Hope, it has been said, is like the clouds: some pass by, and others rain. That’s roughly what the mid-quarter review of monetary policy seems to have achieved. Instead of cutting the policy interest rates — as many had hoped, especially after the reform measures announced by the government of India last week, the Reserve Bank of India (RBI) cut the cash reserve ratio (CRR) — the percentage of their deposits that banks keep with the RBI in the form of cash — by a quarter of a percentage point (25 basis points, or bps). It was a pre-emptive move that will give banks about Rs 17,000 crore in additional loanable funds. We are in the so-called busy season, where credit demand goes up; as credit growth continues to outpace deposit growth, the increase in liquidity will help banks to meet some of that extra demand without raising interest rates beyond current levels. It is also the beginning of the festive season that is expected to last up to the end of November, where retail demand for credit could also push loan demand. The RBI’s reluctance to cut the policy interest rate is understandable: inflation, as measured by the wholesale price index (WPI) has remained stubbornly above 7.5 per cent for the first half of the financial year; consumer price inflation has similarly stayed above 10 per cent. The hike in diesel prices is likely to add to that inflation, at least in the short term. In April this year, in the annual policy announcement, RBI Governor Duvvuri Subbarao had also preemptively cut the policy interest by half a percentage point on the basis of the finance minister’s statement in the Union Budget about taking action on fiscal correction by keeping subsidies in check. As this policy review pointed out, those expectations were belied. Many analysts may have misread the last paragraph of the RBI’s policy statement — which was relatively short — as ‘dovish’, suggesting that as things get better in coming months, the central bank could cut rates. The RBI will probably wait for actual action on policy implementation and signs that inflation is actually softening before announcing a policy interest rate cut. Nothing much has changed, in macroeconomic terms; the challenges of managing the twin deficits — fiscal and current account — and keeping inflation under control still remain. Global conditions do not look too promising ether; the bond-buying programmes announced by both the European Central Bank and the US Federal Reserve Board could keep commodity prices — mainly oil prices — high, which isn’t good for India’s current account, especially when we are buying it with a weakening currency. That last paragraph in the mid-quarter policy review statement merely laid out the challenges much more clearly, and what needs to change before more positive policy action could be taken. It was not couched as a warning, but should probably be read as one. srikanth.srinivas@abp.in
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Deutsche Bank continues to remain tactically bullish on Indian shares. The combination of global liquidity and return of flows to emerging markets should drive Indian equities higher, is what the banks' analysts believe. However, they have also cautioned that for a more sustainable rally the policy environment in India will need to improve considerably.Weak macro fundamentals together with injections of liquidity at regular intervals by central bank have compelled investors to become 'reluctantly bullish". "Show me the earnings" is the motto for markets in the current environment, says Deutsche Bank Asia equity strategist Ajay Kapur. Many G20 central banks have been moving to support growth through monetary stimulus. But the Reserve Bank of India is loathe to reduce borrowing costs, among the highest of major economies, until the government reins in spending on subsidies and increases capacity to fight stubbornly high inflation.Seaking at an event at Cornell University in Ithaca, New York, RBI governor D Subbarao reiterated on 28 August that inflation remains too high and needs to fall further or risk more damage to the economy, dismissing criticism of the bank's hawkish policy stance. He noted that much of the criticism of the bank's policy was coming from a "very articulate" growth lobby in India that includes companies, and said the central bank must also consider other constituents, including the poor who are hurt most by inflation. (Read: Inflation Still Key Threat )However, despite being faced with its own domestic macro challenges, relatively speaking, India has experienced the shallowest downward revision to consensus earnings among its BRIC peers. EPS estimates for MSCI India have been revised downwards only by 2 per cent relative to 15 per cent and 5 per cent for MSCI Brazil and MSCI China respectively. In addition, in recent months, the velocity of the downward revision has accelerated for countries like Brazil, China and Korea, whereas earnings for MSCI India have stayed stable. Only Russia has witnessed positive earnings revision in July 2012.The analyst stresses that earnings and quality balance sheets will become the key factors for markets, more than ever before. In today's environment, investors may have to stop hankering after valuations. We expect companies and sectors — particularly with a shrinking investible universe — will see valuations continue to expand, in many cases, beyond recent historical highs. The premium for earnings predictability will only get richer, in our view.As per DB’s US economist Joseph LaVorgna, the combination of global liquidity and return of flows to emerging markets, should drive Indian equities higher. However, for a more sustainable rally the policy environment in India will need to improve considerably. While coalition dynamics continues to play spoilsport, fears of a sovereign rating downgrade may compel government to move ahead on politically contentious issues—FDI in multi-brand retail, fuel price rationalisation, etc. Recent developments such as conditional approval to RIL for KG-D6 spending budgets after a long hiatus suggest the government is trying to reach out to India Inc. We expect more such decisions.Earlier this month, Deutsche Bank analysts had remarked on the growing disconnect between the Indian market and economy. Analysts pointed out that the markets are clearly trying to look beyond the dataflow, betting on a major improvement in the policy environment. (Read: The Growing Disconnect ).The return of a pro-market reformer to India's finance ministry obviously cheered investors and contributed to the market rally.
