Why do I think India is backpedaling?

While there are quite a few reasons to this, the one reason that can be singled out (and also the one that made me think this way) is a Constitutional Amendment passed by the Upper House of the Parliament today, which is, The Constitution (One Hundred Seventeenth Amendment) Bill, 2012.

This particular bill seeks to amend Article 16 (4A) of the Constitution of India, to enable the Government to provide quotas in promotions for the Scheduled Castes and the Scheduled Tribes. 

To understand the background of this charitable backward amendment, read: http://www.prsindia.org/billtrack/constitution-one-hundred-seventeenth-amendment-bill-2012--2462/

Clearly evident in the aforesaid background for this amendment, whenever the court struck down any law, the legislatures were quick and alert to immediately change the Constitution with unanimous voice and complete absence of debate on the floor. 

At the cost of getting slightly technical, let me try and analyze relevant parts of Article 16 of the Constitution:

Article 16 (1) – There shall be equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State.

(By this proposed amendment, the purpose of this article is being defeated as there is discrimination against people who are not SC/ST)

Article 16 (2)– No citizen shall, on grounds only of religion, race, caste, sex, descent, place of birth, residence or any of them, be ineligible for or discriminated against in respect of, any employment or office under the state

(The bill being passed today does the exact opposite)

Article 16 (4A) - as it read now: -Nothing in this article shall prevent the State from making any provision for reservation in matters of promotion, with consequential seniority, to any class or classes of posts in the services under the State in favour of the Scheduled Castes and the Scheduled Tribes which, in the opinion of the State, are not adequately represented in the services under the State.

Proposed Amended version of Article 16 (14A)

“(4A) Notwithstanding anything contained elsewhere in the Constitution, the Scheduled Castes and the Scheduled Tribes notified under article 341 and article 342, respectively, shall be deemed to be backward and nothing in this article or in article 335 shall prevent the State from making any provision for reservation in matters of Promotions, with consequential seniority, to any class or classes of posts in the services under the State in favour of the Scheduled Castes and the Scheduled Tribes to the extent of the percentage of reservation provided to the Scheduled Castes and the Scheduled Tribes in the services of the State.”

Now, what does Article 335 say:  The claims of the members of the Scheduled Castes and the Scheduled Tribes shall be taken into consideration, consistently with the maintenance of efficiency of administration, in the making of appointments to services and posts in connection with the affairs of the Union or of a State

In effect, the slight restraint in the form of term ‘efficiency of administration’ is being done away with by over-riding the provisions of article 335.  

It’s an all out effort to please the vote bank at the cost of efficiency which was built-in through article 335. SC/ST gets quota even in promotion without being efficient to the administration or the country.

While I agree that there is nothing new as promotions in reservations for SC/ST, what is being done is giving sanctity to the whole thing.  Earlier, The Supreme Court while deliberating on the issue of validity of Constitutional amendments in the case of M. Nagaraj Vs. UOI & Ors., observed that the concerned State will have to show in each case the existence of the compelling reasons, namely, backwardness, inadequacy of representation and overall administrative efficiency before making provision for reservation in promotion. 

If you read the statement of objects and reasons for the proposed amendment, which reads as ‘There is difficulty in collection of quantifiable data showing backwardness of the class and inadequacy of representation of that class in public employment. Moreover, there is uncertainty on the methodology of this exercise”, it is clear that the amendment is to bypass the Supreme Court direction and have an impediment-free reservation in promotion to SC/ST.

We are all for helping the under privileged, but should it not be restricted to provide them free education as long as they want to study and necessary infrastructure?  Why in job and then in promotion too?  Continuation of reservations even after 50 years of independence in itself is proof enough that the strategy of uplifting the under privileged through reservations has not worked.

This in all probability seems far more dangerous to the country than the highly debated FDI in Retail Bill and the never ending debates. This particular bill, which many term as quid-pro-quo between UPA and BSP for BSP’s support for FDI in Retail, is going to do more damage and deteriorate the country’s fabric in the long run compared to FDI in retail.

Alas! We can’t change the way politicians function.  For me, this is the most backward of bills passed in recent times.  Did the parliamentarians debate this? Yes, for some cosmetic changes and most parties were for this.  It was passed with an overwhelming vote of 206 in the 245-member House. The people who voted against had a more draconian demand – to make ‘Muslims’ also eligible along with SC/ST.

