Thursday, March 31, 2011

My Way Or No Way

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(Daily Mail pic showing former British PM Gordon Brown)

In India, this is something we are used to and used to giving in, almost as we would bow to kings and queens in medieval times. With citizens of other democracies, the reaction can be a little different.

Former British Prime Minister Gordon Brown came under fire after his entourage tried to bump a heavily pregnant woman from business class on an international flight. It happened at Oman, when passengers on a British Airways flight were told they would have to move to a lower class because of an `overbooking' problem'. The story appeared on Daily Mail but strangely cannot be found on the newspaper's website anymore, at least when I last checked !

The pregnant woman's husband moved from business to premium economy and other passengers from premium economy were moved to economy and some, apparently off the flight altogether. The story came to light because the woman, seven months pregnant, refused to budge. She also got a photograph taken which is circulating on the web.

The Indian Way

The passengers of course don't know how lucky they are. In India, quite likely, the sten-gun toting guards of a much lesser politician or real estate developer would have lined up the passengers against a wall and threatened to shoot them. Possibly they wouldn't have carried out that threat because of the mess it would create in a public place. But surely they would rough up.

A friend and a well known Mumbai politician were driving a few weeks ago to a concert in a Mumbai suburb when their car got shoved aside by a real estate developer's motorcade. The politician was travelling like you and me, ie minus the red light and motorcade. He was shocked. I understand he tried to make a few calls to protest but got nowhere. This happens all the time in the world's largest democracy.

Roads are the one place where we all meet, till we retreat to our fortresses, towers or slums as the case maybe. So be prepared for your rights to be trampled at will, if only to temporarily make way for a greater being. Our inability to protest this amazes me. It does not amaze me that elected representatives and thus `servants' of the electorate get away. They will, til we redefine the relationship between ordinary citizens and politicians and the rich and powerful.

Only If I Had The Choice

There is no difference between the three categories, often. Note now former Telecom Minister A Raja spends quality jail time alongside Shahid Balwa of DB Realty, a `leading' Mumbai builder. The latter is charged with bribing the former. I am willing to bet that in good times, both exercised their rights that flow to this class by shoving aside anyone who obstructed their convoys. Like politician Raj Thackeray's entourage did last week in Goa.

Here are a cross section of views. The first is Jawahar on the site which carried the Daily Mail story. "Hey BA, you seem more like our Nepal Airlines Corporation. I thought they bumped people off the flight to make way for politicos only in the airlines of the 3rd world countries. Cannot believe you do that too."

And another one from a Sir John in Australia, "This is just typical of the so-called UPPER-CRUST. And that CRUST is made up of all sorts of persons, who think they can have it over what they call and treat as 'DROSS" or 'THE PLEBS", who this CRUST is supposed to honnor, protect, serve, and thank for, for having been selected to do so !!"

Incidentally I used to be a regular British Airways flier. I stopped some years ago when they bumped me down from Premium Economy without reason. And never responded or compensated me for the loss. Obviously I found better airlines to fly. Unfortunately, I cant do the same with our roads.

Monday, March 28, 2011

Buffett Lesson: Unite In Philanthropy

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Warren Buffett came to India. The closest I came to him is when my aircraft passed his (parked) private jet in Bangalore last week. Of course I was flying commercial. Thanks to a fairly trying schedule involving four cities in as many days I missed most of the media coverage surrounding his India visit. Which means, by deduction, I missed most of media too.

So why did we get so excited about Warren Buffet ? So one reason is the obvious one. He is the Sage Of Omaha. He is the most valued value investor. And for all the wealth his firm Berkshire Hathway generates, he himself lives the life of, well, a sage. Its perhaps the failing of my current assignment (or boon ?) that I only have time to browse a few reports and not take the full blast. It was in this context that I read T N Ninan's piece in Business Standard. I think it beautifully sums up the Sage's wisdom.

The second reason is the reason he came here. To invite India's rich (add recently rich) to part with their billions (in dollars). I could say a lot more on this to but I think the Business Standard's article titled `philanthropy mongering as PR' next day pretty much summed it up. I am not sure whether Buffett had success in either. But that can be assessed later.

