My Page September 2012




M G Warrier’s
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A monthly bulletin from M G Warrier incorporating select published letters/articles (and some stray thoughts based on what he read/saw and wrote during the month). Mailed during the last week of every month. Please send your responses and views to mgwarrier@rediffmail.com
Vol II, No 9, September 2012
HAPPY ONAM
M G Warrier, 2005/1-D, DREAMS, Bhandup(West), Mumbai-400078 (9349319479)
Dear Reader

From now on, My Page will be posted on Warrier’s Blog accessible at mgwarrier.blogspot.com

Regards
M G Warrier



Online comments at VITALINFO
That Dr Subbarao has been able to convince North Block and the opinion-makers in New Delhi that, after all, RBI is doing the best within the given constraints to support economic development gives some comfort. Dr Subbarao cannot do what GOI has to do and this RBI Governors have told in unambiguous language several times. This time around, RBI has been more specific by saying that the central bank had expected more action from GOI. We have been telling small borrowers from time immemorial that cost of credit is secondary and what is important is timely availability of credit in adequate measure and now we are repeating the rhetoric to MFI borrowers.

This principle should be applicable to big borrowers as well. What RBI has done is to point to a source where funds are awaiting release, if other conditions for credit absorption will be taken care of by GOI. The temptation to maintain higher levels of SLR than necessary should be discouraged by a combination of incentives and disincentives. In the long term, government should look outside the captive pocket of SLR requirement for borrowing by introducing market-friendly instruments for investment by companies and High Net-worth Individuals who keep heavy floating funds. Alternatively, GOI can wait for RBI to come back with some solution for this problem in due course.

M G Warrier, Mumbai
Online comments on COALGATE
There should be national consensus on the trusteeship principle of natural resources. While government as trustee shares the right to exploit nation’s precious resources with private individuals or corporates there should be clear understanding as to sharing of unexpected losses and windfall gains. What happens in the present situation is greed being factored into law, thereby legalizing sort of loot.
ET Editorial on changes in Labour laws Online comments 240812
M G WARRIER (MUMBAI)
The editorial brings out issues which should receive attention from all stakeholders, namely, government, employers and employees in public and private sectors, trade unions and leaders who speak for the workers in the unorganised sector and practitioners of labour law. Time is not on the side of those who believe that ‘starvation labour’ will be perennially available or with those who thought that ‘job security’ can be taken for granted in certain sectors. Policy overhaul factoring in the global changes that have taken place in H R Management and wages-income structures is the need of the hour.
Letters: Good auditing

Business Standard / New Delhi Aug 21, 2012, 00:15 IST

Comptroller and Auditor General (CAG) Vinod Rai has certainly sharpened the tools of auditing by infusing expertise in his team and training cadres, making it possible to set priorities, ensure perfection and bring professionalism in auditing. If similar initiatives had come from heads of departments in the government and from CEOs in the public sector and statutory organisations, the agony that the current government is now going through would have been lesser.

Rai’s approach to auditing is consistent with the changes that have occurred in the law and practice of accounting and auditing. The reforms in the CAG’s office brought about by him and his predecessor, who understood the post-LPG (liberalisation, privatisation and globalisation) situation better, have started paying dividends.

The present political leadership is the “who’s who” of the rich and influential class that has its own constituency interests to protect. We are heavily dependent on the government’s other arms like the CAG, the judiciary and regulators like the Reserve Bank of India to come to rescue when extraneous compulsions force government departments and public sector organisations to misappropriate public funds to the advantage of their masters or greedy corporations and individuals. Beyond fighting corruption and black money, ensuring ethical practices in managing nation’s resources and public funds should become a national priority.

M G Warrier Mumbai

...or mere sensationalising?

Earlier, CAG reports used to enjoy some credibility and authenticity. Today, they are barely distinguishable from sensational journalistic reports. CAG reports, of late, seem to be prepared with an underlying political motive. Not only do the writers lack technical competence in the subjects with which these reports deal, but also their calculation and estimates are grossly exaggerated and inflated to attract public attention and controversy.

