27th April

Allocate through auction

The article praises the govt decision to allocate the spectrum to the telecom operators on auction basis rather then on the basis of subscriber-base. It also talks about the issues that such system can face and its possible solutions. 

A government committee suggested the auction based system is better to allocate the spectrum to the existing operators. It would be more transparent and equitable then the existing system and enable efficient use of the scarce resource. The policy change comes after the TDSAT (tribunal for telecom disputes) verdict that the telecom policy doesn’t promise GSM operators more then 6.2 MHz of spectrum. Beyond this, it’s up to the government to decide the criteria of allocation. Subscriber based criteria could be misused by the existing operators by showing inflated figures of subscriber base. It also encourages inefficiency. Auction based allocation would compel the operators to debate whether to invest money in the bidding or improve the efficiency of the current spectrum by using new technology or simply erecting more towers. However, there are few issues as well in the auction based method for the existing operators. Like, the policy needs to clarify who would get the priority for the spectrum – the operators already having 6.2 MHz and needing more or the ones who are below that level and require additional spectrum. The best thing to do would be to go for auction of the entire additional spectrum beyond the initial level of 4.4 MHz. The funds raised by this could be used to create additional spectrum for auction and ensure steady supply of spectrum.

If other countries can allocate as much as 25 MHz of spectrum for operators, India can surely go for 15 MHz. 

Smokescreen as policy

The article throws light on the government’s proclamation to phase out tobacco production in the country within next five to 10 years. What has happened is exactly opposite. The author insists on fiscal measures to discourage tobacco consumption and thus, its production.

While 14 months back, the minister of state for commerce planned to phase out tobacco production in next 5-10 years, Flue-Cured Virginia (FCV) tobacco production in Karnataka was hiked to its all time peak at 100 million kg in the meeting of all stakeholders, convened by the commerce ministry through the Tobacco Board. For AP it was hiked to 170 mkg and for Karnataka, this time again, it was held at 100 mkg. This time, no election manifesto for LS elections or AP assembly elections talks about phasing out tobacco. Not only that it is grown in almost half of the constituencies in AP, but other reason for this crop’s success is that it is the only crop whose per-kg price-realizations have almost doubled over the last few years. The reason for this is that worldwide the production of the crop has fallen down. While in Zimbabwe, eco-political turmoil has lead to decreased production, Europe has been phasing out subsidies on the crop for cultivation as per EU norms. Decreased production in Brazil, the leading producer of the crop, also affected the prices. In these conditions, with cheap production cost in India, Indian tobacco enjoys the competitive edge. This is precisely the reason why the authorized crop is regularly hiked. 

In order to discouraged production of the crop, fiscal measures like more excise duty and indirect taxes should be imposed. People should also be educated about the ill-effects of tobacco. Without this, the action-plans to phase out the crop remain a smokescreen.

Tennis Australia double-faults

The article expresses dissatisfaction over the decision of Tennis Australia to skip the Davis Cup tie between the two nations to be played at Chennai over the security reasons. It also insisted on joint efforts of sports federations of India and Union Sports Ministry to convince the other nations about India’s preparedness for security for any international sports event.

The grounds on which the Tennis Australia scrapped the events are totally unjustified. Citing the shifting of IPL T20 as a reason is disgusting since the difference between the scales of the two events is incomparable. IPL is a mega event that needs massive security compared to Davis Cup. After the Lahore attack on the Sri Lankan team on March 3, there is a perception among the foreign teams that they could become target of terrorist attacks. It is important for India’s sports federations to work with Union Sports Ministry to convince their counterparts that the security levels here are fool-proof, considering the fact that India would be hosting three mega events in the next two years i.e. Commonwealth Games, Hockey World Cup in 2010 and ICC Cricket World Cup in 2011. 

Taking the cue from China, India should clearly demonstrate that if its neighbour can host Olympics 2008, India also has the well and capabilities to provide security to any international event of any scale.

25th April

RIL earnings growth muted

The article talks about the better then expected growth of Reliance Industries and its future prospects considering the fact that the worst part is over for oil industry. The company would also get the boost with discovery of gas in the KG basin.

The forth quarter performance of RIL has beaten the market expectations despite 1% net fall in profits and 25% in revenues. While gross refining margin fell from $15.5 per barrel to $9.9 per barrel Y-o-Y, it is still better then global benchmarks. Demand has contracted for hydro-carbon industry in both domestic and global markets as well as price softening of crude and products, both petroleum and petrochemical. Reduced production hasn’t helped. Refining and marketing business that accounted for 70% of company’s revenues has seen 31% fall in EBIT and 25% in revenues. But petrochem business has seen 31% decline in revenues but 17.5% increase in EBIT. E&P business also saw 5.8% growth in EBIT despite 11% drop in revenues. However, the worst is possibly over. The feeling is attributed largely to the recent beginning of gas production from KG basin as well as commissioning of new refinery. 2009 is expected to be a transformational year at least by the company CMD, Mukesh Ambani. The new peak gas production combined with increased demand in by the end 2009 would be a big boost for company’s topline. Company has tied up with fertilizer producers and is expected to sign up contracts with power plants and manufacturing industries. 

Finally, the merger of RPL with itself would also help with 25% of world’s complex refining capacity and greater bargaining power with respect to price and quality of crude would rise. Improved efficiency would be an added advantage in this volatile industry.

Shares as currency 

The article advocates for use of shares as a currency in certain cross-border transactions such as import of capital good and technology. Such facility would also help the companies to revive their investment plans. 

Indian companies have already been allowed the issue of equity shares in lieu of lump-sum fee, ECBs and capital goods imports after the approval from Foreign Investment Promotion Board. But wider use of shares as currencies would help cash-starved companies to fulfill their needs as well as revive their investment plans. Such an arrangement might result in better appreciation of shares of the buying company and the arrangement would be certainly better then barter system. But the only doubt here could be that in the current risk-averse environment there might be fewer takers for equity payment. However, this system can also bring two needy parties together. For example, there might be a company for want of capital goods but might not have enough cash for the purchase while on the other hand there might be a capital goods manufacturer who might not be getting and buyer in the current demand-starved economy. Share payment might be the right deal for both of them. Thus the arrangement has the potential to generate more economic activity in these times of liquidity crunch and credit freeze. The proposal can also be used for payment of salaries to employees. ESOPs are already there but companies can go one step further to make monthly payment of salaries in the form of stocks instead making them loose the entire salary altogether. Legal partnership firms already work on the basis of providing a percentage share of equity and profits to all partners.

However, in this entire exercise, care has to be taken that the interests of all stakeholders are protected.

24th April

PMO in the coalition era

The article offers a counter-argument to Narendra Modi’s statement that the current PM Manmohan Singh is indeed a weak prime minister. The article explains the dynamics of the coalition politics which has made politics more regionalized.

