Current Affairs: International Issues: 16 April - 01 May 2010

International Issues (Political/Social)

Content:

1. From the Cold War era: 50 years since the U-2 incident
2. Belgium bans burqa

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3. Mass protest in Nepal
4. Army to vacate Jaffna properties
5. Greece crisis
6. Greece vows deeper defence cuts

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7. Chinese company confirms Pakistan reactor deal
8. U.S. oil leak more than feared
9. Australia puts carbon trading scheme on hold
10. Fred Halliday, scholar of international relations, dead

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11. Republicans block financial bill
12. Developing countries get a bigger say in the World Bank
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Brief Description:

From the Cold War era: 50 years since the U-2 incident

* Fifty years after his father was shot down by the Soviets in an incident that marked
a turning point in the Cold War, Francis Gary Powers Jr. visited the wreckage of his
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dad’s U-2 spy plane.

* “It’s a wonderful display,” Mr. Powers Jr. said while standing in the hall of the Central
Armed Forces Museum in Moscow which holds the wrecked plane and other material
commemorating the so-called “U-2 incident” of May 1, 1960.
* On that day, Francis Gary Powers, a U.S. pilot carrying out a secret mission for the
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CIA to photograph Soviet nuclear sites, was shot down near the Urals Mountains city of
Sverdlovsk, now called Yekaterinburg.
* Powers parachuted out and was captured by the Soviets, who later convicted him of
espionage and threw him in prison. In 1962, Powers was released in a U.S.-Soviet spy
swap at the border between East and West Germany, in exchange for America’s release
of Soviet spy Rudolf Abel. Powers died in 1997.
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* The incident was a major embarrassment for the United States, which had denied
carrying out spy flights over the Soviet Union and it derailed efforts to make peace be-
tween the two Cold War superpowers.

Belgium bans burqa

* Despite being in the grip of an acute political crisis that threatens its very existence
as a state, Belgium became the first state in Europe to ban the burqa in public places.
* The vote on the burqa became a major diversion from the country’s monumen-
tal woes and Belgium’s Lower House of Parliament on Thursday banned it in public.
However, the bill has to be passed by the Senate to become law and delays are being
foreseen.
* Belgium is currently without a government, Prime Minister Yves Leterme and his
Cabinet having resigned over linguistic differences and the country is mired in a deep
identity crisis, with both French and Flemish speakers refusing to compromise on the
status of the largely French-speaking capital which falls within a Flemish-dominated
area. Early elections are likely to be held in the coming months.

Mass protest in Nepal

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* To mount pressure on the Madhav Kumar Nepal-led regime to form a new consen-
sus government under its leadership, the major opposition party — the UCPN (Maoist)
— is holding a nationwide mass demonstration here on Saturday.

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* The Maoists have said they would mobilise half a million people and the cadres
have already started descending on the capital. Though the party has said it would be
a peaceful demonstration, various political parties, civil society members and foreign
diplomats have voiced concern as the party trained the cadres in the use of khukri and
sticks. The police have confiscated sacks of empty bottles and hundreds of litres of pet-
rol, which they said might be used in making bombs.

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Army to vacate Jaffna properties
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* The Sri Lankan military has begun the process of gradual withdrawal from civilian
properties under its occupation in the Jaffna peninsula.
* Defence Secretary Gotabaya Rajapaksa, on a visit to the Northern Province, told
journalists after unveiling a memorial at the Elephant Pass on Friday that the military
would withdraw from the properties.
* The continued occupation by the military has been a matter of concern to the Tamil
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parties and the civilians. They have been demanding that the owners be given back
their properties.

Greece crisis
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* Greece has confirmed its expected request to the European Union and the Inter-
national Monetary Fund (IMF) for a bailout of €45 billion as initial assistance in its eco-
nomic crisis.
* Athens will have to pay out on bonds worth about €8.5bn which mature in May and
also has to pay €54bn this year as debt-servicing on €300bn.
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* In addition, the country’s budget deficit for 2009-10 was 13.6 per cent of GDP, or
about €300 billion; the eurozone rules allow member states only three per cent. As for
the bailout itself, the EU as a whole cannot provide such. Individual member states will
contribute €30 billion for three years at five per cent, with Germany and France provid-
ing half that sum; the IMF is due to contribute €15 billion.
* Conditions will most probably focus on public-sector cuts and substantial changes
to the state-pension system. Early public reactions in Greece have been hostile, with
demonstrators particularly resentful of IMF involvement. Financial markets have re-
sponded selectively, despite Standard and Poor’s downgrading of Greece’s debt rating
to junk.
* Kenneth Rogoff, a former IMF chief economist, points out that national debt de-
faults and restructurings usually follow banking crises.
 * He concludes that Greece must do all it can now to maintain international financial
credibility so as to avoid IMF-imposed restructuring in future. But the matter is more
complex than this assessment suggests.

