Any measure aimed at increasing the number of shares available for public trading enhances liquidity and depth of the stock market and is desirable. In that sense, the amendment to the Securities Contracts (Regulation) Rules 1957 (SCRR) by the central government to provide for a minimum 25 per cent threshold level of public holding for all listed companies is a very welcome move. The use of the words &ldquo;all listed companies&rdquo; is to say the least heartening. The presumption is that the word &ldquo;all&rdquo; would imply that there will be no exemption to any one. The earlier dispensation of rule 19 2(B) of the SCRR, however, has much the same intent. But the practical difficulties have bedevilled its implementation all these years.

A good measure, but...

Business Standard

Government spinmeisters will have you believe that while no decision on freeing up oil prices could be taken on Monday due to a lack of quorum of critical ministers, things will work out at the next meeting of the Empowered Group of Ministers (EGoM). This is so much pie in the sky.

Say goodbye to oil PSUs

The caution that Finance Minister Pranab Mukherjee sounded at the recent G20 meeting seems to have been very timely. The world economy and particularly the developed countries face an active danger of a double-dip depression in the aftermath of the Greek crisis and so there is a need to avoid rushing to the fiscal exit all at the same time, Mr Mukherjee advised. Fiscal deterioration is a natural corollary of deep and prolonged downturns as governments try to stimulate economies back to their potential. The slow signs of recovery that the globally coordinated fiscal stimulus generated in the aftermath of 2008 appear threatened in the face of the belt-tightening measures that European economies like Spain, Portugal and Ireland are introducing in order to avoid the fate of Greece. The dilemma faced by policy-makers is real. Investors and markets will give a thumbs down to economies whose fiscal health appears seriously undermined.

Don't get stampeded

Granted, he was a lightweight and no tears will be shed over Shashi Tharoor resigning from the Cabinet. But it is curious that the only ministers who&rsquo;re resigning from the UPA government are those belonging to the Congress party. Even Shivraj Patil, who was axed after the Mumbai terrorist attack, was a Congressman. In sharp contrast, ministers like Praful Patel were not axed after the mess made in the civil aviation ministry (and this goes way beyond the Mangalore accident); A Raja continues to be his cocky self even after there is enough evidence to suggest that he cost the country Rs 50,000-60,000 crore in terms of the cheap licences he handed out; and Sharad Pawar seems unconcerned by stories such as the one involving a company in which he has a stake bidding for an IPL franchise.

The Jalan solution

It is not clear what exactly Vijay Mallya&rsquo;s contribution has been to the upper house of Parliament, other than the free hospitality he has often extended to his fellow members of Parliament on his private jets. But Mr Mallya is not the only business leader to have had a poor parliamentary track record. Even the flamboyant Rahul Bajaj or the handsome Anil Ambani failed to make an impact on the proceedings of Parliament. Then there are scores of other less high profile business leaders seated on all sides of both the upper and lower houses of Parliament, but few of them have shaped policy or moulded public life. Only the younger Ambani saw the light of day in time and quit a few months into his term. Mr Mallya, on the other hand, has chosen to seek a second term. Clearly, business persons who seek a seat in Parliament must think it worth their while. Their shareholders must approve of this investment.

Business of politics

A global survey&rsquo;s rating of Indian consumers as the greenest in the world, though significant in itself, should be viewed in perspective. In the annual survey carried out by the National Geographic Society and the international polling firm GlobeScan, India topped the ranking for the eco-friendly consumption pattern of its population for the second year in a row. Brazil has been adjudged second, China third and the US last in the survey that appraised 17 nations. The criteria chosen for measuring the environmental impact of consumption pattern included modes of transportation, household energy and resource use, food consumption and the use of consumer goods, besides people&rsquo;s attitude towards environmental issues. It is not surprising that barring housing, where India scored behind Brazil, it topped in all other areas. Much of the credit for this high green rating goes to the poverty and frugality of Indian consumers.

A mixed blessing

Earlier this week, Gustav Balduf, Air India's new Chief Operating Officer, told reporters in Berlin that the airline needed to cut costs and improve passenger services to turn around. This is an unexceptionable statement: controlling costs and focusing on service is, after all, at the heart of any airline&rsquo;s success. But in state-owned Air India&rsquo;s case, Mr Balduf&rsquo;s statement suggests irrational optimism. In theory the nature of ownership doesn&rsquo;t matter as far as performance is concerned, look at Singapore Airlines, but in practice it seems to matter a lot for Air India.