Ravinder Jit New Delhi

Letters can be mailed, faxed or e-mailed to: letters@bsmail.in

ET Online comments August 23, 2012
M G WARRIER (MUMBAI)

22 Aug, 2012 09:47 PM

GOI should fast change its approach to HR Management to ensure that best talent can be recruited and retained at various levels in government and public sector organisations. Appointments at top levels should be for longer tenures (opportunity to stay for, say 5 to 10 years stay at the highest two levels) and remuneration packages should ensure that the incumbents do not have to depend on associates and clients for maintaining a reasonable lifestyle.
COALGATE
MMS, by accusing only of inaccuracies in computing losses, has been considerate as compared to Kapil Sibal who had first used India’s first contribution to mathematics(zero) to multiply the figure of any loss pointed out by CAG in 2G. After all, where are the accurate figures? We have mostly estimates, revised estimates and guestimates in most cases. MMS knows this. PM cannot always plead that states are not cooperating or departments are delaying action. PM should lead, guide and work for consensus where necessary and if all efforts fail, do what is best in national interest. The present statements from UPA spokespersons give an impression that even PM is supported status quo (which resulted in perpetuating losses) to keep the coalition going.
Online comments @ moneylife.in

Human Resources Management did not get the attention it deserved in India for several reasons. Employers thought, because of the kind of unemployment situation that prevailed, hiring and firing men of their choice can go on eternally. In organized sector which recruited the best available talent did not care to ensure further skill development or a career progression commensurate with the potential of the employees. Still the workforce remained with government and public and private sector organisations because there was job security and certain built in social security systems that were taken for granted. The fast changes as part of LPG(Liberalisation-Privatisation-Globalisation) during the last two decades did not factor in timely changes in HR practices or for that matter India’s education policy also ignored the changed scenario and continued the same old systems. The need of the hour is an overhaul of the education, recruitment and skill development policies side by side with a close look at the remuneration packages factoring in the content of a ‘living wage’ at all levels and appropriate additionalities commensurate with qualifications and expectations as career progresses. The mutual distrust between management and trade unions caused by the greed of owners and politicization of trade union leadership should go. The inevitability of peaceful coexistence should be understood by both sides. If all these are not attended to on a war-footing, we will see more eruptions like stoppages of work, acts emanating from frustration, sagging efficiency and several corrupt practices all of which we are witnessing helplessly for the last few years.
Business Line, August 18, 2012
Letters

Leadership vacuum

This refers to “India at 65, a rudderless ship” (Business Line, August 15). On the occasion of Independence Day, the feelings of a right-thinking Indian would not have found better expression. The absence of governance; refusal by a person, to whom circumstances provided the PM’s position on a platter, to rise to the occasion; and the bankruptcy of the political class have been brought out well.

UPA-2 by design had a one-item agenda of remaining in power for five full years. Manmohan Singh was entrusted with the task of ensuring this. CAG may write any report; the PM will not move a finger until forced by the benevolent employer.

Time was when people waited in small groups around radios with anticipation and hope to listen to the PM’s speech on every Independence Day. Now, it is difficult to find a single soul who has anything positive to say about the PM or the government he leads. As stated in the article, any change will be for the better.

M.G. Warrier

Mumbai

(This article was published on August 17, 2012)

PIONEER, August 20, 2012: RBI forms committee to reduce gold import
Online comments:
M G WARRIER 2012-08-20 09:21

Import and accumulation of huge quantities of gold in the form of jewellery have other social implications like under-utilisation of financial resources for productive uses and pledging of assets for raising funds which ultimately helps only the money lender in whatever attire he surfaces. In this context the present move by RBI deserves praise. In the absence of a system to check purity easily, a likelihood of individuals/families getting perennially ‘attached’ to a particular jewellery group cannot be ruled out. This is a possibility, as jewellery shops are yet to universally accept the current hall marking arrangement when it comes to gold bought from outside. One hopes the committee will also go into measures to discourage further accumulation of ‘ornament gold’ in households which is partly responsible for financial loss to middle class families in India and to some extent, dowry-related issues and security problems
Business Line, August 15, 2012: At 65, India a rudderless….B S Raghavan

Online comments:

The absence of governance, refusal by a person, to whom just certain circumstances gave the PM’s position on a platter, to sit back and think or stand up and act rising to the occasion and the bankruptcy of the political leadership as a class, et al have been brought out in a language only a veteran of BSR’s stature can handle.