1. First, Greece is hardly alone; the U.S. budget deficit for 2008-9 was 9.9 per cent
and the U.K.’s was 10.9 per cent for 2009-10. Sweden has also survived a comparable
crisis.
2. Secondly, Ms. Merkel’s party, the Christian Democratic Union (CDU), faces a hard
reelection battle in the province of North Rhine-Westphalia and needs to talk tough on

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Greece.
3. Thirdly, the preceding Greek government, a conservative one, hugely expanded
public spending and the budget deficit, by increasing public-service employment and

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failing to tackle widespread tax fraud. Meanwhile, the EU’s regulatory bodies did noth-
ing about the country’s rising budget deficit, and Greece colluded with an investment
bank to falsify the figures.
4. Finally, Prime Minister George Papandreou has announced measures to crack down
on tax evasion, to raise taxes, and to cut the budget deficit by four percentage points in

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the current financial year. The EU is also likely to adopt tougher regulations, which will
reduce the capacity of private players to attack member states through financial mar-
kets. The Greek crisis, though serious, gives the EU an opportunity to help a member
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state, curb predatory financiers, and improve its own institutions and procedures.

Greece vows deeper defence cuts

* Greece’s Defence Minister on Thursday promised “colossal” cuts in military operat-

ing costs to help the debt-ridden country emerge from its financial crisis and speed up
plans to modernise the armed forces.
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* Defence Minister Evangelos Venizelos Greece is aiming to slash operating costs by

up to 25 percent in 2010 from 2009, instead of the planned reduction of 12.6 per cent
listed in this year’s budget.

Chinese company confirms Pakistan reactor deal

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* China’s biggest operator of nuclear power plants has confirmed that it will export
two 340 MW nuclear power reactors to Pakistan in a $2.375-billion agreement, in a
controversial deal that analysts say goes against internationally-mandated guidelines
governing the transfer of nuclear technology.
* The China National Nuclear Corporation, which has already set up two civilian nu-
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clear power reactors in Pakistan, has now signed construction contracts to build two
more.
* The two governments had in principle agreed on the deal during President Hu Jin-
tao’s visit to Islamabad in 2006. But they are yet to publicly formalise the deal.
* The CNNC, however, has said in a statement, posted on its website last month, that
it had reached the agreement “with the aim of developing an overseas nuclear power
electricity market”.
* The CNNC has already agreed to build two power reactors in Pakistan, the 325 MW
Chashma-1, which started operating in 2000, and Chashma-2, which will be completed
next year. The statement said the two new reactors are “2x340 MW”. “Chashma-2 will
be a benchmark for C-3 and C-4 projects,” said the statement. On February 12, the two
governments had signed a loan contract which went into effect in March, according to
the CNNC.
* But, Chinese officials on Thursday continued to deny a deal was in place. One of-
ficial said while the government had given its backing to the deal in principle, some final
details still had to be ironed out .

U.S. oil leak more than feared

* A BP executive on Thursday agreed with a U.S. government estimate that the oil

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leak in the Gulf of Mexico could be pumping up to 5,000 barrels a day of crude into the
ocean, far more than previously thought.
* The U.S. government’s National Oceanic and Atmospheric Administration (NOAA)

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earlier said that more than 200,000 gallons of oil a day were now thought to be spew-
ing into the Gulf from the debris of the Deepwater Horizon rig, which sank last week
following a deadly explosion.

Mehsud alive?

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* Pakistan and U.S. intelligence wrongly reported the death of the head of the Pa-
kistani Taliban in a CIA drone strike and he is now believed to be alive, said Pakistani
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spies on Thursday in an apparent propaganda coup for the insurgents.
* The reports that Hakimullah Mehsud survived the January missile attack in an area
close to the Afghan border will raise questions about the quality of the intelligence be-
ing gathered in the region.
* U.S. officials were not immediately available for comment. The Taliban had always
claimed Mehsud was alive and dismissed the earlier reports of his death.
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* The militant network said it was not going to offer any evidence such as a video re-
cording because doing so could help security forces hunt Mehsud down. But until there
is proof he is alive, questions may linger about his fate, given the apparently patchy
nature of intelligence in the tribal regions.
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Australia puts carbon trading scheme on hold

* The Australian government has shelved an ambitious carbon trading scheme that
was the cornerstone of plans to reduce the country’s greenhouse gas emissions by up
to a quarter by 2020.
* Labour Prime Minister Kevin Rudd said the scheme would be delayed until 2013 be-
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cause of parliamentary opposition and slow progress on a global climate change pact.
* Mr. Rudd said the government would wait until the first phase of the Kyoto protocol
expires in 2012 before implementing one of the world’s most comprehensive carbon-
cutting regimes.

