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 The
debate on whether a single regulator for the financial sector is
better than several of them is still out in the open, but it continues
to pop up every now and then. More recently, it resurfaced at a
meeting between Finance Minister P. Chidambram and the chiefs of
the public sector banks in New Delhi. The bankers argued for a single
regulator, saying that with most banks becoming one-stop shops for
a variety of products such as insurance, mutual funds, bonds and
credit cards, among others, the distinction between banking, securities
and insurance activities had blurred. Hence, it was important to
ensure that there's no overlap of jurisdiction between regulators.
That would also pre-empt turf battles.
Interestingly enough, it was the current Governor
of the Reserve Bank of India (RBI) and the then Deputy Governor,
Y.V. Reddy, who had initiated the debate on the need for an overarching
regulator at a 2001 seminar aptly titled "Issues in choosing
between single and multiple regulators of financial system".
The Reddy Formula, as it came to be called, talked about "creating
an apex regulatory authority through a legislation, without disrupting
the existing regulatory jurisdiction, to arbitrate on regulatory
overlaps and ensure regulatory coordination". And that would
mean allowing the Board for Financial Supervision (BIS) of the RBI
to continue supervising banks and non-banks, but by the Deputy Governor
as Chairman; the Insurance Regulatory Authority of India (IRDA)
to monitor insurance companies; and the Securities and Exchange
Board of India (SEBI) to regulate the markets. The apex body would
have the Governor of the RBI as its chairman, the three chairmen
of the regulatory bodies as members, and outside experts working
on a part-time basis.
Subsequently, the Finance Ministry took the idea one step ahead
this year by suggesting that the different regulators-RBI, SEBI,
IRDA and the yet-to-be-constituted Pension Fund Regulatory and Development
Authority-be rolled into one mammoth and all-powerful regulator.
This will mean bringing banking, securities and insurance oversight
under a single umbrella. The concept of a single regulator, now
in its slightly modified form, has many takers. A Mumbai-based analyst,
who did not want to be named, says that it will bring in economies
of scale, cost savings on the basis of shared infrastructure, administration
and systems, greater transparency, and clearer accountability.
Moreover, a single regulator, the argument
goes, can respond more effectively to market innovation and development,
allow pooling of scarce resources, especially in the specialist
areas. Last but not the least, the global trend is to have a single
regulator at least in the financial sector. The best example is
that of Financial Services Authority (FSA) in the UK, and more recently
in Japan, Korea and Sweden. Even the European Union has recommended
a single national regulator for its 25 members.
The opponents of the idea too have a strong
case when they cite the example of the US, which continues to be
one of the best-regulated financial markets in the world despite
the presence of multiple regulators. It has one national regulator
for the stock markets, the Securities and Exchange Commission (SEC),
a separate regulator for formulation of monetary policy (the Federal
Reserve), yet another to oversee the insurance industry (Federal
Deposit Insurance Corporation) and then the Office of the Comptroller
of Currency, which regulates banks.
After all, the critics argue, any unification
could also lead to a lack of clarity in functioning as multiple
regulators have different objectives. The objective may be depositor
protection for banks, investor protection for capital markets and
consumer protection for other financial firms. Hence, pooling of
resources may not produce the synergy that is expected.
Surprisingly, the critics may have a supporter
in the Finance Minister, who seems to have had second thoughts about
a single regulator. At a recent conference organised by the IRDA
in New Delhi, he said that a single financial regulator may not
be the best thing for the country, given its size and complexity.
Besides, the super regulator may actually be slower than several
smaller regulators if decision-making were to be concentrated with
one person or a core board. The better idea, this magazine feels,
would be to make the existing regulators more efficient and responsive.
-Ashish Gupta
Budget
Countdown
What's top of the agenda this Budget.
With
budget 2005 round the corner, it is red alert at North Block. Entry
for outsiders is banned and even telephone calls are going unanswered.
Yet, there's news trickling out that this year's is going to be
a development-oriented budget, with special emphasis on social and
infrastructure sectors as promised by the United Progressive Alliance
(UPA) government's National Common Minimum Programme (CMP). BT looks
at some of the key moves Budget 2005 may announce.
