Ministry auditors haul up SCI over costs of ship chartering
Impractical to have a fixed policy, says Shipping Corp.
Chennai, Nov. 14:
The Shipping Corporation of India has been pulled up by the Shipping Ministry's internal auditors on chartering of ships.
The auditors observed that in the absence of policy guidelines on the engagement of vessels on long term and spot market rates, the SCI deployed majority of its vessels on fixtures at a charter hire rate determined by the spot market.
monitoring
"The idle days when the ships were not earning any income but costs increased indicate the need for closer monitoring," said the auditors in the Shipping Ministry's annual report for the last fiscal.
The company should also formulate a policy for having an optimum mix of own ships and vessels it needs to charter vessels in the liner segment to bring down the high incidence of chartered costs, the auditors said.
However, a senior SCI official defended the company's stand on chartering of vessels. The actual fixing of vessels' travel always depends on the requirement of charter and the rates that are available for each type of fixture. "Thus, it is impractical to have a fixed policy. The rates, at which the vessels are fixed, always depend on the current spot market as applicable for period charter and voyage charter," said Arun Kumar Gupta, Director (Technical and Offshore Services), SCI.
Decisions are always made on the basis of inputs from various market reports, which give details of current market as well as expected future. The deployment also gets influenced by various factors such as age of vessels, tradability constraints, trade practices, availability of cargo and further deployment pattern of the current fixture, he said.
The national shipping carrier has a multi-segment fleet covering very large crude carriers and other various sizes of tankers, which transport crude as well as cater to the shipping of other petroleum products.
SCI caters to both coastal movement of crude and petroleum products as well as import/export of such cargo. Similarly, on the dry bulk side, SCI has various sizes of vessels ranging from Panamax to Handysize. "Because of a wide range, SCI has always intended to have a mix of Contract of Affreightment, Period Charter as well as spot business," said Gupta.
The auditors recommended that the company needs to have a system of reviewing loss-making operations at regular intervals for taking remedial measure in time. As the country's premier shipping line, the SCI owns and operates around one-third of the Indian tonnage and has operating interests in practically all areas of the shipping business, servicing both national and international trades.
SCI mans/manages a number of vessels on behalf of India. These include LNG transport companies (various joint venture companies), Andaman & Nicobar Administration, Geological Survey of India (Ministry of Mines), Ministry of Earth Sciences (Department of Ocean Development), and Oil and Natural Gas Corporation.
For the year 2011-12, SCI posted a loss of Rs 428.21 crore as compared to profit of Rs. 567.35 crore in the previous year. During the last financial year end, it owned 75 ships of 5.52 million deadweight tonne and was present in most segments of shipping, including container, bulk carrier, tanker and the offshore segment.
Despite the loss, SCI had a net worth of Rs 6,734 crore and strong cash balances.
raja.simhan@thehindu.co.in
FinMin may notify Rajiv Gandhi equity scheme soon
New Delhi, Nov 14:
The Finance Ministry is likely to notify the Rajiv Gandhi Equity Savings Scheme (RGESS), which is aimed at attracting retail investors to equity, within this week.
"The revenue department is likely to notify RGESS by Friday this week," a senior finance ministry official said.
Finance Minister P Chidambaram had already approved the scheme on September 21. He had indicated the revenue department would notify the scheme shortly and the Securities and Exchange Board of India (SEBI) would issue relevant circulars.
The scheme, which was announced in this year's budget by the then Finance Minister Pranab Mukherjee, would provide a 50 per cent tax deduction on investments up to Rs 50,000 to investors whose annual taxable income is below Rs 10 lakh.
These investors can put in money through mutual funds and exchange traded funds and the investments would be locked—in for a total of three years.
The scheme would cover stocks listed under BSE 100, CNX 100 and Navratna, Maharatna and Miniratna public sector firms.
Investors will also be allowed to invest in follow—on—public offer (FPO) of such PSUs and initial public offering (IPO) of PSUs, with turnover more than Rs 4,000 crore, a move which is expected to give a push to the government's disinvestment drive.