I also recommend Arun Shourie’s “Falling over Backwards: An essay against Reservations and against Judicial populism”, for anyone who is keen on some insight into this disastrous trend of RESERVATIONS.  
Read more at http://www.indianexpress.com/news/affirmative-activism/989733

End of the day – it’s all about votes at the cost of efficiency, growth and development! 

Miscellany…

Here's my take on some issues that made for eye-grabbing headlines, expressed in no particular order...

The End of Kasab!

How does it get any better any than this! Not the hanging in itself, (which, in my humble opinion is overdue) but the manner in which he was executed.  It is difficult (and rather disastrous to imagine the kind of circus the media would have indulged in had there been a prior notice). The fourth estate would have gone berserk as always and the issue would have ended up being trivialized. End of the day – it was good riddance of bad rubbish without media intervention for once!

The Aam Aadmi Party!

Mr. Arvind Kejariwal (messiah of the ‘mango’ people) has arrived with his party for the people, by the people and of the people, christening it as the “Aam Aadmi Party”!   

Rewinding a little, the events prior to the launch of the party have urged me to think that news channels should now have a separate corruption bulletin, something on the lines of a “SportsCentre”, “World of Sports”, or “Weather Update”. The said special can highlight the day’s exposé, a status on the last few exposés and so on. Throw in a Top-10 of Exposés as a highlight and interested people can keep tab, while others can stick to regular news! There is some reprieve these days considering these revelations have slightly lost their steam!  

 

If it sounds absolutely cynical and irresponsible to make the issue of corruption look trivial, that is certainly not the intention. Corruption is an ultimate evil and needs to be addressed. The point that I am trying to ascertain is that the aam aadmi is beginning to lose interest in these “startling exposés”, considering they are going nowhere besides ‘Breaking News’ on TV. It is not front page news anymore, none of these seem to reach a logical conclusion and the ones named in them are not going to get hurt, barring, maybe, minor electoral setbacks. 

What I think is being missed in this ‘press-conference-driven-system-clean-up-act’ is, we Indians are almost used to corruption and there is no element of shock or surprise to this.  Probably one of the sensible comments was made by a Union Minister was when he stated that the amount mentioned in a so-called scam was too low for a Union Minister to get involved in.  While he may have defended himself (read clarified) later by saying he was misquoted, but come to think of it, what he said made perfect sense and I’m sure the majority public agrees with him. Public is already of the opinion that such things are a part and parcel of politics and “yeh chota mota corruption toh chalta hai boss”!!  

What the Aam Admi Party could rather do is focus on what they can offer other rather than mere exposés. At the end of the day, you do need capable people to run government not just clean people!

Parliamentary functioning!

What amuses me is the childish behavior of politicians, especially the so-called Opposition. In India, Opposition takes the word ‘opposition’ a bit too seriously – they HAVE to oppose everything.  It is understood that there are few contentious issues, for instance ‘FDI in retail’. Why can’t they conduct regular business and agree on agreeable things like passing a simple economic legislation like Companies Bill? Why stall the functioning of parliament for an issue which they don’t have a consensus on or rather an issue on which they don’t want to have a consensus on?  It’s funny but that’s democracy for you. Latest is the opposition wants two separate voting and discussion on same issue of FDI in retail.  It is hard to imagine the time that gets wasted and of course, the taxpayer’s money.

Tendulkar and the ‘R’ Word!

Disclaimer – like the millions of other Indians, I also like Tendulkar – but the way things are unfolding is nothing but disappointing.  To see THE MAN struggle and allowing every Tom Dick and Harry (including me) to debate on his calling the shots is appalling. Let’s hope he goes out on a high and not like this.

Indo-Pak Cricket Diplomacy! 

In spite of a thousand debates on this, it still does not make any sense.  The only beneficiary of this is the BCCI considering the moolahs they get to make from this one. As we all know, cricket diplomacy has not helped the two countries improve their ties in any way.  It’s just a gimmick.  And yes, India and Pakistan have been playing against each other on other tournaments, which should be enough to cater to a cricket fan’s appetite.  We are under no moral responsibility to revive or help Pakistan Cricket by offering to play a series with them.  The only outcome can be some law and order problem in the country which, we have in plenty anyways!

The Sahara Saga!

