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Savers will continue to lose money in chain money schemes because the regulators are pretending not to understand the core issues
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If we cannot export or do not want to export our foodgrain at cheap prices, can we at least divert a reasonable quantity of the available surplus to meet the needs of millions of workers, who are in the lower rung of the society?
Due to the poor conditions prevailing in the Parliament, the presiding officers of both Houses had to declare sine die as the efforts earlier to get the Food Security Bill passed was in vain.
The Opposition had waged relentless battles on the need to dismiss the ministers concerned, and in the end, both Pawan K Bansal and Ashwani Kumar tendered their resignations, as the investigations by CBI continued. It would be a couple of days before the work can commence again.
In the meantime, the BJP lost its bastion in the South and the people of Karnataka, fed up with the corrupt administration, brought in the Congress by a simple majority vote. Siddaramaiah took over as the chief minister, on the Akshaya Tirtya day and the ceremony was attended by over one lakh people in the Kanteevara Stadium.
The very first act of the chief minister as to make an announcement of various schemes that he had promised in the manifesto, which would start with the benefit being extended to 98.17 lakh people below the power line (BPL) by making available rice at Re1 per kg, with a maximum of 30 kg per family each month, effective from 1st June. It may be remembered that earlier, BJP government had distributed 20 kg of rice per family at Rs3 per kg through the PDS.
So far, so good for the BPL families in the state. And what about the national level? What is the foodgrain situation in the country, and what are the prospects for the ensuing monsoon which is around the corner? Let's take a look.
Last year, despite drought conditions in parts of Maharashtra, Gujarat and Karnataka, the country's foodgrain output reached 254 million tonnes. Food stocks in the central pool stood at 59.67 million tonnes (MT), consisting of 35.46 MT of rice and 24.20 MT of wheat. This was after our exports.
Last year, rice exports reached 10 MT but this year, it is unlikely to reach 6 MT due to serious price competition from Vietnam and Thailand. Likewise, after exporting 5 MT of wheat, due to cheaper supplies from Ukraine, Indian export can not make much headway unless the price is reduced or matched. Such delays in deciding the export quantum or price level is detrimental to our exports.
A similar situation is likely to be faced in the export of corn to 3 MT against 4 MT last year due to shipments from larger producers like USA, Brazil, Argentina and Ukraine. Only in the case of soya meal, India is in a better wicket due to higher prices obtainable from Iran but this can change at short notice, because of the political developments in that country right now. The elections are around the corner in India and we need to watch the political climate with great care and interest.
The fact is, when prices globally fall or rise, exporters need to be able to take the decision without delay in order to maintain our customers abroad. In the long run, it is cheaper to accept a loss in the falling market rather than trying to maintain perishable commodities like foodgrain, when new arrivals are expected in the months ahead. Or otherwise, plan alternative uses for the same!
No doubt, there is the urgent need to secure supplies for consumption locally. So far, the monsoon predictions are favourable, but the actual rainfall alone will determine the farm output—right time and in right quantities.
Meanwhile, grains stored both in the open areas and closed warehouses, are subject to natural rot, rodents, and other forms of damage on which we have little or no control.
So, this issue will take us to the innovative canteen scheme of Tamil Nadu chief minister Jayalalithaa, who has sponsored these canteens, initially with 73 centres (target of 2,000) by supporting women's self-help groups. The corporation makes available suitable housing locations from where these women make and supply the popular breakfast dish of idli at Re1 a piece, sambhar rice at Rs5 and curd rice at Rs3, from seven in the morning till 10 pm. Such centres will cater to the needs of mainly daily manual labourers, slum dwellers and people from the lower economic strata. Already, these centres are overflowing with people who form early queues even before these are open for business.
The question now, therefore is, if we cannot export or do not want to export our foodgrain at cheap prices, which are currently available due to intense international competition, can we at least divert a reasonable quantity of the available surplus to meet the needs of millions of workers, who are in the lower rung of the society? Farm labourers, daily wage earners and others in this category can be fed by introduction of this scheme all over the country, with each state providing for basic infrastructure facilities and encouraging women's self-help groups, and these are healthy and good quality food that can sustain their work?
Such a move to popularize the idea will be a boon to a lot of workers all over the country, avoid waste in foodgrain rotting in the warehouses, permit export when international prices stabilize and when new harvest comes in, there is adequate space available for storage for a rainy day?
While the concept of idli, sambhar and curd rice may be workable in the Southern region, a suitable alternative or modification may be in order when it comes to the North, where food consumption is wheat-based. Some food/nutrition experts may have to work out suitable alternatives, but what is important is work on this innovative idea to use our foodgrain in the granaries, and meet the needs of the hungry people.
(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.)