Power Sector: The long-neglected power sector
could be a major beneficiary, with all kinds of sops being talked
about for companies willing to invest in this sector. For instance,
tax exemptions till 2012 may be offered to companies investing across
the spectrum of generation, transmission and distribution. There
is also talk of bringing down the import duty on power equipment
to 5 per cent from 10 per cent.
Expenditure Commission: The government is likely
to announce the setting up of an Expenditure Commission to look
at the contentious issue of subsidies. Last year in his budget speech,
Finance Minister P. Chidambaram had promised the creation of such
an agency.
VDIS: Another Voluntary Disclosure of Income
Scheme (VDIS) may be announced to unearth black money and shore
up the government's falling revenues. The CMP had categorically
stated that special schemes to unearth black money and assets would
be introduced.
Dividend Tax: A reduction in the dividend distribution
tax from 12.5 per cent to 10 per cent may materialise. The reduction,
which will lower government's revenue collections by Rs 1,500 crore
or so, was part of the Kelkar Committee report on direct taxes.
Services Tax: Service providers with an annual
turnover of less than Rs 10 lakh will be exempt from the services
tax. At present, only 71 services are under the services tax net
and a host of new services, including rail, road and air transport
could fall into the tax dragnet.
Cess Break: While it is highly unlikely that
there will be any withdrawal of the 2 per cent cess for education
imposed by last year's budget, there is a move to impose a cess
on tobacco and pan masala this year.
-Ashish Gupta
Purnendu's
Big Bid
Purnendu Chatterjee and partners bid over $5
billion for a Dutch petrochem major.
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| Chatterjee: Will he make history? |
If
he pulls this one off, Purnendu Chatterjee of The Chatterjee Group
will earn a coveted place in Indian corporate history. Chatterjee,
a one-time fund manager for George Soros and co-promoter of Haldia
Petrochemicals (HPL) along with ICICI Ventures and two us-based
funds, has put in a shortlisted bid to take over Basell Polyolefins.
At an estimated $5 billion-plus (Rs 22,000 crore-plus), the bid,
if it materialises, will be India's biggest M&A deal by far.
Owned by Royal Dutch Shell and BASF, the Hoof-DDORP (near Amsterdam)-based
petrochemicals company has an annual capacity of 7.8 million tonnes
of polypropylene and 2.5 mt of polyethylene, and revenues of Euro
5.7 billion (Rs 31,920 crore). Two other bidders, National Petrochemicals
of Iran and Europe's Ineos Chlor, are said to have been shortlisted.
What's hot about Basell? Apparently, its know-how.
It is one of the world's two top owners of proprietary polymer technology,
which it has also licensed to petrochem players the world over,
including Indian Oil Corporation (IOC). Says Chatterjee: "Basell
has over 5,500 patents in every stage of the petrochemical chain
and it is this technology we're interested in." How much has
he bid and who are his US partners? Chatterjee declines to comment.
Asked specifically about the source of funds, he says, "We're
in the process of working out the details. I can't say anything
further at this stage."
It is unlikely that HPL will play a key role
in the bid, given that it has just turned the corner. However, it
will be needed for the ride because industry experience is one of
the bid criteria. If the Chatterjee consortium finally wins the
bid, it will give HPL access to the latest technology and manufacturing
facilities in 20 countries across continents.
-Arnab Mitra
SELF WORTH
Hot Sector; Hot Minister
The IT and Telecom minister has taken the high
road.
 Dayanidhi
Maran, the 38-year-old minister for telecommunications and information
technology doesn't come across as a crusader. Indeed, he comes across
as just any other 38-year-old of his background-rich; educated at
Chennai's Don Bosco and at the city's Loyola College, and at Harvard
where he completed a four-month programme for owner-managers; once
manager of part of his family's thriving media empire (elder brother
Kalanidhi looks after the Sun Network of television channels, while
he looked after the print and cable businesses, besides a discotheque
called Hell Freezes Over, which was shut down in 2001 by Chief Minister
J. Jayalalithaa)-would: easy-going, articulate and armed with the
good humour that success often vests in people.
Yet, Maran has dared to do what no minister
in the past two decades has: take on the might of Reliance. Reports
in the vernacular media suggest that Maran (along with others like
Suresh Pachauri, Minister of State for Personnel) has asked the
Central Bureau of Investigation (CBI) to investigate Reliance's
role in the ADC (access deficit charge) scam.
