New curbs on cattle slaughter
Rules notified to prevent sale of cows and other bovines for slaughter at markets
•The Centre has banned the sale of cattle for slaughter at animal markets across the country.
•Under a notification, titled the Prevention of Cruelty to Animals (Regulation of Livestock Markets) Rules, 2017, those who wish to sell cattle — bulls, cows, buffaloes, steers, heifers and camels — may do so only after they formally state that the animals have not been “brought to the market for sale for slaughter”.
Verification of buyers
•At the same time, buyers of cattle at animal markets will have to verify they are agriculturalists and declare that they will not sell the animal/s for a period of six months from the date of purchase.
•The rules, notified by the Ministry of Environment, Forest and Climate Change on May 23, demand that buyers “follow the State cattle protection and preservation laws” and “not sacrifice the animal for any religious purpose”. They also prohibit cattle purchased from animal markets being sold outside the State, without permission.
•Monitoring committees at the State and district levels will be set up to implement the rules and monitor the functioning of animal markets. Such markets will be identified and registered; any new market that is set up will need the approval of the District Animal Market Monitoring Committee, which will be chaired by the Collector or District Magistrate.
•To inhibit smuggling, animal markets may not function within 25 kilometres of a State border and 50 kilometres of an international border.
Kerala condemns
•The notification drew the strongest response from Kerala, where Chief Minister Pinarayi Vijayan declared it was part of a plan to further the RSS agenda. He said in a statement that the Centre’s action was contrary to diversity, which is the core of Indian democracy. All major parties in the State, barring the BJP, were critical of the decision with the Congress Leader of the Opposition Ramesh Chennithala describing the notification as a threat to human rights.
Impact on industry
•While individuals have not been prevented from selling cattle for slaughter, representatives from the meat and livestock industry have expressed serious concern about the impact of the notification. D.B. Sabharwal, secretary general, All India Meat and Livestock Exporters Association, said representatives from the industry have asked for a meeting with Central government ministers and senior officials including in the Ministry of Environment, Forest and Climate Change to inform them about the adverse impact on industry, employment as well as the export sector.
•He said that 90% of buffaloes are sourced from mandis by middlemen for sale in slaughterhouses against a mere 10% that is bought directly from farmers. He added while the Centre is empowered to frame rules, implementation of the regulation of livestock falls under the State government’s ambit.
•Sources said that Harsha Vardhan, who recently took charge as the new Minister of Environment, Forest and Climate Change, is likely to meet the industry representatives soon.
SC had taken varied positions on cattle issue
Ultimately it asked the Centre and States to devise policy
•For years, the Supreme Court has struggled for consistency in its judicial pronouncements regarding cattle, leaving it ultimately to the Centre and States to devise an appropriate policy.
•While Supreme Court banned the bull-running sport jallikattu as cruel, it refused to intervene with States to frame a uniform policy on cattle slaughter. Neither did the court deem it fit to examine a plea to ban animal sacrifices for religious purposes.
Traditions
•“The balance and harmony of all faiths, this court is bound to it. Your petition makes generalised statements on a very, very sensitive matter.. We have to close our eyes to centuries and centuries old traditions,” Chief Justice of India (as he was then) H.L. Dattu orally observed in court to a petition filed by a journalist, Varaaki, in September 2015.
•The petition had contended that “faith, religion, customs and practices should not take precedence over lawful rights, human or animal. This being true for all religious communities, whether it be Durga pooja, the slaughter of lambs for Easter, turkeys for Thanksgiving or goats for Bakri-Eid.”
•Again, in 2017, a Bench led by Chief Justice of India J.S. Khehar declined a plea by Delhi resident Vineet Sahai to direct the States to frame a national policy as contradicting laws ensured a favourable clime for illegal inter-State transportation of cattle.
Extending rules
•In April 2017, the apex court had asked the Centre to extend to India-Bangladesh border areas its rules framed to counter the smuggling of cattle to territories in Nepal.
•Legal precedents also show that the court had differed on the question whether beef was a “poor man’s diet”.
Red tape herring?
Abolishing the FIPB is just symbolism — to attract FDI, more reform is needed
•Nearly four months after Finance Minister Arun Jaitley promised in his Budget speech to abolish the Foreign Investment Promotion Board, the Union Cabinet has approved its ‘phasing out’. The FIPB was set up in the early 1990s as an inter-ministerial mechanism to vet investment proposals from abroad. The Department of Industrial Policy and Promotion under the Commerce Ministry is now expected to formulate a standard operating procedure to process foreign direct investment applications in 11 sectors that are still not in the automatic FDI approval list. The department would have to be consulted by line ministries, which have been empowered to take ‘independent’ decisions on investments proposed in their domains. The government believes that once the Board is history, red-tapism will shrink, ease of doing business will improve and investors will find India more attractive. However, the decision is little more than a symbolic gesture. Over 90% of investment flowing in already does not require an FIPB nod as it comes in through the automatic route. And while the FIPB may have delayed clearances at times, the efficacy of this move will be determined by the ability of individual ministries (and sectoral regulators which may be involved in the ultimate decision) to exercise ‘discretionary’ powers without fear, favour or the cover provided by a collective decision-making body.
