Sunday, March 27, 2011

FDI cap on insurance a deterrent, says Warren Buffett

BANGALORE: American investor, industrialist and philanthropist Warren E. Buffett said on Tuesday that he was seeking to invest in large economies like India, Brazil and China.
Addressing a media conference Berkshire Hathaway Chairman and CEO Mr. Buffett said the 26 per cent ceiling on foreign direct investment in the insurance sector was a deterrent.
Pointing out that his company operates as an agency for Bajaj Allianz, he said, “Obviously, for the time being, the limit would make us operate at the agency level rather than at an underwriter level.” Berkshire Hathaway recently made a foray into the Indian non-life insurance sector as a corporate agent for Bajaj Allianz General.
Mr. Buffett said his company had traditionally focussed on investment opportunities in the U.S. “About 85-90 per cent of Hathaway's investments have been in the U.S., but we are now seeing more opportunities in some of the larger economies like India. India is a logical place to invest in,” he remarked. He said investments had to “be large enough to be meaningful.”
Mr. Buffett said investing in emerging markets was ‘tougher' because the size of these markets was small. “Berkshire Hathaway has generally favoured investing in larger companies,” he said.
“I am an enormous believer in free trade, and world trade is not a zero sum game,” Mr. Buffett said.
“The more India and China prosper, the more the U.S. will prosper,” he said. The “resilience of American capitalism has been a major factor in its success,” he said.
Asked if he was investing heavily in information technology companies, Mr. Buffett said: “I do not know which of the companies (global IT companies) will be the winners, but I do not understand the industry well enough.” Speaking about investing, Mr. Buffett said, “Invest in what you understand. Do not go outside your circle of confidence.”
Mr. Buffett is here to visit a facility of TaeguTec, a metal-cutting tool manufacturer, which is owned by Israeli company Iscar. Berkshire Hathaway bought an 80 per cent stake in the Iscar in 2006.
Mr. Buffett said the three main objectives of his India visit were to visit the TaeguTec facility, promote philanthropy and to “explore opportunities” in the insurance business.

Buffett seeks higher FDI in Indian insurance sector

Keen to enter growing insurance sector, US billionaire Warren Buffett, who is here mainly to promote philanthropy, on Friday wondered if India would raise the FDI limit in the sector to 49 per cent.The U.S. based company is keenly watching the developments regarding further opening of the sector to foreign investment.Legendary investor Buffett, whose group recently entered Indian insurance market, called on IRDA Chairman J Harinarayan here and wanted to know if the FDI cap would be raised to 49 per cent. IRDA is the insurance regulator.“Buffett wondered whether the foreign direct investment limit for foreign insurers could go up to 49 per cent (from the present 26 per cent),” Mr. Harinarayan told PTI after meeting chairman of conglomerate Berkshire Hathaway.“The discussions were very general and was good,” he said.Mr. Buffett, known for his business acumen and choice of investments, said that India is an “an exciting market”.
The Insurance Laws (Amendment) Bill, 2008 is pending in Parliament.The Bill, when enacted, would allow raising the FDI cap for the industry to 49 per cent. However, it has been awaiting approval since 2008 as it was delayed by strong opposition from the Left parties.
Berkshire Hathaway had recently forayed into the Indian non-life insurance sector as a corporate agent of Bajaj Allianz General.On his maiden visit to India, Buffett had said that an foreign investment cap of 26 per cent in insurance sector here was a deterrent.Earlier in the day, Berkshire Hathaway head re-insurance Ajit Jain said the question of larger investments in the sector in India, “depends on regulation.”India-origin Jain, long rumoured to succeed Buffet, looks after the conglomerate’s multi-billion dollar re-insurance business.
On Thursday Mr. Buffett along with Bill Gates, held a dinner meeting here with 70 business people, including Wipro Chairman Azim Premji and discussed a wide range of issues related to philanthropy.As part of its India entry, the American conglomerate has incorporated Berkshire India to sell and distribute general insurance products in India. It would directly sell insurance to consumers through the portal ‘’ and by way of telemarketing.Berkshire Hathaway is a sprawling conglomerate that has interests in various businesses, including property and casualty insurance and reinsurance, finance, manufacturing, and retailing.