CBI should not probe biz decisions, public sector banks tell FinMin
'RBI reviewing working, performance during onsite inspections'
Mumbai, Nov. 13:
Top public sector bank officials have told the Finance Ministry and the Reserve Bank of India that the Central Bureau of Investigation should not call into question the commercial decisions taken by them in good faith.
They warned that if the investigating agency starts questioning the commercial decisions taken for growing the loan book, then the decision-making process as well as the officers' morale will be affected.
CBI probe
This feedback was given to the Ministry and the RBI following an enquiry conducted by the CBI into certain alleged irregularities committed by the former chief of a Karnataka-based public sector bank in waiving the processing fees in the case of some of the borrowing companies.
"The CBI conducted an investigation into the waiver/reduction of processing fees granted by the former chief of the public sector bank as it suspected his bona fides in exercising such discretionary powers," said a banker well-versed with the development.
For achieving loan growth in a competitive market, banks are required to waive or reduce processing fees and other charges and also reduce the rates of interest.
"It is not proper to judge the conduct of bank officials by isolating and adding up the total amount of waiver of fees or reduction in interest rate," said the banker.
Bankers emphasised that review of decisions taken by them has to be done by taking into consideration the overall growth of advances and aggregate income generated by such growth.
In their feedback, the banks, under the aegis of the Indian Banks' Association, underscored the fact that their working and performance is reviewed by the regulator through annual onsite inspections.
"Sound health of the banking industry in India is indicative of the capabilities of the RBI to supervise the banks and there is no need for an agency established for investigation of crime to assume a regulatory role," said a public sector bank official.
Freedom needed
Bank officers, according to the official, need to be provided freedom to use tools of waiver/reduction of processing fees and other charges, subject to delegated powers, policy norms and guidelines issued by their board of directors to facilitate achievement of business growth in the competitive market.
DLF to issue fresh equity shares to reduce promoters' stake
New Delhi, Nov 14:
Realty major DLF today said it will issue fresh equity shares in the next fiscal to dilute promoters' stake to 75 per cent as per market regulator SEBI's guidelines and will use the funds to cut debt.
"In the medium term, (this will) further pare down the net debt to below Rs 15,000 crore with operational cash flow surpluses and equity issuance to bring the free float to 25 per cent (in compliance to current regulations) during FY14," DLF said in an analyst presentation.
DLF Executive Director (Finance), Saurav Chawla said there would be a capital market transaction next year leading to dilution of promoters' stake in the company.
"It will be a fresh issue of share," he added.
As on September 30, promoters and their group companies held 78.58 per cent stake in the company. As per the SEBI guidelines, private companies should have a minimum public shareholding of 25 per cent by June 2013.
Chawla said the company plans to cut debt to around Rs 15,000 crore from the existing Rs 21,200 crore from sale of two big-ticket non-core assets (hospitality chain Amanresorts and wind energy business), surplus cash flow and capital market transaction.
In 2007, DLF had come out with its IPO and raised over Rs 9,000 crore. The company had offered shares at Rs 525 each that is now trading at around Rs 200 apiece.
The company's promoters had sold 9.9 per cent stake in 2009 to raise Rs 3,860 crore.
Those earning up to Rs 1 lakh a year are economically weak
Now, an urban poor with annual household income of up to Rs 1 lakh will be classified under Economically Weaker Section (file photo).
REVISED CRITERION FOR HOUSING SCHEMES
New Delhi, Nov 14:
The income criterion for defining beneficiaries under Government housing schemes has been raised. The real estate industry reacted by terming the move as practical, but insufficient.
On Wednesday, the Housing and Urban Poverty Alleviation Minister, Ajay Maken, approved the upward revision. Now, an urban poor with annual household income of up to Rs 1 lakh will be classified under Economically Weaker Section (EWS). Earlier, this limit was Rs 5,000 a month or Rs 60,000 a year.
