When Parliament passed the Securitisation Bill (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002), it generated a lot of excitement and hope that recovery of bad debts would reduce the mountain of non-performing assets (NPAs) of Indian lending institutions. However, the sceptics may probably prove right. After the initial euphoria and the flurry of notices to seize defaulters’ property has fizzled out, the squabbles have begun in earnest. It started with ICICI Bank settling a big chunk of the Modern Group’s debt, by selling it at a 50 per cent discount to another bank. The deal knocked out the bargaining power of IDBI and IFCI and all but ended the coordinated recovery effort by institutions. Borrowers, who are at the receiving end, find that the Reserve Bank of India has indeed issued a Fair Practice Code on Lenders’ Liability (FPCLL) and a scheme for Prompt Corrective Action (PCA), but it simply ignores their complaints. Those that are not loss-making entities, but have stopped repayment because of institutions’ failure to release the sanctioned loans are in worse trouble. One institutional lender demands hefty ‘management fees’ for routine restructuring and demands equity from the profit-making companies.
The other institutions sabotage its effort by refusing to negotiate, and issuing notices under the Act and threaten to attach the company’s properties. If the RBI doesn’t wake up to the need to monitor genuine cases soon, it will find that empowering lenders is only destroying genuine business instead of restructuring it.
Some weeks ago this column pointed out that the 70,000 odd taxis that have been licensed to operate in Mumbai are choking India’s most crowded metropolis. Krishan Khanna of www.wakeupcall.org claims that at any point of time, just over 10 per cent of the taxis are ferrying passengers while the rest are clogging up valuable road space. That the reckless registration of taxis has created a frightening glut should have become obvious when Mumbai’s taxis forgot to demand a hike despite frequent increases in fuel prices. My trader sources have discovered that those taxis that have been converted to CNG fuel have lower costs and are willing to offer a fairly hefty discounts on the official tariffs for passengers travelling long distances. Those passengers, who have discovered that you can often haggle a discount on taxi tariffs, are quietly passing the word around to their friends and relatives. The site of roads choked with idle taxis only demonstrates the utter lack of urban planning in Mumbai. The city has ignored mass public transport in the form of segmented bus transport and the introduction of high-capacity buses, and is instead allowing expensive taxis have been allowed to hog scarce road space.
At a time when Chief Minister Narendra Modi has assured industry that nearly Rs 8,000 crore of investment is set to flow into Gujarat, there is news that Gujarat Electricity Board (GEB) was the highest loss-maker among all State Electricity Boards (SEBs) as of March 2002. While Maharshtra severed its links with Enron’s Dabhol Power Company, Gujarat’s woes are mainly due to the exorbitant tariff it has been paying to Independent Power Producers (IPP). GEB’s losses touched a whopping Rs 2,208.58 crore last March, which is well over twice that of Madhya Pradesh Electricity Board—the second biggest loss maker in India. In fact, even Bihar has lower SEB losses than Gujarat. Modi will have to set his electricity utility right if his boast about investment flows into Gujarat is to hold true. After all, industry cannot survive without power and water.
Except for the occasional reports about how prison labour and low wages have contributed to the Chinese economic miracle, the country manages to present the world a confidently prosperous face. But occasionally the mask is ripped of. Last week the Washington Post reported the pathetic tale of a construction firm foreman and his colleague who got paid for their labour only when they threatened to throw themselves off a 10-storey building. The Post says that such threats are often the only means of getting the police to intervene and get employers to pay their workers, mainly migrant labour from Chinese villages. It also says, ‘‘that China’s courts, trade unions and government agencies are unable or unwilling to help them. These institutions are underfunded and understaffed, and often controlled by party officials who have close ties with local employers”. An uncaring system is familiar to India’s hapless labour too, except that there isn’t even an economic miracle to look forward to. -- Sucheta Dalal