While Manmohan has been stated as a weak PM, it is important to know that PMO has acquired a different character in these days of coalition politics. Pre-coalition era has parties who won the elections with simple majority. PMs were more authoritative and sometimes to the extent that it threatened the democracy itself. These days politics is more regionalized and democratic. PM has to act with consensus which makes him look weak and vulnerable. Manmohan Singh looked weak when there was opposition for the nuclear deal to the extent that it was feared to fall at one point of time. This would have affected the credibility of PMO itself. Even Vajpayee looked weak and vulnerable during his times. But sometimes this apparent weakness can be strength in the sense that every major decision is discussed and highly debated. The exercise might be frustrating but at the end it gives more durable and lasting solution. Coalition politics gives shape to more inclusive governance which is why PM’s statement last week that regional parties are detrimental to growth is self-contradictory.

While Indian polity becomes more regionalized, it should be known that it is this politics only that has thrown a PM like Manmohan from nowhere. 

Financing infrastructure

The article talks about the need of huge amount of debt financing for the infrastructure projects in the country even at the current reduced economic growth projections. IIFCL (India Infrastructure Finance Company) has to play a big part in it.

While IIFCL has stepped up its lending to Rs. 6000 crores from Rs. 3200 crores last year and Rs. 1500 crores in 2007-08, it is still a drop in ocean considering the total debt requirement of Rs. 988035 crores in the 11th Plan period according to Secretariat for the Committee on Infrastructure. The projects are worth Rs. 2056150 crores. But these projections are based on 9% GDP growth. But as the story is different today, IMF has projected 4.5% growth in the current calendar year and 5.6% in the next, after 7.3% growth registered last calendar. However, downturn has little to affect the infrastructure project since the country already has a backlog in infrastructure project financing. While corporate investments grew by 9% of the GDP between 2002 and 2007, infrastructure investments grew by only 2%. Thus there is a huge debt financing required to catch up and government has to play a pivotal role in this. IIFCL, a special government-owned SPV, with guarantees extended by centre, can raise funds since it plans to sell taxable bonds of Rs. 5k crores and tax-free bonds of Rs. 30k crores.

While IIFCL could do more, for the present it should identify bankable projects that need financing and ensure the funds get available to them as soon as possible.

23rd April

Optimism on generation

The article talks about the reforms that need to be implemented in the power sector to minimize power thefts which forms the major part of AT&C (Aggregate Transmission and Commercial) losses.

The 4000 MW ultra-mega Sasan power project of Reliance got financial closure in the form of legally binding commitment from its equity holders and debt financers. With low fuel prices, exploration of gas from KG basin, more power projects would take off in future. But without reforms in electricity distribution, everything is vain. Seven states haven’t been able to unbundle their SEBs as per the Electricity Act of 2003. AT&C losses are still over 30%, with some states even recording 40-50%, in spite of govt grant of Rs 40K crores over the tenth plan through Accelerated Power Development and Reform Program (APDRP). AT&C is euphemism of power theft which can be curbed by installing Distribution Transformer (DT) meters but it is still not implemented in most of the states. By March 2008, only three states achieved 80-100% DT metering. Average realization remains lesser then average costs resulting in huge losses by SEBs. While incentives haven’t worked evidently here, it is important to build political consensus to achieve large power reform. Gujarat govt has shown that power sector reforms are possible without losing vote banks. 

While cost of providing free electricity to farmers is so low that if govts curb the theft effectively, they would have spare electricity for all their vote banks without compromising with viability of SEBs. Shrewd politicians have already realized the benefits of power reforms.

Civilian plight in Lanka

The article emphasizes on prioritizing the refugee relief in Sri Lanka and providing them a country where they feel more a part of the nation rather then a segmented community. Such atmosphere would also help curbing resurrection of militarism in future.

While humanitarian crisis are at its peak in the region, it is a litmus test for Rajapaksa regime to provide the relief and rehabilitation to refugees before going for post-LTTE reconstruction and inclusive govt when the war would be over. Given the history of chauvinist Sinhala form of military tactics, the strategy for the future governance is debatable but for now as he send a special emissary to India to discuss rehabilitation measures for the refugees, he has send some positive signals. For India, it is important to prevent the spill over effect of crisis to Tamilnadu. It should, like other countries, immediate ask Sri Lanka for ceasefire to enable the remaining civilians to escape from the war-field. With more casualties and civilian sufferings, Tamilnadu would definitely react. But the state should make a distinction between the legitimate rights of Lankan Tamils and existence of LTTE. 

As of now, Colombo should have delivery of its promise of rehabilitating refugees as a top priority. A human catastrophe at this stage could act as an ingredient to resurgence of military extremism in future.

22nd April

Hobson’s Choice

The article comments about the policy rate cuts that RBI announced yesterday. While the rate cuts clearly reflect the limited options RBI has, it also signals the banks to react to this and reduce their lending rates. 

As the 25 basis points cut comes on both, repo rate and reverse repo rate, the bank has done a little for both the opinions i.e. those who believed that the bank should succumb to industry pressure and drastically reduce the interest rates and those who believed that the bank should wait and see the effects of its policy measures. However, its statement answers almost everything except the major problem faced by the banks today which is of increasing credit risk in the times of slowdown and reduced growth rate. However, RBI has clearly signaled that the interest rates are sufficiently low and that banks should reduce their lending rates further. While RBI’s urgency to bring down the retail lending rates is understandable, there is very little it can do about it owing to the abysmal fiscal policy status which would remain so in the near future. 

With low interest rates, huge government borrowings would act as a villain as RBI tries to spur investment demand. The net result would obviously be 6% project GDP growth.

Reality Check for Aviation

The article expresses necessity to restructure the cost structure in the Indian aviation sector since the present one doesn’t allow the airlines to reduce the air fare without which they would run out of volumes and deepening their losses.

While Jet Airways reduced its fleet size due to reduced demand, Air India reduced its fares by up to 70%. With high growth rate that the airline industry saw in the past three years up to 2007-08 (15.1%, 31.4% and 21.2%), the large part of it was owing to the low fares that airlines offered. But these fares weren’t viable with the operating costs of the airlines because of which they were sitting on huge losses. But now most airlines have raised fares despite dropping volumes. At this time Air India’s decision to slash down fares comes as a paradox. However, Air India is a state-owned enterprise and would definitely be there for eternity with the use of public funds. While such a large player’s tactics obviously affects the market, AI shouldn’t abuse its public sector strength. At the same time the airline shouldn’t also be burdened with its social commitments. Airlines have started adjustments through capacity cuts and reducing flights as the domestic traffic goes down by almost 10% in February 2009. Current costs are high as new airports are being developed and existing airports are modernized. But the costs should go down as these airports become more efficient. 

As the bulk of these costs are in govt domain like fuel charges and mandatory capacity on unviable routes, unless govt pitches in, aviation prices would settle at levels beyond a common man’s reach.

21st April

Ouch!

The article talks about the realization that has come to the Indian consumers about the ill effects of credit cards as their numbers decline in the last fiscal by about 28 lakhs while on the same time the number of debit cards issued increased exponentially to 2.37 crore. 

