservation for retail individual investors

(i) Minimum 10% of the issue size shall be reserved for retail investors i.e. for the investors bidding for amounts less than Rs2 lakh. In case this percentage is not fully utilised, the unutilised portion may be offered to other investors.

(ii) Seller of shares may offer a discount to retail investors in accordance with the framework specified from time to time.


(2) Allowing non-promoter shareholders to offer shares through OFS

Non-promoter shareholders having (shareholding) more than 10% or such percentage as specified by SEBI from time to time shall be eligible to use OFS.


(3) Expanding the list of eligible companies

OFS mechanism shall be made available for shareholders of top 200 companies by market capitalization.


Common KYC in financial sector

The centralised know-your-client (KYC) system introduced by SEBI has evolved and stabilised with data of about 1.95 crore KYCs of investors. The client, who has already done the KYC with any SEBI registered intermediary need not undergo the same process again when he approaches another intermediary. The system has benefited the investors, SEBI claimed.


At present this facility of sharing of KYC information is available only among SEBI registered intermediaries. The SEBI Board has now approved the amendment to SEBI (KYC (Know Your Client) Registration Agency) Regulations, 2011 for sharing of KYC information available on the centralised system with entities regulated by other financial sector regulators.


SEBI said, "This would further facilitate the KYC process for the investors in the entire financial sector. This will not only reduce the paper-work and bring down cost of operations for the investors as well as for the intermediaries, but will also save the investors from the hassle of getting KYC done again by the intermediaries regulated by other financial sector regulators."


Research Analyst Regulations

Based on consultations with market participants and comments received from the public on the consultation paper and draft regulations for research analysts, SEBI Board approved the draft SEBI (Research Analyst) Regulations, 2014.


The regulations require individual research analysts and entities engaged in issuance of research reports or research analyses to register with SEBI. However, investment advisers, credit rating agencies, portfolio managers, asset management companies, fund managers of alternative investment funds or venture capital funds are exempted from registration under these regulations.


To act as research analyst an individual person or an entity is required to have certain experience, qualification, certification and capital adequacy. Also there are some restrictions on trading by research analysts.


The regulations also specify restrictions on trading and on compensation of the persons who make comments or recommendations concerning securities or public offer through public media.


Building a Better India – Part 9: Boosting hospitality and tourism

We urgently need to curtail and reduce all formalities, consents and permissions by repealing or  changing existing relevant laws on hotels, restaurants, bars and pubs, mostly framed by state governments

Service based establishments like hotels, restaurants, resorts and bars are of immense importance for the Indian economy and many micro economies around the country, in terms of providing facilities to Indian and foreign tourists and guests, contributions to government revenues, employment and earnings of foreign exchange. But setting up a hotel or a one of these establishments is among the most cumbersome, time consuming and expensive procedures, in terms of number of consents, licences and registrations required and number of taxes involved :-

 Licences, consents and registrations required

Blue print of the site plan and Sanction of building plan.
Permission from local police and fire department.
NOC from chief medical officer and approval of water lines and sewerage and Clearance from director of industrial safety and health.
Consent for water and air pollution and approval of garbage
disposal and sewerage.
Licence for power and electrical installations.
Trade licence and Registration with shops & establishment dept.
Licence to play music in rooms, common areas and on special   events.
Bar licence from state excise authorities.
Restricted money changers licence
Sanction of LPG and furnace and Calibration of weights and      Measurements
Food handler’s licence and nomination under food adulteration act.
Permission to open parlours and saloons within hotel.
Obtaining Hotel star classification from central government
License for installing and operating lifts.
Tax registrations and formalities:

Registration with state excise authorities with numerous formalities, records and filing of returns for storing and serving liquor.
Registration for state VAT, Service tax and Luxury tax
PAN and TAN number
Registration with PF. Dept. And Registration with ESI
Trade licence.

NOTE: almost every consent, permission, registration and licence has official and 'unofficial' fees.

Ironically no rule or restrictions or any other formality applies to food cooked and sold on pavements and streets, other than some pay-offs to local officials.

In search of solutions:

The ministry of tourism of every state government  should set up a separate department to provide a single window facility to the entrepreneurs for granting one single consolidated licence for opening a new hotel, restaurant, bar or pub by coordinating with various agencies after taking all necessary information /clarifications / supporting documents from the applicant; and by charging a single lump sum licence fees and such licence should replace all existing licences, consents and permissions. This should be renewable once in three years upon payment of renewal fees, review and inspection. The single window should also have the responsibility of registration of the applicant with various tax departments under one roof.

There is an urgent need to curtail and reduce the formalities, consents and permissions by repealing/ changing the existing relevant laws on hotels, restaurants, bars and Pubs mostly framed by state governments.

You may also want to read...

Building a Better India-Part1: How to create a smaller and smarter government
Building a Better India-Part2: Transforming political landscape
Building a Better India – Part 3: Bringing systemic changes in constitutional bodies
Building a Better India – Part 4: Identifying tax issues
Building a Better India – Part 5: Bringing tax reforms

Building a Better India – Part 6: Fast track clearances

Building a Better India – Part 7: Managing India's Deficit

Building a Better India – Part 8: Boosting Coal Production

(Kolkata-based Dalbir Chhibbar practised as a CA till 1990 and later started his own buinsess)



Shreekanth Prabhu

2 years ago

This may require work-flow automation where prospective licensee comes to know of status of all approvals. Otherwise he will simply be waiting or again ending up following up. Time-bound and transparent approval process is needed. Since all these approvals are important. They should be processed without unofficial fees.

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