The Reserve Bank of India (RBI) has made it clear that it would like to ensure only the &ldquo;fit and proper&rdquo; make the grade when it comes to securing licences to set up private banks. The onerous criteria laid down by the central bank do not explicitly bar firms with an interest in other lines of business activity, outside of real estate and capital market, from securing licences. But to do so these firms have to meet more stringent norms than insisted on ever before. The draft also explicitly refers to the need to prevent &ldquo;self-dealing&rdquo; by promoters. Given the mood in the country today, it is just as well that RBI has laid down such tough eligibility criteria. Finally, as in the past, the central bank has said a high-level group will process the applications after due diligence by various regulatory authorities as well as enforcement and investigation agencies.

Banking on licences

Business Standard

The recent commissioning of the INS Satpura, the second of the indigenously constructed guided missile strength frigates, effectively completes two-thirds of Project 17 &mdash; India&rsquo;s ambitious programme to design and construct its own stealth frigates. Following the expected commissioning of the INS Sahyadri sometime in 2012, Mazagaon Dock Limited (MDL) will commence work on the construction of four even more advanced &ldquo;Project 17 A&rdquo; frigates. The navy&rsquo;s strategy to put together the components of what would eventually be three naval battle groups centred around aircraft carriers is far reaching.

Riding the waves

Thirty years is too long a period for any political leader to rule a nation &mdash; dictator or democrat. Egypt&rsquo;s President Hosni Mubarak has clearly over stayed his invitation. Time for him to go. India and Indians cannot remain mute spectators to developments in the Arab world. To be sure, this is very much India&rsquo;s neighbourhood. Far too many Indians live there, the livelihood of millions of Indians is based on peace, stability and prosperity in the Arab world.

Mr Mubarak must go

For all its visible activism, it is not clear why the Union environment ministry has remained slow in activating the National Green Tribunal (NGT) which came into being in October 2010. No appointments have been made to the NGT after Parliament passed the NGT Act last October. The ministry has also not yet framed the rules under the Act. The NGT is mandated to have between 10 and 20 judicial members and 10 to 20 experts on environment and allied sciences.

No-go tribunal

India still has enough green cover left for Union Minister for Environment and Forests Jairam Ramesh to gather fig leaves to hide his shame each time he does a somersault on policy. It would seem Mr Ramesh wants to convince himself more than his critics that he is not changing his mind, but is in fact getting his way. After a series of policy reversals, with ostensible riders that the party concerned says they can ride, Mr Ramesh has now done the big one. A green signal has finally been given to the South Korean steel giant Pohang Iron &amp; Steel Company (Posco) to take the next step to bring the biggest foreign-funded industrial project into India. The 32 new conditions for port development, the 28 new ones for the steel-cum-power plant and the additional one, not yet given, for forest use have all been found acceptable to Posco and the state government.

Sixty-one fig leaves

The outgoing chairman of State Bank of India, O P Bhatt, seems to be defending the indefensible and, in the process, making things worse by committing a second transgression. The first was initiating teaser rates and the second, not only standing by the action but in a manner that appears to be disrespectful of the banking regulator. Teaser rates cannot have more dubious antecedents. They were among the practices that brought upon the US the entire sub-prime crisis &mdash; a bubble built on sanctioning mortgages to those who did not have the means to service them. It is this that eventually snowballed into the financial crisis of 2008, from the adverse consequences of which the global economy is only now recovering. At a time when the property bubble was building up, mortgage initiators in the US induced people to take on obligations that they had no means of sustaining by offering starting interest rates and, therefore, payments that were artificially low.

Banker's balance

Union Minister Kapil Sibal&rsquo;s latest proposal to delink telecom licences from spectrum allocation suggests that he has finally come round to agreeing with the Comptroller and Auditor General&rsquo;s view on revenue losses from underpriced spectrum. To be fair, Mr Sibal&rsquo;s new stance is logical. Spectrum is a scarce resource and should not be given away for commercial purposes at sub-optimal prices, especially by a government struggling to control a ballooning fiscal deficit.

Out of order

The Boston Consulting Group&rsquo;s (BCG&rsquo;s) &ldquo;Global Challengers List&rdquo; for 2011, continues to be dominated by companies from China, India, Brazil, Mexico and Russia, though their collective share has fallen. Africa, with four entries, is a notable entrant in the most recent list. The firms that qualify are predominantly characterised by innovative business models in tune with emerging market realities and the financial puissance to avail of opportunities to buy assets globally and compete with established competitors from developed economies. Twenty Indian companies have made the list, a number exceeded only by China with 33. However, all Indian &ldquo;challengers&rdquo; are privately owned, unlike their Chinese counterparts, where a significant number are state-owned enterprises or have substantial government holding. Six of the 20 Indian firms belong to the Tata Group, while the rest expectedly comprise sector or industry leaders in India.

Global challengers

In the extant virtual lynch mob environment on corruption in high places, there is the risk that the media&rsquo;s herd instinct may force the government to make new mistakes in seeking to correct old ones on the telecom policy. Former Union telecom minister A Raja has finally been arrested after the investigating agency was able to find adequate evidence of wrongdoing and personal aggrandisement on the minister&rsquo;s part.

