Sucheta Dalal :Overdue recognition (26 May 02)
Sucheta Dalal

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Overdue recognition (26 May 02)  

When Finance Minister Yashwant Sinha called the National Stock Exchange (NSE) ‘one of the great Indian success stories’ last week, it was an official recognition that was long overdue. Sinha, to his credit was all charm and grace; he even remembered to pay a special tribute to Dr R.H. Patil, NSE’s former MD who had played an important role in shaping its success story. But having done that, Sinha went on to say several other things that left the audience completely flummoxed. For instance: He talked about sugar futures and how ‘NSE’s sophisticated knowledge in finance’ was a national asset when it came to creating new futures market. Sinha’s obviously didn’t know that NSE was already part of a consortium that had won a mandate from the Forward Markets Commission to set up exactly such a market. The mandate was recently cancelled because the consortium made no headway in setting up the Commodities Market, something that Sinha may want to look into. Sinha then suggested that NSE should create an international currency futures market, trading after Hong Kong and before London. NSE officials probably squirmed at this because the suggestion was sure to incense the mighty Reserve Bank of India which is setting up its separate trading systems even in the debt market (which the NSE already has ready infrastructure), simply because it does not want a confusion over its regulatory jurisdiction. Sinha then told NSE not to use its dominant position in the market to raise transaction charges either to make big profits or because of inefficient cost structures. That certainly startled NSE executives because they have steadily reduced transaction charges over the years and reduced them twice last year. Did the FM confuse them with the National Share Depository, which has increased transaction charges for individual investors? Finally, Sinha said something about NSE’s ‘monopolistic control over information coming out of the exchange in real time’ and advised the bourse not to ‘collect a rent’ for it. As far as we know, real time transaction data of all exchanges is freely available on brokers screens and the only other real time data is the ticker tapes of stock prices which are sold to news agencies, television channels and websites. Now, why would the Finance Minister worry about the small fee that the NSE collects for this data when the buyers are not complaining?

Homework needed

The Joint Parliamentary Committee (JPC) would do so much better if its members did some homework before firing off their questions. Recently, CBI director P.C. Sharma was questioned about the 27 lakh missing shares of the Harshad Mehta group pertaining to Scam 1992. Sharma was vague about why the Custodian had discovered the missing shares after 8 years. A little ground work would have revealed that the Mehtas had themselves written to claim that the shares were stolen from them. The custodian responded by filing application 88 of 2000 before the Special Court and the Court directed CBI to investigate the claim and this led the trail back to the Mehtas. There were several other gems at the hearing. For instance, the CBI asserted that the Swiss Authorities had conducted a suo moto investigation leading to a disclosure of Ketan Parekh’s Swiss account on June 26 last year. Sharma called this the ‘first happy instance’ when the Swiss authorities had, on their own revealed details of Parekh’s multi million Swiss Franc nest egg. Curiously, the benign JPC did not bother to ask why this sensational information had not led to the filing of a charge sheet against Ketan Parekh. Sharma was then asked about the Madhavpura Bank pay order that bounced. He confidently claimed that it was ‘Bank of India’s duty to see that the bank draft which he (the bank official) received was supported by money in the bank’. Congress MP Kapil Sibal pointed out that a draft was like cash and the bank did not have to check, but Sharma remained unfazed about this all-important detail about banking instruments.

Taxing income

While on the Finance Minister, he insists that income-tax rates in India are comparable to world standards. Here is a bunch of statistics sent in by various readers. In the US, a tax rate of 30.5 per cent (lower than our highest rate) is applicable only on incomes over $65,550, which at the current rupee-dollar parity would amount to Rs 30 lakh and above. Even if one applied a purchasing power parity rate of Rs 14 to a dollar, the minimum slab would apply to incomes above Rs 9 lakh and not Rs 1.5 lakh. Even China, Russia and Pakistan, which are comparable with us, apply the highest income slab at much higher income levels.

-- Sucheta Dalal