Antilla Musings

From a vantage point, somewhere in south Mumbai, I was watching helicopters land and take off from the Mahalakshmi Race Course on Sunday morning. A friend pointed to Mukesh Ambani's 27-storey Antilla home (clearly visible from where we were standing) and added that he had applied for permission to land on his terrace. My friend being a pilot, presumably had an aviator's interest in landing and take-offs from a building terrace. Of course Antilla's in your face opulence was not lost on him.

To most, Antilla represents a pinnacle in Indian business achievement and sheer ostentatiousness. Although, its now difficult to say where one ends and the other begins. And therein lies the problem in India. So we like and respect success but are uncomfortable when someone brandishes his wealth and power so openly. More so in a nation where the disparities are so stark. Remember, we never saw it like this before either.

A Mukesh Ambani is not to blame for the disparities. He must, like all entrepreneurs big and small, be lauded for creating opportunity, jobs and Gross Domestic Product (GDP). Most of us accept that too. But then, why the discomfort ? I think its because of the concept of perceived equality. Which means that at one level we feel the very rich have taken from the Land and its People and not compensated sufficiently in return. On the other, the State has not done its job of giving us a good deal either.

Distributed Equality

You might argue that the entrepreneur is not to blame for this. True. But the State must fix the perceived gap between the entrepreneurs who mine (pun not intended) the resources the Land has to offer and the benefits that flow to the populace. It does not help that most of the wealth generated in the last decade has to do more with resources that were appropriated in ways and means that were mostly illegal. The 2G telecom scam is a good example.

But what if the State did a much better job in delivering services than it is currently ? I am not upset about a helicopter landing on someone's terrace and whisking him off. But I am surely upset at Mumbai's horrible roads, which surely hold the record for the most non-linear man-made construction on Planet Earth. Or Mumbai's domestic help who marvel at Mukesh Ambani's Rs 70 lakh ($143,000) monthly electricty bill when their homes an hour's train ride from Mumbai are beset with daily power cuts.

Its the distributed inequality that makes Warren Buffett and Bill Gates come and talk about philanthropy. There are two arguments here. First that most Indian businesses practice philanthropy and were not waiting for Mr Buffett to come and preach to them. The other is that philanthropy cannot fix the problems that we really want fixed. Even if the extent of philanthropy, lets say, doubled or even tripled.

So Who Fixes What ?

Most successful businessmen realise this too. They would rather contribute to the larger cause of opportunity creation (which India desperately needs) rather than Buffett-induced philanthropy which in a nation of a billion will always be a drop in the ocean. Unless you were someone like Azim Premji (Wipro chief) who talked about the deficits of education for a long time and finally decided he was going to put some money where his mouth was.

Can businessmen help the State deliver better services ? This is a tough one. The State does not like being told what or how to do. On the other hand, the same taxes you and I pay can deliver a better quality of life. We know this but have to find sufficient ways of enforcing better delivery from the State. We will. I also believe, however, that there is a case for more co-ordinated giving for larger objectives. What if the Ambanis, GMR Group, Birlas, Tatas and the thousands of new and very wealthy entrepreneurs combined their funds for a few specific causes ?

Its not something that any of them would jump to. After all, most of us like to leave our singular stamp on our giving. But for a country of this size, such efforts will bear more fruit. Particularly in areas like education and healthcare. And that's something that Mr Buffett figured too. By donating to the Gates Foundation rather than trying to do it himself. Thats a lesson we should surely take away.

Wednesday, March 23, 2011

The Real Fear Of Flying

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I have been mostly on the road for the last three weeks. Which means catching flights of various shapes, sizes and of course pilots. I am worried. Because neither the airline, India's regulatory body (Director General of Civil Aviation) seem to know whether the pilots flying the aircraft have earned their licenses honestly and didn't forge their tests. And till some 4,500 licenses are fully scanned, we will entrust our lives to pilots whose credentials are not re-established.

I was reading an insightful piece in the Business Standard which talks about how the pilots forged critical components of the tests required to become certified pilots. For instance, most of the now suspended pilots flunked papers on aviation meteorology, radio aids and air nagivation. How this escaped everyone's attention is a little bit of a mystery. Or not.

