Many investors, mostly overseas, have often expressed concerns about India Inc&rsquo;s opaque corporate governance practices. In that context, the Securities and Exchange Board of India&rsquo;s (Sebi&rsquo;s) decision to put the issue of governance under the spotlight is welcome. The proposals aim to make Clause 49 of the listing agreement, which spells out corporate governance rules, relevant. This follows the passage of the Companies Bill by the Lok Sabha last month. The suggestions are intended to make companies more accountable to minority shareholders, who have been affected by certain actions by promoter-controlled firms.

Principles and rules

Business Standard

The goals articulated in the Centre&rsquo;s new Science, Technology and Innovation Policy (STI 2013) are both ambitious and unexceptionable. STI is key to addressing a host of issues concerning energy and food security, nutrition, health care, environment, water, sanitation and, ultimately, employment generation. The policy paradigm is to be &ldquo;inclusive innovation&rdquo;, where STI furthers the aims of faster, inclusive and sustainable growth. STI integration is also the bedrock of the National Action Plan on Climate Change (NAPCC) and the policy seeks to support STI-led services for increasing transparency in government functioning. Specific time-bound goals have been set. The prime minister, addressing the Indian Science Congress last week, said that STI 2013 aimed to position India among the &ldquo;top five scientific powers&rdquo; by 2020. Technology missions will target global leadership in select areas.

First, a scientific temper

December turned out to be a mixed bag for the country&rsquo;s car makers, throwing up confusing signals. Maruti Suzuki, the country&rsquo;s largest car maker, reported a six per cent rise in domestic sales during the month over December 2011. Mahindra &amp; Mahindra&rsquo;s sales were up 18 per cent. On the other hand, Hyundai, the second-largest car maker, saw sales drop almost 10 per cent. Tata Motors was down a staggering 51 per cent.

Waiting for the RBI?

What explains the Indian political system&rsquo;s stunning inability to come out and clearly defend women&rsquo;s right to leave their home, navigate safe public places and go to work? A series of recent statements on women&rsquo;s rights from politicians and leaders, especially from those who owe their allegiance to the Rashtriya Swayamsevak Sangh, deserved a firm counterpoint &mdash; both from those within the Sangh&rsquo;s affiliate, the Bharatiya Janata Party (BJP), who believe in economic growth and modernisation, and from those members of the political class with no ties to the Sangh. A senior minister in the BJP&rsquo;s government in Madhya Pradesh, Kailash Vijayvargiya, declared that there was a &ldquo;Lakshman rekha&rdquo;, a line that women should not cross or else they would be subject to abduction, as Sita was in the Ramayana.

Women at work

When it comes to regional connectivity, the government of India appears to err on the side of unwarranted generosity to private airlines. Its recent decision to scrap rules that make it mandatory for airlines to deploy 10 per cent of their capacity on unviable routes like Jammu &amp; Kashmir, the northeast and the Andaman &amp; Nicobar Islands and subsidise those that agree to do so flies in the face of logic. The generosity does not stop here. The government also plans to approach state governments in such regions to lower sales tax on aviation turbine fuel (ATF) to attract private carriers to their airports. It is hard to understand the logic of either policy. First, although it is true that airlines incur losses on these routes, they can by no means be suffering losses solely on account of them. That&rsquo;s because they cover these losses through cross-subsidies in regular passenger fares on other, viable routes.

Flying in the face of logic

By all accounts, the finance ministry is seriously considering increasing the marginal tax rate on the richest Indians in the next Union Budget. The reasons for this are easy to understand. The Centre needs to act on fiscal consolidation urgently &mdash; the reminder from Fitch, the ratings agency, this week that India still stood at risk of a downgrade will not have eased minds in New Delhi. Direct tax rates have not been revised for some time; they remain at the level set by Finance Minister P Chidambaram during his first stint in the job, in 1997. Direct tax revenue was then at six per cent of gross domestic product, but is now actually lower. Further, the Congress party will no doubt try and sell any tax increase on the richest Indians as proof of its aam-admi credentials.

