There is one aspect wherein the acumen of the Indian government has hardly any close match. It very consistently manages to beat all our expectations and keeps setting up new records. In case you haven't guessed it yet, we are referring to 'corruption scams'.
A leaked draft report of the Comptroller and Auditor General has yet again revealed something very disturbing. Reportedly, it states that between 2004 and 2009, the government gave away 155 coal acreages to private and public companies for five years. The biting aspect of this entire matter is that all this was done without a proper auctioning process. In the absence of auctions, it's obvious that the corporates managed to take hold of areas in which coal could be mined for dirt cheap prices. It is estimated that due to this the government exchequer lost about Rs 10.67 trillion (approximately US$ 210 bn). In layperson's languages, the country became poorer by that quantum. It is quite distressing to know of such happenings at a time when the country is facing a shortage of coal and paying a high price for it.
If this report is true, it just exposes how the government is sacrificing the wealth of the nation to narrow interests. A natural resource like coal legally belongs to the State on behalf of the citizens. It is unacceptable that such resources fall into private hands without appropriately compensating the citizens. A proper auction would have not just ensured transparency, but would have also made sure that the price paid is appropriate.
Whether the claims of this report are true or not is a different matter. But the fact remains that our government seldom works in the interest of the larger economy. By various means, it has time and again burned holes in the pockets of the country's taxpayers and investors. Sometimes it does so by milking cash-rich PSUs. Sometime it does so by bailing out ailing companies.
The way the government is taking the country for a ride is simply outrageous. Hence unless tax payers raise their voice against this gross misuse of our country's wealth and resources, such wealth destruction will prevail.
Friday, March 23, 2012
Fungibility - Stanchart IDR-Fungibility
A term called "Fungibility" is used for these IDR's, now what does this means & how it relates to IDR/ADRS ?
The actual meaning of the word fungible is the ability to substitute one unit of a financial instrument for another unit of the same financial instrument. However, in trading, fungibility usually implies the ability to buy or sell the same financial instrument on a different market with the same end result.
Its a financial instrument (i.e. individual stock, futures contract, options contract, etc.) is considered fungible if it can be bought or sold on one market or exchange, and then sold or bought on another market or exchange.
For example, if one hundred shares of an individual stock can be bought on the NASDAQ in the US, and the same one hundred shares of the same individual stock can be sold on the London Stock Exchange in the UK, with the result being zero shares, the individual stock would be considered fungible. There are many fungible financial instruments, with most popular being individual stocks, some commodities (e.g. gold, silver, etc.), and currencies.
Fungible financial instruments are often used in arbitrage trades, because the difference in the price (the arbitrage part) often comes from a difference in location (the fungible part). For example, if the Euro to US Dollar exchange rate was 1.2500 in the US and 1.2505 in the UK, an arbitrage trader could buy Euros in the US, and then immediately sell Euros in the UK, making a profit of 0.0005 per Euro (or $5 per €10,000), because Euros are a fungible financial instrument. Similarly it implies to Stocks IDRs etc.
by: Rajiv Handa, Via e-mail
The actual meaning of the word fungible is the ability to substitute one unit of a financial instrument for another unit of the same financial instrument. However, in trading, fungibility usually implies the ability to buy or sell the same financial instrument on a different market with the same end result.
Its a financial instrument (i.e. individual stock, futures contract, options contract, etc.) is considered fungible if it can be bought or sold on one market or exchange, and then sold or bought on another market or exchange.
For example, if one hundred shares of an individual stock can be bought on the NASDAQ in the US, and the same one hundred shares of the same individual stock can be sold on the London Stock Exchange in the UK, with the result being zero shares, the individual stock would be considered fungible. There are many fungible financial instruments, with most popular being individual stocks, some commodities (e.g. gold, silver, etc.), and currencies.