Sunday, March 13, 2011

Banned pesticides being used in India, admits Pawar

Agriculture Minister Sharad Pawar on Friday admitted in the Rajya Sabha that 67 pesticides banned or restricted in a number of countries are being freely used in India.
Replying to questions during question hour, Mr. Pawar said 27 pesticides, including calcium cyanide, have been banned for manufacture, import and use in India. Nicotin sulfate and captafol have been banned for use but their manufacture is allowed for export. Four pesticide formulations have been banned for import, manufacture and use, while seven others have been withdrawn. Thirteen pesticides, including endosulfan, are allowed with restrictions. Asked why these pesticides were being allowed in India, he said that only some countries have banned their use, while others such as Brazil and Australia continue to use them. “We take all precautions in allowing use of these pesticides. Certain countries have banned them, but certain countries have allowed their use. We have taken the opinion of the scientific community and considered the interest of the farming community in allowing their use.”
On reports of the presence of high level of pesticides in fruits and vegetables in cities like Delhi, Mr. Pawar said samples were collected from time to time and appropriate action was taken.
On the use of endosulfan, Mr. Pawar said four different committees of scientists have certified it as being safe for use. However, in view of request from the Kerala government its use had been disallowed in Kerala. Similar request has been received from Karnataka and use of endosulfan is in the process of being stopped in the State.

