Friday, November 27, 1998
today's calendar
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B U S I N E S S | Friday, November 27, 1998 |
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spotlight today's calendar |
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$ 40b inflow into
infrastructure likely
Irregular
milling hits solvent extraction |
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S&P rates IDBI, ICICI,
BoB negative SEBI
for changes in buyback ordinance
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India, Belgium sign trade
pacts Kamadhenu
Ispat turnover rises Poultry
exhibition |
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$ 40b inflow
into infrastructure likely NEW DELHI, Nov 26 (PTI) — The government expects $ 40 billion of funds to pour in to the infrastructure sector in the next five years with the opening up of the insurance sector as major foreign players are likely to set up joint ventures in the country. “This is not an unrealistic expectation,” Insurance Secretary B.K. Chaturvedi said adding as of now only $ 5 billion (Rs 20,000 crore) funds are available from Life Insurance Corporation which would go up by at least six to eight times. Total insurance premia as a proportion of gross domestic product (GDP) was only 2 per cent in the country and this was expected to double if not more, with the opening up of the sector, he told PTI. This figure varied from 4 to 16 per cent of GDP in several countries with South Korea and South Africa topping the list with 13.16 and 15.47 per cent of GDP respectively. United States and Switzerland had this insurance coverage intensity as high as 9 and 10.5 per cent of GDP respectively, he added. He said as of now pension fund including insurance formed only 12 per cent of GDP in the country unlike in many other countries where it was as high as 40 per cent of GDP making available huge quantity of long term funds. Such long-term funds could be provided only by insurance and pension funds and the country needed a massive investment of $ 130 billion in the next 10 years for infrastructure development, he said. Chaturvedi said only one comprehensive Bill would be brought before Parliament in the winter session and this would provide for setting up the Insurance Regulatory Authority, Amendments to 1956 LIC, 1972 GIC and 1938 Insurance Act to enable opening up of the sector besides making penalty more stringent for violation of IRA rules. Refusing to give details of the Bill saying it was still at the drafting stage, he said Insurance Regulatory Authority would be definitely provided “more teeth”. “The proposed IRA would like SEBI having power of both adjudication and penalties,” he said. He did not agree with the view that surveillance would become difficult with the opening up of the insurance sector as has happened in the case of capital market. The number of players were very large in the capital market unlike in the insurance sector where it was limited, he said adding surveillance and monitoring would not be difficult in the insurance sector. Asked when he expected foreign insurance companies to set up their joint ventures in the country, he said 6 to 8 months after the comprehensive Bill is passed in Parliament. To a question on which
were the foreign insurance companies evincing interest in
coming to India, Chaturvedi said he would not like to go
into their names but all major players including from the
United States, the United Kingdom, Switzerland were
interested in setting up joint ventures in India. |
S&P rates IDBI, ICICI, BoB negative MUMBAI, Nov 26 (PTI) — Standard & Poor’s (S&P) today revised from stable to negative the rating outlooks on Industrial Development Bank of India (IDBI), Bank of Baroda (BoB) and ICICI Ltd, while affirming their long-term foreign currency counterpart credit ratings at “BB”. The outlook change reflects S&P’s concerns that continued weakness in a number of key sectors of the Indian economy is having an adverse effect on the asset quality and profitability of India’s financial intermediaries. Asset quality within the Indian system continues to deteriorate, although balance sheet growth has disguised non-performing assets (NPAs), which have increased in absolute terms, the international rating agency said. The subordinated debt rating on ICICI and the short-term counterpart rating on State Bank of India has been affirmed at “B”. A slowing economy, depressed demand and greater competition flowing from liberalisation is having a deleterious effect in a number of key industries, including steel, petrochemicals, textiles, paper and cement, it noted. Consequently, impaired assets and charges for bad and doubtful debts of Indian banks and financial institutions are expected to continue to rise, constraining profitability and internal capital generation in the medium term. A combination of the stated factors will moderate the financial flexibility of Indian banks and financial institutions at a time when they are seeking to comply with more stringent capital and provisioning requirements recently announced by RBI. S&P, in a special
