Sucheta Dalal :Office of profit
Sucheta Dalal

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Office of profit  

Apr 2, 2006

Even as political parties are plotting hard and striking deals to buy support to bury the ‘‘office of profit’’ monster, a powerful class of citizens is agitated enough to take the battle to court. Former Expenditure Secretary, EAS Sarma, known as an upright and no-nonsense official, has written to political parties questioning their ‘‘attempt to introduce a liberal law that will enable many MPs to retain their respective offices’’. Sarma says, ‘‘Such moves are against spirit of the Constitution and we will resist it tooth and nail. We citizens are frustrated with your gimmicks. Resigning from the Parliament and contesting again will cost us, the taxpayers. We will question this in the Courts.’’ Instead of piecemeal public litigation on the subject, he urges President APJ Kalam to seek a clarification from the Supreme Court before Parliament is convened and ‘elected representatives’ gang up to pass a self-serving law. The Chief Election Commissioner (CEC) also appears to be going slow on recommending disqualification on grounds that government is soon bringing a Bill. This is highly inappropriate, says Sarma, as it would allow those who prima facie attract disqualification to vote on the Bill. Interestingly, former CEC T. S. Krishnamurthy has agreed to join the battle and give it further momentum.


Deal time


While politicians are busy drafting legislation to end the fracas triggered by Jaya Bachchan’s disqualification, several other controversies received a stunning burial last week. Almost miraculously, it would seem, the Civil Aviation Ministry ignored the claims and demands of other airlines and cleared the Jet Airways-Sahara Airlines merger with full transfer of infrastructure and parking bays. The ostensible reason was that similar questions over infrastructure would arise again when the newly christened Indian is merged with Air India. This argument sounds plausible but doesn’t quite wash. For starters, Air India operates from a separate terminal in the two major cities and in others; airport upgradation would have made the infrastructure problem a non-issue. Secondly, it is strange to equate the two national airlines with private carriers, when they already enjoy so many privileges, including separate terminals and a steady channel of passengers who pay higher fares for the privilege of travelling on government-reimbursed tickets. How does this work? Everybody travelling at government expense for official meetings is obliged to fly Indian. These tickets, in most cases, are more expensive than other full service carriers such as Kingfisher and substantially more expensive than Go Air or Spice Jet. Interestingly, it seems to have been a double bonanza for the Sahara Group last week. At the same time that its deal with Jet was being cleared, the Reserve Bank of India also decided to give Sahara India Financial Corporation (and Peerless), two residuary non-banking companies, ‘more time’ to comply with prudential norms.


Reluctant cooperation


Midas Touch Investors Association of Kanpur, which has bagged an Investor Helpline project for grievance redressal, funded by the Investor Education and Protection Fund (IEPF) is facing a piquant situation in trying to build a comprehensive database of companies. The Bombay Stock Exchange (BSE), which sits on a whopping Rs 247 crore in investor protection funds, has not updated the soft copy of its directory of 4,500 companies. But it made up for it by providing Midas with a hard copy very promptly and free of cost. The Uttar Pradesh Stock Exchange similarly offered a hard-copy for a nominal Rs 125. The Ministry of Company Affairs produces a searchable Compact Disk of a massive 6.5 lakh companies with a search facility plus other data and it is free of cost. But Ahmedabad Stock Exchange provided Midas with a hard copy of 2,500 companies and a floppy (who uses a floppy these days?), which wouldn’t open and also raised a fat bill of Rs 10,000. Given that Gujarat has produced the largest number of vanishing companies, Virendra Jain of Midas Touch believes that that steep pricing and shoddy transaction probably points to a reluctance to share information openly.


Mutual improvement


Securities and Exchange Board of India (Sebi) Chairman M. Damodaran is all praise for AMFI’s (Association of Mutual Fund of India) initiative in pushing for a fairer allocation of costs and fees by mutual funds, especially in terms of amortisation of issue costs in new schemes. However, since there was no unanimity among its members adopting the new cost structure, AMFI asked Sebi to order the changes. The Sebi board recently cleared the proposal to amortise issue costs over the life of the scheme. This ensures that costs are not unfairly back-ended and loaded on to longer term investors, while some large, nimble-footed investors skip from one newly launched scheme to another in order to maximise returns. Interestingly, Damodaran does not want to force too much of new regulation down the throats of the Fund Management business. Instead, he hopes that large global funds that are now eyeing the Indian market will bring in international best practices as well and force trustees to take greater responsibility for monitoring their fund managers.




-- Sucheta Dalal