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The rupee and bond prices trimmed gains after the Reserve Bank of India kept interest rates on hold, dashing hopes the central bank would follow up with action of its own after the government announced fiscal reform measures. The rupee was trading at 53.76/77 per dollar as of 11.07 a.m., weakening from around 53.71 levels before the RBI announcement, although still stronger than its 54.30/31 close on Friday. The 10-year bond yield rose 5 basis points to 8.17 percent from levels before the data and was down 1 bp on the day. Read: RBI Holds Repo Rate, Cuts CRR By 25 Bps The one-year swap rate rose 8 bps to 7.68 percent from levels before the data, according to traders' quotes, though the rate was still down about 5 bps from Friday's close. (Reuters)
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The Reserve Bank of India on Monday left interest rates unchanged but cut the cash reserve ratio for banks by 25 bps, saying the primary focus of monetary policy remains fighting inflation, days after the government unveiled a spree of reforms to boost growth and improve its fiscal position. The RBI left the policy repo rate at 8 per cent, in line with expectations in a Reuters poll on Friday before the government unexpectedly announced measures to allow foreign direct investment in industries including supermarkets and airlines. On Thursday, the government announced a sharp increase in the price of heavily subsidised diesel. The RBI cut the cash reserve ratio, the share of deposits banks must keep with the central bank, by 25 basis points to 4.5 per cent in a move it said will inject about Rs 17,000 crore of liquidity into the banking system. "I suspect the RBI still wants to see inflation pressures move lower before easing policy further. (There) is also the risk that the recent round of government reforms could come unstuck if opposition in India is strong enough," said Jonathan Cavenagh, currency strategist at Westpac in Singapore, adding that he thought a rollback of those moves is unlikely. The rupee and bond prices weakened immediately after the RBI decision, with the yield on the 10-year bond rising 5 basis points from before the RBI statement to 8.17 per cent. The one-year swap rate rose 8 bps to 7.68 per cent from before the release. The Sensex also trimmed gains. "The government's recent actions have paved the way for a more favourable growth-inflation dynamic by initiating a shift in expenditure away from consumption (subsidies) and towards investment (including through FDI)," the RBI wrote in its policy statement. "However, in the current situation, persistent inflationary pressures alongside risks emerging from twin deficits -- current account deficit and fiscal deficit -- constrain a stronger response of monetary policy to growth risks," the RBI said. Read: Expert Views In an unexpected 24-hour frenzy last week, New Delhi unveiled a slate of measures to rein in a ballooning fiscal deficit and avoid a credit rating downgrade to junk. The RBI has held borrowing costs steady since a deeper-than-expected 50 basis point cut in April, and has repeatedly called on the government to do its part by improving its fiscal position, which had fuelled some expectation that it might cut rates as a gesture in reply to the government's moves. Thursday's diesel price hike had initially prompted market participants to speculate that the RBI may lower interest rates on Monday, but a spike in August inflation data on Friday from July's near three-year low put a damper on such expectations. India's wholesale price index rose a higher-than-expected 7.55 per cent in August from a year earlier, mainly driven by higher food prices. Serious About ReformThe diesel price rise will aggravate short term inflation. But, along with the measures unveiled Friday to liberalise ownership of supermarkets and other industries, it shows the government is serious about fiscal consolidation and encouraging investment, and may make RBI Governor Duvvuri Subbarao more inclined to ease monetary policy sooner than later. The government kicked into gear late last week after a wave of corruption scandals had weakened it and led to months of little substantive policy action, souring investor sentiment and putting at risk India's investment-grade credit rating. Analysts have cut their economic growth forecast for the current fiscal year - some to as low as 5.1 per cent - amid stalling industrial and manufacturing activity and concerns about the current account and fiscal deficits and lack of reforms. By comparison, the prime minister's economic advisory panel's trimmed-down forecast of 6.7 per cent looks optimistic. Meanwhile, the US Federal Reserve's aggressive stimulus plan last week complicates the RBI's task, as the injection of liquidity delivered by the Fed's measures may push up global commodity prices and add to inflationary pressures in India. (Reuters)
