Sucheta Dalal :Dangerous delays (17 November 2002)
Sucheta Dalal

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Dangerous delays (17 November 2002)  

The Securities and Exchange Board of India (Sebi) needs to clean up the department handling its depository business, and to do it fast. Sebi has been sitting on key decisions relating to supervision of companies that have dematerialised their shares since February 2002.

It has also not responded to National Share Depository’s (NSDL) letters and monthly reminders with specific details of companies, whose listed capital and outstanding dematerialised shares do not match. According to NSDL, the issuer company alone has access to all the information on outstanding capital. This includes shares in NSDL’s custody, those with the Central Share Depository Ltd (CDSL) and physical shares.

Since some companies have been sending demat requests without waiting for in-principle listing approval from stock exchanges, it has lead to confusion, mis-match and some mischief. NSDL has been requesting Sebi to take three quick decisions.

First, to force companies to have just one registrar and transfer agent to handle physical shares as well as the depository interface. Second, to start a secretarial audit of companies. And third, to inspect those companies that have been flagged off by NSDL as potentially problematic.

Unfortunately, Sebi’s improved efficiency has not percolated to the particular department dealing with depositories—probably because its officials were busier planning their deposition before the Joint Parliamentary Committee to make allegations against Sebi’s top brass.

A political score

When Finance Minister Jaswant Singh cried off inaugurating Maharashtra’s much touted Infrastructure Summit, the State government had to settle for Lok Sabha Speaker Manohar Joshi to do the honours. Joshi, a former Chief Minister and a Shiv Sena man to boot, relished the opportunity that it presented and enjoyed himself.

With his trademark wit and sarcasm, he had leaders of the ruling coalition (Congress and Nationalist Congress Party) squirming in their seats. The Speaker didn’t fail to mention that his government had commissioned Maharashtra’s only infrastructure showpiece— the Mumbai Pune Expressway. Or how R. C. Sinha, the man truly responsible for the project’s success had been unceremoniously shunted out just months before its completion.

Apart from Manohar Joshi’s barbs, the State already had a lot to be uncomfortable about. There were hardly any takers for the infrastructure projects on offer or to pay up the hefty delegate fees and attend the summit. Potential participants were also more worried about companies such as MSRDC and the irrigation corporations defaulting on their commitments despite a State guarantee. It is no wonder then that no significant announcement emanated from the event.

Power politics

At a time when Maharashtra is all set to revive the Dabhol Power Company, news about the latest settlement in California’s energy deregulation debacle should be of interest to many Indians. As part of the settlement, William Companies, one of the biggest electricity and natural gas suppliers to California and other States agreed to pay more than $400 million to settle accusations that it had over charged customers and driven up prices during the power crisis.

It also agreed to restructure a $4.3 billion power contract signed with California at the height of the energy crisis. This will save the State over a billion dollars. The settlement comes at a time when US federal agencies are investigating allegations that energy companies created artificial scarcities to ramp up prices, and after a senior energy trader at the bankrupt Enron Corporation had pleaded guilty to participating in such manipulation.

What does this say to all those in India who sided with Enron and insisted that we should honour an exploitative deal only because we had signed a contract?

Necessary evil

If corporate America has shocked the world with its manipulated accounts and fat pay packets, a recent Harris poll shows that Wall Street’s image is also affected but relatively less. Americans have indeed lost some confidence in Wall Street, and the number of people who still believe that it ‘benefits the country more than it harms it’ is down from the high of 80 per cent in 1997.

But at 66 per cent of those polled, a very high number of Americans still believe in the Street and think that it is ’absolutely essential because it provides the money that businesses must have for investment. Yet, an equally high 61 per cent think most people on Wall Street would be willing to break the law if they believed they could make a lot of money and get away with it. In effect, Americans probably believe that Wall Street is a necessary evil.

-- Sucheta Dalal