•Bureaucrats are likely to remain cautious till the government carries out changes it has promised to the anti-corruption law to protect them from the wrath of auditors and investigative agencies for bona fide decisions taken in the line of duty. The trouble is that even where FDI limits have been raised significantly, there are riders and rules attached that officers need to interpret for each case. FDI inflows have surged to record highs after a lull in the UPA’s second innings, and long-awaited easing of FDI thresholds in certain sectors has been carried out. But cumbersome rules, not the FIPB, have been responsible for a less than enthusiastic response from foreign investors in some sectors. For instance, global insurers can hold up to 49% ownership in Indian ventures but only if Indians retain management and control over these entities — this is an onerous definition of control that has inhibited deal-making. Despite allowing 100% FDI in food retail, rules prohibit foreign players from using a small fraction of their shelf space for non-food items, affecting investment plans. This, in a sector that can create millions of jobs and boost farm incomes. On the other hand, archaic land acquisition and labour laws continue to make it difficult for large factories to come up. Looking ahead, the question on foreign investors’ minds is this: if a prime minister with a formidable parliamentary majority doesn’t remove such obstacles now, then when?
PF contribution may be cut to fatten your wallet
Mandatory savings rate to be reduced to 10% from 12%
•Employees may expect a better take home salary in the near future as the Labour Ministry has proposed decreasing the mandatory rate of contribution toward provident fund savings from 12% to 10% of the income.
•Central trade unions, however, are set to strongly oppose the proposal which will be discussed in the Employees Provident Fund Organisation (EPFO)’s central board of trustees (CBT) meeting, chaired by Labour Minister Bandaru Dattatreya, to be held on Saturday in Pune.
•“The social security contribution rate affects the institutional environment and labour market efficiency. It has an impact on the carry home pay of the employees,” the meeting’s agenda papers said. “Lowering the rate of contribution may facilitate widening the coverage of all employees, as a lower social security contribution rate reduces the incentive for evasion. Even employees may wilfully become a party to evasion if the social security contribution is very high.”
Compulsory saving
•At present, 24% of a formal sector worker’s salary is deducted — with 12% counted as employer’s share and 12% as employee’s contribution — toward Employees’ Provident Fund savings. This is compulsory for employees earning Rs. 15,000 a month.
•The EPFO’s central board of trustees will consider a proposal to lower “the rate of contribution to be paid by the employer and an equal contribution by employees from the present 12% to 10% by the issue of an appropriate order by the Central Government.”
•The Employees’ Provident Fund and Miscellaneous Provisions Act 1952 empower the Centre to lower the contribution rate toward EPFO schemes and the Government intends to issue a notification to effect the change.
•The move comes following a directive from the Labour Ministry to EPFO on April 28. “…There have been demands from various quarters on many occasions to review the present rate of EPF contribution and place it on par with other social security schemes such as National Pension System (NPS),” the Labour Ministry’s letter said.
•The EPFO said that employees who intended to make higher savings could still do so by availing the option of voluntary provident fund contribution allowed under the present law.
•The Labour Ministry also said that government employees contributed less toward their social security schemes compared to EPF schemes which were applicable to private sector workers only. For instance, under the New Pension System and Contributory Provident Fund, equal contribution of 10% of income is made by employers and employees.
Union opposition
•The RSS-affiliated Bharatiya Mazdoor Sangh (BMS), which has not participated in nationwide strikes organised by central trade unions in the last two years, is threatening to go on a strike this time.
•“The government is benefiting the corporate businessmen by hurting the interests of millions of workers. We will go for a nationwide strike if the government doesn’t roll back its proposal,” said BMS National Vice President M. Jagadiswara Rao, who is also a member of EPFO’s CBT.
•“(Prime Minister Narendra) Modi government’s fourth year begins with further intensifying the attacks on the rights of the working people of the country. While the government claims that the rights of the workers will be safeguarded, this move on reducing EPF contribution of employers exposes the pro-corporate policies of the government and its only concern for ‘ease of doing business’,” said Centre of Indian Trade Unions general secretary Tapan Sen.
Hope to see consolidation among government-owned banks in 2-3 years
Larger banks have better market access and should be able to merge with smaller banks
•Moelis & Company, which started its India operations in 2012, works with a team of 14 bankers headed by veteran investment bankerManisha Girotra. Prior to Moelis, Ms. Girotra was the chief executive of Swiss bank UBS’s India operations. Moelis, which advised several high profile deals like the sale of Japyee’s cement assets to Aditya Birla Group, is upbeat on the opportunities to resolve stressed assets in India and wants to play an active role in the sector.
