[aaykarbhavan] Business standard updates 7-1-2014

CAG Gears  up to  audit  books of 5 pvt telcos, Delhi discoms

RUCHIKA CHITRAVANSHI &SUDHEER PAL SINGH New Delhi, 6 January The Comptroller and Auditor General's ( CAG's) office, with its across- the- spectrum audits in recent times, has ruffled many a feather in the political and corporate establishments. But its status as the trusted auditor and the cases on its plate seem to be only growing with time. On Monday, while the Delhi High Court allowed CAG to conduct audit of five major private telecom companies, the auditor also moved a step closer to inspecting the accounts of Delhi's three private power distribution companies (discoms) and sought from the state government all available financial records of these firms. According to Chief Minister Arvind Kejriwal, who had last week announced a historic subsidy scheme to make electricity 50 per cent cheaper for 82.4 per cent of the capital's consumers, the audit will expose financial irregularities and make a case for reduction in power rates. Even as the discoms opposed the audit, Delhi's Lieutenant Governor Najeeb Jung on Monday said the companies must cooperate or face cancellation of licences. " A CAG audit of electricity companies is being carried out since power distribution was privatised. Licences of those not cooperating in the process may be cancelled," he said in his address to the Delhi Assembly. He added the government would not be a " silent bystander" on the issue and would not hesitate in taking decisions. Jung had requested CAG for the audit after a meeting with Kejriwal last week. The auditor has now written to the state government seeking appointment of a nodal officer to coordinate between the two parties for the audit. A senior CAG official told Business Standardthe letter did not clearly mention the objectives and extent of the audit. It did not specify whether CAG had to examine the profit & loss of these companies or power rates. The two parties —the auditor and the government —will soon hold a meeting to understand the specific purpose of the audit. Besides, the Delhi High Court's decision to allow CAG to audit the books of private telecom companies is seen further strengthening the stand of Kejriwal's Aam Aadmi Party ( AAP) that discoms' financials be audited. However, unlike Delhi discoms, the telcos have a revenue- sharing arrangement with the government, under which these pay the national exchequer more than ₹ 20,000 crore annually. The issue of a CAG audit of Delhi discoms is currently before the high court, which will hear the case on January 22. In its order on audit of telecom companies' financials, the Delhi High Court has stuck to only receipts ( or revenue earned) of the companies, and not the expenses, as the government's income from telecom operators is linked to telcos' revenues. The bench of Pradeep Nandrajog and V Kameswar Rao said: " A small caveat by way of reminder to CAG. In relation to the accounts of the telecom service providers, the audit has to be only an audit pertaining to the receipts and no more. The Comptroller and Auditor General would not confuse himself with his wide all- embracing power under Section 14( 2) of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971 which includes inquiries into aspects like faithfulness, wisdom and economy in expenditures." At present, telcos pay 1- 8 per cent as spectrum usage charge, apart from the annual licence fee. Besides ensuring the government's actual earnings from telcos, the audit would enable the government to see the telecom operators were not underreporting revenues, said an industry analyst. Turn to Page 20 > Lt Governor says discoms must cooperate or face cancellation of licences; Ficci cries interference WIDENING THE AMBIT Private companies audited by CAG DELHI INTERNATIONAL AIRPORT PVT LTD ( DIAL) WHEN: JUNE 2012 Outcome: CAG alleged DIAL could earn ₹ 1.63 lakh crore over 60 years from the land leased out for a mere ₹ 100 per year. It criticised the civil aviation ministry for allowing DIAL to charge airport development fees ( ADF) from air passengers in violation of agreement RELIANCE INDUSTRIES LIMITED ( RIL) WHEN: IN NOVEMBER 2007 Story so far: CAG was requested to conduct special audit of production- sharing contracts for eight blocks from where revenue was generated. In May 2012, it was decided CAG would undertake audit for the years from 2008- 09 to 2011- 12 CAG Shashi Kant Sharma >

 