report on “risk management & corporate
governance — new challenges for the Indian finance
sector” released yesterday, had said social lending
mandates have moderated the development of quality
governance in the Indian banking sector and locked the
industry into high levels of non-performing assets (NPAs)
and low-margin business lines. |
India, Belgium sign trade pacts NEW DELHI, Nov 26 (PTI) — India and Belgium today decided to give a new impetus to bilateral economic and trade ties as companies from the two countries signed over 300 contracts for joint venture projects on natural gas terminal, dredging, chemicals, graphic art, banking and other areas. The tie-ups were
formalised during the week-long visit to India of a
high-powered Belgian delegation led by Crown Prince
Philippe who arrived here on the last leg of his tour. |
Agro-Tech
’98 from December 2 CHANDIGARH, Nov 26 — The agro-business fair, Agro Tech ’98 to be held here from December 2 to 6, will offer a platform for the $ 70 billion food industry, with over 360 domestic and international participants. The fair, which will display state-of-the-art agro related technologies, will be held concurrently with two focused exhibitions - Dairy Expo ’98 and Poultry Expo ’98. Spread over an area of 16,000 sqm, Agro Tech will feature major international participation from Israel, UK, Italy, Netherlands, Canada, France and Spain. Punjab and Haryana have been designated as the host states while Andhra Pradesh, for the first time has been accorded the partner state status. Kerala, Tamil Nadu, Karnataka, Rajasthan, Uttar Pradesh, Himachal Pradesh and Jammu and Kashmir are the other states who have confirmed their participation. The highlight will be dairy pavilion which is being set up at an estimated cost of Rs 1 crore by the Israel Dairy Board in collaboration with the Punjab Government. The pavilion will showcase Israel’s winning technologies in the field of breeding, feed stuffs, milking equipment, cold storage facilities, processing and packaging methodologies and a milk processing unit. Coinciding with the
exposition, the CII will be organising a series of
conferences on fruit and vegetable processing, emerging
technologies in the dairy industry, recent developments
in the poultry industry, cold chain technologies,
application of biotechnology in agriculture and industry
and water management. The faculty would comprise experts
from the USA, Italy, Israel, the Netherlands, Sweden,
France, Denmark, Germany, Australia and China. |
Irregular
milling hits solvent extraction PATIALA, Nov 26 — Solvent extractors of the state are passing through a crisis triggered by the irregular functioning of the rice milling activity in the state. Industry representatives disclosed that they were passing through a crisis as regular supply of rice bran to the solvent industry could not be maintained by millers who themselves were having a poor season. A precondition for getting edible grade oil from rice bran was that it should be supplied to the industry within 24 hours of its production. Industrialists say that since they can not get daily supply of bran they were constrained to store it to build up sufficient inventories. Extractors said the storage of bran over a period of time resulted in the fatty acid component in it increasing making the oil unfit for edible purposes. They said Punjab had produced about 100 lakh tons of paddy and if smooth rice milling activity was ensured by the government it could produce about one lakh tons of edible grade rice bran oil besides 20,000 tons of fatty acids. However, the disruption in smooth functioning of rice milling had caused loss to the industry. Solvent Extractors Association President A.R. Sharma said since the raw material prices for the industry and the sales prices of main finished product were determined by the government, the industry was in government’s hands. Mr Sharma said immediate steps were needed by the government to make rice milling operations more remunerative. He said the main contention of the millers was that the yield in present paddy had gone down from 67 per cent to 62 per cent while the costs of production had increased manifold. The association president
said mechanical harvesting had also increased the
percentage of broken rice in paddy and also reduced the
time period of harvesting.