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The BSE Sensex rose to a 15-month high, while the Nifty hit 17-month highs, after the government's reform proposals for the insurance and pension sectors sparked gains in financial stocks such as State Bank of India and ICICI Bank. State Bank of India gained 2.1 per cent, while ICICI Bank rose 2.9 per cent. The BSE Sensex rose 1 per cent to 19058.15. The 50-share Nifty gained 0.98 per cent to its highest close since April 27, 2011.The Cabinet is set to approve bills that would raise the cap on foreign direct investment in insurance firms and open the pension sector to foreign investors, a government minister told reporters on October 3.The Bills, which require parliamentary approval before becoming law, will likely be taken up in the forthcoming parliamentary session.Their approval on October 4 will come weeks after Prime Minister Manmohan Singh unveiled measures aimed at shoring up government finances and attracting foreign investment to revive economic growth.Foreign groups are not allowed to invest in the pension sector, while investment is capped at 26 percent in the insurance sector.Financial sector reforms including pension and insurance have been pending for years for want of a political consensus.The BSE benchmark Sensex surpassed 19,000 level in early trade by rising over 200 points on sustained buying by participants as government is expected to announce further economic reforms.Rising for the fourth session in a row, the 30-share barometer added 200.48 points, or 1.06 per cent, to trade at 19,070.17. The index has gained nearly 300 points in the previous three sessions.The wide-based National Stock Exchange index Nifty, shot up by 60.35 points, or 1.05 per cent, to 5,791.60.Brokers said trading sentiment remained bullish on continued buying by funds and retail investors on expectations that the government will accelerate pace of economic reforms by raising FDI cap in insurance sector.Earlier this year, Singh had to put on hold a similar bill after failing to win over allies and opposition parties.Domestic and foreign insurers, which have invested billions of dollars in India over the past decade, have been lobbying for years to raise the foreign direct investment limit.The minister, who declined to be named, said the bills would raise the cap on FDI in insurance firms to 49 percent and permit 26 percent foreign investment in the pension sector.Faced with a slowing economy, Singh has been trying to push ahead with stalled reforms to boost growth.Earlier this month, the government raised the price of heavily subsidised diesel and cut supplies of subsidised cooking gas despite strong political opposition, including from within the ruling coalition.It also opened up the retail sector to global supermarket chains, allowed foreign airlines to buy stakes in local carriers and raised the bar on foreign investment in broadcasting.(BW Online Bureau & Agencies)
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The cabinet will approve amended bills on 4 October' 2012 that seek to permit 26 per cent foreign direct investment (FDI) in the pension sector and 49 per cent in the insurance sector, a minister told reporters on 3 October' 2012. The bills will need parliamentary approval before becoming law. Currently, India does not allow FDI in the pension sector, while foreign investment in insurance is capped at 26 per cent.(Reuters)
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The present debt restructuring scheme is essentially a bailout of financial institutions (FIs), and also provides relief to distribution companies (discoms). The recast of discoms’ debt was long overdue and if we had acted two years ago, we would not be staring at a loss of Rs 1.9 lakh crore. The move became necessary as discoms had failed to manage their finances properly and regulators had not revised tariffs at regular intervals. As a result, acute distress was caused to FIs. We had to find a way by which FIs could recover their money, and discoms could find the required working capital to handle their daily purchase of power and ensure improvements in the system. Over the years, matters came to a head; there was no option left for FIs whose loans ran the risk of turning bad and the distribution entities were so deep in debt that they could not raise any more funds. In the power triad, distribution is the last stage, the one that puts money back into the system; generation and transmission recover their funds from the distribution sector. If there is a cash problem in the distribution sector, it will impact the other two sectors. One of the reasons for the dire financial situation of SEBs is that, in many cases, the subsidies that they were to receive from the state governments were not disbursed on time or in full. That led to a situation where utilities had to take short-term loans to buy power. Additionally, revenue collection was postponed in the hope that any shortfall would be made up for in the future. This is a serious flaw on the part of the regulatory authorities. I hope this will now be set right. Distribution being entirely in the state sector, the restructuring scheme will serve as a reminder to state governments to assume ownership of utilities as the states are required to take over the loans as equity, and securitise the bonds to be issued by the discoms. FIs have been asked to provide a moratorium on loan repayments so as to give the discoms some time to get their act together and avoid penal interest. The move would also require strict discipline