Fungible financial instruments are often used in arbitrage trades, because the difference in the price (the arbitrage part) often comes from a difference in location (the fungible part). For example, if the Euro to US Dollar exchange rate was 1.2500 in the US and 1.2505 in the UK, an arbitrage trader could buy Euros in the US, and then immediately sell Euros in the UK, making a profit of 0.0005 per Euro (or $5 per €10,000), because Euros are a fungible financial instrument. Similarly it implies to Stocks IDRs etc.
by: Rajiv Handa, Via e-mail
Tuesday, March 20, 2012
Government to refund over Rs 2,500 cr to Vodafone
20 Mar, 2012, 09.32PM IST, PTI
Government to refund over Rs 2,500 cr to Vodafone: Salman Khurshid
NEW DELHI: Within hours of Supreme Court dismissing the review petition in the Vodafone's tax case, Law Minister Salman Khurshid said the government will have to refund money (about Rs 2,500 crore and interest) to the firm.
"No curative petition to my knowledge ... I suppose government will have to refund Vodafone money," he told reporters after a meeting of top ministers called by Finance Minister Pranab Mukherjee this evening.
The curative petition is the last judicial remedy available with the government. The hurriedly called meeting was attended by Home Minister P Chidambaram, Telecom Minister Kapil Sibal and Attorney General G E Vahanvati, among others.
In its judgement on January 20, the Supreme Court had set aside the Bombay High Court ruling and asked the Income Tax Department to return Rs 2,500 crore deposited by Vodafone International Holdings within two months along with 4 per cent interest.
The apex court had held that the tax department does not have jurisdiction to levy Rs 11,000 crore as tax on the USD 12 billion overseas deal between Vodafone International Holdings and Hutchison Group.
Following the judgement, the government had filed the review petition, which was dismissed today. "I said review has been dismissed, law remains what is being stated by SC," Khurshid said, adding the government can tax a company on the basis of the existing law.
The Government, meanwhile, has proposed amendment in the Income Tax Act, under which such overseas mergers and acquisition would be taxed retrospectively from 1962.
"You can only tax on the basis of existing law. We have no right to tax them, current law will prevail so long law is not changed," Khurshid said.
Under the proposed amendment to the I-T Act, whether resident or non-residents having business connection in India will be required to deduct tax at source and pay it to the government even if the transaction is executed on a foreign soil.
However, Khurshid said that one should not link dismissal of the review petition with that of the Finance Bill as latter has independent existence and stands on its own merit.
"We should not confuse Finance Bill with this (dismissal of review petition). Finance Bill has independent existence. It is retrospective. It stands on own merit and when Finance Bill be passed will create a new situation," the Law Minister said.
He further said, "we should wait till the Finance Bill is passed and we all are aware that there is provision which is being proposed in the Finance Bill ... Once the Finance Bill is passed, consequences of the passage of the bill and whatever provisions are provided in that bill then rule the law of land."
Commenting on the today's decision of the Supreme Court, HDFC Chairman Deepak Parekh said, "Actually, it's a good decision ... We would have liked the government to amend this regulation prospectively not retrospectively ... because going retrospectively means going against the Supreme Court judgement".
Government to refund over Rs 2,500 cr to Vodafone: Salman Khurshid
NEW DELHI: Within hours of Supreme Court dismissing the review petition in the Vodafone's tax case, Law Minister Salman Khurshid said the government will have to refund money (about Rs 2,500 crore and interest) to the firm.
"No curative petition to my knowledge ... I suppose government will have to refund Vodafone money," he told reporters after a meeting of top ministers called by Finance Minister Pranab Mukherjee this evening.
The curative petition is the last judicial remedy available with the government. The hurriedly called meeting was attended by Home Minister P Chidambaram, Telecom Minister Kapil Sibal and Attorney General G E Vahanvati, among others.
In its judgement on January 20, the Supreme Court had set aside the Bombay High Court ruling and asked the Income Tax Department to return Rs 2,500 crore deposited by Vodafone International Holdings within two months along with 4 per cent interest.
The apex court had held that the tax department does not have jurisdiction to levy Rs 11,000 crore as tax on the USD 12 billion overseas deal between Vodafone International Holdings and Hutchison Group.