Fred Halliday, scholar of international relations, dead

* Fred Halliday, who has died of cancer aged 64, was an Irish academic whose main
interest was West Asia and its place in international politics.
* His first major book, Arabia Without Sultans, was published in 1974. The culmi-
nation of adventurous field research in the region, including Oman, it was a study of
Arabian regimes, their support from the West and Iran, and the revolutionary forces
fighting against them.
Russia, Ukraine ratify base deal
* The Russian and Ukrainian Parliaments on Tuesday simultaneously ratified a land-
mark agreement to extend the lease of a key Black Sea naval base in Sevastopol to
Russia by 25 years.
* While in Russia’s State Duma the accord sailed through seamlessly, with 410 depu-
ties voting for and none against, in Ukraine’s Verhovna Rada the ratification process
turned into a violent battle between supporters and opponents of the pact.

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* In what looked like a street riot, opposition deputies staged fistfights with pro-gov-
ernment MPs, threw eggs at the Speaker and set off smoke bombs in a futile attempt
to disrupt voting.
* Crouching behind two umbrellas held over him by aides, Speaker Volodymyr Litvyn

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gave a start to electronic voting. When the winning tally 236-to-0 came on screen, it
was hardly visible in the heavy smoke that filled the hall.

Republicans block financial bill

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* Senate Republicans on Monday blocked Congress from further considering a ma-
jor bill that proposed an overhaul of financial regulation in the aftermath of the credit
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crunch. The move comes even as investment bank Goldman Sachs faced a Congres-
sional hearing that sought to understand the bank’s role in the recent financial crisis.
* The regulation reform bill, called the Restoring American Financial Stability Act of
2010 (RAFSA), is the creation of the Senate Banking Committee headed by Democrat
Chris Dodd. RAFSA is described by the Committee as “a direct and comprehensive
response to the financial crisis that nearly crippled the U.S. economy beginning in
2008”.
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* Following the move by all 41 Senate Republicans and Ben Nelson, Democrat, to
block the bill from being taken forward to vote in the coming weeks, President Obama
said, “I am deeply disappointed that Senate Republicans voted in a block against allow-
ing a public debate on Wall Street reform to begin.” Democrats need 60 votes to push
the bill through.
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* The President charged the bill’s blockers with believing that such obstruction was
a good political strategy and seeing this delay as “an opportunity to take this debate
behind closed doors, where financial industry lobbyists can water down reform or kill
it altogether”.However, he argued “the American people can’t afford that. A lack of
consumer protections and a lack of accountability on Wall Street nearly brought our
economy to its knees, and helped cause the pain that has left millions of Americans
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without jobs and without homes.” He urged the Senate to get back to work and “put the
interests of the country ahead of party.”
* Yet Republicans were quick to clarify the grounds on which they objected to the
bill, to pre-empt accusations of obstructionism and siding with Wall Street over Main
Street.
* The main objection was to the Dodd proposal requiring large financial companies to
contribute $50 billion over five to 10 years to a fund held at the Treasury, which would
only be used by the Federal Deposit Insurance Corporation in the “orderly liquidation of
a failing financial company with the approval of the Treasury Secretary”.
Castro warns of climate change

* Cuban leader Fidel Castro warned of the aftermath of uncontrollable climate change
and the side effects of scientific progress.
* “Science created the ability to destroy ourselves and the planet several times in a
matter of hours,” said Mr. Castro in an editorial published by local media.
* “The greatest contradiction in our age is the ability of our species to destroy itself
and its inability to govern itself at the same time.” In the editorial entitled “The madness
of our time”, Mr. Castro listed the catastrophic effects of global warming and pointed to

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threats posed by new weapons and military technologies of the United States.
* He criticised the United States for developing new high-tech military devices such
as the recent launch of an unmanned “space plane” from Cape Canaveral.

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Cyber-racism summit in Australia

* CANBERRA
* Leaders from the anti-discrimination and Internet communities will join forces to

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tackle online racism in Australia, the Australian Associated Press reported.
* The Australian Human Rights Commission said instances of cyber-racism, which
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included racist websites, images, blogs, videos and comments on website forums, were
on the rise.
In a bid to solve the problem, the commission has teamed up with the Internet Industry
Association to co-host the summit on Tuesday.