Mr Balduf's dilemma

Railway Minister Mamata Banerjee&rsquo;s opposition to disinvestment in Coal India and Hindustan Copper is difficult to fathom. There can be, it is true, two opinions on whether outright privatisation, strategic or otherwise, of profit-making state-owned enterprises (SOEs) is a good thing, be it from the viewpoint of workers, consumers or taxpayers. It should be acknowledged though that if an organisation grows faster after privatisation, workers tend to do better, investors and consumers benefit. Even if politicians are only worried about the rights of organised labour, and not those of taxpayers and consumers, most privatisation structures seem to have a clause protecting workers from getting fired.

Money doesn't grow on trees

The country&rsquo;s first locally developed H1N1 vaccine, Vaxiflu-S, which is claimed to provide protection against the infection for a year, has been launched and a few more are in advance stages of trials. New Delhi seems to have done well to arm itself with an indigenous vaccine to combat the dreaded H1N1 influenza (swine flu) regardless of the view that the World Health Organisation (WHO) had over-played the threat posed by this pandemic virus. So far, Oseltamivir (Tamiflu) and Zanamivir have been the only drugs available for both cure and prevention of swine flu. Total dependence on imports for sourcing these drugs may not be desirable, especially for pandemics that spread fast and generate drug supply shortages, as swine flu did last year. However, though the circulation of the flu virus has ebbed considerably in the last few months, due partly to seasonal factors, it has not ceased completely.

Prevention better than cure

It is easy to think of the impressive 17.6 per cent increase in the April-on-April growth rate of the index of industrial production as the product of what statisticians call the base effect. Clearly, the low base of April 2009 did make the difference. However, the robust numbers for April 2010 do indicate a new trend in industrial activity. This is underscored by the fact that the capital goods sector has experienced a phenomenal 72.8 per cent growth, no doubt partly due to the base effect but also, and very clearly, because of a revival in investment activity in the country. The Indian economy has recovered from last year&rsquo;s global slowdown and the political uncertainties of mid-2009, as well as the impact of last year&rsquo;s drought and floods. There is an impressive rise in the savings and investment rates as well as in foreign capital inflows.

Base and basis of growth

Union Urban Development Minister Jaipal Reddy has taken an important step in developing public opinion on urban transport along the right lines by supporting the idea of a congestion tax in cities afflicted by severe traffic woes. Making it clear that he is not seeking to impose the idea which state governments will have to buy into, he has nevertheless tellingly pointed out that Singapore, which is a model for India&rsquo;s upwardly mobile classes (those who own private cars), has such a tax. What needs to be clarified, however, is that a congestion tax on cars entering dense inner cities is not the first step but a subsequent one. Absolutely, the first goal for governments at all three levels (local, state and central) must be to create a clean and efficient mass public transport system which can be relied upon to get you where you need to go in reasonable comfort and in time so that you can leave behind not just your car but even the two-wheeler.

Time for a congestion tax

While it may appear paradoxical that at a time when the government is fighting inflationary pressures, it has chosen to hike the minimum support price (MSP) for foodgrains, the reality is that prevailing market prices for almost all foodgrains, oilseeds and cereals are way above even these newly announced prices. Therefore, despite the substantial hike in MSP for kharif crops, especially for pulses, the impact on both market and farmers&rsquo; sentiment may not be significant. Prima facie, the increase in the support prices of pulses, ranging between Rs 380 and Rs 700 a quintal, is truly unprecedented. But this raise is on an absurdly low base, that is the last year&rsquo;s MSPs, and, therefore, still keeps the official prices far below the ruling market rates.

Minimum solace price

The national executive committee meeting of the Bharatiya Janata Party (BJP) in Patna over the weekend, climaxing with a large public rally, was supposed to be a kind of coming out party for the junior partner in the Bihar government. In the event, it turned out to be a setback resulting from a self-goal.

BJP scores self-goal

The much-awaited revised version of the direct taxes code (DTC) has been widely welcomed with relief. Clearly, the government has been smart to have released a tough version first and followed it up with a softer one, thus earning plaudits! Among the more widely welcomed proposals is that of dropping the one to levy a flat 2 per cent tax on assets in favour of the present regime to levy tax on book profits.

A less taxing code

The news that a trillion-dollar worth of minerals lie buried under the dusty and dreary soil of Afghanistan has made waves across the world. Eager resource extractors are eyeing Afghanistan with renewed interest. Iron, copper, cobalt, gold and lithium are among the many minerals that are said to lie embedded in Afghan soil. Geologists have known this for a long time and China has already put in place plans to dig up and carry away billions of dollars worth of copper. Interestingly, so far it is the United States and western powers that have spent money providing security in Afghanistan, while it is the Chinese who have got their hands on Afghan copper. Perhaps that is the payoff to China for its implicit support to US occupation of Afghanistan. If so, it is a cool deal for Beijing, which may now eye Afghanistan&rsquo;s other mineral resources.