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Kamadhenu
Ispat turnover rises NEW DELHI, Nov 26 — Kamadhenu Ispat Ltd (KIL), the first North Indian steel company awarded with international quality management award ISO 9002, has recorded a marginal growth of 11.5 per cent in its turnover in the first half year of financial year 1998-99 by doing business worth Rs 31.28 crore (previous Rs 28.06 crore). Both the plants situated
at Bhiwadi in Rajasthan are using German high speed
technology. The company is authorised to produce HSD bars
of IS 1876 grade FE 415 by Indian Standard Bureau,
according to a company press release issued here today. |
Poultry
exhibition CHANDIGARH, Nov 26 — Prof Chattar Singh, Speaker, Haryana Vidhan Sabha, will inaugurate a two-day all-India poultry exhibition organised by the Poultry Punch Publications tomorrow at the Circus Ground here. Mr B.S. Rana, Managing Director of Poultry Punch, said they got clearance for holding the exhibition after a lot of opposition from the UT Administration and Chandigarh Municipal Corporation. The permission was granted after the Punjab and Haryana High Court allowed the petition in favour of the Poultry Punch, who were first refused and then asked to change the venue of Sector 22. More than 68 exhibitors
will display their products in 142 stalls. Over 10,000 to
15,000 poultry farmers from Punjab, Haryana, Delhi,
Rajasthan, Uttar Pradesh, Madhya Pradesh, Himachal
Pradesh, Jammu and Kashmir and other states will attend
the exhibition. Industry representatives and
veterinarians will also take part. |
SEBI for changes in buyback ordinance NEW DELHI, Nov 26 (UNI) — The Securities and Exchange Board of India has recommended changes in the ordinance promulgated by the government to allow buyback of shares by the companies’ managements, SEBI Executive Director Pratip Kar said today. “We have recommended flexibility in the ordinance so that buyback could be used as a tool for shareholders’ value’’, Mr Kar said at a seminar on “Managing shareholder value’’, organised by the Institute of Management Technology here. Without elaborating on the changes being proposed, Mr Kar said SEBI had asked for modifications in the debt-equity ratio. “We want people to use the buyback as flexibly as possible,’’ the SEBI Executive Director said. Referring to the bad public issues in the past when lakhs of investors had burnt their fingers, Mr Kar said there was little SEBI could do because of the nature of regulatory framework in the corporate world. While SEBI’s mandate was investor protection, it had no legal powers on companies except in certain areas because companies were governed by a separate statute — the Companies Act. In the companies only certain sectors were concurrently administered by SEBI. “Thus when an investor also becomes a shareholder, SEBI cannot fully protect him because it cannot take action against companies.’’ Later, Mr Kar told UNI that the SEBI-appointed Dhanuka Committee has submitted its report recommending more power for the market regulator. Mr Kar said SEBI had also proposed that the shareholders be allowed to cast their votes in the annual general meetings of the companies through postal ballot. “We have introduced postal ballot for mutual funds and it is not an expensive proposition’’. The move would improve corporate governance which unfortunately has remained a fad so far. Only the institutional
investors, including foreign funds can work out
strategies to force corporate governance and reinvent
system of accountability. |
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MUMBAI, Nov 26 (PTI) — The Securities and Exchange Board of India (SEBI) has suspended 21 registrars or share transfer agents on account of non-payment of annual fees. The entities have been suspended till the expiry of their registration and shall cease to carry out their activities from the date of the respective orders, the regulator said. They suspended registrars
are: Anar Financial Engineers (P) Ltd, Anther Finance
& Consultancy (P) Ltd, Datatech Information Services,
GMS Industries (India) Ltd, Grace Credit Venture (P) Ltd,
Hi-Tec Commercial Services Ltd, Kumar Financial and
Allied Services Ltd, Lyons Financial Services Ltd,
Metropolis Financial Consultants Ltd, Octagon Information
Systems (P) Ltd, P.K. Kutumbale, Palaypu Financial &
Investment, Shell Consultancy Services Ltd, Software
Pont, Somani Capital Investments, Strategic Custodian
Services Ltd, Surana Registrars & Custodials,
Talisman Consultants (P) Ltd, Time Computech Services
Ltd, Visionnova Consultants, Yuj Consultants (P) Ltd. |