Following the judgement, the government had filed the review petition, which was dismissed today. "I said review has been dismissed, law remains what is being stated by SC," Khurshid said, adding the government can tax a company on the basis of the existing law.
The Government, meanwhile, has proposed amendment in the Income Tax Act, under which such overseas mergers and acquisition would be taxed retrospectively from 1962.
"You can only tax on the basis of existing law. We have no right to tax them, current law will prevail so long law is not changed," Khurshid said.
Under the proposed amendment to the I-T Act, whether resident or non-residents having business connection in India will be required to deduct tax at source and pay it to the government even if the transaction is executed on a foreign soil.
However, Khurshid said that one should not link dismissal of the review petition with that of the Finance Bill as latter has independent existence and stands on its own merit.
"We should not confuse Finance Bill with this (dismissal of review petition). Finance Bill has independent existence. It is retrospective. It stands on own merit and when Finance Bill be passed will create a new situation," the Law Minister said.
He further said, "we should wait till the Finance Bill is passed and we all are aware that there is provision which is being proposed in the Finance Bill ... Once the Finance Bill is passed, consequences of the passage of the bill and whatever provisions are provided in that bill then rule the law of land."
Commenting on the today's decision of the Supreme Court, HDFC Chairman Deepak Parekh said, "Actually, it's a good decision ... We would have liked the government to amend this regulation prospectively not retrospectively ... because going retrospectively means going against the Supreme Court judgement".
Iran supply disruption may push crude oil prices by 30%: IMF
20 Mar, 2012, 11.13PM IST, PTI
Iran supply disruption may push crude oil prices by 30%: IMF
NEW DELHI: IMF chief Christine Lagarde today cautioned that supply disruptions from Iran could push global crude prices by up to 30 per cent, at a time when the price is hovering at $ 125 a barrel.
"If there was for instance a major shortage of export of oil from Iran, it will certainly drive prices up, at least for a period of time. We believe that it will be in the range of 20-30 per cent," Lagarde told reporters here.
Her comments come against the backdrop of prevailing global tensions over Iran's nuclear ambitions.
"As I just mentioned the sudden and brutal rise in the price would have serious consequences on the global economy at large and will impact particularly the oil importing countries and amongst them low income countries," International Monetary Fund (IMF) Managing Director said.
Crude oil prices have surged to $ 125 a barrel on concerns over Middle East supplies as well as on signs of stabilisation in the world economy.
Oil price shock would have its implication on the global economy including India, she said.
India heavily depends on import for its crude oil requirement. The country imports 110-120 million tonnes of oil every year.
"If there was oil shock of significant multitude, it will affect all of us, all the importing countries of the world. Clearly India is one but not the only one," Lagarde, who is on her maiden visit as IMF chief, said.
Highlighting the need for re-balancing the supply of crude oil due to geo-political situation, she said, "while other countries adjust in order to address the supply shortage that would result from the limitation of exports".
"So, it is necessary that the re-balancing if that was due to happen... happen rapidly," Lagarde noted.
Iran supply disruption may push crude oil prices by 30%: IMF
NEW DELHI: IMF chief Christine Lagarde today cautioned that supply disruptions from Iran could push global crude prices by up to 30 per cent, at a time when the price is hovering at $ 125 a barrel.
"If there was for instance a major shortage of export of oil from Iran, it will certainly drive prices up, at least for a period of time. We believe that it will be in the range of 20-30 per cent," Lagarde told reporters here.
Her comments come against the backdrop of prevailing global tensions over Iran's nuclear ambitions.
"As I just mentioned the sudden and brutal rise in the price would have serious consequences on the global economy at large and will impact particularly the oil importing countries and amongst them low income countries," International Monetary Fund (IMF) Managing Director said.
Crude oil prices have surged to $ 125 a barrel on concerns over Middle East supplies as well as on signs of stabilisation in the world economy.
Oil price shock would have its implication on the global economy including India, she said.
India heavily depends on import for its crude oil requirement. The country imports 110-120 million tonnes of oil every year.