In the times of economic slowdown, the decrease in the number of outstanding credit cards is good news. Largely responsible for irresponsible consumerism in the good times when salaries increased exponentially and people started buying things beyond their immediate reach, credit cards also brought, along with it, a huge pile of overdues. Card companies also didn’t worry much since they enjoyed the interest rates being charged to consumers on their overdues. But now both, banks and consumers, are all left with huge pile of overdues. While the number of outstanding credit cards decreased from 2.83 crores in April 2008 to 2.55 crores in March 2009, payments made through credit cards have also gone down. At the same time, the number of debit cards issued this fiscal is huge 2.37 crores. This is a welcome rebalancing.

The slowdown has forced us to go to our ancestors’ philosophy of saving something for the rainy day, something alien to US consumers and something inherent in our DNAs. Now people would see credit cards for actually what they are – huge convenience and not the escape from reality.

Sugar pricing

The article criticizes the huge amount of government intervention that goes into the pricing of sugar in India which in turn affects the demand-supply equation of the entire industry. 

Govt’s step to stop futures trading on sugar is a welcome step but it should be known that sugar crisis is not only due to futures but largely due to policymakers. Govt wants to keep retail sugar prices low but still expects sugar mills to pay high prices to sugarcane farmers. While India is second largest producer of sugar, it is also the biggest consumer. Intense government intervention forces sugar mills to go into losses because of which they are not able to pay high prices to farmers, who in turn switch to other crops creating a shortage down the line. Global sugar prices are largely dependent on the demand-supply equation in India. Sugar production this year has gone down drastically by 40% to 15 million tonnes against the consumption of 23 million tonnes. While sugarcane factories have stopped crushing sugarcane owing to lack of supply, the retail prices went up Rs.30 per kg before govt threatened to intervene and allowed duty-free import of both, refined and raw, sugar. Global prices of sugar have gone up in anticipation of huge imports from India. Sugarcane needs to be crushed as soon as possible after harvesting otherwise the sucrose content in it decreases which is not good for farmers. State governments like UP always insists in pricing the sugar at prices higher then scientifically calculated Statutory Minimum Price (SMP). 

While such actions need to be resisted, government should also provide subsidized prices of sugar only to the weaker sections of the society instead of all consumers.

20th April

Get Real

The article emphasizes on the factor of improving the sentiments of the banks towards lending rather then completely relying on RBI’s monetary policy changes to improve the economic scenario in the country.

RBI has very limited options with respect to monetary policy changes. With WPI touching 0.18% on the week ended on April 4 and industrial production down by 1.2% in February 2009, RBI is under pressure to revive the economy big time. But the options with RBI are limited. Even if it decreases CRR to its long term goal of 3% and decrease the reverse repo rate to disincentivise banks to park their funds to RBI, it does not necessarily result into spur in lending or economic activity to the benchmark growth rate. Although growth in auto sales, cement prices and dispatches, and steel production indicate development in some areas. While there is no dearth of money in the economy, making it cheap would risk the currency itself. Unless and until the commercial banks do not lower their interest rates, there is nothing much RBI can do. Cost of funds tend to be low for banks owing to the host of administered interest rates and that reduction in rates could wash out the funds off the banks to alternate avenues. On the lending side as well, the mandated lending rates for certain loans shackles the banks to lower their prime lending rates. 

Thus, there is a very little in RBI’s hands to do to revive the economy and one should not expect any miracle tomorrow.

Mockery of governance

The article condemns the government’s decision to allocate 2% of PSU oil companies’ profits to social programmes. These are listed companies and so government has to take into account shareholders’ view before imposing any such decision that mocks the governance.

Already been a victim of forced unviable pricing by government, the new decision comes as a blow to the investments and returns of other stakeholders. The BIG Four – ONGC, BP, HP and IOC – are all listed and have public shareholding from 20% in IOC to 48.9% in HP. The new CSR decision would not only affect the valuation of these companies and make them less competitive against private sector companies but would also hamper their capital investment and dividend plans. This kind of social extravaganza is targeted more towards the oil minister’s constituency or the other top leaders of ruling party. It would only increase the already widespread misuse of PSU funds. Companies have to conduct their affairs in order to improve social and environment sustainability but not at the cost of corporate governance and opinion of stakeholders. The reason these companies are listed in stock markets is to make their governance more transparent and make them accountable to non-government stakeholders. But if government still treats these companies as their fiefs then it is better to delist them. 

Finally, a publicly listed state-owned company must respect the shareholders democracy as well. 

Promiscuous politics

The article talks about the habit of premier politicians of the country preferring to remain single pre-polls in order to enable them to make post-poll alliances without any bonding or dependency. 

These days, promiscuity hardly ever raises any eyebrows when it comes to post-poll alliances. Even if they swear undying fidelity to the so-called common agendas, many senior leaders believe in this philosophy of ‘short-term marriages’. Taking the example of Rahul Gandhi who has remained virtually non-attached along with many of the senior leaders who have remained single and ready to mingle with any party after the elections to form the government speaks a lot about the business opportunity seen by these leaders in the matrimonial market of politics just like common Indian sees in the actual matrimonial market. Other high profile single leaders include big names like Mamta Banerjee, Navin Patnaik, Mayawati and Jayalalita. But it is interesting to think whether this singleness amount to any peculiar inverse brand equity for politicians as they seek out best alliances to suit their interests say every five years, if not less then that. 

Rahul’s present singleness may pay his party rich dividends post-elections although he may not be personally happy about it given the fact that such post-poll marriages make strange bedfellows.

18th April

Cement Cartelization?

The article tries to find an answer to whether the accusation of builders on the cement manufacturers of cartelization is actually true or not. It also advocates for greater conviction of Competition Commission to not only discover cartels but also chase them down.

While builders have accused cement manufacturers of cartelization, the cement producers cite demand increase, especially in the rural market, as the primary reason for increased prices. The argument also seems valid considering the fact that the rural market has been insulated from the slowdown owing to farmer loan waivers, disbursement of pay commission arrears, rural work programs and good farm incomes. Cement industry has often been accused of cartelization. More then 50% of industry controlled by the top five players ACC-Ambuja Cements, Grasim-UltraTech and India Cements while the rest is distributed among large number of players. Thus, the big players, theoretically, are in a position to dictate prices. However, such accusations have to be proven more directly, through confession of the players itself of the price fixing. Although Competition Commission has all the necessary tools to check cartelization, it lacks the conviction to act against those involved in the cartels after discovering them. 

Cartels are dangerous in economic slowdown, as evident from the fact that relaxation in anti0trust laws in US lead to prolongation of the Global Depression. Thus the competition authority needs to be watchful.

Democracy and its detritus

The article advocates resolution of some of the elements that were successful in creating a bloody day on April 16, the first phase of elections, expresses grief over the cynicism, violence and dirty politics that elections bring along with it.