Broadening the net

The government&rsquo;s announcement yesterday on raising railway passenger fares for all classes of travel was long overdue. Basic fares for all categories, except a small segment of upper-class and air-conditioned travel, have remained unchanged for almost 10 years. As a result, the Indian Railways&rsquo; losses in passenger operations are estimated to have risen to Rs 25,000 crore in 2012-13, a fourfold increase over 2004-05. Cross-subsidisation of passenger fares through increases in freight rates helped only up to a point. That option is now exhausted since competition from other modes of transport has made railway freight rates unviable. With the Indian Railways&rsquo; ability to generate internal resources seriously impaired, investments in fresh capacity &ndash; and even maintaining existing facilities, including safety measures &ndash; have slowed with the curtailment of its annual plan size in the last few years.

Railways moves forward 

The Empowered Group of Ministers, or EGoM, on telecom, headed by Finance Minister P Chidambaram, has said the base price for CDMA spectrum auction should be cut 30 per cent or 50 per cent, as the last auction in November failed to attract any bidders. At that time, pan-India 5 MHz spectrum was priced at Rs 18,000 crore. The Union Cabinet will take the final decision, and the government hopes to wrap up the auction by March.

Dropping the price, again

The decision by the Indian Institutes of Technology (IITs) to increase tuition fees by 80 per cent &ndash; from Rs 50,000 to Rs 90,000 per annum &ndash; is a welcome step in correcting the fee distortions prevalent in most state-owned higher education institutions. The last such fee increase was in 2008 (a 50 per cent hike) and even the worst critics of such fee hikes would admit that another revision was long overdue.

Look beyond govt funding

Finance Minister P Chidambaram hopes to contain the fiscal deficit at 5.3 per cent of gross domestic product, and though no one knows how he will achieve this, one thing is for sure: frittering away government energy and funds on a public sector unit that was virtually a non-starter from its inception in 1972 is not the way to go about it. Indeed, given the stringent expenditure cuts imposed on government departments by a regime committed to heavy entitlement spending, the proposal to sink more than Rs 200 crore in reviving Lucknow-headquartered Scooters India Ltd is particularly inexplicable. On Thursday, the Cabinet deferred a proposal to this effect from the Department of Heavy Industry, the ostensible reason being that the minister concerned, Praful Patel, was not present.

Running on empty 

Estimates for India&rsquo;s industrial production were released by the Central Statistics Office of the ministry of statistics and programme implementation on Friday, revealing that the index of industrial production, or IIP, for November 2012 was 0.1 per cent lower than it had been for November 2011. The government responded by pointing out that festival dates can impact industrial production; in 2011 Diwali was in October, and in 2012 in November, meaning that there was a base effect to contend with. There is some truth to this observation; if industrial output in the two months of October and November 2012 is compared together with the same two months of the previous year, it is four per cent higher. Yet the contention that this inevitably reveals that the economy has bottomed out, and that government action is working, is highly debatable. The detailed figures reveal more than enough reasons for unease about those propositions.

Still in slowdown

Prime Minister Manmohan Singh told the Indian Science Congress recently that issues like genetically modified (GM) foods cannot be settled by faith, fear or emotion, but by reason. This eminently sensible point of view must be taken to its logical conclusion, which means a review of the government&rsquo;s present anti-GM policies. Other recent developments, too, make such a review imperative. First, the Supreme Court last November turned down the plea made by its own-appointed technical panel to impose an interim ban on field trials of GM products. Instead, the court modified the composition of the committee and asked it to revisit its recommendations.

Reason, not fear

Consider the following discrepancies in the farm sector. The country is now the world&rsquo;s largest exporter of rice, a crop grown with huge quantities of scarce water and heavily subsidised fertilisers. At the same time, it is the leading importer of pulses, which require very little water to grow and fortify the land with nitrogen to reduce the fertiliser need even for the subsequent crops. Also, the government is sitting on mammoth foodgrain inventories worth over 66.5 million tonnes, three times the buffer requirement, even as the market prices of rice and wheat are high, hurting ordinary consumers. Furthermore, the annual production of cereals already exceeds the anticipated demand in the terminal year of the 12th Plan (2016-17). Yet the government continues to raise the minimum support prices (MSPs) and offer other incentives to ensure higher production of these cereals.