Another news making headlines these days is the Sahara saga.  To re-capitulate, Sahara Group has raised huge sums through issue of OFCD (optionally fully convertible debentures) and it is alleged that they violated several statutory provisions of Companies Act and SEBI regulations. Strangely, while the whole world knows Sahara gets funds by running these finance schemes, SEBI got to know about this only when the group initiated listing of two of their companies and filed prospectus with SEBI.  The concern here is the OFCD issue through which the funds were raised were actually cleared by the Registrar of Companies and it appears that they are not being held responsible in any way for this mess!

Apart from the legalities, I happen to read an interesting piece on how companies like Sahara succeeds in an article titled ‘Why the poor are willing to hand over their money to Sahara’ which is worth a read…

http://www.firstpost.com/business/why-the-poor-are-willing-to-hand-over-their-money-to-sahara-438276.html

A few more thoughts in a probable Miscellany 2!! 

ABSURD…… Is that the right word?

Free mobile phones to every BPL (below poverty line) family with 200 mins of talk time p.m.!

If things go well (for the UPA and disaster for the nation), that’s how the beleaguered UPA attempts to woo the voters. The scheme is supposedly termed 'Har Haath Mein Mobile’ (a mobile in every hand). 

Would admit – that’s some kind of innovation even for the ‘been there - seen all Indian public’.  





 UPA is trying to take the nation the Tamil Nadu way where ‘free’ was the key word in last few elections.  DMK started with free TV and AIADMK followed by offering mixers/ computers etc. free.  Disaster is a mild word in these kinds of situations.

There has been a lot of debate / shows on ‘cash for vote’ during election times (of course by the media for the media).   What is striking is how this is different from ‘cash for vote’.   The minor deviation is ‘whose cash’.  Here it is the tax payer’s money.  If the idea is to grab votes… why not from their party fund?

See the timing.  We are looking at a general election due in 2014 and  this weird benevolence will take its own time and may fructify only in 2013.  Voter’s memory will be fresh and what more can the UPA ask for!  A bulls-eye! 

Consider the economics of this benevolence which is estimated at Rs.7000 Crores.  Isn’t it peanuts compared to a 2G scam /coal-gate / CW scam and the list goes on.

The only saving grace, if it’s not posturing… is the report that the Finance Ministry is not keen with this proposal.  



I somehow feel that the whole thing is ‘absurd’ and that’s why that word is in the title of this blog.

Oh I forgot......... What about ‘ROTI, KAPADA AUR MAKAN’.  

Come on… thats no big deal when you have a mobile phone and 200 minutes of talk time per month.  ho jayega.......

The Ghost of Dematerialisation!

The attempt here is to capture how the self proclaimed small ‘shareholders’ take Corporate world for a royal ride! I am in no way advocating that Companies are good and the shareholder is bad or vice versa.  It is just that the lawmakers left a big hole, intentionally or unintentionally, on a sensitive issue of corporate governance, which has been exploited by a set of people.

Since this is an academic write-up, I’ll start with explaining the term dematerialisation or demat!

Dematerialisation or Demat: It is the system through which shares in a Company are held in an electronic form. Unlike olden times, you don’t get a share certificate. Instead, what you get is a statement evidencing the title of your shareholding in a Company.

Where it started:  The Government of India promulgated the Depositories Act, 1996, which enabled a shareholder to hold shares in electronic form against the traditional physical share certificates. The intention was perfect and it worked well to revolutionize the securities market. All those litigations arising out of bad delivery, delay in transfer of shares, long book closure periods etc. became the thing of past. It also saved lot of money for shareholders as there is no stamp duty on transfer of shares in electronic form.  Awesome progress all in all!

In the year 1998, Securities and Exchange Board of India (SEBI) abolished the concept of market lot. Hitherto, shares were to be bought / sold/ held only in market lot which was traditionally 50 shares or 100 shares. To popularize demat and also to widen investor base, SEBI came out with these reforms, which was initially extended to 31 scrips and later extended to all scrips trading in demat form. 

What did it do: Unscrupulous shareholders started buying 1 or 2 shares each of Companies and strangely, as the law stands today, they are entitled to the same rights as that of any other shareholder with few exceptions? From here began their journey of harassing Companies.  What helps them is the existing archaic Companies’ Act.  Without quoting the sections, it gives them power to inspect a Company’s records, seek copies, move resolutions to remove directors, etc.  Yes, they can also move court against scheme of arrangements / amalgamations etc.

