Compulsory public float rule issued
On June 5, 2010, the Union government made it mandatory for all listed companies to have a minimum public float of 25 per cent. Those below this level will have to get there by an annual addition of at least 5 per cent to public holding.
The move is expected to result in equity dilution of about Rs 1,60,000 crore by 179 listed companies. These include Reliance Power, Wipro, Indian Oil Corporation, DLF and Tata Communications.
According to the notification, ‘public’ will not include the promoter, promoter group, subsidiaries and associates of a company. ‘Public shareholding’ will mean equity shares of the company held by the public and not the shares held by the custodian against depository receipts issued overseas.
A company can increase its public shareholding by less than 5 per cent in a year if such increase brings its public shareholding to the level of 25 per cent in that year. If the public shareholding in a listed company falls below 25 per cent at any time, the company will have to bring the public shareholding to 25 per cent within 12 months from the date of such fall, compared with the two years allowed at present.
Bhopal Gas Tragedy verdict
On June 7, 2010, nearly 26 years after the world's worst industrial disaster left more than 15,000 dead in the Bhopal gas tragedy, former Union Carbide India Chairman Keshub Mahindra and seven others were convicted and sentenced to two years imprisonment.
Chief Judicial Magistrate Mohan P. Tiwari held the 85-year-old non-executive chairman of the Indian subsidiary of the US-based company and gave them punishment under less stringent provisions of the Indian Penal Code for causing death by negligence.
The 89-year-old Warren Anderson, the then Chairman of Union Carbide Corporation of USA, who lives in the United States, appeares to have gone scot free for the present as he is still an absconder and did not subject himself to trial. There was no word about him in the judgement.
The US based company reacted to the judgement saying neither it nor its officials were subject to the jurisdiction of the Indian court since they were not involved in the operation of the plant, which was owned and operated by Union Carbide India Limited.
In his 93-page verdict, Tiwari said the accused were not sentenced under section 304 IPC (culpable homicide not amounting to murder that provides a maximum of life imprisonment) since they were old age and were suffering from serious ailments including heart disease.
All the convicts applied for bail immediately after the sentencing and were granted relief on a surety of Rs 25,000 each.
Law Minister M. Veerappa Moily described the verdict as an example of “justice buried” and said there was need for fast-tracking such cases and ensuring proper investigation.
The BJP termed the order as “painful” and said the prosecution should appeal against the lower punishment. It also utilised the opportunity to reconsider the provisions of the nuclear liability Bill.
ONGC, OIL get freedom to price natural gas
In a significant development, the Union government has given national oil companies, Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL), freedom to price any additional natural gas produced from blocks given to them on nomination basis at market rates. So far, all gas—current and future—produced from blocks given to ONGC and OIL was priced at government-controlled rates, called administered price mechanism (APM).
Even the price of APM gas from June 1 has been more than doubled to $4.2 per million British thermal units, on a par with the rate at which Reliance Industries sells gas from its eastern offshore KG-D6 fields.
The government has also made a significant departure from the previous practice of pricing natural gas in rupees and has now decided to price it in US dollars.
State-run ONGC and OIL produce 54.32 million cubic metres of gas per day — about 40 per cent of the total amount originating from the country — through fields given to them on a nomination basis.
Petrol, Diesel prices freed from government control
On June 25, 2010, the Union government announced that prices of petrol and diesel would become market-driven, in line with the recommendations of a panel headed by former Planning Commission member Kirit Parikh.
An empowered group of ministers led by Finance Minister Pranab Mukherjee agreed to raise diesel prices by Rs 2 a litre for now. The fuel will eventually be freed from State control. Petrol has been freed fully.
The panel also increased prices of liquefied petroleum gas (LPG) by Rs 35 a cylinder and of kerosene by Rs 3 a litre, though both will remain under government control.
The decision will help to cut fuel subsidies and limit losses of State-run refiners.
The market-driven mechanism would mean users would have to pay more whenever international crude oil prices rise and less when they fall.
The move would bring down the government’s huge subsidy bill and relieve State-owned oil marketing companies of some of the burden they bear by selling fuels much below the market prices. This burden, also called under-recovery, is estimated at Rs 215 crore every day.
Jharkhand again under President’s rule
On June 1, 2001, Jharkhand came under Central rule with President Pratibha Patil accepting a recommendation of the Union Cabinet after the Congress and the BJP gave up efforts to form an alternative government following resignation of Chief Minister Shibu Soren.
The State Assembly will be kept in suspended animation during the President’s rule, which has been imposed for a second time in two years.