The matter picked up steam when the DGCA ordered an inquiry into an improper landing in January (on the nosewheel) by a pilot who, amazingly, had commanded flights with IndiGo Airlines for two years. Turned out she had a forged certificate showing she cleared the tests in November 2009, and thus got the Airlines Transport Pilot Licence (ATPL). A few more names cropped up soon, including one from Air India and another (apparently the authorities are hunting a few) from IndiGo.

Continous Testing

I have no doubt that the airlines themselves are turning over every scrap of paper they can lay their hands on to establish whether the records are in order. As we all know, airlines constantly run their own tests and periodic simulator training sessions. Its not like you get hired it and you are in for life. You are tested constantly - almost like a competition sports player - and have to perform to perfection all the time.

So its a little funny that pilots who have not slipped up for two years suddenly make a glaring error, which in turn starts the chain of events that gets them caught. The other possibility is that they were slipping up all the while and continued to fly. Which of course is highly irregular but also unlikely as no airline would risk its passengers' lives and thus its reputation.

So is there a problem with the quality and nature of testing itself ? Could be, because many pilots say that the Indian DGCA has higher rigor than most other regulatory bodies. This in turn forces desperately aspiring pilots to take measures such as this. Because in their minds they know that they might forge exam papers but will fly the aircraft with the diligence it requires.
Thats a talking point but obviously does not fly because laws have been broken.

Unfair On The Rest

Since everyone is `guilty' until proved `innocent', all record's must be scanned. This is good inasmuch as you never know what else might pop up. Its bad because the reputation of the majority has been sullied. Many pilots I know have earned their licenses through the straight, hard route. By pooling family savings, slogging hard and then battling with the bureaucracy to get their licenses. They have recourse to neither clout or money which might help speed things up.

Coming as this does on the heels of various other scams, including 2G, its a sign of how desperation and aspiration make for a terrible combination in an economy where there more aspirers for any well paying and/or glamorous profession than jobs going. Fudging of certificates happens all the time in the information technology and business process outsourcing (BPO) industries. And hence the creation of a National Skills Register (NSR) by industry body Nasscom. Perhaps the airlines also need something similar. Am sure the solutions will be found, but flying will not be the same. At least for a while.

Wednesday, March 16, 2011

The Forgotten Debates On Nuclear Power: Circa 2007

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Three years ago, I wrote two articles for the Business Standard newspaper. The first, which appeared on October 30, 2007 was called, 'Dump Nuclear Energy For Renewables'. The second, called The Staggering Cost of Nuclear Power appeared three weeks later on November 17.

I am reproducing both articles because I am even more convinced now. Not because of the safety issues that Japan's earthquake has highlighted but the fundamental problems with setting up nuclear power plants that we haven't fully understood, or debated. Actually, I am quite amazed myself how little or nothing has changed. Including the fact that Kudankulam, which I refer to here, is yet to go on stream. Or is finally promised to go live now.

DUMP NUCLEAR ENERGY FOR RENEWABLES

Govindraj Ethiraj / New Delhi October 30, 2007

I visited the Nuclear Power Corporation’s Kudankulam installation, 25 km west of Kanyakumari, two years ago on a dazzlingly clear day. On paper, the project was impressive — 2,000 Mw of fossil-free energy pumped into the country’s power grid at costs that sounded affordable, at least the weighted average cost over the plant’s life.

As my hosts described the project scope and timeline, I asked them when they began work. “Well, technically in 2001, though the first concrete pour was in March 2002,” one of them said. “When is it supposed to be ready?” If I remember, the answer was 2007.

I didn’t pay too much attention to the cost and time factors until a few weeks later when I discovered Kudankulam was actually conceptualised in 1988. It then went off the radar for ten years after the Russians, who offered to help build it, got busy with the USSR’s disintegration. But it was not the Russians alone who delayed the project. Local environmental protests held it back as well. Incidentally, 2007 will end soon and Kudankulam is not ready.

Nuclear Power Is Too Expensive

I remembered Kudankulam again last week when participating in an insightful discussion on climate change hosted by the British High Commission in Mumbai. The panel was led by environmental journalist Paul Brown, author of Global Warning: The Last Chance For Change, and also had Dr Rakesh Kumar from the National Environment Engineering Research Institute (NEERI).