The minister's office is silent on that subject,
but the man himself has gone on record stating that Reliance Infocomm's
transgression of showing international calls as local calls to escape
paying an ADC to Bharat Sanchar Nigam Limited (BSNL) and Mahanagar
Telephone Nigam Limited (MTNL) is enough to revoke the operator's
licence. "He is not the fundraiser for the party and is, therefore,
honest," offers a close aide, making an obvious reference to
recent disclosures that Reliance Infocomm allotted some shares to
associates of a close aide of the previous telecom minister. "The
minister has his own mind and has given his department a free hand
to do whatever is right," says the CEO of a Mumbai-based mobile
telephony company.
Maran's aversion to Reliance's cause has seemingly
divided the telecom establishment into two camps. It is widely known
that he doesn't share the best of relations with Pradip Baijal,
Chairman of the Telecom Regulatory Authority of India (TRAI), whose
recommendations have inadvertently favoured companies offering mobile
telephony on the CDMA platform (there are only two of note, Reliance
Infocomm, with some 10 million subscribers at this point in time,
and Tata Teleservices, with 0.81 million).
To be fair to Maran, he has actually done a
lot more than take on Reliance. One, he has actively worked to get
the ceiling on foreign direct investment (FDI) in telecommunications
raised from 49 per cent to 74 per cent. This should, if all goes
well, bring in a big chunk of the $20-billion (Rs 88,000-crore)
needed to increase India's teledensity to 25 per cent by 2007.
Two, he has championed a broadband policy that
has witnessed high-profile launches by BSNL and MTNL that between
them already have access to 40 million homes, and resulted in lower
tariffs (Maran's target of 20 million broadband customers by 2010
looks distinctly achievable). "This minister has made his presence
felt," says T.V. Ramachandran, Director General, Cellular Operators
Association of India (COAI). "It has generated a lot of confidence
in the industry."
Maran's own confidence is no doubt bolstered
by his proximity to Congress President Sonia Gandhi and Prime Minister
Manmohan Singh. In May 2004, when Maran was inducted into the cabinet-it
was the DMK's pound of flesh, said analysts, shocked that such a
key portfolio should go to a first-time parliamentarian-the world
knew him as the son of one of India's best commerce ministers, the
late Murasoli Maran. Now, everyone knows otherwise.
-Sahad P.V.
ON THE ROAD DEPARTMENT
This Derby Was For the Family
Phones are out, but kids aren't; the Indian
Derby goes beyond horses (and clotheshorses).
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| Indian Derby: Filly or fashion, it was
a feast for all, and fun for the kids too |
For
someone whose immediate association with the word Derby is horses
and fancy hats, the Indian Derby at the Royal Western India Turf
Club on the first weekend of February was an eye opener, to say
the least. True, the Derby is a major event on the Mumbai social
calendar, and the who's who of the business-and the entertainment
world-duly showed up for the biggest race of the season (the prize
money totals around Rs 70 lakh.) And yes, it's also the perfect
ground to parade the latest fashion trends-for the women at least
(though the fancy hats were missing). As far as the guys went, it
was hard to tell one apart from the other with almost everyone in
uniform dark suits, dark glasses and gelled hair.
But horses, clotheshorses, men in black-and
a sea of kids? Amazingly enough, there were hordes of them crawling
all over the place, making you wonder whether you had intruded on
a school picnic (the kids' presence is thanks to a decision by the
Maharashtra Government to allow children-in the non-racing area
of the race course). A special section was reserved for the children
on the lawns, complete with swings and a playpen, not to mention
a guy on stilts and a juggler walking around the place. The previous
day too had a pre-Derby carnival complete with hair braiding and
tattoo artists who made it a fun outing for the kids (and the adults
among them too!). Another corner of the lawn had a live band playing,
which attracted its own share of people, and the ubiquitous food
courts. Brands like Casino Goa and DAKS of London, among others,
were splashed across the lawns. If the horses weren't exciting enough,
there were always the roulette tables to keep you busy. Khushroo
Dhunjibhoy, Chairman, RWITC, is keen that the weekend is seen as
a lifestyle event where everyone in the family can fit in.