on the part of states because they are already guided by the overdraft constraints mandated by the Fiscal Responsibility and Budget Management (FRBM) rules. The states will then have no option but to resort to an increase in tariffs as they will be obligated to pay interest on the bonds they issue. However, it is better to increase tariffs than to have a power crisis. Debt apart, the extent of aggregate technical and commercial (AT&C) losses is unacceptable, even if we assume the national figures to be 27 per cent. The figure should be brought down to at least 15 per cent over the next two years and, in cities, this should come down to single digits, as is the norm in the developed world. The restructuring exercise is also expected to lead to an improvement in the corporate governance of discoms with lenders likely to nominate their representatives on the boards of discoms. Considering the large stake that FIs have in them, this will be a welcome step, with lenders keeping an eye on the discoms’ reforms agenda. The power minister is reportedly drafting an Electricity Distribution Responsibility Bill for enactment by states. If all these measures to work, fuel supply must be assured to generating companies so that they achieve maximum capacity utilisation. There is also need for consumers to be regularly educated on the economics of the power business. We should move away from populism. Power is a business and whoever invests in it has a right to expect a reasonable rate of return on his investment. The consumer needs to understand that power supply comes at a cost that has to be paid. A true cost of power will also encourage efficiency in use. There should be 100 per cent compulsory metering for all consumers. Free power should not be provided to anyone unless the state governments can provide for it. Are they going to make up for it by raising taxes elsewhere? If state governments cannot come out with a plausible solution, free power should not be allowed. An increase in tariffs would have to be matched by improvements in customer care and supply. The discoms would need a cash infusion to make their operations more efficient and smart. Smarter grids can bring back “unpaid” power into the “paid” mode. If we are successful in bringing back 30-35 per cent of unpaid power from some states into the system for people who pay for it, tariffs might not go up to the extent feared. By and large, most states are aware of the reforms prescription. The need now is to perform. The author is former secretary, Ministry of Power. (This story was published in Businessworld Issue Dated 08-10-2012)
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Reserve Bank of India (RBI) Governor Duvvuri Subbarao said on 28 August that inflation remains too high and needs to fall further or risk more damage to the economy, dismissing criticism of the bank's hawkish policy stance. Since cutting its main interest rate in April by a bigger-than-expected 50 basis points to 8 per cent, the RBI has stayed on hold, drawing complaints that high rates are burdening consumers and slowing growth. Cutting interest rates, however, may only support growth in the short-term, while high and persistent inflation will harm the economy longer term, Subbarao said. He noted that much of the criticism of the bank's policy was coming from a "very articulate" growth lobby in India that includes companies, and said the central bank must also consider other constituents, including the poor. "People are hurt by inflation, largely the poor people. They don't have the mechanism to get their voice heard," Subbarao said. He was speaking at an event at Cornell University in Ithaca, New York. Subbarao added that he believes the RBI has been successful in easing price pressures by reducing the inflation rate to 7 per cent from 11 per cent. But he noted that various factors, including high commodity prices, the fiscal deficit and the monsoon, risk pushing it higher. "I believe that the battle against inflation has not ended yet," Subbarao said, noting that the rate needs to fall below 5 per cent. At the same time, he conceded that "some sacrifice to growth is an inevitable price" to pay in order to reduce price pressures. A number of economists have cut their gross domestic product growth forecasts for the current fiscal year in India, Asia's third-largest economy, to around 5.5 per cent. Growth of 5.3 per cent in the March quarter was India's slowest in nine years. At its last review, the central bank raised its headline inflation projection for the year ending in March 2013 to 7 per cent from 6.5 per cent, while lowering its GDP growth forecast to 6.5 per cent from 7.3 per cent. Subbarao said the RBI has less room to drive monetary policy than in the financial crisis of 2008-2009, when people were worried about deflation. He added that the bank would only intervene against the currency if it sees clear benefit to its monetary policy and the bank's credibility, noting that "a failed defense of an exchange rate" can be more damaging than no action at all. Subbarao added that the bank is also taking steps to protect against possible ratings downgrades, but did not give details. Credit rating agencies Standard & Poor's and Fitch Ratings both rank the country the lowest investment grade, with a negative outlook, which means India risks falling into junk territory. A junk rating would make its debt less attractive to investors. (Reuters)