Not surprisingly, one point of debate was whether nuclear power should be favoured over thermal power, a key contributor to greenhouse gases. In the exchange that followed, Kumar took the scientific standpoint that nuclear power was cleaner over the long term and thus preferable. Brown disagreed, though more for other reasons.

“Nuclear power is too expensive,” he said vehemently. According to Brown, even if you ignored the safety aspects, the cost of uranium mining and enriching, running the plant, and, finally, disposing of nuclear waste was rarely presented upfront. Moreover, plants were located far from populated areas for safety reasons. Which means that at least 10% of the electricity (Brown’s “local” estimates) would be lost before it reached anywhere.

Where's The Time/Cost Debate ?

So what is Brown suggesting? According to him, for the same money, every billion dollars spent on nuclear power, you could have hundreds of small- scale renewable alternatives installed, some within months. These would include solar panels, small-scale hydro and wind turbines on homes, offices and factories. Considering that homes in cities like Bangalore are increasingly turning towards solar heating for water, I am inclined to believe this. And there must be a reason for a windmill stock called Suzlon Energy to catch stock market fancy.

All the same, let’s assume Brown is being a little alarmist. I would still insist on a debate on time and cost. The best case construction time for a nuclear power plant is 10 years, give or take. In India, it’s mostly “give”. Even internationally, it could go to 12 years. Second, cost. With the government funding the project, you can be pretty sure that there are several numbers that are not getting thrown up.

Even if there are no over-runs, we are talking about a figure close to Rs 6 crore per Mw at the very least. Which banker, I wonder, would leap at a 10-year outlay at the minimum with such a high capital cost and all sorts of hidden costs, unless it is subsidised, which is the case in most countries, including the UK, as Brown pointed out? Then how long and why should we subsidise nuclear energy particularly if we don’t need to?

No Legislation Either

Even if the bankers sign off, I can bet my half-life that no nuclear plant project will take off in India without first being slapped with a battery of lawsuits and environmental protests. I know site identification is on but can you guess where the next three nuclear power generation sites in India are going to be? I have no clue but I do know that the government is trying to squeeze in two more nuclear plants into Kudankulam.

And by the way, the legislation to allow private sector firms into nuclear power has not been passed. Once again I have no clue where this stands. I can assure you, though, that this is not the easiest legislation to push through, considering that, among other things, the word nuclear, for valid and invalid reasons, is now tied to the Indo-US nuclear deal.

So given all of this and also India’s general track record in big project execution, why then, I wonder, is the government not putting all this energy (in saving the Indo-US deal or propounding nuclear options) into renewables? Incidentally, we generate more than 6,000 Mw of renewable energy but only around 4,000 Mw of nuclear energy! The figures are from NPC and not mine.

So if I were Dr Manmohan Singh, I would call up President Bush and tell him that apart from our left problems, we’ve got a big one when it comes to reconciling the cost of nuclear power versus the returns it will give and the actual time it will take to get more projects off the ground.

Moreover, I would say, we need renewable energy quickly since we don’t want to go down the polluting path that your country did. So instead of pushing nuclear, why don’t you sell us some clean renewable energy producing technologies? You don’t have to go too far for that, you can begin with General Electric, the company that first sold us the nuclear reactors 40 years ago. GE’s big thrust nowadays, in case you have not noticed, is ecomagination.


THE STAGGERING COST OF NUCLEAR POWER

Govindraj Ethiraj / Mumbai November 13, 2007

In 2003, the MIT led an “interdisciplinary” study resulting in an exhaustive report titled “The Future of Nuclear Power”. Four years later, the study continues to be a bible of sorts for proponents of a nuclear power renaissance. And, interestingly enough, for detractors of nuclear power as well.

The opposing views sum up the debates surrounding nuclear power today. While most pro-nuclear power scientific studies and opinions claim nuclear power is safer and cheaper, they also acknowledge that cost is critical. They also argue that cost must not be seen in the absolute, rather in the context of savings in greenhouse emissions.