---

Click here to read more...Turn to Page 20 >

Click: Article continued from… of 5 pvt telcos, Delhi discoms

CAG gears up to audit books of five private telcos, Delhi discoms

The court rejected separate petitions filed by telecom industry bodies — Association of Unified Service Providers of India ( Auspi) and Cellular Operators Association of India (COAI) — against the decision of the Telecom Disputes Settlement and Appellate Tribunal on the issue in 2010, arguing CAG couldn't audit private telecom companies' accounts. Both COAI and Auspi did not respond to calls from Business Standard for comments on the issue. Following the Delhi HC order, stocks of telecom companies tumbled on the BSE. Shares of Tata Teleservices Maharashtra plunged 4.4 per cent, while Idea Cellular closed 1.8 per cent weaker. Among others, Reliance Communications was down 0.5 per cent and the Bharti Airtel scrip ended marginally down. The telcos refused to comment but senior CAG officials said they were happy with the court's order. The Federation of Indian Chambers of Commerce and Industry appeared unimpressed. On Monday, it said there was " no place for CAG interfering into private companies' books", as the auditor had the mandate of looking into the government's business only. "As far as audit through CAG is concerned, we believe CAG was constituted to be answerable to Parliament in respect of businesses owned by the government. So, to my mind, there is no place for CAG interfering into a private company's books. It can happen only if there is a contract between a private company and the government in this regard," Ficci President Sidharth Birla told the media. In his power- rate announcement last week, Kejriwal had limited the mega subsidy to the domestic category, which accounts for 80 per cent of the city's 3.4 million consumers but contributes only 20 per cent to the discoms' ₹ 18,000- crore annual revenue. Had the subsidy covered the remaining 20 per cent consumers as well, the state's annual subsidy burden would have jumped 11 times, to around ₹ 9,000 crore. Reliance Infrastructure holds a 51 per cent stake in BSES Rajdhani and BSES Yamuna, which cater to 75 per cent of the city's population. Tata Power holds 51 per cent in Tata Power Delhi Distribution Ltd, which provides electricity to the rest. The Delhi government holds the remaining 49 per cent through its holding firm, Delhi Power Company Ltd, in each of the three companies. Banks wise up to outwit card fraudsters SOMASROY CHAKRABORTY Kolkata, 6 January Srishti Chakrabarti, a school teacher in Bangalore, was alarmed when she received atransaction alert on her debit card early one morning. Her card was used in a merchant outlet in north Mexico and a large sum of money was debited from her savings account. Chakrabarti had never travelled outside Asia. "My bank statement reflects that it is a POS ( point- of- sale) transaction, which means that a forged card has been swiped there ( in Mexico), whereas the original and authentic debit card is in my possession in Bangalore," she complained on the governments Grahak Seva website. After she persisted with her complaint, the bank admitted that she was a victim of a skimming attack and her card information was stolen. The bank refunded her money. But there are many who have not been so fortunate when their cards were misused. The multiplicity of frauds involving debit and credit cards has prompted the Reserve Bank of India ( RBI) to introduce a set of risk mitigation measures for electronic transactions. " With cyber- attacks becoming more unpredictable and electronic payment systems becoming vulnerable to new types of misuse, it is imperative that banks introduce certain minimum checks and balances to minimise the impact of such attacks," the banking regulator said in a notification on February 28, 2013. While the steps are intended to protect cardholders from swindlers, the risk of fraud remains for customers who are not careful in using plastic money. The new norms, some fear, may also encourage customers to transact more in cash despite banks' efforts to popularise the use of cards. To provide an additional layer of security, cardholders are now required to key in their personal identification numbers ( PIN) while using debit cards in retail outlets like departmental stores, restaurants and fuel stations. It appears that many are actually reluctant to punch in their PINs in crowded shops. They prefer to pay in cash instead. There have been a few instances where cardholders were asked to share the PIN with the shopkeeper instead of typing it into the POS machine. Rishita Dutta ( name changed), aKolkata resident, was dining with her friends at a city restaurant last week. " When I took out my debit card, the waiter asked me for the PIN. I was not comfortable in sharing my PIN with astranger. The restaurant did not have a portable POS device and I was escorted to the counter to make the payment. It was an awkward situation as the waiter appeared offended and kept proclaiming his honesty. In future, I will