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India's plan to increase voting rights for shareholders in banks would improve management and corporate governance and draw more investment, but it falls short of lifting ownership restrictions or relinquishing the government's stranglehold on most lenders. The government's reluctance to shed some of its 50-plus per cent stakes in state banks, which have a market share of 70 per cent and a bigger proportion of the sector's bad loans, means a big chunk of lending remains exposed to political interference. "The biggest risk in India for banks is the political risk," says Juergen Maiar, an Austria-based fund manager with Raiffeisen Euroasien Aktien that owns Indian shares worth $300 million, including in public and private sector banks. Still, in what is seen as a positive step towards reform, Parliament is expected soon to approve amendments to banking laws that include raising the limit on shareholders' voting rights in public and private sector banks. However, the current parliamentary session, which ends on 7 September, has been paralysed by a furore over a state auditor investigation into coal block allocations, casting doubt over the timing of a vote on the bill. If approved, the cap on voting rights for investors in private sector banks such as HDFC Bank and ICICI Bank would rise to 26 per cent from 10 per cent, and to 10 per cent for government banks such as State Bank of India from just 1 per cent now. "Higher voting rights will be good for investors. It will help banks raise capital from investors. But in public sector banks where the government shareholding is high it may not make much difference," says R.K. Bansal, executive director at state-run IDBI Bank. The voting rights proposal was a key cause of last week's two-day strike by roughly one million bank workers, mostly from state banks, who oppose the government ceding any control. "The government is trying to increase the influence of MNCs over banks, both private and public sector," says Vishwas Utagi, secretary of the All India Bank Employees Association. "It's a threat for the banking sector and the country." The country has struggled for years to reform and liberalise key sectors such as banking, retail and insurance due to political opposition, including from within the ruling Congress party. Left unchanged is the limit that caps any single investor from owning a minority stake of more than 5 per cent in an Indian bank, or 10 per cent with central bank approval. The limit has deterred investment in an industry in need of capital to meet stricter buffer requirements for banks under the global Basel III rules. "Foreign players may get a little more interested as ... it's a step in the right direction," says Abhay Gupte, senior director at Deloitte India, referring to the plan to raise voting rights. State DominanceAdvocates of reform say the increase in the voting rights limit should be followed by other long-pending measures, including cutting the government's holding in public sector banks and issuing new bank licences. The last new bank licence to a private firm was issued in 2004. The government proposed in 2010 to issue more licences, including to corporate houses, in a bid to expand access to financial services in a country where more than half the billion-plus population don't have a bank account. "To attract new foreign investment you will have to open the sector more," says Walter Rossini, a Milan-based portfolio manager for Gestielle India, which manages about $200 million. A government panel recommended in 1998 that it reduce holdings in state banks to 33 per cent from more than 50 per cent. The government's resistance to ceding its majority stakes was reinforced by the 2008 global financial crisis. Doing so would help banks tap local and overseas markets to raise funds to meet the tougher new capital requirements and improve operational performance, analysts say. The Reserve Bank of India (RBI) estimates state banks need to raise about 4 trillion rupees of equity to meet Basel III capital rules by 2018, meaning India's deficit-strapped government may ultimately have little choice but to sell down some of its bank stakes. @page_break@ More ForgivingGovernment dominance of state banks often leads to political pressure to lend to favoured borrowers, including farmers. It has also been using ownership clout to exercise influence on operations including loan pricing and sectoral exposures. State banks also tend to be forgiving when corporate borrowers get into trouble, and a RBI deputy governor recently said India's debt restructuring process is biased in favour of state banks and big borrowers. An RBI panel has proposed tighter rules around the process. "Occasionally there are concerns about the government exercising its ownership rights not through the established channels which is the board mechanism but outside of the board," RBI Governor Duvvuri Subbarao said last month, responding to the government's influence over state banks. "I don't think that's a good example of corporate governance." A senior bureaucrat in the finance ministry's banking division did not respond to a request for comment. Bad loans as a percentage of total loans was 3.2 per cent for state banks at the end of March, compared with 2.2 per cent for private sector banks, according to the central bank. Soured loans at State Bank of India, the country's biggest lender, were nearly double expectations in the June quarter. "With the government as its biggest shareholder and not much voting rights for investors, things like the waiver of farm loans will continue," Maiar said, referring to state banks in general. "The government even uses its power to tell these banks to lower their lending rates." (Reuters)