MR DHARAM VIR ANAND took an insurance policy on the life of his minor daughter. The policy, issued on March 31, 1990, was “back-dated” to “cover the risk” from May 10, 1989. On November 15, 1992, his daughter committed suicide. LIC promptly repudiated Mr Anand’s claim on the ground that the insured had committed suicide within three years of the date of issue of the policy, thereby attracting the exclusion clause 4B of the policy. Mr Anand on the other hand pointed out that the policy was dated back to May 1989, and therefore calculating from that day, the death had occurred after three years from the date of the policy. The District Consumer Disputes Redressal Forum, before which Mr Anand filed a complaint agreed with his view and held that the policy had actually commenced from May 10, 1989, the date from which the policy was back-dated. The State Commission and later the National Commission too agreed with this view, but not the Supreme Court. Here, the Apex Court (SLP No. 10830 of 1998), examined Clause 4B of the policy, which said: “in the event of death of Life Assured occurring as a result of intentional self-injury, suicide or attempted suicide, insanity, accident other than an accident in a public place or murder at any time on or after the date on which the risk under the policy has commenced but before the expiry of three years from the date of this policy, the corporation’s liability shall be limited to the sum equal to the total amount of premiums paid under the policy. The SC pointed out that the LIC had used the expression commencement of risk’ as well as ‘date of the policy’ in the clause. Thus when the same clause of a contract uses two different expressions, ordinarily those different expressions convey different meanings and both expressions cannot be held to be conveying one and the same meaning. Thus it upheld the view of the LIC and set aside the orders of the consumer courts. It, however, referred to the offer of the Claims Review Committee to pay Rs 2 lakh on ex-gratia basis and said since this offer was made three and a half years ago, the corporation should pay Rs 3 lakh in full satisfaction of the claim. This case, however, raises several important issues on the practice of “back-dating” of policies by the LIC. According to the LIC, the principle of back-dating was an accepted norm for issue of policies the world over and it was done to benefit the policy holder avail of certain income tax benefits, or certain age limits imposed on a policy holder or to bring down the premium fixed on the basis of the age of the policy holder. But then, is it not unethical on the part of the corporation to “back-date” a policy and collect premium for a period for which it did not actually cover the risk? It is equally incorrect to back-date a policy to avail of a benefit otherwise not available to a policy holder. Secondly, it is dishonest to “cover the risk” for a period when no risk can occur, as the period is already past. In fact in the case of LIC of India vs Ms Anu Mohanot, the counsel for Ms Mohanot had argued before the National Commission that back-dating part of the contracts for Life Insurance fell beyond the definition of Life Insurance business as set out in Section 2(11) of the Insurance Act and was contrary to public policy as the contingent event, as neither death nor the happening of any contingency dependent on human life can occur during the back dated period. Thirdly, under Clause 4B, how can LIC separate the date of risk coverage and the date of the policy? After all, without a policy or a contract, there cannot be any risk coverage. (Clause 4B is the Special Female Clause imposed by LIC while insuring women and minor girls who do not have an income of their own). In the case of Mohanot, the National Commission, quoting the Supreme Court in the case of M. Venugopal vs LIC, had said that in a back-dated policy, it is by a deeming fiction that the contract of insurance commenced from that date, with all consequences attached to it as if the contract of insurance came into existence from that date. If this is so, then the date of the policy should also be treated as dated back. But in this case (LIC vs
Dharam Vir Anand), after back-dating the policy and
collecting the premium for it, LIC denied the benefit of
such back-dating to the policy holder by separating the
date of risk from the date of policy under Clause 4 B.
This is totally unacceptable. LIC must correct this
immediately and suitably amend clause 4B. It should also
review its policy vis-a-vis back-dating. |
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| PHDCCI CHANDIGARH, Nov 26 (TNS) — The PHD Chamber of Commerce and Industry (PHDCCI) will be the facilitator in implementation of the MoU signed by the Itochu Corporation and the Government of Punjab, yesterday. Following the MoU, Mr Prakash Singh Badal, Chief Minister, Punjab has constituted a task force for setting up a ‘world class institute of Packaging’ in Punjab comprising of Mr T.Ota, CEO, Itochu Corporation, India, Ramesh Inder Singh, Secretary, Deptt of Indusrtry and Commerce and Mr H.S. Tandon, Secretary General, PHDCCI. SBI Canon Refinery Gold gains |
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