Developing countries get a bigger say in the World Bank

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* At the end of two days of the annual Spring Meetings of the International Monetary
Fund and the World Bank, the member nations endorsed “voice reform” to increase the
voting power of developing and transition countries (DTC) in the World Bank by 3.13
percentage points, bringing their proportional voice to 47.19 per cent.
* World Bank members including India also agreed to boost the “selective capital” of
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the institution by over $86 billion along with giving developing countries slightly over
47.19 per cent of the total votes.
* The advanced economies’ share under the new arrangements would drop to under
52.81 per cent.

World Bank voting reforms

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* The World Bank member-countries reached an agreement on a 3.13 per cent shift
in voting power to give the emerging and developing nations greater influence in the
Bank last week.
* The voting pattern shift will increase the number of votes of the developing world
to 47.19 per cent from 44.06 per cent. And China’s stake at the bank, in terms of vot-
ing power, rises from 2.78 to 4.42 per cent now, making it the third largest, next to the
U.S. (15.85 per cent) Japan (6.84 percent).
* Post-reforms, India has moved to the seventh spot with 2.91 per cent voting
right.
Attempt on British envoy’s life in Yemen

* The British embassy in Yemen has been shut down after a suicide bomber at-
tempted to assassinate its Ambassador while he was on his way to work on Monday
morning.
* Yemeni officials were quoted as saying a suicide bomber blew himself up close to
the bullet proof vehicle, in which Ambassador Timothy Torlot was travelling. A British
embassy spokeswoman said the envoy was not injured.

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Furore over Arizona immigration bill

* When Jan Brewer, Governor of Arizona, signed into law a new immigration bill last
Friday she could have had little doubt that she would be courting controversy.

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* The Support Our Law Enforcement and Safe Neighborhoods Act, now better known
as SB 1070, would make the failure to carry immigration documents a punishable of-
fence; it also gives police sweeping powers to detain anyone suspected of being in the
country illegally.

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Aliens exist: Hawking Na
* Do aliens exist? They do, but humans should try to avoid any contact with them —
at least, that’s what one of the world’s leading physicists, Stephen Hawking, claims.
* The suggestions, that the extraterrestrials are almost certain to exist, come in a
new documentary series for the Discovery channel, in which Dr. Hawking will set out his
latest thinking on some of the universe’s greatest mysteries.
* Alien life, he will suggest, is almost certain to exist in many other parts of the
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universe — not just in planets, but perhaps in the centre of stars or even floating in
interplanetary space, T he Sunday Times reported.
* His logic on aliens is unusually simple. The universe, he points out, has 100 billion
galaxies, each containing hundreds of millions of stars. In such a big place, Earth is
unlikely to be the only planet where life has evolved.
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* “To my mathematical brain, the numbers alone make thinking about aliens per-
fectly rational. The real challenge is to work out what aliens might actually be like,” the
68-year-old was quoted as saying.

HIV free: Zuma

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* South African President Jacob Zuma on Sunday declared himself free of the deadly
HIV virus, as he launched a drive to combat the disease in the world’s worst-affected
country.
* “My April results, like the three previous ones, registered a negative outcome for
the HIV virus,” said Mr. Zuma
* Mr. Zuma (68) took the test to promote the campaign. He has three wives and
came under pressure after it emerged that he had fathered a child out of wedlock.

S. Korean warship retrieved from sea

* First inspections of the bow of a South Korean warship show it was hit by an out-
side impact of considerable force, a military official said on Saturday, as suspicion in-
creasingly falls on North Korea. The Cheonan sank and was split in half after a mystery
blast on March 26 close to the disputed border of the two Koreas, leaving 40 sailors
confirmed dead and six others still unaccounted for.
* Seoul has been careful not to point the finger directly at the North over the incident
in the Yellow Sea, which has stoked already tense ties, and Pyongyang has denied it
was to blame.
* However, the South’s Yonhap news agency on Thursday quoted a senior military
source in Seoul as saying it was suspected that North Korean submarines attacked the

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ship with a heavy torpedo. On salvage teams took their first look at the bow section
after it was hauled to the surface a day earlier, finding another body and more evidence
a strong external blast was to blame.

