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Thursday, December 10, 2015

What is National Herald Case all About?

Its a long post ... have patience to read it completely...

I'll divide my answer into points and it might be long.
So, lets start with some History.
  • Its the pre-independence era. There was a company formed and named Associate Journals Limited (AJL). This was a publishing house which published newspapers in Hindi and Urdu portraying views about the importance of freedom, etc.
  • The National Herald was the English newspaper which was published by AJL. Jawaharlal Nehru was the chairperson of AJL at the time it was established.
  • During the Emergency, this paper stopped its publication. It revived itself in 1986 but fully stopped its publication again in 2008 with a debt of about 90 crores.

Now, let's come to what the "scam" here is.
  • So, AJL is running in loss. The Indian National Congress(INC) decides to give it a loan of about 90 crores to cover its losses and pay it debts.
  • In November of 2010, a new company called The Young Indian Limited (YIL) was floated. Sonia Gandhi and Rahul Gandhi were owning 76% of the equity in YIL and the remaining were owned by Congressman Mothilal Vora, Oscar Fernandez, Sam Pitroda and Suman Dubey
  • It is alleged that YIL paid 50 Lakhs to INC take over the process of collection of the 90 crore loan given to AJL.
  • Just a month after YIL being formed, in December 2010, the directors of AJL (one of whom was Mothilal Vora - A Congressman AND Treasurer of INC AND A part owner in YIL) decided that the 90 crore debt was not payable.
  • So Basically, Vora the Chariman and MD of AJL, told Vora the treasurer of INC that he will not be able to repay the loan of 90 crores to Vora the stakeholder of YIL. (wut)
  • This debt of 90 crores, which was given interest-free to AJL by INC who later transferred the loan recollection to YIL for a mere sum of 50 lakhs was declared not payable by AJL which had properties worth 2000 crores for its assets.
  • Now, AJL unable to repay the 90 crore loan to YIL, decides to transfer all its ownership (and hence assets) to YIL. So now, YIL has paid 50 lakhs to recover a loan of 90 crores and in return recovered(gained) assets worth 2,000 crores. This doesn't make sense to me and you, but it makes total sense to the Congress Party.

Now, What are the issues?
  • AJL was catagorized under the Section 25 of the Companies Act,1956 which means it was a typically non-profit organization used for promoting commerce, art, science, religion or charity. But AJL, now under YIL was not doing that at all.
  • It is Alleged that Nehru used his then powers to get properties in the name of AJL at a subsidized rate from the government. Today, this property is worth about 600-2000 crores and it goes to YIL.
  • YIL is also registered as a non-profit company. But the building in argument which consists of eleven stories, is rented out to companies and passport seva kendra with an alleged earning of 30-60 lakhs a month, which makes YIL not a non-profit organization.
  • INC was first of all not authorized to grant the 90 crore loan. According to Income Tax Act, no political party can hand out loans.
  • Why did AJL (with assets worth wayy more than 90 crores) decide to grant its ownership to YIL to pay a mere 90 crore loan when it could have liquefied the assets, paid not only the debt but also its shareholders?
  • AJL had 1,057 shareholders at the time it granted ownership to YIL. Were the shareholders approached for their opinion still remains a mystery.

 If there are any faults or corrections, please let me know! Any additions are welcome. This is what I understood from the numerous articles I read about this.

Wednesday, September 16, 2015

Why Pattiseema Project?

Annually, approximately 3000 TMC of Godavari river water is wasted into the Bay of Bengal. In a bid to direct that water to arid regions in Rayalaseema, CBN conceived the idea of Pattiseema project.

Image courtesy: South Report

The Pattiseema lift irrigation project would lift the surplus flooding water from river godavari into the Right Canal of Polavaram which is nearly complete. Under the Bachawat tribunal and inter-state agreement, 80 tmc of water can be diverted from River Godavari to River Krishna.

 The water from Pattiseema project will travel 160 kms. and will join River Krishna at Vijayawada in the up waters of Prakasam barrage. Water will then be supplied to the Rayalaseema through Pothireddypadu head regulator for its Irrigational and Domestic needs making it a drought free region.

Watch the video to learn more about the project…

Tuesday, September 1, 2015

Difference between milk storage in the US & India

Redditor asks about difference between milk storage in the US & India

My friend in US says they buy big bottles of milk and use it over weeks. I'm from India and we buy milk in pouches. It gets stale in 2-3 days. How does milk in US stays fresh for weeks? "

Then an Engineer who designs Dairy Equipment and has specifically studied milk distribution in India showed up on the thread and he explained the difference between milk storage in the US & India. Here is the Answer:-

The vast majority of Indian milk distribution is usually carried out at "ambient temperature" meaning it isn't cooled in any way, and isn't distributed in pouches.