Still, the Derby for most is about races, and
even as you make your way to the entrance from the parking lot,
you're likely to be swamped by peddlers selling books on 'hot' tips.
Signs at the entrance say mobile phones are not allowed, unless
you wanted to be slapped with a fine of Rs 5,000 (that's what a
BT staffer was threatened with). Once you reach the sprawling lawns,
you're enveloped by the endless line of betting windows with last-minute
betters struggling to get a foot in. The horses are ceremoniously
paraded a little before actually being brought to the starting line.
No matter what you have heard about how fast the horses can run,
nothing can actually prepare you for it. It wouldn't be an exaggeration
to say that the horses actually look like they are flying across
the tracks. The screams in the stands are fever-pitched. Chiffon
sari clad women, who on most Sunday afternoons are at ease playing
the role of a dutiful bahu or a mentoring saas, are screaming their
lungs out as the hooves begin to thunder. Of course, once the race
is over, the saas or bahu is back in her skin.
They say fortunes are won and lost at the Derby,
and after hearing out the volume of bets placed (approx Rs 2.2 crore)
on February 6, it isn't hard to believe that. But then this year's
Derby wasn't just about horses and clotheshorses, as the kids will
tell you.
-Priyanka Sangani
How
Craigslist Got Bangalored
Bangalore has arrived. It now has its own spoor
on the world's most popular web resource.
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| Craigslist's Newmark: Dressed for Bangalore |
We'll
say that again. Craigslist has got Bangalored and the city now boasts
its own pages on the world's most popular web resource. Craigslist
(www.craigslist.org) is where anyone who knows how to use a computer
and the internet goes when they want to look for something, like
say, cheap digs (or fancy ones for that matter). The California-based
listing was founded by self-confessed geek and introvert Craig Newmark
a decade ago; the irony that a person like Newmark should found
a vibrant online community hasn't been lost on anyone, with most
reports on the man focussing on his lack of social skills (one report
quotes his hairdresser as saying that Craig is more comfortable
with machines than people). Since its founding, Craigslist has grown
to include listings of 92 cities, across 12 countries, attracts
7.5 million unique visitors and 1.5 billion page views a month,
hosts 4 million new classified ads every month and attracts some
100,000 job listings in the same period, and is 25 per cent owned
by eBay.
The business model is simple: people are allowed
to post ads for free; advertisers pay around $70 (Rs 3,080) per
listing to list their stuff. Executives (there are some 18 of them)
at Craigslist remain tight-lipped on revenues, but this writer learns
that they could be in the range of $7 million to $10 million (Rs
30.8 crore to Rs 44 crore).
So, why Bangalore? "It was purely based
on demand," says Newmark, the company's head of customer services
(its CEO is Jim Buckmaster). "Bangalore got the most votes,
ahead of any other city in India." The Bangalore listing, which
opened late last year, gets around 450,000 page views and 32,000
unique visitors a month. "I posted on it because it was quick,
free and easy," says Dawn Hayes. "Posting in more mainstream
resources would have been costly, not very instantaneous and hit
or miss in terms of audience reach as I am unfamiliar with media
sources in India; posting directly to a location thousands of miles
away at the click of a mouse is pretty convenient."
That it is, and the sheer range of listings
(as captured in the three that follow) is proof enough of Craigslist's
popularity.
Residential flat available on third floor for
rent. It's fully furnished. It has a three-bedroom penthouse. Built-up
area: 2,475 sq. ft. with attached bathrooms, north-east facing,
Italian modular kitchen with electric chimney, vitrified tiles,
private terrace of 690 sq. ft. with all other modern amenities.
This is in or around Bannerghatta, Bangalore.
PhD in organic synthesis and must have 10 years
R&D industrial experience. Should be ready to change location
to Ahmedabad, Gujarat. Job location is Bangalore General.
I am looking to meet, fall in love with and
marry a handsome Indian man. I love your culture, beauty and charm,
will be travelling to India soon and would like to meet you! If
you are interested, please write and send a photo and I will send
mine in return.
"What the public want is genuine service,"
says Newmark, adding that the listing remains moored in its community
roots despite the eBay connection. Thus, a decision on charging
real estate brokers will soon be made after everyone airs their
opinions in a debate.
-Rahul Sachitanand
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