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Today's Hot Stories - April 19, 2010

10 Headlines for Today

(1) Tharoor quits after Manmohan asks him to step down
(2) Supreme Court upholds lifer to Manu Sharma
(3) India at centrestage as Labour, Tories trade barbs
(4) Nifty will try to bounce back around 5150-5200 levels: Rohit Shinde
(5) Indian banks don’t chase hot money: Finance Minister
(6) Protectionism could hit global economic recovery: IMF economists
(7) Deccan Chargers beat Delhi Daredevils to reach IPL semis
(8) IPL semis shifted to Navi Mumbai after Bangalore blasts
(9) Injured Bhupathi settles for runners-up trophy in Monte Carlo
(10) Pak seeks Nepal detour to SAARC after bad blood with India

5 Stories for Today

(1) PM Manmohan Singh-Gilani meeting unlikely in Bhutan
(2) Ahead of New York meet, Iran seeks big changes in NPT
(3) A needless row over control of ULIPs
(4) Sales revival: JLR reviews plant closure plan in UK
(5) Asian FX cooperation would aid growth: ADB chief

(1) PM Manmohan Singh-Gilani meeting unlikely in Bhutan

With just about 10 days to go before yet another Saarc summit is overshadowed by the India-Pakistan non-affair, India says it is looking for "credible action" from Pakistan regarding terrorists operating against it.

PM Manmohan Singh and and his Pakistani counterpart Yousuf Raza Gilani literally bumped into each other at the nuclear security summit in Washington last week, exchanging what everybody called "pleasantries". For most observers, it was the Washington version of the Kathmandu handshake between former PM Atal Bihari Vajpayee and Pervez Musharraf which set the ball rolling for the 2004 summit in Islamabad, again on the sidelines of the Saarc summit.

In Bhutan, it will be difficult for Singh and Gilani to avoid each other, since there aren't that many leaders going around. Going by the innate courtesy of Singh, he wouldn't even want to. But the quality of the meeting can only be judged by actions Pakistan takes in its own country. "The minimum we expect," the PM told, "is that Pakistan takes credible steps to bring perpetrators of the horrible crimes of 26/11 to book. We will be very happy to begin talks once again."

However, it was for the first time that the PM actually named terror leaders like Zaki-ur Rehman Lakvi, Ilyas Kashmiri and Saeed as people that need to be tackled because they were instrumental in "fanning terrorism against India".

At this moment, Pakistan is still some distance away from that realization. Besides, with its forces concentrating on the Pakistani Taliban and working with the US on the Pak-Afghan border, there is also no external pressure for Pakistan to act against the likes of Saeed or his organization. US president Barack Obama asked Pakistan to go after terror groups like LeT, but it lacked force and he did his bit by asking India to resume dialogue with Pakistan.

Besides, with US secretary of state Hillary Clinton actually travelling past Washington's formidable security cordon during last week's nuclear summit to meet Gilani at his swanky Four Seasons Hotel in Georgetown, the signal from the US was clear: US needs Pakistan right now.

The Pakistan army chief responded to US nudging on LeT by saying that was not a priority. LeT has been careful to stay away from attacking Pakistani interests, though its deepening ties with al-Qaida and Taliban mean that sooner rather than later, this group will certainly turn against Pakistan.

But for the moment, the prospects of a meaningful "dialogue" between India and Pakistan in Bhutan appears dim, though a meeting between the prime ministers is likely. Indian officials said they had indicated that foreign secretary Nirupama Rao was ready to travel to Pakistan for the next round of talks with her counterpart Salman Bashir. Pakistan is yet to respond to that. Meanwhile, Pakistan has insisted that it would be satisfied with nothing short of a ministerial meeting.

India is not yet ready for a composite dialogue but it is becoming clear that the template used for dealing with Pakistan for these past few years has had to be revised. A new approach may be in the works. As a senior official explained, India would need to develop a more textured policy towards Pakistan.

(2) Ahead of New York meet, Iran seeks big changes in NPT

Iran on Sunday stepped up its campaign for making radical changes in the Nuclear Non-proliferation Treaty (NPT) ahead of a conference in New York in May that would review the treaty in its entirety.

Iran's Foreign Minister Manouchehr Mottaki, in his concluding address at a conference on disarmament and non-proliferation, said Tehran favoured consultations with “some members” of the United Nations Security Council for setting up a time-table for eliminating all atomic weapons across the globe.

Mr. Mottaki said the drive for nuclear disarmament should follow the lead given by the Chemical Weapons Convention which, despite initial scepticism, succeeded in forging a legal regime to eliminate all chemical weapons. However, he emphasised that destruction of chemical weapons as agreed upon, must be completed by 2012.

The Minister stressed that new ideas were required to revitalise all three dimensions of the NPT — non-proliferation, peaceful use of nuclear energy and disarmament — at next month's review conference. “Forty years after the NPT's coming into force, a new approach was needed to make the treaty relevant,” he said.

Mr. Mottaki pointed out that the NPT had failed to fulfil its promise on non-proliferation. Citing Israel's example, he asserted that “everybody knows who equipped Israel with these weapons, which enabled it to acquire different types of [atomic] warheads.”