UPA-II, by design had a one-item agenda of remaining in power for five full years. Dr Manmohan Singh was entrusted with the task of ensuring this. He took it literally. Heavens may fall, ‘Curiosity’ may land on Mars, Advanis, Hazares and Ram Devs may say what they feel, CAG may write any report, PM will not move a finger until forced by the benevolent employer. The agonizing inaction in the midst of chaos the nation has been dragged into has reached such an alarming level that even on the Independence Day, people ‘celebrate’ by expressing their anxieties and apprehensions. Any change in leadership, will be for the better. That is the feeling one gets.

from: M G WARRIER

Posted on: Aug 15, 2012 at 17:28 IST

Right of GOI to tell what are the government’s expectations from public sector banks is not in question. The issue of micromanagement has come to the fore in the context of several interferences in the functioning of almost all public sector organisations through various arms of government on a day-to-day basis. Instances of ‘obliging’ people even temporarily being deputed on boards/top management positions to ensure ‘smooth’ carrying out of instructions are also coming out. This is not an issue that can be resolved easily. An overhaul of systems and procedures affecting top appointments, tenure of appointments, service conditions of Chairmen/CEOs, selection and appointment to boards of management and HR practices is overdue. In the present scenario, unless the initiative comes from the Prime Minister, we can only keep the debate live.

from: M G WARRIER

Posted on: Aug 13, 2012 at 13:52 IST

Online comments on NPS
M G WARRIER 9 seconds ago

Kerala Government has announced introduction of New Pension Scheme (Rechristened as ‘Participatory Pension Scheme’) for its employees joining service from April 1, 2013. CM is lamenting that this will put additional burden on the state exchequer to the extent of 13% of the wage bill in respect of new recruits and savings, if any, will start accruing when they start retiring! For the new recruits, it will be a straight 13% cut on their remuneration package, which, any serving employee will tell, is a little more than what a normal wage revision factors in as rise in total wages. Media has been keeping a learned silence on the issue. NPS was kept outside the purview of VI Pay Commission, although the scheme was under implementation and already there were several central government employees affected by NPS whose wage structure the Commission was reviewing. Some links are missing. Will anyone come out with the real compelling concerns that weighed with GOI and state governments to introduce NPS which in reality is ‘No Pension’ Scheme, even before it has gained legislative legitimacy with appropriate systems for implementation in place?

M G Warrier
Right of GOI to tell what are the government’s expectations from public sector banks is not in question. The issue of micromanagement has come to the fore in the context of several interferences in the functioning of almost all public sector organisations through various arms of government on a day-to-day basis. Instances of ‘obliging’ people even temporarily being deputed on boards/top management positions to ensure ‘smooth’ carrying out of instructions are also coming out. This is not an issue that can be resolved easily. An overhaul of systems and procedures affecting top appointments, tenure of appointments, service conditions of Chairmen/CEOs, selection and appointment to boards of management and HR practices is overdue. In the present scenario, unless the initiative comes from the Prime Minister, we can only keep the debate live.
Business Line, Online comments:

The case for India-specific solutions for India-specific problems, brought out in Harish Damodaran's article (When animal spirits reigned) and now taken forward in this article deserves attention from policy analysts. The BPL (Businessmen-Politician-Lawyers) combine which decides what is good for India are being guided by voices from outside. External compulsions are guiding our fiscal policy initiatives. If RBI is able to make a beginning by tapping internal resources, restructuring interest rates to support internal mobilization of resources and reducing dependence on import beyond levels which are not sustainable by corresponding exports right-thinking majority will shape opinion. The present leadership at both Mint Road and North Block has the necessary understanding and capability to make the necessary change in outlook.