62% voters turn around for 124 LS seats is a very positive figure considering the violence spread by Maoists that killed 16 people despite heavy deployment of paramilitary forces. However, this election brought with it some of the nastiest mudslinging among the aspirants, coupled with hate-mongering on several occasions. However, the most distressful was the violence by Maoists that claimed 16 lives. It is big time we need to address the issue of Maoists if these people have such guts to act despite heavy security. There is an objective of forming a representative government, however, it would see a lot of post-poll break ups and make ups before the final government takes on the power.

However, the season of violence and utter cynicism has started once again among the stirring aspirants as they go for the battle.

17th April

Decoupling revisited

The article comments on the possibility of ‘decoupling theory’ to find some validity owing to the present economic growth in India and China despite their western counterparts bleeding with stagnant to negative growth. 

While stock markets in India and China have jumped 25-30% from their lowest levels, markets in US has remained largely flat throughout the year. With that indication it is safe to assume that economies like India and China would register 5%+ GDP growth even when OECD (Organization for Economic Cooperation and Development) economies remain in negative territory. Decoupling theory received a setback when Wall Street crashed with effects on real economies around the world as well which is true in static sense but taking a dynamic view it seems that the theory needs a revisit as decoupling would take place for the next few years. Emerging markets like India and China are not only set to grow impressively but also provide anchor to prevent world growth from sinking. Next five years projections put OECD economies to grow by no more then 1% while if India and China continue to grow around 6-7%, it is largely possible that their share in the world GDP may increase from 45% to 60% by 2015 which may lead to some decoupling actually. 

On the flip side it is possible that these emerging economies may get coupled with developing ones which is largely possible since India and China try to develop their domestic market as a shock absorber to decouple from the downfall in the western markets.

Regional Jurisdiction

The article talks about the importance of the Ajmal Kasab’s case with respect to its consequences on the national and international legal framework to deal with such situation. The trial is also important to reaffirm the equality of our legal-judicial system.

The debate on national and international legal frameworks to deal with situations is on owing to the globalized nature of terrorism which involves trans-national actors and thus demands a global legal framework that can address the issue of international jurisdiction. While International Criminal Court remains underrepresented, the issue is particularly pressing for South Asia owing to its much more familiarity with the terrorist acts and future spread of it. Such South Asian legal framework also needs to envisage the law beyond the territory of nation state and also beyond the domain of concerns on the legality of external intervention. However, the Kasab trial is also important to reinstate the feature of our judicial and legal system to be fair and equal even though he might be of non-national status and a terrorist. What is important is prosecution of each and every individual involved in this attack even if they remain beyond our reach.

Finally, in this scenario, the prospect of developing a regional framework to protect the citizens and prosecution of criminals and terrorists is certainly positive in the future.

They pollute too

The article talks about the pollution created by the spam mails that is unimaginable and if better technology is used, it could be reduced to a significant level which would help make the planet greener by reduced emissions of CO2.

A study by the climate change consultants ICF reported that the energy spend in sending a spam, detecting it and deleting it could power 2.4 million US homes. Carbon Footprint of Spam study also indicates that 33 billion KW of power used in spam detection process emits 17 million tonnes of CO2 or same amount of greenhouse gases as 3.1 million passenger cars, burning 7.6 billion liters of petrol. While McAfee is an obvious disinterested party that sells spam filtering technology, there is also some merit in the argument that if every inbox has a filter, it could save some 75% of the energy i.e. taking 2.3 million cars off the road. Also on an average every business user is calculated to be spending 131 kg of CO2 on e-mails which means that the technology can reduce 28 kg of from that amount which is equivalent of driving 93km less. 

While e-mailing is certainly a better and greener technology then paper based communication, a little improvement in the technology can make it even greener. Moreover, for India the comparison of spam with number of cars holds more significance post-Nano and could be better medium to compensate for the car jams to be seen on Indian roads in future.

16th April

NPS delivers good returns

The article praises the NPS (New Pension Scheme) initiated by the central government for its employees and currently managed by three fund managers who have delivered god returns last fiscal 2008-09. 

Started for the central government employees who have joined after 1st January 2004, with some state governments as well joining it, the scheme has delivered good returns in all asset classes except gold. Currently it is managed by SBI, UTI and LIC who have delivered returns of 16.5%, 13.5% and 11.6% in 2008-09 respectively. Ultra-low management fees (0.01% compared to 2.25% industry-wide) and a mix of debt-equity coupled with default option that allocates contributions between debt and equity depending upon the age of the contributor, the fund is a good long-term savings option for individuals. It also reduces the risk to a great extent by investing only in Nifty50 stocks. However, there needs to be a stricter exit option to make it a true pension scheme and also to worry less about maintaining substantial cash holdings which would also improve returns. Currently the NPS returns are taxable which needs to be changed to make it inline with PFs. 

After ascertaining access of the scheme to others, proper marketing is also needed. This would also force its competitors to decrease their management fees as well as cost of funds. 

Tough year ahead for Infosys

The article projects that the coming year could be tough for Infosys as evident from the guidance provided by the IT major for the coming year as well as its recent annual results. However, outsourcing would continue to be robust despite economic slowdown and Obama’s tough stance on outsourcing.

Infosys projected that the dollar revenues could decline by 6.7-3.1% in 2010 while the rupee growth could be 1.7-5.7%. This clearly marks the recessionary trend in the US software industry, particularly outsourcing, it depends mainly on. With 60% of the top 135 clients cutting their IT budget by more then 10% and taking time as long as 15 months to decide on contracts coupled with sharp decline in pricing of services, it could lead to significant revenue losses for firms like Infosys. However, as the big shots of economic gang says that the worst time of economic slowdown is over and probably the global economy would revive by October 2009, there is a scope for Infosys to revise its outlook. This year marked 30% and 28.5% increase in revenue and profits in rupee terms for Infosys while 11.7% and 10.1% for the same in dollar terms. However, the company has done well not only to add the headcount but also the clients as 1772 employees and 37 new clients, 12 of which are from BFSI sector, join the company in one of the toughest Jan-Mar 2009 quarter.

The revival shown by the US banking sector in the first few month of January also signals the promising view of outsourcing in the times to come.

A shot in the arm

The article talks about the revival of Indian hockey that seems to have started owing to the team’s victory in the recent Azlan Shah Cup at Ipoh when they defeated the host Malaysia with a convincing margin.

The Indian Hockey seems to be coming back on track after its handling was taken away from Indian Hockey Federation owing to the corruption charges. After defeating New Zealand and then Pakistan, the Indian team went on to defeat the hosts Malaysia by a convincing margin in the finals. However, the litmus test would be when the team would clash with superpowers like Australia, Holland, Germany and Spain for which they would have to qualify into two major international events – Olympics and World Cup. India, for the first time in the history, didn’t qualify for the Olympics last time after losing to China, for the first time, in the 2006 Qatar Asian Games. Thus, India’s performance would be closely watched now in the 2010 World Cup to be held in Delhi. However, FIH has reservations about IHF not hosting the games. The team would also be under scanner in 2010 China Asian Games.

Nonetheless, many more things need to be done to bring about the Renaissance in the Indian Hockey.