"If there was oil shock of significant multitude, it will affect all of us, all the importing countries of the world. Clearly India is one but not the only one," Lagarde, who is on her maiden visit as IMF chief, said.
Highlighting the need for re-balancing the supply of crude oil due to geo-political situation, she said, "while other countries adjust in order to address the supply shortage that would result from the limitation of exports".
"So, it is necessary that the re-balancing if that was due to happen... happen rapidly," Lagarde noted.
Cairn posts record profit of USD 4.56 bn
20 Mar, 2012, 07.56PM IST, PTI
Cairn posts record profit of USD 4.56 bn (CMP=360)
NEW DELHI: Edinburgh-based Cairn Energy plc today reported a record full year profit of USD 4.56 billion for 2011 on the back of proceeds from 40 per cent stake sale in its Indian unit to Vedanta Resources.
However, the company posted an operating loss of USD 1.1 billion against a USD 298.9 million loss in 2010 as a result of an unsuccessful drilling campaign in Greenland.
Cairn, which had in 2010 reported a profit of USD 1.08 billion, drilled five exploration wells offshore Greenland in 2010 and five in 2011 without any success.
It said net proceeds of the sale of majority stake in Cairn India to Vedanta was about USD 5.4 billion, allowing a cash return of USD 3.5 billion to shareholders in February.
Simon Thomson, Chief Executive, Cairn Energy said: "Cairn has delivered on its key objectives for 2011: completion of the sale of 40 per cent of Cairn India, the return of USD 3.5 billion to shareholders and the farm-down of the Pitu block in Greenland to Statoil."
"With full cycle capabilities and balance sheet strength, Cairn is well positioned to create significant value from transformational exploration, within a well balanced portfolio of exploration and production assets," Thomson said.
After Eqqua block, the firm said its exploration focus in 2012 will switch to the Pitu Licence in the Baffin Bay area west of Greenland over which 3D seismic and geochemical seabed sampling surveys were acquired in the summer of 2011.
Cairn had in January this year farmed out 30.625 per cent stake in the Pitu block to Statoil.
"Commercial quantities of hydrocarbons have yet to be discovered, but the first phase of our exploration programme in Greenland has demonstrated that all of the geological ingredients necessary for success are present," Thomson said.
Cairn has retained a 22 per cent share in Cairn India, following the stake sale to Vedanta.
Cairn posts record profit of USD 4.56 bn (CMP=360)
NEW DELHI: Edinburgh-based Cairn Energy plc today reported a record full year profit of USD 4.56 billion for 2011 on the back of proceeds from 40 per cent stake sale in its Indian unit to Vedanta Resources.
However, the company posted an operating loss of USD 1.1 billion against a USD 298.9 million loss in 2010 as a result of an unsuccessful drilling campaign in Greenland.
Cairn, which had in 2010 reported a profit of USD 1.08 billion, drilled five exploration wells offshore Greenland in 2010 and five in 2011 without any success.
It said net proceeds of the sale of majority stake in Cairn India to Vedanta was about USD 5.4 billion, allowing a cash return of USD 3.5 billion to shareholders in February.
Simon Thomson, Chief Executive, Cairn Energy said: "Cairn has delivered on its key objectives for 2011: completion of the sale of 40 per cent of Cairn India, the return of USD 3.5 billion to shareholders and the farm-down of the Pitu block in Greenland to Statoil."
"With full cycle capabilities and balance sheet strength, Cairn is well positioned to create significant value from transformational exploration, within a well balanced portfolio of exploration and production assets," Thomson said.
After Eqqua block, the firm said its exploration focus in 2012 will switch to the Pitu Licence in the Baffin Bay area west of Greenland over which 3D seismic and geochemical seabed sampling surveys were acquired in the summer of 2011.
Cairn had in January this year farmed out 30.625 per cent stake in the Pitu block to Statoil.
"Commercial quantities of hydrocarbons have yet to be discovered, but the first phase of our exploration programme in Greenland has demonstrated that all of the geological ingredients necessary for success are present," Thomson said.
Cairn has retained a 22 per cent share in Cairn India, following the stake sale to Vedanta.
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