Last fortnight, I argued that given the cost and time overruns of nuclear power plants in India and their minuscule contribution to total capacity, they are just not worth the effort. I admit that what you may well hear from most detractors is the worst-case scenario for anything nuclear and the best case for everything else, particularly those related to non-fossil fuels.

Renewable Scores

But I also argued that if we already generate more renewable energy in India than nuclear power (6,190 Mw versus 4,120 Mw), than what sense does it make to pursue the latter? Assuming of course, at least for the purpose of estimation, we have no dual-use objectives for nuclear fuel or the power plants.

My little reading of the subject shows that opinions on the cost of nuclear power can vary sharply. Often the best scientific brains are on opposing sides. And both can brandish figures to support their claims. But even the most optimistic do not claim that nuclear power is a bargain basement buy. And even these seem to skip the crucial matter of over-runs. And it’s because of the over-runs that the fundamental viability of nuclear power must be questioned.

A Greenpeace report titled “The Cost of Nuclear Power”, released in May this year, highlights the considerable delays in constructing nuclear power plants all over the world. It quotes, for instance, US Department of Energy (DoE) data to show that while the estimated cost of 75 reactors in operation in the US was $45 billion, the final bill was $145 billion.

Longer To Build, Costlier To Erect

The report also points out that the average construction time for nuclear plants has increased from 66 months for completions in the mid 70s to 116 months or almost 10 years between 1995 and 2000. Greenpeace says the longer construction times are symptomatic of a range of problems including managing the construction of increasingly complex reactor designs.

In India’s Tarapur III & IV, for example, the cost went from Rs 2,427 crore at start to a final figure of Rs 6,200 crore. Greenpeace figures also show that all nuclear plants in India have run massively over time even as capital costs ballooned. Greenpeace has also compiled, interestingly, details of some 14 nuclear power projects the world over where work has stalled. These are mostly in former Soviet Russia but also include Argentina and Brazil.

India’s Department of Atomic Energy has an installed nuclear generation target of 20,000 Mw by 2020. Completing nuclear reactors under construction will take the capacity to 7,280 Mw. A good part of this, for instance, the Kudankulam power project, will be delayed and will have cost implications which will only emerge in later Comptroller & Auditor General (CAG) reports.

The Total Cost Equation

The question thus is not whether nuclear makes sense. From a technology and safety perspective, India’s track record is undoubtedly sound. India’s skills in this sector are also good. Fuel is a question mark but it can be bought from somewhere. And finally there is the cost and effort involved in decommissioning and nuclear waste.

But the total cost picture is what is extremely unclear. Incidentally, building any new power plant is fraught with risk. This is quite evident if you look at the number of announcements that have been made over the years (including Ultra Mega Power Projects) and those that have actually fructified. On the other hand, capacity could come from anywhere. Reliance Energy’s two proposed plants at Sasan and Krishnapatnam will alone add 8,000 Mw to the national grid. And there are other projects as well, all of which together dwarf the activity on the nuclear side.

The lesson here is that nuclear power is good but mostly in theory. When it comes to capacity addition, the private sector will move much faster with fossil fuel-based projects. Obviously that is not a great idea, either. But in any case that’s not the thinking that really seems to be driving our nuclear power programme.

The Final Equation

If the government is so keen to pursue this, then total costs for every component of construction — technology, operations and disposal — must be made completely transparent. The Department of Atomic Energy, the mother organisation for all things nuclear in India, should explain why and how it feels nuclear power is favourable over, let’s say, renewables.

Interestingly, the DAE has a primary mandate of increasing the share of nuclear power in the country. Its other mandates include driving nuclear research and applications in medicine, food processing, agriculture and “basic research”. One solution is to bring expand the mandate to include, maybe, renewable as well. That should not be too difficult. Once upon a time, the Electronics Corporation of India, a DAE arm, used to make economy television sets.

Sunday, March 13, 2011

Can Social Media Survive ?

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Well that's the question many have asked already. The problem is not in social media's utility, its in the revenue model. Which again many have alluded to, particularly in reference to the $50 billion valuation figure placed on Facebook.  I was part of an interesting discussion last week in New Delhi where consulting firm Deloitte presented its Technology, Media & Telecommunications (TMT) predictions for 2011.