15th April

Quick settlement for Satyam

The article, while praising the agility shown by government to solve the Satyam crisis, also demands such nimbleness in dealing with other bankruptcy cases as well.

The urgency by the government was perhaps mainly due to the fact that the company is listed overseas and that it could taint the entire IT industry. Also it was this urgency that prompted Tech Mahindra to pay Rs. 2889 crore for the 51% stake. However, the steps taken in Satyam case can very well be replicated in other cases of corporate fraud as well as bankruptcy. According to WB’s “Doing Business” report, while it takes 10 years in India to settle a bankruptcy case, the creditors recover only 13 cents to a dollar. Compare it with UK having an average time of a year and recovery rate of 92 cents to a dollar. Delay in settlements not only locks the productive assets from being utilized but also lose its value over the period of time. This denies credit t small borrowers/businesses. The Securitization and Reconstruction of Financial Assets and Security Interest Act 2002 has managed to empower creditors having secured interest to seize the assets but not takeover the management. 

Finally, like other countries, we need special bankruptcy courts. Also existing owners should be prevented from stalling the process by new buyer. Equitable access to credit is not possible without sound insolvency regime.

Futile leadership debate

The article talks about the crisis that is concerning mainly to the nationalist parties with respect to the identity management. With national issues being taken over more by the regional concerns and communal agendas, debate for a national level leadership becomes futile.

Today, a common man exercising his voting right in general elections has very little to do with identifying a national leader. The political class is playing all around the national, regional, local and communal issues. These issues are more or less becoming the deciding factors on how an average Indian electorate would caste its vote at the end. Thus the debate, whether Advani is strong or Manmohan, holds very little significance. Post-independence although there has been enormous churning witnessed by Indian polity, the competitive identity politics has always remained core. While the parties make sure they play well the sectional interest groups very well and even these groups managed to get the share in the developmental pie, the split in the Indian polity will endure. 

Finally, the political party will succeed, that cleverly micro-manages the caste equations at local/regional level.

14th April

The suitable boy

The article praises the way entire Satyam episode was handled by the government as well its appointed board, right from the confession of Raju till Satyam’s sale to Tech Mahindra.

The credit goes to the govt as well as the appointed board that completed the sale of the company in less then three months and that too without any controversy. This restores the confidence of investors on the Indian corporate sector to deal with such situations. Besides government, SEBI and Company Law Board also played a noteworthy role in removing the roadblocks to a swift management change. Now it’s only the CLB of Tech Mahindra that has to approve the acquisition. Markets also responded positively as shares of Tech Mahindra jumped 25% post-winning of bid. With Rs. 58 per share, Tech Mahindra has bid 23% higher then Thursday’s closing price and shed away all the speculation of a lower reserve price for Satyam owing to the uncertainty of actual liabilities facing the company. The acquisition would, in fact, put Tech Mahindra as a serious player in the Indian IT sector along the lines of TCS, Infosys and Wipro and expand its presence in US. 

With speedy completion of all transaction and management transition, there would be an end to speculations of Satyam employees, clients and investors that have been suffering since last three months. 

Missed Opportunity

The article contemplates on the missed opportunity by the Asian countries for larger economic cooperation owing to the cancellation of ASEAN Summit to be held in Bangkok over the weekend. 

When it comes to regional economic cooperation, Asia trails far behind Europe. Although ASEAN is there but it excludes India and China; thus representing only a third of the entire population in the continent. However, China, India and Japan were in their own stages of development in signing the FTA agreement in good and services with ASEAN. East Asia Summit was also in an attempt to forge greater cooperation in the Asia-Pacific region. But all these measure got a setback when the much awaited ASEAN Summit was cancelled owning to the political crisis in Thailand. Earlier in December, this is the second time the Summit has been cancelled. Although attempts are made to reorganize it somewhere in August but as of now it’s a lost opportunity. The Summit had on its agenda, following the G-20 summit conclusion in London, the global economic crisis. While India was in the process of signing the FTA, the elections have postponed the process till the next govt comes to the power. Being an executive exercise in some countries, there is no point in waiting for the next government to do the proceedings. 

There is also a possibility of dilution of such larger economic cooperation owing to the growing protectionist sentiments. However, any such view would be, ofcourse, shortsighted.

13th April

Home truth

The article talks about the effect of interest rates on the housing market in India which is being continuously affected adversely but anybody hardly noticing the real problem.

While prices and affordability is getting the limelight in the housing market debate, nobody has noticed that it is the interest rates which are unbearably high which is resulting into dampening sentiments. With increasing interest rates, borrowers have only two choices in hand; either to increase the tenure of EMIs which can well extend beyond their work life or to increase the amount per EMI itself which can be as much as 30%. While banks are reluctant to pass on the benefits of tight monetary policy by RBI to borrowers, the so-called floating interest rates are virtually fixed at very high levels. Even the fixed rates are set very high in present scenario. 

What is needed is transparent regime in floating rates. While banks lend with respect to PLR, there is no need to change the PLR as the cost of funds decreases since banks can very well lend below PLR. In fact there should be a provision in banks to offer fairly priced long term fixed rate loans. Financial institutions should also be encouraged to offer swap option for the borrowers who don’t want to take the risk of floating rate loans. 

Sahabhagi

The article talks about the importance of execution of the process of the goal of inclusive growth and governance, the political parties often talk about. 

While process is often forgotten and goals remain, it is necessary that the intended beneficiaries of the goal achieved should also take part in formulating and implementing the government measures. This would not only improve the designing and implementation of solutions with the knowledge of ground realities but would also bring about a transformation in the participants to an unimaginable extent by connecting them with the rest of the society. This would also bring about a new level of cohesiveness within the society and help it to become a single unified community. As far as the conflict of interests are concerned like that of between contractor-politician nexus with the beneficiary, which till date use to haunt every single govt process, greater participation will ensure exorcizing such illegitimate conflict of interests.

Finally, this is what exactly the purpose of Times Foundation initiative, Sahabhagi, is through greater participation from all the sections of the society, political parties and voluntary organizations. 

Bidding for Oil

The article welcomes the introduction of more transparency by the govt in the process of bidding for E&P sites in the Indian waters but complains that the weightage on various bidding parameters needs revision to improve the transparency.

While the govt invites bids for the eighth round of bids for 70 E&P (exploration and production) sites in oil & gas, the process is also on for 10 blocks of E&P of coal-bed methane. The policy seems to be paying rich dividends given that already $10b has been committed in the previous rounds. While the oil and gas production is set to double, thanks to KG basin, there is significant hydrocarbon left in other areas like Barmer, Rajasthan. The coming round has blocks of Andamans as well. While the move to declare weightage of various bidding parameters like “works programme” and “fiscal package” is welcome to improve transparency, there is, at the same time, a need to revise these parameters since the present weightage does not conform to the level of risks involved in the E&P business which is more capital intensive and expertise based. For example, 50% weightage to “works programme” in non-deep offshore oil & gas blocks and 25% for the same in deep offshore oil & gas blocks is not only irrational but would also keep away the potential investors. Early commitment on “works programme” would also compound risks for bidders. 