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* Quoting an unidentified military official, Yonhap said initial inspections confirmed a
large iron gate was off its hinges and a chimney was missing. “This means there was a
strong impact from the outside,” the official said.
* A Joint Chiefs of Staff spokesman told AFP that they expected to find more bodies
in the bow, which was to be towed ashore later Saturday for detailed inspections to find

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extra clues as to what tore the vessel apart.
* The stern was salvaged on April 15 but offered few ideas as to what had caused
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the explosion, from which 58 sailors were rescued.
* South Korean Defence Minister Kim Tae-Young said a mine or torpedo may have
sunk the corvette, but his Ministry said it would keep an open mind until the investiga-
tion is completed.
* Pyongyang has accused the South’s “war maniacs” of seeking to shift the blame for
the tragedy to the North.
* The disputed Yellow Sea border was the scene of deadly naval clashes between the
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North and South in 1999 and 2002 and of a fire-fight last November that left a North
Korean patrol boat in flames

New turn in French niqab ban row

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* The controversy in France surrounding an imminent ban on the wearing of the

burqa, the niqab or other full face coverings suddenly took a dramatic turn when a
young woman revealed she had been fined €22 by the police for driving while wearing
a niqab.
* The 31-year-old woman, a French national, said she had been wearing the niqab for
the past nine years and had never had either an accident or a problem with the police.
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She said she had committed no crime and planned to challenge the fine and sue the
government for harassment. Nothing in France’s traffic regulations prevents a person
from driving whilst wearing a mask. The police imposed the fine claiming that her niqab
“reduced her field of vision”.

Abhisit rejects compromise

* Thai Prime Minister Abhisit Vejjajiva on Saturday rejected a compromise offer from
anti-government “Red Shirts”, who had said they would end weeks of protests if polls
were called in 30 days.
* The international community has urged both sides on Thailand’s political divide
to find a negotiated solution to end weeks of protests that have been punctuated by
deadly clashes leaving 26 dead and hundreds injured
* The 30-day concession is just aimed at getting the attention of foreign media. I
don’t think it is the answer to the problems,” Mr. Abhisit said. “Tomorrow everything will
become more clear when I and the army chief will jointly appear on my weekly televi-
sion address.
* “Negotiations must be aimed at finding a solution for the whole country, not just
the Red Shirts, they are just part of society,” he added.

China removes Xinjiang party chief

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* The Chinese government removed the powerful head of its western Muslim-major-
ity Xinjiang region, in the first indication yet that the central government was rethinking

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its policies that many say have led to ethnic unrest.
* The decision comes amid a tightening of security in the region’s capital Urumqi,
where local officials and residents told The Hindu this week there were growing fears of
a recurrence of last July’s ethnic violence.

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NATO invites Bosnia
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* NATO leaders on Friday urged Bosnia to begin the MAP programme that is a cru-
cial stepping stone for eventual membership, but warned that more needed to be done
to transfer military infrastructure to central authorities. U.S. Secretary of State Hillary
Rodham Clinton told reporters at a meeting of the alliance’s Foreign Ministers in Estonia
that she hoped that the “membership action plan” would help Bosnia, a deeply divided
country, to “function more effectively as a state”.
* Membership action plans, or MAPs, establish criteria and guidelines for candidate-
countries to become NATO members. Bosnia applied for an action plan last year.
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Sri Lankan Cabinet sworn in

* Sri Lankan President Mahinda Rajapaksa on Friday administered the oath of office
and secrecy to 76 Ministers, 37 of whom hold Cabinet rank.
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* G.L. Peris, who held the portfolio of Export Promotion, has been designated as For-
eign Minister. The former Prime Minister, Ratnasiri Wicremanayake, has been inducted
into the Ministry with the portfolio of State Management and Reforms.

Focus on role of monks in quake recovery

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* Two years ago, the monks of Qinghai province were in the news in China for violent
riots that tore through many of the ethnic Tibetan regions.
* But this week, millions of Chinese were exposed to a strikingly different picture
— newspapers and news broadcasts showed images of Tibetan monks, in their distinct
red robes, heroically digging through debris and rescuing the survivors of last week’s
devastating quake.
* Monks, in the past often characterised as political “trouble-makers” by the State-
run media, were, ironically, filling in for the State in a remote region beyond its reach.
* The role played by Tibetan monks in the quake’s aftermath has become a subject
of focus for the media in China and abroad, given the uneasy relationship between
monasteries and the Chinese government, most evident during the riots of March 2008
in Tibet.
* On Friday, the government said it had advised monks to leave quake-hit areas to
allow reconstruction work to continue.

Current Affairs: Economy Issues: 16 April - 01 May 2010

Economy Issues

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Content:

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1. ICICI Bank, HDFC Bank not Indian-owned: Centre
2. Nine Indians in Top 100
3. NTPC-NPCIL sign JV agreement
4. Public debate on FDI in crucial sectors proposed

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5. Cabinet clears Rs. 15,000-cr capital infusion in public sector banks
6. Calculate eligible BPL families for Rs. 3 per kg foodgrains’
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7. Telcos dispute CAG’s power to audit them
8. The status of regulating the petroleum sector
9. What are commodity currencies?
10. Yet another committee on small savings?
11. What is India’s interest in joining the FATF - Financial Action Task Force?
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12. What are MSS bonds?