The Soren government was reduced to a minority on May 24 when the BJP, with 18 MLAs and the JD(U) with two, withdrew support to it. The JMM, with 18 MLAs and having the support of seven other legislators, was short of the required 42 in the 82-member House. The BJP took the decision after Soren voted against the cut motions sponsored by the opposition in Lok Sabha on April 27.
Jharkhand has seen seven CMs since its creation on November 15, 2000, came under President’s rule for the first time on January 19, 2009.
India, Canada sign civil nuclear pact
On June 28, 2001, India and Canada signed a civil nuclear cooperation agreement. The pact was signed during Prime Minister Manmohan Singh’s visit to Canada.
The deal, the ninth signed by New Delhi, significantly alters Canada’s stance towards India. The North American nation had led the world in pushing for nuclear isolation after the 1974 tests in Pokhran.
The US, France, Russia, Mongolia, Kazakhstan, Argentina, Namibia and Britain are the eight countries that have already signed similar pacts with India.
Among other things, the India-Canada Agreement for Cooperation in Peaceful Uses of Nuclear Energy provides for tie-ups in design, construction, maintenance, supply of uranium and waste management. The two countries can also promote cooperation in the development and use of applications related to health, industry, environment and agriculture.
Visit of South African President
On his maiden visit to an Asian country as the President of South Africa, Jacob Zuma was given a rousing reception by the Indian leadership on June 4, 2010, as the two countries signed three key pacts, including one on air services, and agreed to support each other’s candidature for the non-permanent seat at the UN Security Council for the 2011-2012 term.
A wide range of bilateral issues as well as global developments, including reforms of the UN Security Council, closer cooperation between the two countries at various international fora, particularly on climate change, and increasing the volume of bilateral trade, came for discussions during the talks.
Apart from the pact on enhancing air connectivity, the two countries signed an MoU on agriculture cooperation and another for linkages between the Foreign Service Institute of India and the Diplomatic Academy of South Africa.
Both India and South Africa are keen to increase the two-way trade, which currently stands at $7.5 billion annually. Zuma said he wanted that to grow to $10 billion by 2012.
Visit of Sri Lankan President
Sri Lankan President Mahinda Rajapaksa visited New Delhi on June 9, 2010. During his talks with Prime Minister Manmohan Singh, he sought to cool down tempers in India over the plight of Tamils in his island nation by promising to quickly resettle displaced Tamils and expedite a political solution to the ethnic issue.
The two countries also signed seven agreements, including a treaty on mutual legal assistance in criminal matters and an MOU on sentenced prisoners, after wide-ranging talks.
The two countries announced a major initiative to undertake a programme of construction of 50,000 houses for internally displaced persons (IDPs) in Northern and Eastern provinces of Sri Lanka with India’s assistance. India would also be taking up several projects for the reconstruction of the North and the East, including rebuilding of railway infrastructure, rehabilitation of Kankesanthurai harbour and Palaly Airport, construction of a cultural centre in Jaffna and several vocational training centres, renovation of the Duraiappaj stadium and rehabilitation of war widows.
The two countries also decided to resume the ferry services between Colombo and Tuticoran and between Thalaimannar and Rameswaram. India would also establish consulates general in Jaffna and Hambantota. India would also assist the island country in setting up a thermal power plant at Trincomalee.
At their one-on-one meeting which was followed by delegation-level talks, the Indian PM and the Sri Lankan President also discussed a wide range of bilateral issues, including the proposed comprehensive economic partnership agreement (CEPA), as well as international issues. Sri Lanka supported India’s case for inclusion in an expanded UN Security Council, as well as its candidature for a non-permanent seat for the 2011-2012 term.
The five other agreements, signed after the talks between the two sides, were: renewal of MoU on SDP schemes, MoU on setting up of a women’s trade facilitation centre and community learning centre, renewal of cultural exchange programme, MoU on interconnection of electricity grids and MoU on Talaimannar-Madhu railway line.
Indo-US strategic dialogue
The Strategic Dialogue between India and US is another “milestone” in bilateral relationship with the Obama Administration. External Affairs Minister S.M. Krishna and US Secretary of State Hillary Clinton co-chaired the first Cabinet-level Indo-US Strategic Dialogue, which helped to set the pace for the long-term strategic relationship between the two countries.
Hatoyama resigns as Japan’s PM
Japanese Prime Minister Yukio Hatoyama, who ended five decades of single-party rule when he swept to power in August 2009, but stumbled when he confronted a long-time ally, the United States, resigned on June 2, 2010. Hatoyama quit at a meeting of leaders of the Democratic Party of Japan in Tokyo, becoming the fourth straight Japanese leader to leave after a year or less in office.