It is important to note that such policies may entail the risk of losing the experts and specialists in the bidding process. Thus there is a need of more flexibility for sure in this process.

8th April

Time to ease ECB norms

The article strongly supports easing of borrowing norms for NBFCs so that they can have better access to the foreign capital to complete their infrastructure projects. 

Government and RBI has considered easing of borrowing norms for NBFCs that seek to raise debt from abroad to finance domestic infrastructure projects. While there is a sharp decline in the foreign debt inflows in India, it is important to mention that the extant policies for NBFCs are cumbersome and self-defeating. Recent measures by RBI to relax the rules were accompanied by inexplicable caveats as well. For example, the policy said that NBFCs can only borrow money from recognized multilateral financial institutions like World Bank, ADB etc and that these institutions should have extended a certain minimum amount already to the project in order to be eligible to fund NBFCs. This assumes unlimited corpus with the agencies that fund NBFCs. While agencies like ADB marginally exceeded the upper limit in lending last year, it renders such policies meaningless. Pretty much same is the case with other bilateral FIs. What is needed is more freedom to NBFCs to tap the global capital. Rating system for NBFCs by RBI would ensure that only serious players tap the international market. 

Finally, restrictive foreign borrowing policies were good at the time of excess capital inflows but in present conditions and considering future forecasts we are far away from that luxury.

Setback in steel

The article criticizes imposition of anti-dumping duty on stainless steel imports. Such duty would just increase the cost of manufacturing for domestic producers and in turn backfire and hit the industry itself. 

The Directorate General of Anti-dumping and allied duties (DGAD) in the commerce ministry has lost the bigger picture and not taken into consideration that such measures would increase costs, reduce output and invite retaliatory measures from our trading partners. In the condition when the global meltdown is there and the exports are declining, such duties only add up to the trade barriers. While the global steel prices are down, such duties remove the scope for reducing the domestic price cuts. DGAD has acted on the complaint of only one producer and hasn’t taken into consideration the whole industry. There is a serious need for producers to import requisite stainless steel and special grades since the country has an abysmal record in producing quality high grade steel. While poor domestic demand may be one of the reasons, the main reason is distortionary policy. As the domestic iron ore prices are as low as Rs.11 per tonne and captive mines are a norm, there’s a little incentive to move to high grade steel. 

There are other rigidities as well such as opacity in the steel policy. What is needed is to move out from such rigidities and promote steel import to move up in the value chain.

7th April

Emperor’s new clothes

The article criticizes the NACAS (National Advisory Council on Accounting Standards) for allowing the suspension of AS11. Altering the accounting standard is not the answer to the huge M-2-M forex losses on which the corporates are sitting right now.

In spite of opposition of ICAI, the Centre overruled the objection and held on the decision by NACAS to suspend AS11 and allow corporates to create a special reserve to park exchange differences and write them off over a period of time. They would also have to redraw the accounts retrospectively from December 2006. But altering the accounting standard doesn’t seem to be the answer to huge mark-to-market losses the corporates have registered. Nor does this change the reality of the losses. Although these are only potential losses and not the realized ones, the same accounting standard helped them register inflated profits and valuations when the tide was on their side. However, government could not prevent the lobbying of corporates just like in US where the government allowed corporates to hold toxic assets in their books without marking them down to the current miserable market prices. 

However, what needs to be done has already been suggested several time by TOI i.e. to make corporates publish two books of accounts, one with mark-to-market prices and one without it so that investors and general public get the true picture.

Auditor gets a reprieve

The article talks about the reprieve received by PWC from after the Satyam CFO cleared PWC role in the fraud. However, this calls for improvement in quality of auditing with some special attention to cross-checking the financials and accounts of the company. 

While PWC has been cleared of the fraud, it only clears from criminal offenses and not from the charges of negligence while auditing. Simplest thing like verification of bank statements wasn’t done directly but through Raju brothers which was a grave mistake. If not criminal, then it certainly calls for disciplinary actions by the regulators. Internal check systems needs to be improved, especially cross-reviewing of the work done by partners to ensure best quality of audit. With abysmal record of disciplinary actions against errant members, ICAI hasn’t played a good role as regulator who is an important determinant of quality professional services rendered. While this time ICAI shows alacrity, even the auditors have become cautious with document verifications. However, this should not amount to over-cautiousness and increase the time as well as cost of audit. 

While peer review of audits is set to become a norm, join audits should become mandatory for companies crossing a certain threshold of revenues.

Under the TV gaze

The article ironically indicates the importance of TV in making people believe in something which has happened like in the case of girl flogging in Pakistan’s Taliban controlled area.

Disgust came from Pakistani public only after the episode was shown on TV, months after it actually occurred. This episode is enough to indicate the horror lurking around in our, as well as Pakistani’s near-neighborhood. While we were unconcerned when the same terrifying acts were going on in Afghanistan, it was much because perhaps it wasn’t televised in other countries. While Taliban never pretended any sanity apparently, the episode is only an extension to the chap who killed healthcare workers delivering polio drops. According to their theory it’s a western plot to turn warriors into impotent idiots. While women suffer inarguably in this expression of godliness, the latest news is the declaration of money under the central income support scheme as “haram” by the Taliban folks. The chaps expressed regret to be unable to provide identity cards to their women, although ironically it’s puzzling for them to see women having an identity. 

While the Child Parliament comes to the rescue of Pakistanis by condemning the girl flogging case, this must cower the Taliban now. But we should put it on TV first.

6th April

Look inward for growth

The article talks about looking inward for enabling growth in these recessionary times. By inward, it means tapping the rural market which has seen faster growth then their urban counterparts.

While Hero Honda saw a sales jump of 10.3% in March 2009 and 11% for the entire fiscal 2008-09 when the industry growth was 1.9%, Maruti showed 15% rise in sales in March. The common thread between the two was their strong rural market. While rural sales accounted for 8.5% of sales in 2008-09 as against 3.5% in 2007-08 for Maruti, for Hero Honda, its strong distribution network in rural market has accounted for huge sales. HUL also has more then 50% of its sales coming from rural market. While rural market has been growing on account of four straight good monsoons as well as various government incentives like subsidies, income transfer through NREGS and farm loan waiver, there is a huge demand in the rural sector for goods and services. However government’s present fiscal position doesn’t allow it to continue the benefits in the future and monsoon can fail anytime. Thus there is a need to de-risk and strengthen the rural market. Increasing farm sector productivity and services sector that currently accounts for 28% of rural GDP and growing at more then 30%, is necessary. With 30% of farm households having access to formal banking, there is a huge potential of financial services which is currently available through money lenders. 

There is also potential in healthcare, education, broadband and several other services that can help in achieving the 8% growth mark. 

Sharpest decline in Trade

The article talks about the sharp declining trade in rupee terms that is a serious cause of concern and demands sooner government intervention. However, the good news is that non-oil imports have continued to rise which suggests increase in economic activity.