Balancing a diet

It should go without saying that the media has a role in informing and educating a citizenry about the issues of the day, providing background, context and holding the powerful to account. A case study in how not to go about this is currently being provided by the electronic media in its coverage of recent raids and counter-raids on the Line of Control in Jammu and Kashmir, in which two Indian soldiers have been killed, and one allegedly subjected to post-mortem mutilation.

Crossing a red line

The markets have greeted the results of India&rsquo;s two information technology leaders, TCS and Infosys, with a degree of added enthusiasm, which may not be fully deserved. Infosys has done better than otherwise would have been the case. This is because it is recognising for the first time the gains from the acquisition of Lodestone. This is not a fortuitous event and the firm is fully entitled to take credit for its action whose positives will continue to flow over time.

IT leaders please

The government has finally declared what action it intends to take on the General Anti-Avoidance Rules (GAAR), which were announced with much fanfare in the last Budget and prompted widespread concern among investors. A committee headed by Parthasarathi Shome, now an advisor in the finance ministry, had gone into GAAR and come out with several recommendations, many of which have been accepted by the government and others that have been slightly modified.

Watering down GAAR

The annual royalty that McDonald&rsquo;s Indian franchisee will pay to the US-headquartered fast-food company is all set to go up from three per cent of net sales now to eight per cent by 2020. Ever since the government liberalised the royalty rules in 2010, there has been a sharp increase in payouts to foreign collaborators. An analysis by this newspaper of 75 companies listed on the Bombay Stock Exchange shows that royalty payments more than trebled between 2007-08 and 2011-12, though sales grew 80 per cent and net profit a little over 30 per cent. Proxy advisory firm Institutional Investors Advisory Services says that while the money remitted by the top three royalty-paying companies &ndash; Maruti Suzuki, ABB and Nestle India &ndash; jumped over three times from Rs 784 crore in 2007-08 to Rs 2,495 crore in 2011-12, their collective revenue increased only 1.8 times.

Due to royalty 

Tax reform need not focus merely on tax slabs and the nature of the laws governing taxation. It can, indeed it must, also look at the decision-making processes and the incentives governing those in charge of tax assessment. One good indication of the maladministration at work in this branch of the government is the overall number of tax orders that are eventually taken to be adjudicated to the tax appellate tribunals, and thenceforth to the high courts and the Supreme Court.

Taxation, not litigation

That the Indian bureaucracy finds it difficult to shake off its micro-management of the economy more than 20 years into economic reform is a given. But even by its own standards, the recent move by the Directorate General of Civil Aviation (DGCA) to launch an enquiry into the on-time performance, or OTP, of airlines touches new heights of interference. The enquiry is not the result of concern for passengers on account of delayed flights, which should ordinarily concern an industry regulator. Amazingly, it is quite the opposite. The DGCA wants to know how some airlines, using the same aircraft as other airlines on a given route, take a shorter time to reach their destinations. It claims that airlines are breaching a DGCA stipulation that the difference between the maximum and minimum time on a particular route should not be more than 10 minutes. The airline industry regulator is purportedly concerned that the actual difference can be as much as 30 minutes.

Out of time

On Thursday, Petroleum Minister Veerappa Moily said that the government had decided to allow the oil marketing companies to raise the price of diesel in small amounts, in order to reduce the losses OMCs make on selling the refined fuel. Those losses, or &ldquo;under-recoveries&rdquo;, are of course eventually covered partly by the central government, and are the most potent contributor to India&rsquo;s problems with its fiscal deficit. It has been known for a long time that the first step towards fiscal consolidation, and thus to healthy public finances and a more stable macroeconomy, was to decrease the subsidy amount spent on diesel. The United Progressive Alliance (UPA) government has dithered too long on diesel. It was agreed, in principle, that deregulation should happen in mid-2010, when petrol was deregulated, and the prime minister has been calling for it in public since this time last year at least. But that the decision has finally been taken is nevertheless welcome.

Well begun, half done

Chief Minister Mamata Banerjee is now well into her second year at the helm of affairs in West Bengal. But it seems that Ms Banerjee has decided that whatever else may change about West Bengal, her populist style won't. Ms Banerjee&rsquo;s crowd-pleasing ways, however, don&rsquo;t always match the sort of crowd she&rsquo;s facing.

Walking it alone

Incisive columns and editorial comment by top opinion leaders

Page 603 - Editorial Comment