dfa-29-aug

Daily Financial News Analysis – 29th Sep’20 – Free PDF Download

 

Monetary Policy Committee (MPC)

  • RBI deferred this week’s scheduled MPC meeting a day before it was to start.
  • REASON: The government has not yet finalised the 3 independent members of the 6-member panel that sets policy interest rates.
  • Impact: NIL – because investors/market were/was not expecting any changes with rates
  • The MPC has six members with voting powers, three of them from the RBI.
  • Apart from the governor, they are the deputy governor and executive director dealing with monetary policy.
  • The other three members are nominated by the government.
  • The governor has a casting vote in case of a tie.
  • Efficacy of inflation targeting, the key aim of the MPC, is being debated amid the collapse of growth.
  • The RBI’s other activities such as market operations and liquidity measures will go on as normal as they do not need MPC approval.

Trai Chairman

  • PD Vaghela, currently secretary in the Department of Pharmaceuticals, has been appointed the next chairman of the Telecom Regulatory Authority of India, replacing RS Sharma, who retires on September 30.
  • The Appointments Committee of the Cabinet “approved Vaghela’s appointment as the new Trai chairperson for a three-year period or till he attains the age of 65 years,” – Department of Personnel & Training.
  • Vaghela was previously commissioner of commercial tax in Gujarat.
  • “The new Trai chairman will have to see through the digital transformation of the telecom sector and make it healthy… he should facilitate the flow of investments and also look into the optimal pricing and quantum of 5G spectrum,” TV Ramachandran, president of the Broadband India Forum.
  • “The industry is keenly looking for the leadership and support of the regulator and government for creating a more stable regulatory environment, which is essential for further growth of the digital services sector,” said SP Kochhar, director general of the Cellular Operators Association of India, representing Reliance Jio, Bharti Airtel and Vodafone Idea.
  • “The new Trai chairman has to help settle nerves by indicating firm plans on 5G, find a pragmatic solution for AGR (adjusted gross revenue), the USO fund and issues around the industry’s financial health by creating a healthy market place for survival of telcos,” ex-Reliance Jio MD Sandip Das said.
  • He said Vaghela should expedite decisions and plans announced over the past two years.

Alternative Investment Fund

  • Small and emerging startups looking for growth capital could soon have a domestic alternative to private equity and venture capital money.
  • The central government is in discussions with a global pension fund and the insurance and capital market regulators about floating an alternative investment fund (AIF) that will pool domestic capital from insurance companies and some private equity funds to invest in growth-hungry startups that need funding.
  • AIFs are funds that pool capital from institutional investors and wealthy individuals to invest in riskier assets.
  • All AIFs in India are regulated by the Securities and Exchange Board of India (SEBI).
  • Irdai has been very conservative so far in terms of allowing insurance companies to invest in newer products.
  • Like all investments, most insurers will be pragmatic and prudential in approaching risks.
  • The regulations on investment norms for an insurance company have always been guided by some element of conservatism as between shareholders dividends and policyholders’ money, the regulator’s priority is to protect the latter.
  • But some of the insurance industry’s rules and regulations need to change if insurance companies are to play a substantial part in this AIF.
  • The development is part of the central government’s strategy to provide domestic funding options to startups and thereby reduce the dependence on foreign private equity players, especially those from neighbouring countries.

UPPCL

  • The Uttar Pradesh power sector, mired as it is in a perpetual state of crisis, has identified unmetered connections (katiya connections) to be one of the reasons for its bane.
  • UPPCL’s total consumer base of 281 lakh, about 25.93 lakh (9.23%) connections are unmetered.
  • Shockingly, Purvanchal Vidyut Vitaran Nigam (PuVVNL), the Varanasi discom that is soon going to be put out for bidding, accounts for 49.24% (1,27,6747) of these unmetered connections.
  • Stating that metering is the biggest challenge in Purvanchal, the additional chief secretary (ACS) (energy) and the chairman of UP Power Corporation (UPPCL) Arvind Kumar, in a series of tweets said that the department was pushing hard to meter them by the end of the current financial year.
  • Meanwhile, to bring down distribution losses, the department has started taking strict action to control power theft in all the districts in the state and has one exclusive anti-power theft police station operational in each district for lodging of FIRs and investigation of offences under the Electricity Act.
  • UPPCL also has the problem of people who have metered connections but do not pay their bills, mainly those who had been given connections under the Centre’s ambitious Saubhagya scheme.
  • Of the total 208.62 lakh rural consumers, only 17.73% (36.98 lakh) have paid at least once since April 1, 2020.
  • The rest about 171.64 lakh have not paid even once.
  • Though the situation was slightly better in urban areas, yet only 72.49% (52.23 lakh out of 72.05 lakh) have paid electricity bills since April, while nearly 20 lakh have not paid even once in the current financial year.

 

 

 

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