In dollar term terms the exports shrank by 21.7% in Feb 2009 and the imports by 23.3%. But in rupee terms, the decline was 3% after the increase of 4.3% in January and 22% in December. This shows erasing of gains by the rupee depreciation of almost 25% in the intervening period. This also means the exporters would now need more government help on account of declining exports. Imports, as well, fell by 4.9% after growth of 1.4% in January. However, excluding oil imports, the growth is 10% Y-o-Y which is contrary to the conventional wisdom which says that imports shrink when the currency depreciates. This shows that economic activity hasn’t weakened that much. Non-oil imports include capital goods, intermediate goods, gold and unpolished gemstones etc. While decline in commodities prices provide good help, the huge relief came from 48% decline in oil bills compared to a year ago. This has helped to narrow the trade deficit by 27% compared to February 2008 which stands today at $4.9 billion. It would help in balance of payments as well.

However, the real threat to the domestic economy comes from the declining demand.

4th April

Glimmer of hope

The article talks about the positives that have come up on the eve of London Summit 2009 o G-20 nations and also points to the two most important issues that remained to be discussed at such an important forum.

Some said the summit was new Bretton Woods but the truth is it is nowhere near to the 1944 epoch-making conference that gave the world its present financial architecture. However, the summit could be placed as a worthy successor. Although the much hyped $1.1 trillion fund is not a reality presently, but the immediate increase in the IMF funds of $250 billion to the present level of the same would definitely help to stir up some global economic trade and provide some fuel to the capital-starved countries. Also significant is the agreement on broad principles of financial regulations and supervision, reforming multilateral institutions, preventing protectionism, crackdown on tax heavens etc. Establishment of Financial Stability Board, as a successor to Financial Stability Forum, with representation from all G-20 countries to oversee global financial system and establish early warning system is another positive. 

However, the forum failed to address the two most important issues with respect to the present crisis and to prevent its recurrence: role of USD as international reserve currency and global imbalances. Although the issues cannot be resolved easily but avoiding them is an open invitation to another crisis itself.

Spurt in gas output

The article calls for a proactive effort in designing a proper market for the Gas sector as the newly operational KG basin is set to double the gas output for the country.

The GoM has set the price for Krishna-Godavari (KG) basin gas with an objective to better allocate the resources for underdeveloped gas sector as well as determine the reasonable scarcity value. The initial price works out to be $4.2 per mmbtu, which after taxes and levies, reaches $5.34-5.87 per mmbtu depending upon the location. Although the price is considerably high compared to $4/mmbtu for Henry Hub (HH) in US, the fluctuations would be considerably low in India as compared to HH which are market determined prices. In this recession it is no surprise that gas prices are low for HH. The market in India is yet to see the vigor owing to underdeveloped supply, storage and distribution infrastructure. For India, it is time to intensify efficient price discovery for gas. While GoM prices would be valid for five years, mechanism to market determine the price of gas in both spot and futures ought to follow. A good infrastructure and a network of pipelines would help multiple gas producers and suppliers. Reliable logistics hubs would help efficient trading, price discovery and exchange-determined gas prices. 

What is needed is a proactive market design for the gas sector which is all set to pay us rich dividends for the coming decades owing to more then trillion cubic meters of gas reserves and extensive deposits of gas hydrates as well.

Dutt plays multiple roles

The article talks about the latest election drama going on in the Samajwadi Party theatre with Sanjay Dutt playing the protagonist. 

First he came to Lucknow as an SP candidate to contest LS elections but SC banned him on the grounds that a convict cannot contest elections. To its reply Sanjay openly claimed on NDTV to have carried out a sting operation on a Union Cabinet Minister who told him that he would not be allowed to contest elections till he is with SP. He was accompanied by SP leader Amar Singh. Dutt didn’t felt feared at all while carrying the operation, the reason he believes to be his acting background. He also didn’t fear going to jail since he knew that he was right. He told about the distressful life his father spent with Congress and the foul language used by Shiv Sena candidate Sanjay Nirupam who was inducted by Congress. This episode says a lot about the various roles Sanjay is playing in his real life as well. A politician who says he’s an actor and does a journalistic sting operation on a Union Cabinet Minister while claiming that he is also a loyal son, caring brother and a faithful friend. 

Amar Singh too, at the same time, has bypassed best of the Bollywood directors in extracting an award winning performance from the super star.

3rd April

Spectrum policy in focus

The article talks about the TDSAT judgement regarding the spectrum policy of TRAI towards the existing and new operators. It also talks about improving the spectrum allocation policy and providing a wider spectrum for Indian operators as well like in the West.

In reply to GSM operators’ petition regarding allocation of GSM spectrum to CDMA operators, the TDSAT said that GSM operators have no ‘vested rights’ to receive spectrum beyond 6.2 MHz and also questioned TRAI for not suggesting a cap for number of operators in a circle. Although it criticizes TRAI on its subscriber base criteria for spectrum allocation, it supported DoT in adopting the same. If an operator wants a spectrum beyond 6.2 MHz it is unfair to deny him just because there in no policy for that. Instead a premium should be collected from the operator to reflect the spectrum scarcity and enable efficient use of spectrum. Since auction is not possible to allot extra spectrum, company valuations in the last round should be used as benchmark. For start-ups, their valuations would be the proxy prices for spectrum. On a long run, the money earned from the spectrum allocation should be used up to free up more spectrums. The average spectrum available to operators in other countries is 25 MHz. Thus Indian operators must be availed the spectrum of at least 15 MHz. 

While digitization would free up lot of spectrum, sharing could also be considered a good option since mesh technology has made it possible and currently experimented with.

Inchoate Front

The article talks about the unclear vision of the Third Front that can be a major hurdle for it to remain a stable coalition at the center or even off the center. 

NCP Chief Sharad Pawar had no dithering in revealing his PM ambitions when he heightened the speculation of its possible coalition with TF, although his party is currently a part of UPA at the center. But despite projecting itself as a clear alternative to non-Congress non-BJP government at the centre and even dreaming of latter’s dependency on them for forming coalitions, the absence of a core ideology to hold all the TF parties together is their major problem. Besides just being ‘secular and pro-people’, there has to be some core political and developmental agenda to form a viable front. While CPI(M) has been trying hard to forge a national and secular alternative to the Congress party, the lack of core ideology is preventing itself to become a stable and long term coalition.

In the current scenario, with diverse agendas, personal ambitions of the constituent parties and internal tussle due to various interest groups provide enough ground for cynicism.

Normal is an aberration

The article talks about the increasing medicalization of human condition since we see these days that for every human condition there is a term in a medical science ending with the word ‘syndrome’. 

In olden times when most of the human conditions were considered perfectly normal, it’s not like that anymore. Children who are naughty, energetic but distracted in olden days were not much of a cause of concern as it is today. Today they are thought to be suffering from a disease called ADHD (Attention Deficit Hyperactivity Disorder). In olden days when wise parenting and school supervision was remedy for such children, that has been replaced by medical prescription and psychotherapy besides special diet, megavitamins, “attention training”, body treatments and even chiropractic sessions. The reason is believed to be pharma companies since medicines would only be sold when there would be diseases. Discovery of new diseases lead to more R&D and thus further more diseases discovered. However, a part of blame also goes to people who illogically accept anything that is told to them. Their expectation for their child to be perfect rather then natural drags them to assume that their child is suffering from a disorder every single moment. 

