From a country where, food shortages was an accepted fact and we had to go through periods when we needed administration's permission to host a family marriage lunch and dinner, we have come far. But the sad fact remains that all are yet to travel this distance.
While the intelligentsia, discuss in forums issues that need to be done to rectify this anomaly, little gets done at ground level. From the mid seventies till now, the misuse of funds earmarked for irrigation projects is a classic case in point. Where, irrigation projects got done and rivers regulated, we see prosperity. But the millions which were wasted on the canals which never got made or got built as per intended specifications, have brought misery to many.
Today, India is at cross roads, as your editorial points out.
Given the communication access to many even in the hinterlands of the country, today the rural urban divide is visible to many and increasingly people are demanding answers. With the increased thrust being seen internationally for allocating the necessary importance to increased food production, it is time our ministries got their act together, to bring in the next major thrust..
Today, the cultivated land share is reducing by the year due to rapid industrialisation. We had still not perfected the model of transferring the correct costs for the agricultural produce, before which, this IT led industrialisation has landed on us. Our Economy managers, are now compelled to choose between segments, which they cannot. If one has to pay the correct price for the agricultural produce, we run the risk of increasing inflation and more by way of inflation expectations. But before long one has to do something about it.
We cannot subsidise imported food, but we can extend subsidy to our own agriculturists. While we are moving towards a full fledged market economy, where services are paid at cost, it is essential that the sector which gives the maximum employment opportunities in the country pay the labour minimum wages in relation to industry wages. This has to be achieved through direct subsidies.
Subsidies, however need to be made in transparent manner and cannot again be routed through free services like the Free electricity or through corporations such as subsidised prices for fertilizers. Pay a remunerative price for the farm produce, but demand remunerative price for the inputs used by the beneficiaries of the subsidy. This demands a significant change in the mind set and political will, and one only wishes that our politicians see the long term benefits in such an approach.
Development efforts, to introduce new grain strains, which reduce the water intake, cuts down sow to reap time, is resistant to known strains of diseases , has to be encouraged with state funded initiatives.
It is a mission to increase agricultural production and therefore it has to be taken up with the same zeal it demands; anything less can damage what we have gained since independence.
Any regulator would insist that the system where stake holders process their transactions capture trails which can be utilised to trace participants role leave alone their antecedents. He will be extra cautious about intermediaries, who transact on behalf of clients. The details of the clients though not available at the time of processing the transaction through the system, is an essential data which needs to be recorded. It shall be available to the regulator and the other participants of the transaction and cannot be the left indeterminate.
PN falls short of this and makes the transaction opaque. Especially, where the intermediaries are understood to have offered exotic products through their own financial engineering, the regulator needs to intervene to demand either transparency or prescribe different set of guidelines for such transactions to limit their scope.
Whether it is a cash market dealing or a derivative dealing the completed transaction over a period the owner parties (buyer or seller) to the deal are to be identified. It is therefore essential that funds behind PN needs to be identified and cannot forever hide from the purview of regulator.
While one may fault the manner in which the announcements have been made, the timing, the intent and the prescription are timely.
PGCIL share allotment
A preliminary study of the Demand & Basis of Allotment of PGCIL shares makes an interesting case study from the view of the Basis of allotment of employees quota.
Here is a case of over subscription of the employee quota by 3,18 times and some of the employees have been denied FIRM allotment even though they have subscribed to the reserved quota. The shares available for allotment under the employees quota totals up to Rs. 72. 68 crores which has been subscribed for Rs.231.78 Crores. Given the fact that the EMPLOYEE quota no longer has the restriction of Lock in period, the overwhelming response needs to be discounted for the possibility of proxy subscription.
Under such circumstances, is the basis of allotment justified, in as much as it has denied original allotment to some genuine employees, while making allotment on a proportionate basis to the level of interest shown. It is a different factor that such employees can now definitely buy these shares from the market at a premium(more than 75% as per Grey market indications).
In my opinion this basis of allotment is flawed as it ignores the fact that all employees are to be treated equal. We need to therefore ensure that
Here is a case of over subscription of the employee quota by 3,18 times and some of the employees have been denied FIRM allotment even though they have subscribed to the reserved quota. The shares available for allotment under the employees quota totals up to Rs. 72. 68 crores which has been subscribed for Rs.231.78 Crores. Given the fact that the EMPLOYEE quota no longer has the restriction of Lock in period, the overwhelming response needs to be discounted for the possibility of proxy subscription.
Under such circumstances, is the basis of allotment justified, in as much as it has denied original allotment to some genuine employees, while making allotment on a proportionate basis to the level of interest shown. It is a different factor that such employees can now definitely buy these shares from the market at a premium(more than 75% as per Grey market indications).
In my opinion this basis of allotment is flawed as it ignores the fact that all employees are to be treated equal. We need to therefore ensure that
- Minimum shares based on market lot considerations need to be allotted to all those who have applied for under the quota and
- Full allotment of the applied shares are alloted to the maximum number of persons with out denying anybody allotment.
Determination of Price for IPO by auction
Determination of IPO price by auction does increase the probability of pricing the issue much closer to the open market level as compared to any other form of discovery of price. By definition, the auction process is much closer to the open market but with out circuit breaker given the enabling controlled environment, effectively supervised by the Regulator for compliance.
Hence a solution could be, to put in place a system where IPO prices can be determined through auction, at the option of issuer, but with a lower limit on the price of the scrip, specified by the issuer, below which he may with draw the issue. With such an approach, the investor, especially the retail investor and HNI investors get a better role to play in the determination of price. This system will also usher in a mind set, where long term (read 2 to 3 years) outlook is essential to capture the value of the scrip.
In a developing economy like ours where the stock market is discovering new growth stories every month, we need to move to an auction platform quickly so that the issuer is provided an alternate option and is not necessarily compelled to accept the price suggested by the "Book Builder".
Determination of Price for IPO by auction
Determination of IPO price by auction does increase the probability of pricing the issue much closer to the open market level as compared to any other form of discovery of price. By definition, the auction process is much closer to the open market but with out circuit breaker given the enabling controlled environment, effectively supervised by the Regulator for compliance.
Hence a solution could be, to put in place a system where IPO prices can be determined through auction, at the option of issuer, but with a lower limit on the price of the scrip, specified by the issuer, below which he may with draw the issue. With such an approach, the investor, especially the retail investor and HNI investors get a better role to play in the determination of price. This system will also usher in a mind set, where long term (read 2 to 3 years) outlook is essential to capture the value of the scrip.
In a developing economy like ours where the stock market is discovering new growth stories every month, we need to move to an auction platform quickly so that the issuer is provided an alternate option and is not necessarily compelled to accept the price suggested by the "Book Builder".
Subscribe to:
Posts (Atom)