13. Monetary policy review by RBI
14. CK Prahlad is no more
15. Quantitative restrictions on imports may be back
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16. New national transport permit regime

17. Major Economies Forum (MEF)

Brief Description:
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ICICI Bank, HDFC Bank not Indian-owned: Centre

* The Central Government said ICICI Bank and HDFC Bank could not be called In-
dian-owned banks, setting at rest the debate generated over the nationality of the top
two private sector lenders.
* At best, the two can be called Indian-controlled banks.
* ICICI Bank had maintained that it continued to be an Indian bank as its manage-
ment and board was Indian.
* However, ICICI Bank and HDFC Bank have over 74 per cent foreign holding, includ-
ing that of foreign banks and overseas institutional investors.
Nine Indians in Top 100

Rangarajan to head panel on public expenditure

* The Planning Commission announced the setting up of an 18-member expert com-

mittee headed by Prime Minister’s Economic Advisory Council Chairman C. Rangarajan
to recommend measures for efficient management of public expenditure.
* Among its terms of reference, the main brief of the high-level committee is to sug-

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gest an action plan for abolition of the present system of classifying public expenditure
as Plan and non-Plan. This will include detailing of the changes in the mandate of the
various organisational units in the government that deal with allocation of public re-
sources and the management of public expenditure.

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Ethical practices in IT sector outlined

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* Ethical practices for contracts, clear accountability, compliance with legal issues,
data security, privacy as well as thrust on customer satisfaction are the key recommen-
dations, released by the Governance and Ethics Committee of the National Association
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of Software and Service Companies (Nasscom) released to further strengthen the cor-
porate governance practices in the IT-business process outsourcing industry.
* The report, released by the committee set up last year comprising industry experts
and chaired by Infosys mentor N. R. Narayana Murthy, enumerates a set of detailed
voluntary recommendations with an objective to establish highest standards of probity
and corporate governance within the industry.
* The report is structured across the stakeholder ecosystem to build an effective and
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ethical governance framework.

* The recommendations detail the role of the board of directors wherein it can move
from traditional advisory to strategic oversight of company affairs.
* In terms of competitors the recommendations involve sharing of best practices, re-
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specting intellectual property and ethical hiring would enable a collaborative industry.
* On the issue of employees, the recommendations include confidentiality of infor-
mation, protecting company assets and adherence to company policies and processes
would enable the company and its employees to align to common goals.

NTPC-NPCIL sign JV agreement

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* Nuclear Power Corporation of India Limited (NPCIL) and NTPC entered into a joint
venture agreement (JVA) to set up nuclear power projects.
* The agreement was signed by S. K. Jain, Chairman and Managing Director, NPCIL,
and R. S. Sharma, Chairman and Managing Director, NTPC, here.

Public debate on FDI in crucial sectors proposed

* The UPA Government, in a major shift from its oft repeated ‘no discussion’ stand,
on Monday indicated its willingness to tread the ‘forbidden path,’ stating that it was
ready for public debate on the issue of allowing foreign direct investment (FDI) in the
‘politically sensitive’ sectors such as agriculture, defence, pharmaceutical and multi-
brand retail.
* The Department of Industrial Policy and Promotion (DIPP), the nodal agency for
framing FDI policies, will come out with six discussion papers in mid-May on overseas
investment norms. This is in contrast to the UPA I regime, when it had shelved plans
to throw open multi-brand retail owning to strong opposition by Left parties and small
and medium traders.

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* Under the present FDI policy, India allows 51 per cent FDI in single brand retail
and 100 per cent in the cash-and-carry (wholesale) sector. However, many countries
— including foreign chains — have been pressurising the government to throw open the
multi-brand retail sector to FDI investment which, they claim, would bring the much

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needed competition and quality for the consumers.
* Interestingly, while trans-national companies like WalMart and Carrefour and In-
dian industry chambers are pitching for opening up of the multi-brand segment, a Par-
liamentary Standing Committee has proposed a ‘blanket ban’ on the entry of corporates
into the unorganised sector employing millions of people.