The best cure to this would be to use a little common sense but the question is can we resist the urge to hope for the worst?

2nd April

Handle with care

The article talks about the serious implications of a high current account deficit to the Indian economy compounded by capital account deficit. However, the situation is not as acute as 1991 crisis but caution needs to be taken by RBI to avoid the worst.

The balance of payment (BoP) numbers for the third quarter has raised serious concerns as current account deficit slides to $14.46 billion (5.43% of GDP), which is three times the same last year. Besides that the import bill of $8 billion showed by RBI is unusually higher then the same shown by commerce ministry. While it is possible that some importers might have rushed for dollar purchases over the risk of depreciating rupee, the outlook is not as robust as we might wish. For the first time in a decade, even the capital account has shown a deficit which means capital inflows in third quarter would not be able to fund the current account deficit. This is surprising as well as worrying since ideally current account deficit should remain in the comfortable range of 2-3% even as capital inflows are able to fund it. But the current figures are not good considering that much of our imports consist of oil imports which are price inelastic. Thus, considering the global outlook, any deterioration in current account deficit could have serious implications. 

However, the current crisis is nowhere near to 1991 crisis owing to our healthy forex reserves of $240 billion and also because of low oil prices. Also Indian economy is more resilient now. However, the exchange rate would definitely come under pressure once BoP numbers in subsequent quarters exhibit some trend. 

Not so bright a scenario

The article talks about the worsening power sector scenario in the country. It tries to provide suggestions to improve the power infrastructure in the country.

While the peaking shortages increase from 12.3% in January to 13.2% in February, according to Central Electricity Authority, it is time for politicians to avoid promises on reckless give-aways and free electricity. Open ended subsidies and huge revenue leakages coupled with increasingly huge investment backlog has contributed to the deteriorating supply side situation. In spite of economic slowdown, when the electricity demand is expected to ease, the constantly increasing power shortages indicate systemic rigidities. Despite of two decades of reforms and opening up, the state level power sector has hardly improved on their performance, particularly in the western and northern region. On panoply of rigidities, the Planning Commission called for efficiency ratings of Electricity Regulatory Commissions (ERC) in the states. However, it has failed to improve the performance as well as finances. What is needed is more disclosures and performance measures along with use of IT and expert system to track performance. Also the corporate structures in state power utilities need to rev up transparency and operational efficiency. 

A proper market where efficient power producers and suppliers can seek custom in real time would also revive the prospects in power sector. Otherwise the future seems really dark.

Identical twins

The article narrates the true story of Chandigarh twins wherein one of them secured, first, a job for himself and later on for his brother without being noticed by their employers. The article compares the case with Gulzar’s old movie Angoor which has a quite similar plot.

Prem and Ratan where identical twins with same features, voice, height and even birth-marks. Only the IQs were different. While Prem sat for UPSC exam in 1974 to secure a job for himself in the central excise department, he also sat for another exam conducted by Punjab government to secure a job for his brother in state’s weights and measures department. Rattan continued for 28 years without being unnoticed. However, the crime was detected in 2002 when Rattan applied for VRS. While a criminal case is filed against him, he has sought a stay order from the court on vigilance department’s recommendation for recovery of Rs. 8.11 lakh in job benefits but the plea was rejected on the grounds that since he was not the person appointed for the job. While this could be a good story for making a blockbuster movie, it reminds the author of 1982 Gulzar movie “Angoor” where in two identical brothers separated in childhood lands up in the same city 25 years later. The complication comes when one of the brother has to share the bed with his sibling’s wife but escapes committing the sin. 

Height of complication comes in another case in Karnataka that involved a single person secured two jobs in two different towns and continued it for two decades by taking leave in either of the offices to work in the other.

1st April

So far, so good

The article talks about the latest report submitted by the Committee on Financial Sector Assessment and its importance in terms of timing. The report also suggests reforms that are needed although it marks the overall financial system in India as sound and resilient.

Set up in September 2006, when capitalism was at its peak, the committee took over two years to submit its report. These two years witnessed the failure of capitalism and brought out a great reality check for the free market fundamentalists and pure financial capitalism. This resulted in the report being far more conservative then the other two recent reports on financial sector – one headed by Percy Mistry and other by Raghuram Rajan. It suggests calibrated liberalization on the lines of RBI over the issues like opening up of banking sector to foreign banks, capital account convertibility, caution against off balance-sheet items and OTC derivatives. While the tide has turned from liberalization to conservatism, caution has to be taken that in their desire to play safe, the practitioners do not strangle financial innovation. While the report still suggests that the financial system is “essentially sound and resilient”, there is a scope for improvements like poor bankruptcy workout mechanism that hinders efficient resource allocation. 

The report also suggests a need to reduce government holding in banks to complete the unfinished task. Finally, very few countries can today take pride for ‘no discernible concerns’ on their financial sector and we are one of them.

Frontier at home

The article points to the lack of consensus in the Pakistan polity which is the main hurdle to their fight against terrorism and a major catalyst for the spread of Taliban and Al Qaeda forces in the state.

While it was heartening to see Pakistani security forces exulting after capturing a terrorist in the Lahore police training centre attack, the attack once again underscores the fact that terrorists have moved from Frontier to mainland Pakistan. The question is whether Pakistan’s political class has that consensus to take on these extremists? While for India, it would be now harder to maintain that the will of Pakistani state would help vanishing terrorism, for US it just means more fierce battle for Allied forces in Afghanistan region. For Pakistan, however, it now faces more bitter and entrenched foe while they continue to lack the political accord. Political consensus comes as a prerequisite before any proper counter-insurgency plan. Till then the Obama’s strategy on Af-Pak problem remains on paper. 

For India, it is all the more important, first, to make realize its neighboring state the internal enemy, and then aid them in declaring the battle against the common enemy. 

Professionals in the race

The article talks about the new trend of professionals joining the political race to the lower house of 2009. However, it specifies that it’s not the qualifications or the education of the candidate that makes him winnable, but to which class of people he appeals that makes him the right candidate.

Till now, middle class and political class were always on the opposite ends with one boycotting the other. Middle class refrained from voting while political class made dear with more active and volatile caste and communal votebanks. But the times have changed as more and more professionals join the election race either from a political party or even as independent. But just to mention that even before this, political parties were never short of lawyers, engineers, bankers, teachers, managers or other qualified professionals. Qualifications never qualify a person to represent the public or stamp his social awareness and inclination for public service. The differences between the need of the rural electorate and the urban one in India makes it difficult for any person to represent both in an election. Only he, who can appeal to both the classes, can truly represent them. 

Independent aspirants should also remember that it is not only the political parties who select the candidates based upon their winnability factor, but also the public who vote on the same principle.