probably pay cash to avoid such a situation," Dutta says. There's nothing wrong with paying in cash, except it is cumbersome and could lead to a decline in sales for retailers in large cities. Settling into a new way of life But most bankers feel that these are stray events. " These changes are for the better. Teething problems crop up whenever a new process or system gets introduced. I believe it will be a matter of only three or four months before the issues are resolved. It is just a question of merchants as well as consumers getting used to this new way of life," Kusal Roy, general manager and head of payments and unsecured loans at ICICI Bank, says. The limited supply of portable POS machines, especially in restaurants, is probably an issue that needs to be resolved. Customers are not always keen to walk up to the counter to make the payment. Bankers say that non- portable POS devices are more popular with merchants because they cost less, half the price of portable machines in some cases. POS devices are generally priced between ₹ 15,000 and ₹ 40,000 depending on the brand, features and portability. Lenders explain that there is no regulatory mandate on merchant establishments in choosing the type of POS device. Hence, the inexpensive ones are preferred by most. There are two types of fees that retailers pay for use of POS machines at their outlets. If transaction volumes are low, then the retailer is asked to pay a monthly rental to the bank setting up the POS device. In addition, the retailer also pays a fixed percentagebased fee, known as merchant discount rate, for facilitating electronic transactions at their stores. This fee is shared by the bank providing the POS machine, the card issuer and the company offering the payment platform. According to RBI data, there were 965,910 online POS machines in the country at the end of August, 2013. But customers complain that many of them are not functioning properly and transaction requests are often declined despite entering in the correct PIN. Bankers admit that such instances occasionally crop up but assure that the issues are now being resolved. " Initially, there was a dip of a few percentage points in our authorisation rate. It came down from 96 per cent to 92 per cent between July and September. But now it has started improving again. These are temporary issues. When ATM cards were first introduced it took time to gain traction. Similarly, the new measures will take time to gain acceptance but the steps will help protect the entire ecosystem of cardholders, banks and merchants," says Pallav Mohapatra, chief executive of SBI Cards, a joint venture between State Bank of India ( SBI) and GE Capital. Keeping the cards local RBI has also directed lenders to issue all debit and credit cards only for domestic usage unless international usage is specifically sought by customers. In addition, banks need to ensure that cards allowing international usage are enabled for EMV chips and PIN. All magnetic strip cards that have been used overseas at least once will have to be converted into EMV chip cards as the latter offer better security. Studies have shown that it is almost impossible for fraudsters to decode EMV chip cards and hence cardholders' confidential information stay protected. The initial deadline for replacement, June 30, 2013, has already been missed by most banks. While bankers claim that a majority of magnetic strip cards used overseas have now been replaced, they agree that the entire re- carding process is yet to be completed. Industry analysts estimates that roughly 2 per cent of the 362 million debit cards and one- sixth of the 18.5 million credit cards in India have been used overseas. The replacement process has also led to an increase in the cost of operations for banks. A magnetic stripe card generally costs ₹ 30- 50, while a chip- based card can cost more than ₹ 150. Banks will also have to incur expenses for delivering these new cards to their customers. Since, replacement is mandated by RBI, banks cannot recover the additional cost from the cardholders. However, some bankers feel that the impact of cost on their margin could be reduced by increasing the annual fees and usage charges on cards. RBI has also advised banks to put a cap on the international usage on all active magnetic stripe cards to lower the risk of cyberattacks and misuse. The overseas spend limit will be a subset of the customers overall credit limit. In other words, the international spend limit will be less than or equal to the overall credit limit of cardholders. While customers are allowed to revise — increase or decrease — the international usage limit by contacting their respective banks, some of them blame lenders for not explaining it to them unambiguously. For instance, a customer of a large private bank recently received a message informing her that she would not be able to spend more than ₹ 10,000 a day overseas on her credit card. " It works out to less than $ 200 a day. With this kind of limit, I would not be able to stay in a proper