from: M G WARRIER

Posted on: Aug 10, 2012 at 11:41 IST
Before deregulation of interest rates, there were multiple interest rates in existence. Post-deregulation RBI and banks have experimented several methods to bring transparency and order in the interest rate regime. The media and the banks give an impression to the common man that interest rates on deposits and advances are directly related to RBI’s base rates which are announced by the central bank as part of monetary policy exercise. Although these rates do have an impact on banks’ interest rates, such impact is slow and sometimes the scenario changes even before the guidance percolates to the ground level. The floating interest rate system now being debated is worth a trial. In any case, the present confusion from which only the banks take advantage and give less to small depositors from whom major portion of the deposits are collected and take more from borrowers who do not have a ‘voice’ to protect their interests needs to be removed.
Online comments on ‘Wish away death by not being larger than life’: ET, August 4, 2012
Though remembered in a sad context, Team ET deserves to be congratulated for putting together the six survival tips for the stress-affected. From J R D Tata to N R Narayanamurthy who have made a mark in the Indian industry, had all several commonalities. These include, faith in team work, approach to asset accumulation as a process which will help doing their social commitments better or recognizing the principle of trusteeship, ensuring that those who participate in their efforts as fellow-humans having all the emotions, needs and aspirations they have and resisting the temptation to conquer for the sake of just being bigger. None of these entrepreneurs waited for a reminder from the almighty for being charitable. Many of the successful businessmen understood the difference between windfall gains and return on capital. Thank u Team ET for giving an opportunity to share these thoughts. M G Warrier, Mumbai
ET Wealth August 6-13, 2012: Online comments under New Pension Scheme story:

M G WARRIER (MUMBAI)

08 Aug, 2012 09:39 AM

The introduction and implementation of NPS have been topsy-turvy. NPS was imposed on new central government recruits(excluding defence employees) from 1-1-2004 even before the supporting legislation was in place. NPS was kept outside the purview of VI Pay Commission. A study of pension schemes by ING and IIM, Bangalore was commissioned three years after the introduction of NPS. The fund managers were initially made to agree for ridiculously low charges for managing the funds (0.0009% against the prevailing 2% for mutual funds) Thus a hurry in pushing through the scheme rather than the intention to introduce a reasonably reliable and credible social security scheme is evident throughout.
Perhaps ET Wealth could, in one of its future issues, throw some light on the costs and benefits of conventional defined benefit pension schemes, how it compares with a 10% (by employee with matching contribution of 10% by employer) Contributory Provident Fund and the New Pension Scheme in which Govt makes an initial annual matching contribution of Rs1000 for first few years. For a normal pension of 50% of last drawn emoluments what should be the savings needed at the present rate of inflation and rates of return also may be indicated.
The introduction and implementation of NPS have been topsy-turvy. NPS was imposed on new central government recruits(excluding defence employees) from 1-1-2004 even before the supporting legislation was in place. NPS was kept outside the purview of VI Pay Commission. A study of pension schemes by ING and IIM, Bangalore was commissioned three years after the introduction of NPS. The fund managers were initially made to agree for ridiculously low charges for managing the funds (0.0009% against the prevailing 2% for mutual funds) Thus a hurry in pushing through the scheme rather than the intention to introduce a reasonably reliable and credible social security scheme is evident throughout.
Preventive maintenance and post-accident rehabilitation/compensation are totally neglected areas in India especially when it comes to infrastructure and services used by aam admi and when people involved are not from the high net-worth category.
Government and public sector organizations are attracting avoidable criticism by ignoring the need for:

• Timely replacement of obsolete or defunct equipments,

• Ongoing preventive maintenance,

• Ensuring competent skilled staff in position and

• Concurrent ‘audit’ of accounting and performance in service establishments.