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Finance Minister P Chidambaram said on 28 August that the Direct Taxes Code (DTC), initiated by him during his earlier tenure, needed a fresh look. After a meeting with top officials of Central Board of Excise and Customs (CBEC), he also said the tax department has to be firm with tax evaders for whom non-compliance is a business."DTC has gone through various versions...I need time to look at DTC. I am only 28 days old... It requires a fresh look", Chidambaram said in reply to a question at a press conference.The idea of DTC, which seeks to replace the Income Tax Act, 1961, was mooted by Chidambaram as finance minister in the UPA-1 government and lot of drafting was done when he was shifted to home ministry in 2008.His successor Pranab Mukherjee introduced the DTC Bill in 2010 which also included a number of new provisions, followed by changes suggested by Parliament Committee on Finance. The controversial provisions relating to retrospective tax amendments and GAAR were enacted in the Finance Bill, 2012, which are under review.Chidambaram has already directed a review of retrospective amendments to the Income Tax Act. Media had reported earlier that the government’s take on recommendations to be given by the Parthasarthi Shome Committee on the General Anti-Avoidance Rules (GAAR) and the N Rangachary panel on taxation on IT sectors may be incorporated in the proposed Direct Taxes Code (DTC).On 28 August, to a question GAAR would get postponed again, Chidambaram said, he was awaiting the report of the Shome Committee, which is looking into the concerns expressed by foreign and domestic investors.On the indirect tax collections, the minister said that he was hopeful that the target of Rs 5.05 lakh crore during the current fiscal would be met. Chidambaram said the department would have to be firm with the small number of non-compliant businesses."Most people would like to be compliant with tax laws. It is only a very small number that wishes to be non-compliant. I have told the department that we have to be firm with the small number of those non-compliant people", he said. The government is expected to soon announce some initiatives to boost investor sentiment and push exports which may miss the $360 billion target because of global economic uncertainties, commerce secretary S R Rao said at the CII Export Summit in Delhi on 28 August. (Read: Steps To Boost Investor Confidence)"I am sure that the government is taking proactive steps. In the next 3-4 weeks, I expect significant policy announcements which should encourage our industry, our exports," said Rao.On becoming finance minister for the third time, Chidambaram had vowed to revive an economy he steered through the 2008 credit crunch with tax cuts. The buzz on his return to the ministry helped a market rally, further fuelled by a flurry of minor policy moves.India never fully unwound the consumer-oriented tax breaks that some economists say caused the economy to overheat. With inflation at close to 7 percent for 2-1/2 years and a yawning fiscal deficit in the cross-hairs of ratings agencies, India, like China, has little space for a new round of stimulus.India is expected to post April-June growth of 5.3 per cent on 30 August, matching the rate of the previous quarter and marking the deepest slump for nine years. (Read: No Fast Growth Rebound)"If the GDP data prints below 5 percent, there may be some immediate depreciation pressure on the rupee," said M. Natarajan, head of treasury of Scotiabank in Mumbai."However, if the equity markets subsequently start building in rate cut hopes, the rupee may gain to sub-55 levels."CBDT Forms Committee To Screen Important Cases Meanwhile, in view of "contentious and controversial" legal cases like that of Vodafone faced by Income Tax department, the CBDT has created a committee of top Finance Ministry and I-T officials to understand the intricacies involved and present a sound case in court.By setting up Central Technical Committee (CTC), the Central Board of Direct Taxes (CBDT) aims to bring clarity on contentious legal issues and reduce litigation by adopting a consistent approach on them."It has been observed that a large part of litigation in the direct taxes matters involves interpretation of legal provisions. Lack of desired clarity on contentious legal issues amongst the officers of the department sometimes leads to inconsistent approach on the same issue giving rise to further litigation.
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