What is happening now: These unscrupulous shareholders harass Companies by making unreasonable demands; the ulterior motive is black mailing and in turn, money-making, and unfortunately, most Companies end up falling for it to buy peace! They threaten Companies by moving a resolution to remove a director, seeking all kinds of documents in the name of corporate governance. The regulators are blissfully silent on this whole issue.

Economics of this misuse: Let me try and put this across through a hypothetical situation.  Say, a shareholder holds 1 share of Rs. 10/- in a Company. To send an annual report to a shareholder who has not provided his/her email id, the Company has to incur at least Rs.30/- (a conservative estimate for printing / mailing).  The trend is, most of these shareholders ask for physical copies for reasons only known to them. Worse, if the Company decides to declare a dividend – say 15%, which is Rs.1.50/-, they have to incur at least Rs. 5/- (mailing of warrant if there is no bank mandate and if there is a bank mandate, mailing intimation about payment of dividend). There are instances when these warrants of Rs. 2/- or Rs. 3/- comes back to the Company for revalidation as the shareholders forget to present them within the stipulated 3 months time. Yes, last year, the Ministry of Corporate Affairs allowed sending communication to shareholders through email. But the catch here is providing email id is not compulsory. Further, sending the reports/ notices through email also has a cost attached to it since the Registrars charge for emailing.  The question is, whom are we serving and how does this madness qualify as corporate governance? Imagine the plight of a Company like Reliance Industries which has around 34 lakh shareholders out of which approx. 33.50 lakh shareholders hold shares that are worth less than a lakh each of rupees in nominal value!

The magnitude of this wastage is not known. Maybe it would be a good idea to ask Companies to disclose expenses incurred on servicing shareholders.  Or should we call it ‘governance’ expenses’.

What happens in a Shareholders meeting:  The scenes witnessed in a typical shareholders meeting are really pathetic. I have had the sad privilege to attend general meetings of several Companies in the last decade and without exception, what happens in a shareholders’ meeting is nothing short of a ‘circus’. These small shareholders land up at the venue to gobble the gift / sweet box / refreshments / meals.  Some of them rarely enter the meeting hall. Thanks to dematerialization, they can open multiple accounts and demand whatever is given for each folio / demat account. They are rarely bothered about the Company’s financials, performance, track record etc.  Their only focus is to extract maximum mileage out of a hapless secretarial department by fighting for an extra food coupon, conveyance and the likes!  Another trend is they normally land up with their entire family including kids. With 1 or 2 shares, they also demand factory / plant visits. Without slightest exaggeration, I have stood witness to scenes as bad as “a shareholder bringing a thermos and taking tea and coffee in the same thermos”.  Of course, there are so many other cheap antics they indulge in which one can’t even imagine. 

The concern: Who benefits out of this whole tamasha? There is a huge cost in serving these shareholders. No one, except these ‘small shareholders’ who have anything but concern on how a Company runs or on the concept of corporate governance.  Why are the regulators silent on this whole mess?   In the process, is it not true that the actual idea of governance gets lost?  Without sounding like an environmental activist, what about the tons of paper being wasted in this whole exercise of sending annual reports?

Plausible Solution: Bring back the concept of market lot or set a minimum investment requirement in Companies for these privileges, i.e., it can be number of shares, amount etc. Others can always invest through mutual funds. Alternatively, curtail rights of shareholders who do not hold minimum number of shares.  i.e., set this at 100 shares or Rs. 50,000 investment amount at least. Shareholders who do not fall in this category should be entitled to only dividend, not even an annual report or attendance in a shareholders meeting. This eligibility setting is not a new concept; the Companies Act has this provision when it comes to eligibility to demand a poll.  A shareholder or group of shareholders should have 1/10^th of the total voting power or must hold shares worth Rs.50,000 to demand a poll. Also, make email id compulsory for a depository account. Regulators can also look at setting up investor centres at major cities where annual reports of all Companies can be provided for reading or should I say ‘analysing’. 

Caveat: I am not advocating that Companies are angels! I firmly believe that if a Company is indulging in unethical activities, it should be punished without exception.  But that should be the job of the regulator and there are enough laws that provide them the power to monitor and penalize. It is far from sensible to leave a Company at the mercy of a bunch of people who has not interest in a Company’s welfare.

On a Concluding Note: What I have listed here today is merely wishful thinking.  As it stands today, in India, the Government acts only on issues which would tend to hurt them or majorly due to the coalition push.

On a lighter note, may be if a coalition partner raises the issue as a condition for support, there could be some action.  Till then, we have to live with this menace.