Accusing the West of undermining the NPT, he emphasised that “nothing has been achieved in the direction of disarmament.” He was of the view that The New York conference should emphatically agree on the establishment of a nuclear weapons-free zone in West Asia — a proposal that would squarely bring into its ambit Israel's nuclear weapon arsenal.

The Minister said Article 6 of the NPT, which called for disarmament, and Article 4, which promised peaceful nuclear technology to the member-countries should be brought into sharp focus in New York.

The next edition of the conclave, which would also include participation by religious scholars, would be held in Tehran in April 2011 and would be called the second conference of “International Disarmament and Security.

(3) A needless row over control of ULIPs

The Securities and Exchange Board of India has at last discovered, what many knew for years, that unit linked insurance plans (ULIPs) are similar in structure to mutual fund products. One of the arguments being advanced to prove this discovery is that the premium charged for life cover under a ULIP constitutes only two per cent of the total premium. What the SEBI does not seem to know is that this is the practice under all insurance plans, both traditional and unit linked, except under pure term assurance plans. The insurance component increases along with age at entry and policy term.

The SEBI order also shows that an extreme step has been initiated without fully studying the basic difference between traditional and unit linked plans. A traditional plan of insurance has three components — risk cover, assured benefits and discretionary benefits. For example, for a stipulated annual premium, the insurer may assure that an amount of Rs. 2 lakh plus bonus will be paid on death of the life assured before the date of maturity and Rs. 1 lakh plus bonus on survival up to the date of maturity. Here, the risk cover is Rs. 2 lakh, assured benefit is Rs. 1 lakh and the bonus being declared each year is the discretionary benefit. A bonus, once declared, becomes an assured benefit.

Under unit linked plans, the amount payable on maturity may not be assured or may be assured partly, as ‘not less than a stipulated amount'. The excess of net asset value over the minimum assured amount will be the equivalent of discretionary element (bonus) under traditional plans.

The quantum of bonus under traditional plans is determined each year by the actuary based on the company's performance and will progress smoothly from year to year. Under unit linked plans, the quantum of bonus is determined by market forces and can fluctuate from time to time. Just because the design of the ULIP has similarities with a mutual fund product, it cannot be termed identical to a mutual fund product.

Many mutual funds, in association with insurance companies, provide accident cover, critical illness cover and the like. No one, including SEBI, ever thought that mutual funds were marketing insurance products in the garb of mutual fund products. The Insurance Regulatory and Development Authority (IRDA) too never complained that such products were not submitted to it for approval.

The controversy between the two regulators is being dubbed a turf war. It is an unnecessary war since the hands of both are already more than full and neither is able to do full justice to its responsibilities.

Look at the way mutual funds are managed. The trustee of a mutual fund holds only an honorary position, with no remuneration and with absolutely no resources. Under Chapter III of the mutual fund regulations, SEBI has defined the duties and responsibilities of trustees in such a way that they can be held responsible for anything and everything that is happening.

When such enormous responsibilities are cast on part time honorary functionaries with no independent resources to carry them out, one would expect officials of SEBI to at least hold periodic meetings with the board of trustees of each mutual fund and discuss their problems.

The SEBI concentrates only on regulatory aspects and takes no active interest in proper development of mutual fund industry. It does not ensure that mutual fund operations are systematically extended to smaller towns/rural areas and more and more individual investors are attracted.

The turf battle between the two regulators need not go to court and can be resolved by taking two simple steps.

Bring the mutual funds under a separate regulatory and development authority (MFRDA) and direct the IRDA to put an end to ULIPs being used as instruments for exploiting the policyholders.

(4) Sales revival: JLR reviews plant closure plan in UK

Indian conglomerate Tatas-owned luxury carmaker Jaguar Land Rover is reviewing earlier plans to close one of its UK plants on account of a recent revival in sales and is also likely to seek the UK government's assistance for launching new models.

Jaguar Land Rover (JLR) is "weighing a dramatic about-face on plans to close one of its three UK production plants". A recent revival in sales coupled with the arrival of a new management team "has led to a review of the closure plan".

In September last year, the company had said it planned to close one of its factories. "Its plant at Halewoood on Mersyside was safe, with the axe to fall on one of the Midlands sites, Castle Bromwich or Solihull.

Tatas have hired CarlPeter Forster, a former boss of General Motors in Europe, and Ralf Speth, previously a BMW executive, to manage JLR operations. Quoting sources, the publication said that Forster and Speth were now considering a business plan that would see both marquees launch models and increase production. The plan could require keeping all three plants open.

(5) Asian FX cooperation would aid growth: ADB chief

More cooperation between Asian countries on exchange rate policy would help growth and increase the region's flexibility, the head of the

Asia Development Bank said on Sunday.

Haruhiko Kuroda, in Madrid for talks between Asian and European financial officials, said the meeting did not cover the specific question of whether China's yuan currency should appreciate. But he said if Asian countries cooperated more, they would not have to fear losing export competitiveness compared to their neighbours.

"By cooperating and coordinating on exchange rate policies in Asia, Asia as a whole can have greater flexibility of currencies vis a vis developed economies and that would surely contribute to rebalancing," he said. "An exchange rate adjustment in Asia would be quite conducive to rebalance growth from an excessive reliance on exports to more reliance on domestic demand."

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