Usually, it takes about 4 hours for milk to be transported to your doodhwallas (milk delivery people), who then add water to it, and sell it on to their customers. Average time for milk to go from cow to the customers is 6 hours. By most dairy standards, this milk is already unfit for human consumption.

Customers in India usually know that their milk is mixed with water, and are happy about it because the day's milk is boiled before each use. At the end of the day in the average household, the last bit of milk has been boiled about 4-5 times. It's used to make paneer and ghee

By this time, the milk has a slightly burned/sugary taste, and is a little brown in color.

The milk that IS distributed in pouches only counts for about 15% of milk in India. From experience, I can tell you that finding a "clean" dairy is rare (the cleaning chemicals are not cheap), and that the pasteurization process used isn't always as good as it can be. Also... the distribution of the pasteurised packs is Ambient temperature again. This gives the milk a good head-start on the way to "going off".

At this point, It is important to understand what Pasteurization does.... it kills active bacteria - stuff that damages the milk, and eventually takes over the milk causing it to "spoil" and "go off". Taste is important too. Pasturised milk tastes very like milk from a cow. Approximately 10% of Indian milk is buffalo milk. This stuff is hard to deal with, and the pasteurization process is less reliable. Pasteurization does NOT kill the bacterial spores. These are like bacteria "seeds", and will produce more bacteria if the conditions are right. In India, the conditions are nearly always right.

The alternative is UHT treatment. "Ultra High Temperature" pasteurization is a very precise process that isn't used much at all in India, mostly because it "tastes wrong" and is very very white. both the color and taste are not trusted by the average Indian. If you tell someone that the milk will last in the package "for over a year" they usually assume that there are nasty chemicals in it.

UHT treatment - very importantly - kills the spores. If you then put your milk in the right kind of container, it will last for a very very long time.

For Indian customers, Taste is very important. Also, Tradition is very important. You have a trusted doodhwalla, you're going to get your milk from him. Daily.

IF you're a your "new generation" Indian, chances are you buy your milk in a plastic pouch and put it in the fridge. The problem is, your pasturised milk has already had plenty of opportunities for the spores to produce bacteria, and your pouched milk is a ticking clock.

The Abrams that was destroyed by the Houthi rebels

It was part of a Saudi-led ground operation in Yemen, involving US-made Abrams M1 tanks and other armored vehicles.

A video shows what are said to be Houthi rebels in Yemen using old Soviet-designed Fagot anti-tank guided missiles to destroy American-made, Saudi Arabian-owned and operated Abrams M1 MBT.

A direct hit by a Fagot missile just below the M1’s turret led to the detonation of the tank’s ordnance payload stored in the turret’s back. This is the weakest spot of America’s main battle tank, which leaves the crew with virtually no chance of survival.

The Fagot antitank missile system entered operational service in 1970. Its missile uses a 2.5 kg High Explosive Anti-Tank (HEAT) warhead which can penetrate up to 600 mm of conventional steel armor and has an effective range of up to 2,500 m through the use of an improved solid propellant sustainer rocket motor and lengthened guidance wire.

Thursday, August 27, 2015

What is GST (Goods and Service Tax)?

The Goods and Service Tax Bill or GST Bill, officially known as The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014, proposes a national Value added Tax to be implemented in India from April 2016. "Goods and Services Tax" would be a comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout India, to replace taxes levied by the Central and State governments. GST would be levied and collected at each stage of sale or purchase of goods or services based on the input tax credit method, irrespective of State.

Image courtesy: Kashmir Reader

India has a dual tax system for taxation of Goods And Services. The tax system is described by Central Taxes and State Taxes, which may be further subdivided into Excise Duty, Service Tax, VAT and Customs Duty. In 2005 VAT was introduced for intra-state transactions, using the input tax credit principle.

Until a few years ago, there were only three countries that did not have GST - India, US and Brazil. Brazil has it now. So that leaves US and India.

Current status of taxation in India:

Every state has its own tax rate.