Investors are paying the price for companies’ failure to follow listing norms and the companies are allowed to get away scot-free by the exchanges and regulators. A PIL is seeking probe by the CBI into this gross mischief
It is estimated that as much as Rs1 lakh crore of savings have been flushed down the drain because of poor supervision and regulation. This attitude continues to be evident in the regulators’ stand on public interest litigations (PILs) filed by investor rights groups.
Midas Touch Investors' Association has filed a PIL in the Delhi High Court alleging, among other things, that stock exchanges have failed, as first line regulators, to ensure compliance of the listing agreement by companies and take action in the event of non-compliance. How did the Securities Exchange Board of India (SEBI) react? Its affidavit in response says, the PIL is “devoid of merit”and has been filed by the petitioner “without appreciating the fact that the interest of the investors have duly been taken care of and protected” by SEBI.
How true is this? Well, consider some facts. The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) told a committee chaired by MS Sahoo in 2010-11, that 1,845 companies listed at BSE and 203 companies at NSE were not in compliance of the listing agreement terms. Trading in securities of most of these 2,048 companies (out of 5,000 companies listed on the BSE and NSE) has since been suspended leaving small shareholders holding illiquid shares. In effect, investors pay the price when companies do not meet listing norms—the companies themselves get away scot free. The table provides the number of companies that are suspended by the BSE each year since 1995.
Midas Touch estimates that the total value lost to investors due to these suspensions is a high as Rs1 lakh crore due to their investment in around 3,000 such companies listed on the BSE, NSE and 14 regional exchanges.
What action has SEBI taken against these companies? Its counter affidavit filed in the court provides the answer. SEBI claims to have initiated action against 23 companies for failure to redress investor grievances. Of these, it proposes to start adjudication proceedings in 19 cases. It is important to note that the MS Sahoo Committee itself was constituted by SEBI only on Midas Touch’s insistent demand, as a accredited investor association, to initiate action against companies that forget about investors once they have raised public money and are no longer interested in staying listed and following onerous compliance and disclosure rules.
Do SEBI and the bourses have other powers that could have been invoked against these companies instead of suspending trading, which only hurts investors? The petition documents that too.
According to Midas Touch, the Securities Contracts (Regulation) Act (SCRA) gives plenty of scope for regulatory action.
* Under Section 23A, the failure to furnish information, returns or report to stock exchange within the time specified in the listing agreement is liable to be punished with a penalty of Rs1 lakh per day or Rs1 crore, whichever is lower.
• Section 23E provides for a penalty of up to Rs25 crore for failure to comply with provisions of listing conditions.
Failing to comply with the listing agreement is also liable for prosecution u/s 23(2) of Securities Contracts (Regulation) Act, 1956 (SCRA). Stock exchanges can initiate this prosecution and the law provides for imprisonment that may go up to 10 years with or without a fine, which may be as high as Rs25 crore.
As Midas’s writ petition points out, SEBI’s failure to invoke these powers and perform its statutory duties, “has enabled thousands of listed companies, their promoters and directors to get away with unfair practices and violation of listing agreement terms”. It says “Small investors are the biggest losers due to such inaction. Resultantly, their estimated investment of over Rs1 lakh crore has been blocked, is in suspended animation for years and perhaps gone down the drain with all its ramifications on the health of securities market and economy.
The number of affected small investors may be one crore. They have lost heavily and withdrawn from the securities market, severely affecting fund-raising by companies for speedier development of the economy.”
The petition also points out what Moneylife has harped upon with monotonous regularity. “During two decades of enactment of SEBI Act, 1992, the number of retail investors has gone down from two crore to 80 lakh; Share of household savings deployed in the securities market has gone down drastically, during first half of 1990s over 10% of financial household savings were deployed in the securities market which has dropped to around 4% currently”.
Midas goes on to expose SEBI’s track record. It says, SEBI ought to have initiated “Prosecution/Penalty proceedings against more than 12,000 promoter and directors (an average of six directors and promoters per company) and 2,000 compliance officers/company secretary of 2,048 companies u/s 23 A, for each year, starting from the year 2004.
It ought to have started adjudication proceedings against over 20,000 entities for penalty u/s 23E and filed criminal complaints u/s 23(2) against defaulting companies and the persons responsible.”
Instead, SEBI was more occupied with disposing off 1,755 cases in four years through the consent mechanism rather than start direct adjudication action even in a dozen cases over the past eight years.
Midas Touch concludes that this smacks of an unholy nexus between unscrupulous corporates, stock exchanges and SEBI to loot ordinary investors. Its petition has asked for direction to the Central Bureau of Investigation (CBI) to investigate, fix accountability for dereliction of duty by SEBI and stock exchanges officials and take appropriate action against them. It also seeks a write of mandamus directing SEBI to act on the recommendations of the Sahoo Committee in a time-bound manner and to start adjudication proceedings against promoters of all the suspended companies under the SCRA provisions.