“Since last year’s elections, I tried to change politics in which the people of Japan would be the main characters,” he said later at a nationally broadcast news conference. But he conceded that his efforts weren’t understood.
Hatoyama ran for the premiership on a campaign platform of maintaining a more equal relationship with the United States, which still enjoys enormous support among most Japanese. His decision to challenge Washington over the details of a massive military base relocation plan on the island of Okinawa befuddled Japanese and American analysts and government officials alike.
Hatoyama also called for Japan to become more of an “Asian nation,” which sparked concern in Washington that he wanted to move away from the country’s pro-US stance and closer to China.
Finance Minister Naoto Kan succeeded Hatoyama as the new Prime Minister.
Maoists force Nepal PM to resign
Nepal’s Prime Minister announced his resignation on June 31, 2010, bowing to pressure from opposition Maoists who had been demanding his ouster in Parliament and on the streets. Prime Minister Madhav Kumar Nepal said in a televised speech that he decided to resign to end political deadlock and shore up the peace process.
Mr Madhav Kumar had taken over the post in May 2009 after the previous government led by the Maoists resigned following differences with the President over the firing of the army chief. He had the support of 22 political parties in Parliament and more than half of the 601 members in the Assembly. However, the Maoists, who have the largest number of seats in the Assembly, refused to support his government and instead staged protests to demand disbanding the government.
In May 2010, the Maoists had shut down the nation for more than a week, imposing a general strike. The protests also delayed the writing of a new constitution, which was supposed to be complete by May 2010. The deadline has now been extended by one year.
Landmark US Financial Reform Bill
On July 1, 2010, the US House of Representatives approved a landmark overhaul of financial regulations. The Bill would impose tighter regulations on financial firms and reduce their profits. It would boost consumer protections, force banks to reduce risky trading and investing activities and set up a new government process for liquidating troubled financial firms.
However, the Republicans say the Bill would hurt the economy by burdening businesses with a thicket of new regulations. They also point out that it ducks the question of how to handle troubled mortgage finance giants Fannie Mae and Freddie Mac, which Democrats plan to tackle in 2011.
Ethic Riots in Kyrgyzstan
Russia sent hundreds of paratroopers to Kyrgyzstan on June 13, 2010 to protect its military facilities as ethnic clashes spread in the Central Asian State, bringing the death toll from days of fighting to 97. Ethnic Uzbeks in a besieged neighbourhood of Kyrgyzstan’s second city Osh said gangs, aided by the military, were carrying out genocide, burning residents out of their homes and shooting them as they fled. Witnesses saw bodies lying on the streets.
The interim government in Kyrgyzstan, which took power in April 2010, after a popular revolt toppled President Kurmanbek Bakiyev, appealed for Russian help to quell the riots in the south.
Led by Roza Otunbayeva, the interim government sent a volunteer force to the south and granted shoot-to-kill powers to its security forces in response to the deadly riots, which began in Osh, before spreading to Jalalabad.
Renewed turmoil in Kyrgyzstan has fuelled concern in Russia, the United States and neighbour China. Washington uses an air base at Manas in the north of the country, about 300 km from Osh, to supply its forces in Afghanistan.
G-20 Summit meeting
A Summit meeting of Leaders from the Group of 20 economic powers was held in Toronto, Canada on June 28, 2010. The leaders have agreed to halve deficits by 2013 and stabilise or reduce the government debt-to-GDP ratio by 2016. At the same time, the bloc left it to individual countries to decide on levying taxes on banks or adopting other means to fund future bailouts.
Along the way, the G-20 leaders who completed their fourth meeting since the global financial crisis of 2008, also diluted their position on a number of problems they had decided to fix earlier. For instance, while reinforcing their desire to move to a more stringent capital structure, the communiqué issued after two days of discussions said countries would “aim” to put in place a new framework by the end of 2012, which was earlier the target date. Members will also get flexibility in phasing the new rules.
The good news is that once these rules are implemented banks will have more capital to deal with crises as the ratio of core Tier-I capital of a bank to its risk-weighted assets is expected to double from the present level of 2 per cent.
On trade, too, there was dilly dallying. The G-20 leaders, who had earlier said that the Doha Round of trade liberalisation talks should be concluded in 2010, have not mentioned any deadline now. All that has been said is that they will now deliberate on the ways to take forward the talks when they meet in Seoul in November 2010.
G-20 members have also decided against erecting any new trade and investment barriers.