•The Centre has recently amended the Banking Regulation Act that gives more power to the RBI in resolving stressed assets. Does this present an opportunity for you?
•I believe the part of the NPA problem will be resolved with economic growth reviving. Growth should be robust in the next two-three years which will resolve the NPA problem. Having said that some of them will need restructuring, some of them may need a change in ownership. There is a political will to see our banks healthy again.
•There is a strong opportunity for Moelis in the restructuring space. We had participated in some of the deals like selling of Jaypee’s cement asset to Aditya Birla. We were also involved in the restructuring of Essar’s coal assets in the U.S., to name a few. I see more such opportunities for us. Restructuring is a large part of Moelis’s global business. I think the opportunity exists here too because of the stressed situation in banks.
•It is heartening to see that there is a political will. The whole joint lender’s forum could not come to a consensus because there were multiple players — what was really needed was someone to drive it. So I am very positive on what has happened. With the Act amended, we are hopeful to see all of this debt recast implemented properly and we expect in the next 12-18 months a lot of these problems unwinding.
•Many private equity funds were awaiting regulator’s clarity for participating in the stressed assets sector. Will the change in Act help?
•The conversations are all alive with the banks. The new ordinance will help. You will see a lot of private equity funds coming into India to acquire stressed companies in the next 12-18 months.
•RBI has recently revised the norms for prompt corrective action (PCA) and imposed restrictions on some banks. Do you see this as a prelude to consolidation among public sector banks?
•I don’t know, but I hope they are. I think in the state-owned bank’s space there is a lot of scope for consolidation.
•The larger banks which are better capitalised, have better market access and should be able to merge with the smaller banks. There should be fewer banks but stronger banks. Whichever sector it is, if there are fewer players with deep pockets, they dominate and the sector does very well. We have seen it in the telecom sector. I really hope to see consolidation among public sector banks in the next 2-3 years as the sector needs to consolidate.
•But bigger banks are also facing asset quality headwinds…
•The financial sector is getting a lot of flows from the public market. At the moment, state-owned banks aren’t getting the share of these capital flows. As it is able to walk through some of the NPA problems, we will see funds flowing into these banks again.
•So then they can raise funds through FPO, QIP etc., and get capitalised. So it is a bit of a two-pronged strategy… as you see some of the NPA problems get resolved, the market will have confidence on them, and then they can get capital and then drive growth and consolidation.
•The merger of public sector banks is a political hot potato. Do you think the government will push consolidation?
•The government is really serious about the business, they are serious about solving the NPA problem. We have seen the political will they have demonstrated in the last 18 months…it is unprecedented…I have not seen anything like this in my career. So they want to strengthen their banks. So, I hope the next step will be consolidation among state-owned banks.
•How do you see mergers and acquisition activity panning out in the banking and financial sector?
•The sector will remain active, there is a lot of capital coming into the sector. Rather than bank-to-bank, there is a lot of consolidation activity in bank to NBFC, bank to MFI which provide you certain geography, certain product … and I think you will see more of those happening. Also, a lot of capital is chasing the fintech players. The whole demonetisation exercise and drive to digitisation gave these companies a huge push. That space also realises that there is merit in scale. So, you will see consolidation for the reason of scale. I think the fintech sector will remain active in the 12-18 months with regard to consolidation.
•Last year we have seen healthy M&A deals. How do you see the demonetisation exercise impacting such deals?
•Demonetisation has no consequence on M&A activity. Last year we had $60 billion of M&A. A refreshing trend that I have seen is that a lot of domestic M&As are happening… earlier you have not seen Indian entrepreneur selling to an Indian entrepreneur or an Indian entrepreneur paying a higher multiple for an Indian company. There is always this build versus buy argument.
•But today, they are willing to pay the multiple. In my career, M&As were always inbound or outbound. This is the first time I am seeing domestic M&A outnumbering inbound plus outbound. Out of the $60 billion of M&A last year, $30 billion would be domestic, $20 billion was inbound and $10 billion would be outbound.
Do you see this trend continuing?
•Domestic consolidation will remain an important theme because people are realising India is too big a country and to play in this country you need to have a scale. The scale provides you cost reduction opportunities, market access etc. Also, there are some companies where the second generation does not want to involve in business. So they are happy to monetise, earlier this never used to happen! The other trend we are seeing is that the private equity players have actually been able to monetise stake. They are not only exiting through IPOs but they have been able to sell companies. That is a very important trend because they are able to demonstrate that if they are able to put capital in India, they are also able to exit capital out of India.