hotel when I would travel overseas. Later I was informed that I could increase this limit. It is really confusing and I cannot understand the need for an overseas spending limit if I am allowed to increase it," she says. Bankers believe that it is only a matter of a few months before customers realise the benefits of these new steps as the measures will ensure better security for cardholders. "There are initial hiccups with every new system. I am quite confident that things will stabilise in the next few months. The measures are going to enhance security of cardholders manifold," Prashant Joshi, managing director and head of private and business clients at Deutsche Bank in India, says. New guidelines by RBI on card usage will make it difficult for swindlers to dupe cardholders, but customers say security has come at the cost of convenience "When ATM cards were first introduced, it took time to gain traction. Similarly, the new measures will take time to gain acceptance but the steps will help protect the entire Cards THE DO'S AND DONTS |Never share PIN with employees at merchant outlets |Do not keep your PIN and card together |Avoid using birthday/ birth year as your card PIN |If transaction fails at the first attempt, check if the amount has been debited or not before swiping the card again |Replace magnetic strip card with EMV chip and PIN card after returning from overseas |Contact your bank to revise international spend limit on your card before travelling overseas PAPER TURNS PLASTIC CREDIT CARDS Month Total cards ( mn) POS transactions ( cr) August, 2013 18.46 ₹ 10,748.4 July, 2013 18.80 ₹ 11,038.7 June, 2013 19.15 ₹ 11,375.1 May, 2013 19.61 ₹ 12,463.8 April, 2013 19.57 ₹ 12,418.2 DEBIT CARDS August, 2013 362.33 ₹ 8,017.8 July, 2013 355.42 ₹ 7,722.1 June, 2013 349.51 ₹ 7,082.5 May, 2013 342.25 ₹ 7,713.0 April, 2013 336.87 ₹ 7,625.6 ONLINE POS TERMINALS Month August, 2013 965,910 July, 2013 952,534 June, 2013 932,752 May, 2013 914,569 April, 2013 900,352 Source: RBI   SAT order soon in RIL insider trading case BS REPORTER Mumbai, 6 January The Securities Appellate Tribunal (SAT) has finished hearing Reliance Industries' appeal against the Securities and Exchange Board of India ( Sebi) in an insider trading case dating back to 2007. SAT has reserved its order after hearing arguments by Janak Dwarkadas on behalf of RIL and D J Khambata for Sebi. Dwarkadas said Sebi cannot turn down an application without due cause, even if it is a case of insider trading. " It says it is not consentable to begin with… because the allegations are such… It cannot be done on an irrational basis…" he said. He also pointed out Sebi had not initially provided certain documents related to the case. Khambata argued the discretion on deciding on a consent application remains with the regulator. He said Sebi's not providing certain documents does not suggest prejudice unless the entity can prove how the documents would have been relevant to its position. Sebi has been looking into alleged insider trading involving Reliance Petroleum, which was later merged with RIL. The firm reportedly made gains of ₹ 500 crore by taking positions in the stock market on the basis of price- sensitive information about the merger. The regulator has been investigating the case since 2008. It issued ashowcause notice in 2010. RIL tried to resolve the matter through the consent mechanism, which allows companies pay a sum of money to settle the charges against them. However, Sebi turned down the consent application. Later, it also amended the consent mechanism so that serious violations such as insider- trading cannot be dealt with through the same. RIL subsequently moved the SAT, which hears appeals against Sebi, stating that it had not received access to a number of documents pertaining to the case. The first appeal was disposed of on December 20, 2013 after the regulator said it had already provided the required documents.

 

--

 

CS A Rengarajan

9381011200

CS Benevolent Fund is a collective effort towards extending the much needed financial support to the community of Company Secretaries in times of distress  Let us lend support and join for noble cause.

SHARING KNOWLEDGE SKY IS THE LIMIT

This mail and its attachments (if any) are confidential information intended for persons to whom the email is planned for delivery by the sender. If you have received this mail in error please notify the sender of the error by forwarding the email and its attachments (if any) and then deleting the mail received in error and the relevant email trail in this connection without making any copies or taking any prints.

__._,_.___

receive alert on mobile, subscribe to SMS Channel named "aaykarbhavan"
[COST FREE]
SEND "on aaykarbhavan" TO 9870807070 FROM YOUR MOBILE.

To receive the mails from this group send message to aaykarbhavan-subscribe@yahoogroups.com

Your email settings: Individual Email|Traditional
Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch to Fully Featured
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe

__,_._,___