Similarly, an urban poor, whose annual income falls between Rs 1 and 2 lakh will be categorised as belonging to the Low Income Group (LIG), against the earlier Rs 5,001 to Rs 10,000 a month or Rs 60,012 to Rs 1,20,000 a year.
Maken said the previous income criteria for selection of beneficiaries under various schemes of the Ministry of Housing and Urban Poverty Alleviation were fixed during 2010.
The revised criteria, he said, has been approvedbased ongrowth in per capita income, minimum wages for non-agriculture workers, monthly per capita expenditure, NHB's RESIDEX, consumer price index and consumer food price index.
Not too pleased
The real estate industry was not totally convinced by the latest move. Industry body, NAREDCO's, President, Navin Raheja, said, "With inflation and income going up, revising the income criterion upward is a practical move, but it should be left to the States to decide the criterion on the basis of property index in various cities." He said that it was not cost of construction, but floor space index (FSI) and cost of land that was important.
Going by the land cost in the National Capital Region, an EWS house with a super carpet area of 300 square feet will cost at least Rs 15 lakh. "If one takes a housing loan, then the EMI will be Rs 12,000-13,000. Now, can a person with a monthly income of Rs 8,000 or so afford this," he asks.
Set right debt recovery tribunals
Bleak industrial scenario…the Sarfaesi Act has not been effectively implemented. — Rajeev Bhatt
In view of rising NPAs, the inefficiencies in these tribunals need to be sorted out quickly.
Announcing the last credit policy review, the RBI mentioned that the rise in non-performing assets (NPAs) was 'disturbing.' The reference was to the steep rise in NPAs of the banking sector in the first quarter of the current fiscal, from 2.9 per cent in March to 3.25 per cent in June.
However, the recovery of NPAs has failed to keep pace commensurately. The rise in pendency of cases in Debt Recovery Tribunals (DRTs) is prolonging the decision on cases, keeping the banks, financial institutions (FIs) or asset reconstruction companies (ARCs), which buy out NPAs from banks and FIs, in waiting, even as the assets pledged with lenders are losing value.
The pace of NPA recoveries, including under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, may not pick up pace, unless some grey areas in functioning of DRTs are ironed out.
DILATORY TACTICS
The number of cases pending with DRTs is mounting day-by-day. With more and more lenders and ARCs started approaching DRTs, the pile of pending cases touched 67,524 in 33 DRTs and five Debt Recovery Appellate Tribunals (DRATs) by March 2012. That is a whopping 80 per cent jump in a span of 15 months, from 37,616 cases pending by the end of 2010.
It is expected in terms of sub-section 24 of Section 19 of the Recovery of Debts due to the Banks and Financial Institutions Act (RDDB Act) that the tribunal shall deal with the applications by it as expeditiously as possible and endeavour shall be made by it to dispose of the application finally within 180 days from the date of receipt of the application.
But it is observed in practice that this happens rarely. The presiding officers (PO) and appellate authorities (AA) are expected to record the reasons in compliance with the provisions of the legislation. However, that is not being done, perhaps thinking that the issue could be dragged to the higher courts. There is a need to adhere this process.
Though the delay in decision in DRTs mostly occurs due to dilatory tactics adopted by the defaulting borrowers, administrative issues like not filling the vacant positions of presiding officers and appellate authorities (AA) of DRTs and DRATs in time are also accentuating the problem. Many months have passed without an appellate authority at some DRATs.
Unless the AA disposes the cases, the applicants cannot go to any other forums for final resolution and enforcement of security interest by lenders/an ARC. Even the number of DRTs and DRATs in operation is not commensurate with the growth in number of cases filed, of late.
NPA RESOLUTION
Experience shows that resolution of cases pertaining to NPAs at an early stage enables banks and FIs to reap the benefit of 'going concern' value of the concern in default, through mergers and acquisitions or sale of business. With the passing of time, realisations from the same will keep falling, also affecting the possibility of putting the assets (or national resources) into use at the earliest. As such, early resolution of NPA cases would benefit all the stakeholders.