Many who die or get injured while traveling by rail or road(including pedestrians) even go unidentified. Carrying an identity proof should be made mandatory for using rail and road travel facilities.
Business Line, August 1, 2012: Editorial ‘Textbook response’

Online comments dated August 1, 2012

That Dr Subbarao has been able to convince North Block and the opinion-makers in New Delhi that, after all, RBI is doing the best within the given constraints to support economic development gives some comfort. We have been telling small borrowers from time immemorial that cost of credit is secondary and what is important is timely availability of credit in adequate measure and now we are repeating the rhetoric to MFI borrowers.

This principle should be applicable to big borrowers as well. What RBI has done is to point to a source where funds are awaiting release, if other conditions for credit absorption will be taken care of by GOI. The temptation to maintain higher levels of SLR than necessary should be discouraged by a combination of incentives and disincentives. GOI should look outside the captive pocket of SLR requirement for borrowing by introducing market-friendly instruments for investment by companies and High Net-worth Individuals who keep funds outside the formal channels

from: M G WARRIER

Posted on: Aug 1, 2012 at 21:25 IST

Hindu, August 5, 2012: Learning from controversy, Online comments

The efforts to erase history by bans and withdrawals of texts and pictures are too primitive a method to express dissent and hopefully, sooner than later, civilized society will learn to discard such eruptive symptoms of uninformed intolerance and move ahead. Those who were fortunate to live during the ‘Shankar’ Weekly era will know the respect Shankar commanded from the political leadership and other statesmen, those days.

The present intolerance makes the following observation of Shankar in the souvenir he brought out in September 1975(farewell issue of Shankar’ Weekly was dated July 27, 1975) prophetic:

‘It was not without a pang that I decided to stop publication. We could have taken the emergency in our stride, but the burden of running a weekly magazine on a shoe-string was too much. Institutionalisation of a magazine of this type is extremely difficult, for the flavour will indubitably change in that situation.’

Our legislators should read Shankar's Weekly souvenir again.

from: M G WARRIER

Posted on: Aug 5, 2012
Hindu Business Line, July 31, 2012

When ‘animal spirits’ reigned By Harish Damodaran: Online comments

I am one who has lived through the agonies emanating from the mismanagement of resources by those who had control over the resources of the joint family which I belonged to. Many of us in the family survived and lived reasonably contented lives. Something similar is happening to our country. Those who have control over the resources are pledging the resources and borrowing to satisfy their temporary needs without thinking about tomorrow.

The reference in the article to the basic macroeconomic identity, that any excess of a country’s domestic investment over savings equals the current account deficit (CAD) in its balance of payments, says it all. We should try and get over the hangover of the lifestyle we are mimicking from the so called developed countries (which are neck-deep in domestic and foreign debt!) we should awaken the ‘animal spirits’ of the ‘Swadeshi Movement’ and convince ourselves the need to deploy the domestic resources prudently,before going for foreign funds.

from: M G WARRIER

Posted on: Jul 31, 2012 at 10:00 IST

Hindu Business Line, July 30, 2012

Letters

Treasure gold

In ‘‘A gold medal for Subbarao’’ ( Business Line, July 27), the author mentions that the World Gold Council in 2011 refers to a domestic stock of 18,000 tonnes of gold in India. The RBI should persuade the Government to understand the significance of this treasure lying idle in the country, and put pressure on the powers that be to put at least some 10 per cent of this to productive use in the next five years. This will reduce the country’s gold import bill by 50 per cent. This can be achieved by:

Introducing gold-backed financial instruments which are not dependent on imported gold;

Bringing a portion of household gold stock by offering some instrument like ‘Gold Bond’, backed by government guarantee to return solid standard gold at the time of redemption, which could be, say, after 10 years and a small return in the interregnum;

Arrange for infrastructure, technology support and linkages for gold refining and certification facilities of international standard;

The RBI and the Government could consider even deficit financing for procurement of domestic gold as this could be the beginning for adopting a partial ‘Gold Standard’.

M. G. Warrier Mumbai

(This article was published in the Business Line print edition dated July 30, 2012)





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