Wednesday, March 9, 2011

Corporate socialism's 2G orgy

The Union budget writes off Rs.240 crore in corporate income tax every single day on average — the same amount leaves India each day in illicit fund flows to foreign banks.
In six years from 2005-06, the Government of India wrote off corporate income tax worth Rs.3,74,937 crore — more than twice the 2G fraud — in successive Union budgets. The figure has grown every single year for which data are available. Corporate income tax written off in 2005-06 was Rs.34,618 crore. In the current budget, it is Rs.88,263 crore — an increase of 155 per cent. That is, the nation presently writes off over Rs.240 crore a day on average in corporate income tax. Oddly, that is also the daily average of illicit fund flows from India to foreign banks, according to a report of the Washington-based think tank, Global Financial Integrity.
The Rs.88,263 crore covers only corporate income tax write-offs. The figure does not include revenue foregone from higher exemption limits for wider sections of the public. Nor higher exemptions for senior citizens or (as in past budgets) for women. Just income tax for the big boys of the corporate world.
Pranab Mukherjee's latest budget, while writing off this gigantic sum for corporates, slashes thousands of crores from agriculture. As R. Ramakumar of the Tata Institute of Social Sciences (TISS) points out, the revenue expenditure on that sector “is to fall in absolute terms by Rs.5,568 crore. Within agriculture, the largest fall is to be in crop husbandry, with an absolute cut of Rs.4,477 crore.” Which probably signals the death of extension services, amongst other things, in the sector. In fact, “within economic services, the largest cuts are to be in Agriculture and Allied Services.”
Even Kapil Sibal cannot defend the revenue losses as notional. For the simple reason that each budget sums up these numbers clearly in tables within a section called ‘Statement of Revenue Foregone.' If we add to this corporate karza maafi, revenue foregone in customs and excise duty — also very largely benefiting the corporate world and better off sections of society — the amounts are stunning. What, for instance, are some of the major items on which revenue is foregone in customs duty? Try diamonds and gold. Not quite aam aadmi oraurat items. This accounts for the largest chunk of all customs revenue foregone in the current budget. That is, for Rs.48,798 crore. Or well over half of what it takes to run a universal PDS system each year. In three years preceding this one, the customs write-off on gold, diamonds and jewellery totalled Rs.95,675 crore.
Of course, this being India, every plunder of public money for private profit is a pro-poor measure. You can hear the argument already: the huge bonanza for the gold and diamond crowd was only to save the jobs of poor workers in the midst of a global economic crisis. Touching. Only it didn't save a single job in Surat or elsewhere. Many Oriya workers in that industry returned home jobless to Ganjam from Surat as the sector tanked. A few other workers took their own lives in desperation. Also, the indulgence for industry predates the 2008 crisis. Industry in Maharashtra gained massively from the Centre's Corporate Socialism. Yet, in three years before the 2008 crisis, workers in the State lost their jobs at an average of 1,800 a day.
Returning to the budget: There's also the head of ‘machinery' with its own huge customs duty concessions. That includes surely, the crores of rupees of sophisticated medical equipment imported by large corporate hospitals with almost no duty levied on it. The claim of providing 30 per cent of their beds free of charge to the poor — something that has never once happened — is an excuse to dole out these ‘benefits' (amongst others) to that multi-billion rupee industry. Total revenue foregone on customs duty in the present budget: Rs.1,74,418 crore. (Which does not include export credit-related numbers).
With excise, of course, comes the standard claim that revenues foregone on excise duty translate into lower prices for consumers. There is no evidence provided at all that this has actually happened. Not in the budget, not elsewhere. (Sounds more like the argument now making the rounds in some Tamil Nadu villages that nothing was looted in the 2G scam — that's the money translating into cheaper calls for the public). What is clearly visible is that the write-offs on excise directly benefit industry and business. Any indirect ‘passing on' to consumers is a speculative claim, not proven. Revenue foregone on account of excise duty in this budget: Rs.1,98,291 crore. Clearly more than the highest estimate of the 2G scam losses. (The preceding year: Rs.1,69,121 crore).
Also fascinating is that the same classes benefit in multiple ways from all three write-offs. But how much does revenue foregone under corporate income tax, excise and customs duty add up to across the years? We have baldly stated budget figures for six years starting 2005-06, when the total was Rs.2,29,108 crore. To the current budget where it is more than double that sum at Rs.4,60,972 crore. Add up the figures since 2005-06 and the grand total is Rs.21,25,023 crore. Or close to half a trillion U.S. dollars. That is not merely 12 times the 2G scam losses. It is equal to or bigger than the Rs.21 lakh crore sum that Global Financial Integrity tells us has been siphoned out of this country and illegally stashed away in foreign banks since 1948 ($ 462 billion). Only, this loot has happened in six years starting 2005-06. The current budget figure for these three heads is 101 per cent higher than it was in 2005-06 (see Table).
Unlike the illicit fund flows, this plunder has a fig leaf of legality. Unlike those flows, it is not the sum of many individual crimes. It is government policy. It is in the Union budget. And it is the largest conceivable transfer of wealth and resources to the wealthy and the corporate world that the media never look at. Oddly, the budget itself recognises how regressive this trend is. Last year's budget noted: “The amount of revenue foregone continues to increase year after year. As a percentage of aggregate tax collection, revenue foregone remains high and shows an increasing trend as far as corporate income tax is considered for the financial year 2008-09. In case of indirect taxes, the trend shows a significant increase for the financial years 2009-10 due to a reduction in customs and excise duties. Therefore, to reverse this trend, an expansion in the tax base is called for.”
Rewind a year further. The 2009-10 budget says the same thing in almost identical words. Only the last line is different: “Therefore it is necessary to reverse this trend to sustain the high tax buoyancy.” In the current budget, the paragraph is absent.
This is the government that has no money for a universal PDS or even an enhanced one. That cuts anyway meagre food subsidies from the largest hungry population in the planet. That, at a time of rising prices and a great food crisis. In a period when its own economic survey shows us that the daily average net per capita availability of foodgrain for the five year period 2005-09 is actually lower than it was in 1955-59 — half-a-century ago.