Even the Key Advisory Group on the ARCs, headed by Alok Nigam, has also suggested removal of bottlenecks for ensuring timely clearance of cases.
Secondly, some of the DRTs still continue to grant stay orders without proper distinction. Like any other court it becomes a routine, and an avoidable decision considering that NPA realisation calls for early decisions.
Finally, when the DRTs pass their decision, enforcement of security interest has to be done by the recovery officers (RO). But there are not many qualified ROs, even this is the case with many of the bank officials being appointed, who are lacking in knowledge about the due legal process.
The government has called for applications for the position of RO and in that they have encouraged officers from banks to apply, even though the position calls for a different mindset.
If bank officers were to be the best bet for recovery of dues as ROs, they would have done it so well when they were acting as authorised officers (AOs) or law officers of the banks. Both ROs and AOs have judicial powers in enforcing the recovery process.
Though ARCs are supposed not to miss an opportunity in realising the maximum possible revenue at the earliest out of the NPAs it has acquired, most of them are not exploiting the available opportunities like seeking declaration of the list of assets at the disposal of the defaulting borrower, once the former possesses the decree from a DRT.
There is no separate provision for resorting to this means in Sarfaesi Act, but it is available under the Civil Procedure Code. However, there are not many banks or ARCs resorting to take advantage of this opportunity and bringing such assets for verification by the recovery officer.
In a recent study, the industry body Assocham had found that the net NPAs of Indian banks may surge by 27 per cent to Rs 2,00,000 crore by March 2013. This would account for 3.75 per cent of the total loan assets of the banking sector then. If the above suggestions are taken care of, we could expect recoveries to bridge pace with rising bad loans to a greater extent.
(The author is Chief Advisor, PDS & Associates, and former CMD, Corporation Bank.)
Milk prices head south as private dairies stop buying
Private dairies are no longer keen to buy more milk and farmers are pouring in their entire surplus to co-operative dairies.
New Delhi, Nov. 14:
The virtual exit of private dairies from procurement this year has led to a drop in milk prices by up to 15 per cent, mainly in the southern and western parts of the country.
Even in the North, where the peak flush season is set to begin with the onset of winter (when buffaloes start giving more milk), the outlook is bearish.
Excess stocks
The main factor behind the fall in milk prices is the huge stocks of skimmed milk powder (SMP) with private dairies, coupled with dwindling realisation from export of casein.
This has led to a situation where private dairies are no longer keen to buy more milk and farmers are pouring in their entire surplus to co-operative dairies. The latter, in turn, have responded by reducing their procurement prices.
"Private dairies have stopped collecting milk this year," said sources at Karnataka Milk Federation (KMF), whose procurement touched an all-time high of 54.8 lakh litres a day during the first week of November. KMF's average daily procurement stands at 53 lakh litres, about 20 per cent more than last year.
In Andhra Pradesh, the co-operatives have sought the Government permission to reduce prices. In Maharashtra, the private dairies have cut the procurement price by Re 1 , while co-operatives are under pressure to reduce.
In North, the dairies are currently paying Rs 380-400 for every kg of fat against Rs 450 last year.
Smp exports
R.S. Sodhi, Managing Director, Gujarat Co-operative Milk Marketing Federation, however, claimed that the worst was over and prices were unlikely to fall further. The pick-up in pace of SMP exports on rising demand and prices should help boost milk prices, he added.
SMP exports, since June this year, have stood at 17,000 tonnes. In September, the Government had estimated SMP stocks at 1.12 lakh tonnes. The industry has requested the Government to consider increasing the incentive for exports from 5 per cent to 10 per cent under the Vishesh Krishi and Gramin Upaj Yojana to facilitate export of accumulated stock. "We expect SMP exports to be between 10 and 12,000 tonnes every month going forward," Sodhi said.
The export prices of SMP are turning attractive to quality producers, say, in the range of Rs 150-160 a kg, R.G. Chandramogan, CMD of Hatsun Agro, said. Besides, the appreciating dollar is an advantage, he added.
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