COMMITIES AND THERE WORK

1.V K Shunglu Committee, which is investigating allegations of corruption in organisation of Commonwealth Games 2010, has put up a list of 2,100 Organising Committee employees on the national portal and sought information regarding their appointments from whistleblowers and common citizens.
2.Srikrishna Committee report made public.The Government of India had made public the report of the committee that looked into issue of Telangana formation.

• Should we have smaller states?
• In the context of the Justice Srikrishna committee submitting its report
  on Telangana, the debate acquires significance.  Take a look at today's
  face-off column that puts forth two differing view points.  Excerpts:
• Against smaller states:
• The debate now is that smaller states ‘facilitate better governance’ and
  ‘help concentration on developmental issues’. But the experience of the
  three states that were carved out of Bihar, MP and UP does not justify
  it. Governance and concentration on developmental issues relate to the
  prevailing socio-economic system. In the present system, economic
  disparity is bound to increase, not only among the people, but also
  among the regions. Industrialisation is determined on the basis of
  location of raw material and development of infrastructure. Regional
  disparity is byproduct of the capitalist order.
• For smaller states:
• The tragedy is that vested interests want concentration of power. For them
  the best way to handle it is through big underdeveloped states. Look at
  the contrast. The US with a population of 310 million has 50 states.
  India with 1.2 billion has 28 states and seven union territories.
• Good governance is possible only when the government is nearer to the
  people. Small states and decentralisation of power through Panchayati
  raj and municipalities are the best instrumentalities to achieve it. It
  is widely acknowledged and scientifically proved that smaller states
  have progressed enormously.
• Tribunal gives biggest share of Krishna water to Andhra
• The Krishna Water Dispute Tribunal on Thursday announced a water-sharing
  formula to end the 43 years of conflict among three states — Andhra
  Pradesh, Maharashtra and Karnataka.
• According to tribunal’s formula for sharing the waters of river Krishna till
  2050, Andhra Pradesh will get the largest share. It also increased the
  allocation for Karnataka and Maharashtra. Every year, Andhra will be
  entitled to 1,001 tmc (thousand million cubic feet), Karnataka will get
  911 tmc and Maharashtra 666 tmc. The tribunal’s decision has come as a
  big victory for Karnataka as it allows the height of the Almatti dam to
  be raised. Karnataka has been raising the issue for long, but was facing
  stiff opposition from Andhra Pradesh.
• The tribunal, headed by Justice Brijesh Kumar, also allowed more water to
  be stored in the Almatti dam in Karnataka. With this order, 524 metre of
  the dam height could be used to store the Krishna water from its
  earlier 519 metre.
• Justice Srikrishna committee submits report on Telangana formation
• Not wanting to fuel speculation over the Telangana report — submitted to
  the government on Thursday by the Justice BN Srikrishna Commission — the
  government has decided to share the document with political parties of
  Andhra Pradesh and also make its contents public in a week’s time.
• The decision to bring the Telangana report expeditiously in the public
  domain is in line with a key recommendation by the Srikrishna Commission
  that a final solution to the Telangana issue must be taken over a
  limited timeframe of three to six months, preferably through political
  consensus. This is in the best interest of every stakeholder in the
  state, the panel is said to have told the government.