Usually, I find such predictions lacking in the kind of leap of faith which make them predictions to start with. I found this set a health departure. For two reasons. First, Deloitte says (among other things) firmly that social media is yet to become a real force, in revenue terms. For one,  advertising spend on social media  is still 1% of total advertising spend. Total advertising revenues for 2011 are  predicted at $4 bn for social media, a small amount compared to the investments perhaps going in. And surely the euphoria.

Second, television continues to grow furiously. Deloitte points out that television ad revenues have gone up from $174 billion globally to an estimated $191 billion in 2011. At a 6% growth, this figure could cross $200 billion in 2012. In contrast, newspaper industry revenues have gone from $126 billion to an estimated  $93 billion in 2011. Indian television revenue is expected to grow 14% in 2011. China on the other hand is expected to grow 16%.  Indian newspapers of course continue to grow.

Why The Telly Could Dominate

How much time will we spend in front of the telly ? Well, Deloitte says 3 hours and 12 minutes in 2011. Compare that to 15 minutes for social media on an average and 33 minutes for the internet, in America. And there are powerful global franchies like Strictly Come Dancing which now attract 250 million viewers in 38 countries. We have our own variations and adaptations of many global franchises in India. And this will grow as there is another 3 billion potential new viewers to target !

I also understand increasingly the role of television and entertainment in the heirarchy of needs, particularly in countries like India. A television will typically come ahead of most gadgets and just after maybe shelter, food, clothing and a now, mobile phone. And not surprising that color televisions are given away free in states like Tamil Nadu. Its the entertainment opportunity, not really news and current affairs. Which can actually make life more content, for most.

What do you think  ? Do you think social media will get the support of commerce. And to what extent ? Do leave  your thoughts !

Tuesday, March 08, 2011

The 1 Cee R Club

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This morning's papers tell me that the residents of Chandigarh  are willing to `shell out as much as Rs 1 crore (twice the actual cost) to own a two-bedroom flat.' And this is a state government-run development ( Chandigarh Housing Board). So while it might be a competent build, it might not have the bells and whistles private developers throw in.

This is not to say the residents of Chandigarh cannot afford Rs 1 crore ($210,000) apartments, particularly for a Housing Board construction. Sure they can. A realtor taking me around in a distant north Mumbai suburb last  weekend told  to forget thinking about buying a good place if I had less than 1 Cee R in my pocket. What he meant is Rs 1 crore . The realtors/brokers say `Cee R', because they think its respectful  in case you don't belong to this exclusive club. Thankfully, the family was looking for a place to rent and not to buy.

The latest Economist has an interesting survey called Bricks & Slaughter, arguing that while property is widely seen as  a safe asset, it might be the most dangerous of them all. Try telling that to the folks in Chandigarh. The Economist piece also talks about  (alongside  advertisements for gleaming new condos in Singapore where you can work, play, live and grow and luxury villas in Gurgaon, near Delhi, where `Fine living rarely gets any finer')  the famous Burj Khalifa, the 388 metre structure in Dubai.  Many flats inside lie empty, as do houses in many parts of the world from the United States to Spain.

Say It With Pride

All of which might seem like alien nations to us in India. Chests brim with pride when it comes to property prices. It's an achievement for which you've worked hard by spotting at the right time and place.  The realtor told me that there was more supply coming up in this distant north Mumbai suburb. "So ?" I asked. "So prices will always be stable or they will keep rising," he told me with the eternal confidence I have come to expect from this breed.

At one level there is nothing exclusive about a club whose tentacles have now spread to the farthest corners of the country. I do wonder, often, why so few people consider  rising asset prices  a problem. Actually, even inflation is barely a problem -  it's a sign of growth which we crave for. Then I wonder if we really have the brainpower to fix the problem of asset prices. And then I wonder again whether the brainpower that there is keeps it that way, by managing and benefiting from such supply-demand imbalances. Hint: one very enterprising young man from  this world was thrown into jail recently.

Oil prices are rising. I asked in an earlier post whether we were ready for a situation when oil would hit $200 a barrel as has been widely predicted. Well, the answer is evidently no. But at least we think about it. When it comes to rising property  prices, we've stopped thinking. Welcome to the 1 Cee R Club. Too bad if you don't belong.

