Significant changes in regulation such as those relating to the capital market should, as far as possible, be for the common benefit of the regulated. They should not be framed so as to favour just one or few parties, however influential the latter might be. This salutary principle has evidently not been kept in mind when the capital market regulator recently authorised two additional methods of accessing the capital market. On the face of it, the two methods — Institutional Placement Programme (IPP) and Offer for Sale of Shares through the stock exchanges — offer companies flexible, cost-effective and less time-consuming options for accessing the capital market, specifically to meet the minimum public shareholding norms. But, although SEBI has not restricted these to public sector companies, it is obvious that the move is primarily intended to boost the prospects of the government's disinvestment programme. Government finances are strained at this juncture. Aggregate public borrowing during the year is slated to exceed the budget target by Rs.93,000 crore. The public sector disinvestment programme, with a target of Rs.40,000 crore, has hardly made a beginning. The markets are subdued, and fresh share issues made in conventional ways are unlikely to fetch the right price. Should it disinvest now, the government will be accused of selling family silver cheap.
With hardly three months to go, the government is evidently driven by a sense of urgency to raise revenue. Some recent policy moves affecting the external economy — such as freeing interest rates on non-resident deposits and providing greater leeway for overseas borrowings — will have the effect of raising the level of short-term external debt and are, therefore, inconsistent with medium-term policy objectives. SEBI's recent guidelines would enable the government to take one more short-cut. The IPP route will obviate the need for a government company to undertake a block deal or a follow-on offer for sale, such as the one made by CoaI India, to meet the listing guidelines. A handful of government companies will be able to place up to 10 per cent of their equity with institutional investors. The government might get the sale proceeds before March 31, but the retail investor will lose out since he will be totally bypassed. Successive finance ministers have waxed eloquent on making ordinary investors the bedrock of the disinvestment process and widening the ownership-base of public sector enterprises. Whatever the justification, it is clear that SEBI's new guidelines do not serve the interests of even the disinvestment process.
Keywords: capital market, SEBI, government borrowing
In today's economic scenerio ,It would be appropriate for going reforms rather than allowing foreign investment in this sector.The writor has clearly illustrated what must be done immediately .The 1st point highlighted by writor is praise-worthy and by curtailing taxes and duties most of the problems could be subjugated.Furtherance to reforms ,there should be strictly watch over the travels of elites(Ministers,MP,State Legislative Members etc)and number of persons which they can carry with them, must be truncated.In addition of these,there should be a regulation which checks the delay in payment by these elites .Hope, by implementing these reforms ,derailed airlinks can be brought on right way
The way i see this new rule is some major psu oil companies would get disinvested and ambani's would by a 10% stake..indian governments like to bring in laws that favor the ambani's. It might also sell some its mineral companies to some friendly companies after all the ruling party needs to prepare its election fund for 2014, and selling a 10% stake to friendly investor in such psu's would also mean some additional under table funds for party coffers. The friendly investor can then sale the 10% stock at higher price, as the stocks prices are "speculative" and just like 2g scam this would not be called a scam as share prices are speculative per government.
I have a few comments: (1) Who really is the retail investor and who should protect his or her interests? When the Central government is owner of an undertaking, and, also the regulator, who should protect small investors? (2) There is a news that the assets of the UTI SUV, which was set up after the government owned Unit Trust of India (UTI) was wound up, would be sold to Life Insurance Corp[oration of India. My question is who would compensate the members of various schemes of UTI which were closed as I believe that part of the assets of this SUV belong to those who were suffered financially after UTI was wound up. (3) I wish to make a specific mention of the Senior Citizens Benefit Scheme which was a scheme that was supposed to take care of health care expenses post retirement was closed buy UTI leading to hardship for many members of the scheme. Here the regulator was helpless against the might of its appointing authority!
Emerging Economy of India is the prime concern for all the countries-
friends,foes and neutral.The economic policies of the govt. should be
diplomatically politicized and must keep self interest at the centre .
Who are the regulated in this issue ? Every single citizen is potentially a regulated. It is not enough even if the benefit of the regulated is considered. Even if the regulated wants something inimical to his benefit he has the right for it and so shall he be given. How do you know what the regulated wants ? Only thing I can think of is a public referendum. Every citizen should be given a chance to vote to decide what he wants. ( I use the third person singular "He" to refer to men and women to make it easier to read and understand. It is an eye sore to read "he or she, him or her, his or hers etc." I also find it difficult to use the word Person to avoid the apparent gender references.)
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