The decision to increase the quotas for developing countries in the International Monetary Fund by the Seoul summit was touted as another gain.
While many elements in the 19-page statement were a reiteration of the earlier pledges, these were at least two new elements. One of them was a proposal to set up a working group on development. The other was the desire to focus on issues related to corruption with members urging to ratify and implement the United Nations Convention against Corruption.
However, the move by some developed countries to insert another new element — a levy on bank transactions — did not find a mention in the final text as the focus of the deliberations remained on reducing fiscal deficit levels. A key demand of European countries, was resisted by the US and developing countries such as India and Brazil.
Along with deficit reduction, G-20 leaders also agreed on ushering in structural reforms by emerging surplus economies, such as China. These countries, which can tailor their reform moves to strengthen social safety nets, should increase infrastructure spending and enhance exchange rate flexibility to reflect underlying economic fundamentals.
G-20 meeting of Finance Ministers
Finance Ministers and Central Bank Governors of G-20 countries met in Busan, South Korea on June 4, 2010.
At the top of the agenda was Europe’s debt crisis. The Ministers also discussed medium-term growth framework and how to solve economic imbalances which caused the global financial crisis. Canada, the current G-20 President, hopes to secure an agreement in Toronto on the broad suite of policies needed to reduce these imbalances. Individual countries would then commit themselves to specific policies at the next G-20 summit in Seoul.
Building on progress to date, the leaders affirmed their commitment to intensify efforts and to accelerate financial repair and reform. They also agreed that further progress on financial repair is critical to global economic recovery and requires greater transparency and further strengthening of banks’ balance sheets and better corporate governance of financial firms.
The leaders also committed to reach agreement expeditiously on stronger capital and liquidity standards as the core of our reform agenda and in that regard fully supported the work of the Basel Committee on Banking Supervision.
The leaders also emphasized the need to reduce moral hazard associated with systemically important financial institutions and reinforced their commitment to develop effective resolution tools and frameworks for all financial institutions on the basis of internationally agreed principles.
The G-20 was established in 1999, in the wake of the 1997 Asian Financial Crisis, to bring together major advanced and emerging economies to stabilize the global financial market. Since its inception, the G-20 has held annual Finance Ministers and Central Bank Governors’ Meetings and discussed measures to promote the financial stability of the world and to achieve a sustainable economic growth and development.
China announces plans to make its currency more flexible
Equity markets across the world made handsome gains on June 21, 2010, after China announced plans to make its currency, the yuan, more flexible against the dollar. India’s benchmark equity index, the Sensex, and the broad-based Nifty today touched their highest levels in more than two months.
Market analysts said China’s move would go a long way in lifting the global economic sentiment that was under the weather due to the Euro crisis. China’s decision would result in a higher growth rate, especially for countries that have a significant trade relation with the Asian behemoth, as currency appreciation would make imports comparatively cheaper in China.
According to Barclays Commodities, there is a thinking that a stronger yuan will “increase Chinese purchasing power” leading to an increase in its “purchases of base metals”. “This coincides with a strong set of Chinese trade data for May 2010, which showed that the country turned a net importer of aluminium and lead, while copper and zinc imports remained strong”.
UNSC slaps sanctions on Iran
On June 9, 2010, the UN Security Council slapped sanctions on Iran over its controversial nuclear programme, targeting the powerful Revolutionary Guard, ballistic missiles, and nuclear-related investments, despite opposition from Brazil and Turkey.
In the 15-member Council, 12 countries, including the US and Britain, voted in favour of the resolution, with Lebanon abstaining and Brazil and Turkey voting against.
The new resolution, which is fourth against Iran to be adopted by the UNSC, creates new categories of sanctions like banning Iran's investment in nuclear activity abroad, banning all ballistic missiles activities, blocking Iran's use of banks aboard and asset freezes for members of the Islamic Revolutionary Guard Corps.
The resolution blacklists entities that includes 15 enterprises of the Islamic Revolutionary Guards Corps, three entities owned by the Islamic Republic of Iran Shipping Lines and 23 industrial companies. The international community accuses Iran of seeking to develop an atomic weapon. But, Tehran has been maintaining that its uranium enrichment program is for peaceful civilian purposes.
India has been maintaining that it is opposed to such kinds of sanctions as it will affect the common people more than the establishment. Russia and China, which have previously raised objections against such sanctions, supported the resolution and said they were happy with the text of the resolution as long as it did not have any negative impact on the people.
Iran voiced defiance, saying it would not halt uranium enrichment and suggesting it may reduce cooperation with the UN nuclear agency.