Raja and praja

So the Cricket Association of Bengal (or CAB) has lost the right to host the India-England match at the Eden Gardens. Work on the stadium, under virtually complete re-construction, is hopelessly incomplete; the ground itself is covered with rubble; and anyone who sees the mess comes to the immediate conclusion that the stadium and ground will not be ready in time for the World Cup. So it may not be just the India-England match, the hallowed Eden Gardens might lose all four World Cup matches.

Not just cricket!

The late Rajiv Gandhi famously, or infamously, once claimed that only 15 per cent of the funds allocated to welfare programmes ever reached the intended beneficiaries. The rest leaked enroute, entering the pockets of an assortment of intermediaries.

Accountability in spending

The European Commission&rsquo;s decision to exclude two key ozone-depleting gases from the purview of carbon trading from 2013 would have negative implications for global warming. The two industrial emissions marked for this purpose are Hydrofluorocarbon-23 (HFC-23), essentially trifluoromethane, and nitrous oxide.

EU and carbon trading

One year ago, this newspaper titled its pre-Budget editorial comment &ldquo;Last call for Mr Mukherjee&rdquo;. The suggestion was that if Union Finance Minister Pranab Mukherjee wished to leave a lasting policy legacy behind, the Budget for 2010-11 was the opportunity to be used. In the event, he crafted a rather pedestrian Budget in policy terms, with a lot of 1970s-type exemptions and exceptions in tax policy. Few can now recall what Budget 2010 was all about.

Last and final call

The decade-old struggle to breathe life into the moribund corporate bond market in India continues. The policy, apparently being considered by the Union finance ministry, to allow banks to offer bank guarantees for domestic debt issues, seems eminently sensible in theory. Bank guarantees help improve the risk profile of a company and enable it to access the market at cheaper rates. However, this is not the first time that the government has tried to kick-start the corporate debt market. The aggregate limit for foreign investors, to take an example, was raised by $5 billion to $10 billion in November. Yet, if the track record of these earlier initiatives is anything to go by, there appears to be little reason to be too optimistic about the efficacy of another attempt to expand this market.

Budget and bond market

As the Aero India show gets under way in Bengaluru today, two facts are worth dwelling on. India is &mdash; and has been for three years &mdash; the world&rsquo;s largest importer of defence hardware. Also, in a list of the 15 largest exporters of defence hardware, India simply does not figure. No other country with a serious defence budget has such a skewed import-export picture. Only one conclusion is possible: something has gone seriously wrong with the indigenisation effort, and with the building of a competitive defence hardware industry.

Defence without industry?

In the $9.6 billion Cairn-Vedanta deal, former Union petroleum minister Murli Deora has left his successor Jaipal Reddy with a significant issue to resolve: can a government use its sovereign power to alter commercial contracts? The world is watching how India will answer that question. On the face of it, Cairn Energy&rsquo;s offer to sell a controlling stake in Cairn India to Anil Agarwal&rsquo;s Vedanta group amounts to a change of corporate ownership that requires shareholder approval, which both have already received. For Cairn India, an open offer should suffice. But as with any deal that involves what politicians are wont to call &ldquo;national resources&rdquo; &mdash; in this case oilfields &mdash; the issue has become a lot more complicated. It is by no means obvious that the government&rsquo;s insistence on permission and conditionalities for the deal is entirely warranted.

You Cairn't do it?

With global commodity prices rising again and expected to remain high, given the revival of global growth, it is entirely understandable that Indian firms have been aggressively scouting around for acquiring equity in commodities and fossil fuels, ranging from high-grade coal, iron ore, oil and gas to several non-ferrous metals like copper and nickel.

The rush for commodities

A recent proposal of the National Advisory Council (NAC) that deserves policy attention relates to the supply of millet and other coarse cereals through the public distribution system (PDS). It is an idea whose time has come for many reasons. Apart from being nutritious, millet can also bridge the food gap likely to be created by the implementation of a food security law.

The importance of millet

A technology advisory group headed by Nandan Nilekani has recommended that national information utilities be set up to handle several large e-governance projects ranging from goods and services tax to the new pension scheme. The country is lucky to have come as far as it has through the successful functioning of the large IT backbones of key operations like the National Stock Exchange and the National Securities Depository.

IT as utility

An election, even a free one, is not the most important test of democracy. Getting voted into power is not the most important sign of real democracy. Ensuring that governments can get voted out of power, and that transitions are peaceful and orderly, is far more important. Thus, India passed its first true test of democracy only in 1977 when the Jawaharlal Nehru-Indira Gandhi era came to an end and a new political formation came to power in New Delhi.

Democracy and pluralism

There are two ways of looking at the Telecom Regulatory Authority of India&rsquo;s (Trai&rsquo;s) recommendation of a hefty six-fold-plus increase in spectrum prices for operators offering 2G services. One, that it is recognising the scarcity value of a resource that incumbent operators have so far enjoyed at significantly lower costs.

Crossed connections

Incisive columns and editorial comment by top opinion leaders

Page 393 - Editorial Comment