Populist Politics or National Nautanki!

The Railway Budget 2012 – that’s what triggered me to put down my thoughts after a long time.

To summarize, India’s Railway Minister Dinesh Trivedi of the Trinamool Congress (TMC) presented the Railway Budget amidst heaps of couplets and poetry! To recapitulate, this was a portfolio held by his Party Chief and TMC President (‘owner’ would be a better word) Mamata Banerjee for past few years, till her party won the assembly election in West Bengal and she chose to become the Chief Minister.

The budget had the following broad elements:

Passenger fares increased marginally. The increase will be by 2 paise/km for suburban and ordinary second class; 3 paise/km for mail/express second class; 5 paise/ km for sleeper class; 10 paise/km for AC Chair Car, AC 3 tier and First Class; 15 paise/km for AC 2 tier and 30 paise/km for AC I. Minimum fare and platform tickets to cost Rs.5.

As per statistics, hike in railway fares has happened after a gap of 9 years. What makes me wonder is; is there anything in this country that has not witnessed a price hike on a regular basis? Be it diesel, petrol, LPG, auto, bus, taxi, air fares, movie tickets, tax rates, electricity, water tariff, and the list is endless, so much so that I can dedicate a whole new blog-post on it!

While that was merely a recollection of facts, what left me rather intrigued were the developments that followed the budget presentation. Mamata Banerjee is seeking replacement of Dinesh Trivedi, for the hike is not acceptable to her party and shocking as it may sound, she claims that she was unaware of the budget proposal involving a hike! Yes, the Railway Minister also confirms this……How dramatic can a nautanki get in this country! Congress is obliged to replace him as it is a demand from the chief of an important 'ally' (for whatever it means). This is the same lady who is seeking an amendment to the President address to the Parliament after she had a chance to review the address. Poor Congress, which already looked lost and helpless, especially after the UP fiasco, is as usual, in a fix and loss of words!

Are we, the commoners, expected to believe that the Railway Minister presented a budget which was not approved by his party Chief?

Well, if that is the case, the verdict is out – Shri Trivedi is a "fit and proper person" to be the Prime Minister of India.

Hail the nautanki, the drama and the populist politics! Jai ho!

Oh Darling! Yeh Hai India!

Today’s news and events are truly fitting to this title, which is borrowed from Ketan Mehta’s ’95 satire starring SRK. The latest diktat from the Election Commission, the “Operation Cover-up”, to ensure several huge statues erected by Mayawati (her own, Ambedkar’s, Kanshi Ram’s and of course hundreds of elephants) ahead of the UP elections, has raised many an eyebrow! While this news splashed across the media and the virtual world, all I could think of was “Oh Darling…. Yeh Hai India!! I mean where else can one witness such antics other than our very own I-N-D-I-A…

Think of this – all these years, the state exchequer was used to build and erect various parks and statues. In the land of countless laws with and without purpose, we failed to find a law that could stop this massive wastage of tax payer’s money. It is reported that more than Rs.2500 crore was spent on projects of five parks and memorials in Lucknow between 2007 and 2009. There were even cases filed in the Supreme Court against raising these ‘memorials’ – as they call it. Yet, it is mortifying to see that no one has been able to stop this wasteful expenditure. Today, out of the blue, the Election Commission wants to cover all these humungous statues with their burqa!!

Now, the ‘cover-up’ situation at hand has become a logistical nightmare for the government authorities. Once again, the government money is wasted on this exercise and it would not be an uphill task to imagine that this clothing exercise will not be anything but futile. For me, and I would presume it is human nature that a closed or covered piece generates more curiosity than an open one. So why bother to cover it up now? Are we not giving more publicity to this ‘statue politics’?

The question at hand – what happens to these statues if the BSP does not return to power? And what happens if they do?

Last heard was a Public Interest Litigation filed in the Lucknow High Court stating that Elephant is a religious symbol and hence ‘burqa-fying’ elephant statues should be stopped.......... What an Idea Sirji!

On an exaggerated note, I was thinking out loud – Are we looking at a situation of arranging over 200 million (which is the estimated population of UP) pairs of gloves to cover all Hands/Palms in UP (because this happens to be the symbol of the rival Congress)? Covering of the ‘Lotus’ and other party symbols will be child’s play as compared to this mammoth task in hand.....

The Glove-making Industry… are you listening?

Welcome to the greatest cover-ups of all times........It happens only in India! Jai Ho!