ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Sidharth SinhaSubscribe to Sidharth Sinha

Public and Private Sector Banks: Convergence in Performance

This article examines the performance of public sector banks and the new private sector banks over the period 2005-06 to 2010-11. What emerges is that while the relative performance of public sector banks had improved signifi cantly by 2005-06, the new private sector banks had moved ahead by 2010-11. It appears that early gains by public sector banks may have been the result of initial slack in the system and new gains will require radical changes in human resource management and corporate governance practices. Such reforms are urgent in the light of the proposal to issue new banking licences.

Corporate Governance of State-Owned Enterprises: The Case of BSNL

A missing element in the reform process in India is the restructuring of the incumbent state-controlled monopoly operator prior to or simultaneously with the opening up of the sector to competition. This places the state-owned operator at a serious disadvantage relative to competitors. This has been the case with Air India/ Indian Airlines with adverse consequences. This paper argues that Bharat Sanchar Nigam Limited/Mahanagar Telephone Nigam Limited may be headed in the same direction. The restructuring of the state-owned enterprises must begin at the top with a complete reorientation of the corporate governance mechanism which establishes the relationship between the government and the enterprise. With the growth of private operators in these sectors the state-owned enterprises are no longer of strategic importance to the government for sector development or providing "universal service". To the extent privatisation is not feasible or desirable at least in the short run, the corporate governance mechanism should be designed around the objective of growth and efficiency as in the case of private enterprises.

Introducing Competition in the Power Sector

Open access and multiple distribution licensees in the same area are two key provisions in the Electricity Act 2003 for introducing competition in the power sector. However, open access is subject to a cross-subsidy surcharge to compensate the incumbent distribution licensee for loss of cross-subsidy. Similarly, new distribution licensees may be required to have a mix of cross-subsidising and subsidised consumers to prevent 'cream skimming'. These restrictions will reduce the competitive impact of these provisions since cross-subsidy is likely to be difficult to reduce, especially for agriculture and rural consumers. Two steps are, therefore, necessary for introducing competition in the power sector. First, there should be a physical and organisational separation of agriculture and rural supply. Second, cross-subsidy in tariffs should be eliminated for urban domestic consumers and replaced with ' lifeline' rates for low income consumers and subsidised extension of the network to high cost areas. As in the case of telecommunications this may be funded through a sector specific 'universal charge'.

Agriculture Insurance in India

Government-run crop yield insurance scheme, procurement at minimum support prices and calamity relief funds are the major instruments being used to protect the Indian farmer from agricultural variability. The proposed Farm Income Insurance Scheme is an attempt at integrating crop yield insurance and price support. Private insurers have been experimenting with rainfall insurance as a substitute for or complement to crop insurance. This paper reviews the development and performance of agriculture insurance and examines the scope for participation by private insurers.

High Price-Earnings Ratio of Indian Stock-Market and Investment by Foreign Financial Institutions

This paper explores the high level of the price-earnings (P/E) ratie of the Indian stock market in the context of investments by foreign financial institutions. The measured P/E ratio may be high because of abnormally low earnings during 1991-92 and the high P/E ratios of foreign controlled enterprises. Even after adjusting for these two factors the P/E ratios is likely to be high relative to historical levels and relative to P/E ratios of other emerging markets. However, given its excellent diversification potential the Indian stock market may be attractive to foreign investors in spite of its high P/E ratio.

Inter-Industry Variations in Capital Structure

This study attempts to explain the variations in capital structure across industries in India on the basis of capital structure theories using datafrom the Reserve Bank of India survey ofthe finances of public and private limited companies. The results are broadly consistent with theory. The most significant explanatory variables for the capital structure patterns are the measures for asset type and profitability.
Back to Top