Sucheta Dalal :A bonanza for industry (29 September 2002)
Sucheta Dalal

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A bonanza for industry (29 September 2002)  



Ever since the government scrapped the Administered Price Mechanism (APM) for petroleum, ordinary Indians have grown accustomed to frequent hikes in petrol and diesel prices.

But thanks to the convenient amnesia of the Petroleum Ministry, ONGC has been supplying natural gas to many of our largest industrial houses at anywhere between 30 to 100 per cent below international prices.

The story goes back six years when Dr Vijay Kelkar first recommended that natural gas prices should be linked to international rates. Industry lobbyists however ensured a safety net for themselves in the form of a price band within which prices could fluctuate. The upper ceiling of the band was Rs 1,800 per cubic meter.

Over the years, the rupee depreciated significantly, international gas prices rose and the APM was scrapped. But the petroleum ministry has conveniently forgotten to revise the price band and the upper ceiling for natural gas prices.

The combined political clout of the main beneficiaries would explain the ministry’s amnesia. The beneficiaries are: the Reliance group, including IPCL, Ispat’s steel project, Essar’s steel and power project and Vikram Ispat of Aditya Birla among others.

Who’s the regulator?

At a recent conference to launch the Indian Venture Capital Associations yearbook, Vishnu Varshney of Gujarat Venture Finance caused a lot of amusement by pointing out that while venture capital industry has grown and made good progress, the regulators continue to be unclear about its role and supervision.

Although Sebi is the designated regulator for venture capital companies, the Reserve Bank of India (RBI), he says, has been insisting on inspecting them by lumping them under the category of Non Banking Finance Companies (NBFC). Their problems are compounded by the fact that RBI officials see no difference between venture financing, which provides risk capital to entrepreneurs, and NBFC operations. They have been grilling venture capital companies for running up ‘bad loans’ oblivious of the fact that a few big winners and many bad and indifferent deals are all part of their business model.

But who can dare argue with the regulator? If the RBI insists on dual regulation of venture capital companies then maybe its officials could do with some training.

Auditors’ woes

While on the Reserve Bank, venture capitalists are not the only ones to crib about the central bank. Auditors appointed by RBI to conduct branch audits of large nationalised banks complain that it never announces the appointment of auditors in time. Often, they say, auditors are appointed in March and are expected to complete branch audits by April.

This leaves them with little time for planning, or to bone up on the specific requirements of bank audits. Also, while the RBI’s supervision division conducts its own bank inspections, there is never any attempt to compare the findings of their inspections with those of the statutory auditors in order to detect if the latter have failed to report the fudging of accounts.

Even when the RBI commissions ‘special audits’, it initiates punitive action against irresponsible statutory auditors only if there is a large scam, that too, is a two year rest from bank audits. Finally, it is alleged that RBI rarely attends disciplinary proceedings of the Institute of Chartered Accountants of India (ICAI).

Clearly, if auditors have always been on the side of the companies and banks that they are auditing, then regulators need to take a long hard look at themselves to figure out why. Son’s daughter’s husband

TAILPIECE

HAS anyone tried fulfilling the requirements of Schedule 1-A of the Companies Act? The Act was obviously written at a time (in 1956) when Indians still lived in large joint families with common property and inheritance. These days, the 23 relatives that are required to be listed and identified are nothing short of ridiculous. So long as the Act required the names of your father, mother, wife, sons, daughters, brothers and sisters it was fine.

Even the listing of a brother’s wife and sister’s husband (including step sisters/brothers, says the Act), son’s wife and daughter’s husband may pass muster.

But when people are asked to fill up father’s father, father’s mother, mother’s father, mother’s mother, son’s son, son’s daughter, son’s daughter’s husband, daughter’s son, daughter’s son’s wife, daughter’s daughter’s husband etc. it becomes rather farcical.

After all, even husbands and wives have independent incomes and careers these days and like to keep them separate. The Act needs to move with the times and replace the list with some sort of declaration.


-- Sucheta Dalal



 



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