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Cabinet clears Rs. 15,000-cr capital infusion in public sector banks

* The Union Cabinet on Friday approved a capital infusion of Rs.15,000 crore in public
sector banks (PSBs) during the current fiscal to facilitate an increase in their lending
capacity by about Rs.1.85 lakh crore.
* According to an official statement on the cabinet decision taken at a meeting chaired
by Prime Minister Manmohan Singh, a sum of Rs.15,000 crore — already provided for in
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the budget for 2010-11 — is to be infused in Tier I capital instruments of the PSBs.
* The exact amount, the mode of capitalisation and other terms and conditions would
be decided in consultation with the banks at the time of the infusion, it said. For the
next fiscal (2011-12), additional capital requirements, if any, is to be worked out in
consultation with the PSBs based on their third quarter results for 2010-11 to ensure
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that they maintain a minimum 8 per cent Tier I capital to meet the credit requirements
of the economy and accelerate growth.
* Explaining the need for additional funding of PSBs, the statement said: “The in-
fusion of Rs.15,000 crore in Tier I capital instruments of PSBs would enable them to
expand their credit growth by about Rs.1.85 lakh crore.
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Calculate eligible BPL families for Rs. 3 per kg foodgrains’

* The Empowered Group of Ministers (EGoM) on Friday urged the Planning Commis-
sion to work out the number of Below Poverty Line (BPL) households and the house-
holds’ size that would be eligible for Rs. 3 per kg discounted foodgrains under the pro-
posed National Food Security Bill.
* The Tendulkar Committee report had placed the BPL percentage at 37.2 which,
at 2005 population and household size, works out to about 7.14 crore households as
against 6.52 crore households at present.
* Statements made by Planning Commission Deputy Chairman Montek Singh Ahlu-
walia have indicated that the Commission had accepted the Tendulkar panel findings
and that 35 kg of subsidised foodgrains would be given to each BPL household. How-
ever, the government is yet to declare its official position on this.
* For the second time, the EGoM headed by Finance Minister Pranab Mukherjee, took
no decision on a proposal of the Food Ministry to enhance the quantum of foodgrains
allocation for the Above Poverty Line (APL) population from the present 10 kilogram to
15 kg per family per month.

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Telcos dispute CAG’s power to audit them

* The country’s leading mobile operators, including Bharti Airtel, Vodafone Essar,
BSNL and Tatas, have questioned the government’s move to direct the Comptroller and

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Auditor General of India (CAG) to audit their books. The CAG is a constitutional author-
ity that conducts independent audits of all government accounts.
* CAG officials, however, reportedly said that a 2002 notification authorises it to au-
dit the accounts of telecom companies, as they share a part of their revenues with the

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government. So far, the CAG never exercised this power.
* In April 2009, the government had ordered a special audit of the account books of
top private cellphone companies, including Reliance Communications (RCOM), Bharti
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Airtel, Vodafone Essar, Tata Teleservices and Idea Cellular, to ensure that they have cor-
rectly reported and shared revenue with it. The audits aimed to establish if there were
any discrepancies in the revenues reported by these companies. The special audit re-
ports for Reliance Communications, Bharti Airtel, Vodafone Essar and Idea Cellular have
already been submitted to the department of telecom (DoT) while Tata Teleservices’ is
expected to be completed soon.
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The status of regulating the petroleum sector

* The PNG (Petroleum and Natual Gas) sector consists of four sub-sectors: explora-
tion and production of PNG, oil refining and marketing, natural gas transportation and
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marketing, and crude oil and petroleum products pipelines. Of these four, the first,
referred to as upstream, is supposed to be regulated by the directorate general of hy-
drocarbons (DGH) while the remaining three downstream sectors fall under the domain
of the Petroleum and Natural Gas Regulatory Board of India (PNGRB).
* As per the MoPNG order, the DGH has been mandated to regulate only one area
—the preservation, upkeep and storage of data and samples pertaining to petroleum
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exploration, drilling, production of reservoirs etc — and to cause the preparation of data
packages for acreages on offer to companies. In all other areas relating to various as-
pects of exploration and production, it is only supposed to advise the MoPNG. In reality,
therefore, it is the ministry that regulates the upstream sector, with the DGH virtually
functioning as an advisory wing of the ministry.
* Before March 28, 2002, the marketing and pricing of petroleum products including
transportation fuels, namely, motor spirit (MS) and high-speed diesel (HSD), were con-
trolled by the government under a mechanism known as administered price mechanism
(APM). The APM was dismantled by a notification dated March 28, 2002, under Section
3 of the Essential Commodities Act, 1955. Then, in 2006, the PNGRB came into exist-
ence. As a result of these two events, the theoretical position obtaining since October
1, 2006, is that all entities are free to price their products and the PNGRB is to regulate
anti-competitive behaviour like predatory pricing. However, strangely, the government
(read: MoPNG) still fixes the prices of MS and HSD and the PNGRB appears to be either
powerless or disinterested in doing anything about it.