3. An excellent critique of the Jalan committee recommendations.

• This committee has been in the news of late for the recommendations it made on reforming the market infrastructure institutions.  The recommendations have attracted both negative and positive support=====   THE Jalan committee report has elicited a lot of comment, mostly related to its recommendations with regard to listing, profit caps and restrictions on the number of exchanges. Important as these issues are, they miss out on the central concern of the report which has to do with systemic risk. In our understanding, whereas the report pinpoints the problem accurately, its recommendations do very little to address this very vital issue and is, therefore, a missed opportunity.
      The report characterises, and we broadly agree, market infrastructure institutions (MIIs) as having the following attributes: MIIs are “likely to gain and keep market power”; MIIs are “systemically important”; and finally, MIIs produce a public good.
      In addition, it argues that it is not possible to separate regulatory and commercial interests; and that the required number of MIIs is limited. The recommendations that follow, therefore, are perfectly logical: enhanced regulatory scrutiny; retention of the SRO (self-regulatory organisation) model; and the dampening of profit expectations. Despite agreeing on MIIs, on regulation, market structure and markets, we find ourselves at variance with the report and, therefore, its recommendations. Regulation: For stock exchanges, economies have used a variety of regulatory mechanisms: the government model; the limited self-regulatory model; the strong exchange SRO model; and the independent SRO model. The report argues that for India, which follows the strong exchange SRO model, “it is premature to think of the ‘independent SRO model’… The government model may not be entirely possible in the Indian context considering the size of the market.”
      There is no elaboration of this very critical assessment. Why is it premature to consider the ‘independent SRO model’? What does the report mean when it says that they government model may not be possible ‘considering the size of the market’? Is the size too big? Both the UK and France follow the government model and the UK market is many times that of India.
      In our assessment, Sebi has been an effective regulator and, therefore, either the independent SRO model or the government model is open to us. Given that MIIs are systemically important, they allow us to deal more effectively with significant conflict of interest issues.
  Market structure:In terms of the arrangement between stock exchanges, clearing corporations and depositories, there are two types of market structures — vertical silos or horizontal integration. The report argues that in India, which follows vertical silos, this market structure has “proven to be competitively viable… no pressing need to alter the existing market structure of solely to address the issue of competition”.
      The report provides no evidence that the market is competitive. In our understanding, the market is a very profitable duopoly. In 2008-09, as reported, the earnings before interest, taxes, depreciation and amortisation (Ebitda) margins of the BSE and the NSE was 70.1% and 73.1%, respectively. If anything, there is a lack of sufficient competition.
      FINALLY, the report does not support the separation of stock exchanges and clearing corporations. It argues that “on value chain consideration… the most risky element… would have to be attached to the clearing and settlement function. Shorn of the clearing and settlement function, the stock exchange is merely a provider of an electronic trading platform”. The report seems to suggest that stock exchanges should own clearing corporations because they are a source of profitability.
      In our understanding, however, the whole point of the report was to look at ways to systemically derisk MIIs. From that standpoint, to completely separate stock exchanges and clearing corporations would be appropriate. The report is concerned that “a single clearing corporation may levy excessive charges on its users”. There are, however, ways of dealing with the issue of market power. For example, the settlement fee can be decided by the regulator. In India’s debt clearing mechanism, the fee is approved by the RBI.
  The market and competition: The report argues that technological change has limited the number of MIIs that might be needed to service the entire marketplace. While remaining agnostic about the optimum number of players in a market, for us what is more important is making the market contestable. We would do this in two ways: first, by reducing the barriers to entry by having an independent clearing and settlement corporation; second, letting market dynamics decide whether competition in trading platforms will come in the shape of new entrants, new products or both. The key is to allow competition to drive an efficient price discovery process.
  Conclusion: Therefore, we are at complete variance with the report on the issue of regulation, market structure and the nature of competition. We believe we should move from vertical silos to horizontal integration. We propose that we move away from the strong SRO model; that clearing and settlement functions be separated from stock exchanges; and finally, cross-listing be allowed. It would also allow us to remove needless restrictions on investors and the cap on profit.
      Given that MIIs produce a public good, we believe that it is fair to have expectations about a reasonable level of profits that MIIs might make. But it is much better to achieve this through taxes on windfall profits (as for public utilities in the UK) rather than cap them at an arbitrary level.
      Our framework would make it possible to both attract capital to stock exchanges and to meet all the concerns of the report with regard to systemic risk and stability. The report has been very radical in posing important questions related to systemic risk. But for reasons best known to itself, the committee has hesitated in choosing the best available option in addressing the issue. 
• What was the Jalan committee constituted for?
• To review the ownership and governance of market infrastructure institutions.
• What is a benami transaction and why are benami transactions bad for the country's economy?
• As the word ‘benami’ suggests, it means not in own name. It is commonly used to denote a transaction, which is done by a person without using his own name but in the name of another. The benamidar has no beneficial interest in the property or business that stands in his name; he represents, in fact, the real owner and so far as their relative legal position is concerned, he is a mere trustee of the real owner.
• The question whether a particular deal is benami or not is essentially a question of fact. The courts in deciding the issue are usually guided by the circumstances as to: (a) the source from which the investment came; (b) the nature and possession of the property after acquisition; (c) motive, if any, for giving the transaction a benami colour; (d) the
  position of the parties and their relationship, if any; (e) the custody of the title deeds; and (f) the conduct of the parties in dealing with the property. These are illustrative instances, not exhaustive. The burden of showing that a transfer is benami is upon the person, who
  alleges benami, i.e., if the government wants to say that a transaction is benami, it will have to prove it. The adverse impact of benami transactions on the country’s economy is
  large. It bifurcates income earning activities into fragments leading to loss of tax revenue. These have been resorted to commit frauds and cheating. These lead to substantial litigation, where the burden of proving benami is on the government, but it does not get discharged substantially because the facts are in the knowledge of respective parties.
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