Afghanistan's real resource

Batten down the hatches? Pull out all the stops? It might be difficult to find the clich&eacute; that adequately emphasises the urgency with which the government needs to tackle inflation. The worry is not just that May inflation was in double digits (10.16 per cent). It is also a fact that prices of commodities other than food are now beginning to gallop. Inflation in non-food manufactured products (often referred to as core inflation) was 6.7 per cent in May, up from 6 per cent in March and 3.6 per cent in January. Non-core inflation actually declined in this period. Thus, inflation now seems to be in textbook territory where rising demand on the back of strong growth pulls up prices. It is no longer principally a supply-side problem driven by shortfall in food production. &ldquo;Demand-pull&rdquo; inflation has the nasty habit of embedding itself and feeding off growth. Its stubbornness makes it a much more difficult malaise to cure than supply-driven inflation.

Pulled by demand

The Planning Commission&rsquo;s advice to the Haryana government to levy a cess on agricultural power to raise funds for replenishing dwindling groundwater is wise counsel that is likely to fall on deaf ears. There is no denying that the continuous decline in groundwater levels across the subcontinent and weak attempts at replenishment constitute a grave threat to human security in this part of the world. Haryana is not a lonely sinner. Punjab, western Uttar Pradesh and Rajasthan in its vicinity are equally guilty of extracting more groundwater than is naturally replenished, causing the water table to decline sharply. Though the gains from tapping groundwater for crop production have, in the past, been spectacular, it has now reached a stage where it is jeopardising the future of agriculture in this key bread basket of the country. What is worse, in peninsular India, including Gujarat, Maharashtra, Andhra Pradesh and Tamil Nadu, groundwater use has reached an unsustainable level.

Rational use of groundwater

India is a land of death by accident. The website of the National Disaster Management Authority lists at least 13 different types &mdash; divided between &lsquo;manmade&rsquo; and &lsquo;natural&rsquo; disasters. Manmade ones are sub-classified under nuclear, chemical, mine, biological, cyber and environment. Infrastructure and transport sectors are not listed separately but one can imagine that more people die in road, rail and fire accidents every year than in all these categories of man-made disasters put together. The NDMA also has a list of natural disasters that include earthquakes, floods, river erosion, cyclones, tsunamis, landslides and avalanches and forest fires. Many of these can also be traced to human error or the combined impact of human actions &mdash; like floods, soil erosion, forest fires and even landslides. Hundreds of thousands of lives are lost every year and crores of rupees lost to the nation.

Murphy's law and karma

Reignited fraternal ties, it seems, form the basis of Mukesh Ambani&rsquo;s dream to build an &ldquo;ignited corporation&rdquo;. This underlying fact comes through very clearly from the growth strategy spelt out by Mr Ambani at the annual general meeting (AGM) of Reliance Industries Limited (RIL). &ldquo;Think Growth&rdquo; and &ldquo;Think Transformation&rdquo; while thinking of Reliance, said the backdrop to the stage where Mr Ambani posed for photographs.

Brotherhood benefits

The Reserve Bank of India (RBI) has been taking one step after another to protect the interest of the savings classes. Some weeks ago, it changed the formula for calculating the savings bank interest rate. Till March 31, 2010, the interest on savings bank accounts was paid on the minimum balance held between the 10th and 30th/31st of every month. With effect from April, 1, 2010, the effective rate of interest in savings bank accounts, under a new methodology, is calculated on a daily balance basis, instead of on the lowest available balance. Last week, RBI took yet another step by canvassing the idea that savings bank account interest rates be deregulated. The existing regime of a fixed rate for savings bank accounts, with the present rate being 3.5 per cent, has outlived its purpose. Indeed, the savings bank interest rate is the only rate in the banking system where an administered price still prevails.

Saving savings

In the world of economic diplomacy where gestures often mean much more than concrete action, China&rsquo;s move to abandon its currency peg against the dollar is significant. It is, therefore, no coincidence that the move comes roughly a week before the G20 summit in Toronto where pressure on China to adopt a more flexible currency regime was expected to intensify. China has clearly pre-empted some of this by agreeing to more exchange flexibility.

Yuan diplomacy

Incisive columns and editorial comment by top opinion leaders

Page 543 - Editorial Comment