What are commodity currencies?

* These are currencies which essentially derive their strength from commodity ex-
ports from their respective markets.

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* Also, in these countries, commodity exports are major source of foreign exchange
inflows. Traditionally lesser developed economies in Africa and Latin America have come
under this category.

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* Despite the weaker correlation between commodity exports and currency strength,
the Canadian, Australian, the New Zealand dollar and the South African Rand are still
considered commodity currencies. In recent times, they have emerged as global cur-
rency traders’ favourite as there has been a general surge in commodity prices glo-
bally.

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Yet another committee on small savings?
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* Faced with another tough decision on deregulating interest rates on small savings
instruments, the government is reportedly toying with the idea of appointing a com-
mittee.
* But already three committees have gone into this aspect and have submitted more
or less similar reports. They were headed by R V Gupta back in the 1990s, Y V Reddy
and Rakesh Mohan later. All three had come to much the same conclusion: scrap the
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present anachronistic system of administered interest rates and link interest rates to
some market-determined rate. But their reports have all been moth-balled. So, why
one more committee?
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What is India’s interest in joining the FATF - Financial Action Task Force?

* India is preparing to join FATF, an inter-government body founded by the G-7

countries in 1989 for developing and promoting national and international policies to
combat money laundering and terrorist financing. FATF is currently evaluating India’s
preparedness for its membership, which will allow the country to gain access to real-
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time exchange of information on money laundering and terror financing.

What are MSS bonds?

* When the central bank purchases dollars, it injects fresh liquidity into the sys-
tem. To prevent such a flood of rupees created as a result of dollar purchases from
pushing up the money supply above the desired level, the RBI then absorbs the rupees
by selling government bonds.
* The bonds used for this purpose are the so-called Market Stabilisation Scheme
(MSS) bonds. Right now, their supply with the RBI has dwindled to some Rs 2,700
crore.
Monetary policy review by RBI

* The RBI raised the two key policy rates—reverse repo and repo—by 25 basis points
each, and left banks with Rs 12,500 crore less to lend with a 25 bps increase in the
cash reserve ratio (CRR).
* This rate hike is seen as moderate by any standard in the current circumstances.
Therefore, most bankers think RBI will have to raise rates as well as increase the CRR
in small doses during the year.

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* Banks borrow from RBI at the repo rate while parking (or lending) surplus funds at
the reverse repo rate. After Tuesday’s rate action, the repo and reverse repo rates are
5.25% and 3.75%, respectively. The CRR, which is like a tax on lenders, is the slice of
customer deposit that banks have to set aside as cash with RBI. After the 25 bps CRR

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hike, from 5.75% to 6%, banks will have Rs 12,500 crore less to lend from the fortnight
beginning April 24.
* RBI began tightening in January when it raised the CRR by 50 bps in two stages.
This was followed by the 25 bps increase in repo and reverse repo in March. While RBI
has been slower than its counterparts in Australia and Israel in raising rates, it has been

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quicker in reversing the cycle than the Chinese central bank and monetary authorities
in many advanced economies.Na
CK Prahlad is no more

* Management Guru is no more and that he died of an illness of the lungs in the
US.
* He was 68.
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Quantitative restrictions on imports may be back

* India had to remove QRs on over 700 items in 2001 after it lost a case in WTO
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against the US which had challenged these restrictions on import of large number of
industrial and agricultural items.
* Under the QR mechanism, a country can impose a restriction on imports up to a
limit on items which are sensitive to its domestic industries. For availing this facility, the
country is required to have an enabling domestic law.
* Now, the country proposes to make good this lacuna by bringing changes in the
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domestic law enabling it to protect its industries against import surges. The Standing
Committee of Parliament has more or less approved a provision in a bill to amend the
Foreign Trade (Development and Regulation) Act.

New national transport permit regime

* To be effective from May 1, the salient features of this regime are:

* Replaces the existing permit regime which requires goods carriers to compulsorily
pay Rs 20,000 annually per truck. Now they will have to pay Rs. 15,000 for plying their
vehicles in the home state and three neighbouring states.
 * For each additional state, the transporter has to pay Rs 5,000
* No relief for customers as permit fee contributes less than 2% of the total cost
* The total revenue contribution from state permits to goods carriers is estimated to
be around Rs 932 crore annually

Major Economies Forum (MEF)

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* The MEF was set up by US President Barack Obama last year and it is focused
on working towards seeking an outcome on contentious issues relating to climate
change.
* Technology is one area that the MEF has sought to address. In this context, it is

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looking for a review of the renewables and efficiency deployment initiative (Climate
Redi), which was launched at the Copenhagen conference.

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