  • Rather than say one rate- sales tax of x% on all goods, literally sales tax on every product is different.This can lead to corrupt lobbying by companies.
  • Unlike other countries, Indian states also impose taxes based on the manufacturing location rather than point of sale. This introduces big distortion. When states promise 5 years tax free status to new factories, this is what they mean. Indian mid-size companies move their entire factories to take advantage of this. Some of my friends have done that. This doesn't lead to any growth, just a movement of factories from one state to another every five years.
  • There is an entry tax at every state. If you have travelled by road in India, you would have noticed a long line of trucks at every state border (for Delhiites - Delhi-Faridabad border). The truckers spend hours and sometimes days in that line to pay entry tax. This entry tax is based on the value of the load they are carrying. Needless to say, it adds a lot of scope of bribing and also inefficiency.Another point - Say you had a truck load of 1cr and a working loan at 13% to finance it until you get paid by the buyer. If because of bad roads and entry tax, it takes you 7 days to transport the goods, you pay an interest of Rs. 27,083 for that week. Instead, if you had transported that good in just one day, you would have paid only Rs. 3869 in interest. So you see, in spite of having low salaries, how expensive India becomes.
  • All these taxes are incredible easy to fudge. India is a cash economy. You can choose not to declare sales and not pay any sales tax. You can fudge the value of the truck load and pay lesser entry tax. You can make false receipts of goods that you sell and thus show an inflated cost of business.
  • There is cascading of taxes. Say you have your factory in Gujrat and you make bicycles and your cost of manufacturing was Rs. 100. And you paid a excise tax(manufacturing tax) of 10%. So your cost is now Rs. 110. You load it on the truck and transport it to WB. Your truck moves through maybe five states and you pay an entry tax of 5% at every state border. Now, your cost is Rs. 135 plus transportation cost. You sell it to a buyer in WB at some profit for say Rs. 160. The retailer adds his own profit and sells it to consumer at Rs. 180. The consumer pays a 9% sales tax so his cost is Rs. 196.20. So you see, the consumer pays almost double the cost of manufacturing because we keep paying taxes on previous taxes.
  • In the above example of making bicycles, I said your manufacturing cost was Rs. 100. Lets analyze this cost. You probably bought tyres,, handles, frames,break-pads from someone else. All of those factories also paid excise tax, entry tax etc. Lets say they paid Rs. 20 in all taxes. When you pay taxes on Rs. 100 of your manufacturing cost, you are also paying tax on Rs. 20 tax that were paid by your suppliers.This cascading tax has a debilitating effect on manufacturing by increasing your cost.
  • It's the absence of these obstacles and inefficiencies that makes west and China competitive in manufacturing compared to India despite their higher salaries. In any factory, whether east or west, salary is a small part of manufacturing cost.
image courtesy: India Briefing

How does GST solve all this?

  • It will reduce the million different tax rates(based on products and states) to just three - based on essential, neutral and luxury goods. With one stroke of pen, you increase efficiency (no more waiting at state borders,simple tax planning) and corruption (no more lobbying to decrease tax rates on just your product) and no more relocation of factories every five years just to take advantage of temporary tax reliefs.
  • GST avoids cascading tax by taxing only value-add and will help India in becoming low-cost economy. What does value-add mean? In my previous example, you paid a 10% excise tax. So, if your manufacturing cost was Rs. 100, you paid Rs. 10 tax on it. But say, your input cost was Rs. 90. That means the value you added was Rs. 10. Your tax under GST regime may be 30% on this value add, which is Rs. 3 in this example. A retailer will not charge you a sales tax of 10% on the price but rather, say 20% on value added. So if a retailer gets a phone at Rs. 10,000 and sells it for Rs. 11,000, he charges you 20% of Rs. 1000 and not 10% of Rs. 10,000. Thus GST helps in making an economy low cost.
  • Under sales/excise tax, you declare your sales and manufacturing to pay taxes. Under GST, you pay estimated taxes in advance and then get a refund from the govt. based on your value add. So you have to declare your input costs to the govt. These input costs will be verified against the receipts from your supplier. This induces honesty and not fake receipts. How? The higher your input costs, the less your value-add and hence you pay low taxes. Thus you have an incentive to ask your supplier to inflate the bills. Under current system of Sales/Excise tax, its done by every company in India to reduce their profits on paper. Under GST, your suppler will refuse to inflate their bills because that increases their value-add and thus the tax that you save, will end up being paid by your supplier. Thus GST forces you to be honest.
  • GST increases tax revenue of the Govt. by forcing honesty in tax declaration and plugging major loopholes. At the same time, it reduces the end price of goods to the consumers. Thus increased consumption leads to more jobs and more tax collection leads to more infrastructure creation. It sets a virtuous cycle of growth.


1) Wiki
2) Reddit