Wednesday, March 02, 2011

Why I Worry About Food Channels

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A confession. This is less about a mid-day chef shootout amidst howling spectators and more about food, the kind that most of India finds it difficult to source daily. There are many indicators to measure governance. Usually, its access to food, shelter and clothing to start with. Then education, healthcare and infrastructure. In a country where elections are often lost on food in general and onions in specific, lets look on food.

Here is a table that I have taken from Time Magazine that's self explanatory.  It highlights  percentage of total household consumption expenditure  towards food.

Country                         % Of Income On Food

United States                                          7

United Kingdom                                       9

Australia                                                 11

Brazil                                                       25

China                                                       33

India                                                        35

Tunisia                                                    36

Egypt                                                       38

Nigeria                                                    40

Indonesia                                               43

Pakistan                                                  46

India is better off than some countries but worse off than many developed countries. And most of these countries are much smaller in any case, except China which is bigger. The Time Magazine draws a connection between rising grocery bills hitting the poor and causing political unrest, note  Egypt and Tunisia. The Economist has a special report on the same subject in the latest issue. The world's population will go from 7 to 9 billion in 2050. Will there be enough food, the author asks ? Adding that at the start of 2011, world food prices have crossed the peak they hit in 2008.

Why No  Blueprint ?

In India, I would pose this question right now. And I did go through the pronouncements of the Union Budget 2011 in this regard. With some disappointment. Because while  are a multitude of steps, none or all add up to  the one Big Idea, Big Blueprint I thought one would expect at a time like this. And given the way we reacted (or not) to the last onion price crisis, I am not sure how much of even this is converting to action and in what way.

Production and supply chain are the big concerns. Much has (and will be) debated and written about on these two aspects of agriculture in India. But to little avail overall. Not just because there are foodgrains rotting in the warehouses of the Food Corporation of India (FCI). Turns out it happens in many countries. The Economist says rich countries waste about the same amount of food as small ones, in quite different ways. Studies in the US/UK apparently say a quarter of food from shops goes straight into rubbish bins or thrown away by shops and restaurants. Salads head the list, if you were keen to know.

That does not help us here. What I would expect now  is a blueprint with action points that says how  food prices could come down and supply go up, in whichever order. You can't do this over the weekend and announce it while inaugurating a car dealership. Instead, take three  months, appoint the right people to work on it, see how technology can help manage the information-supply chain challenges and then present a national solution. Which is surely there. I am not getting into the rest of it (including genetically modified crops) because that's not the problem.

Of Food Shows

The Economist points out somewhere in the survey: (I suggest you read the whole thing) that the food industry has been attracting extra attention of other kinds. For years, some of the most popular programmes in English speaking countries have been cooking shows. That may point to a healthy interest in food, or not. The historian Levy thought the Roman empire started to decay when cooks acquired celebrity status. Meanwhile, for the  last three days, my cable television has been flashing a message  about a new food channel.

Tuesday, March 01, 2011

The Bollywood Formula Guide To Understanding Union Budgets

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This one failed to deliver a Big Idea. Most annual  Budget exercises in India  actually don't.  Usually, they are  a combination of four or five  factors  in no particular order. And almost forumalic, like Bollywood cinema. Sixteen reels make a film, of which 6 reels must be songs, 2 reels must have action sequences and so on. Figures are approximate and you should allow for evolving social mores. Ditto with Union Budget exercises. Needless to add, the  formula will vary depending on the evolving political situations, among others.

So I thought I would look at this annual ritual (and shine the proverbial spotlight) from five  vantage points rather than embark on a deep economic analysis which no one (including self) would follow. And submit that you could use the same five  factors next year too.

1. Plumbing

Where existing policies are cleaned up, given finer shape and  initiatives  discussed in closed loops are showcased for mass viewing. Importantly, promises  are presented afresh, with some garnishing. The best example of course is the transition to a Goods & Services Tax (GST). The one tax that will create the freedom of movement of goods across States in India, just like the European Union did, a while ago, across countries.

The documents released today say the areas of divergence with States  have been narrowed. And a Constitution Amendment Bill is proposed to be introduced in the current session of Parliament. Also, there is significant progress in establishing the GST Network (GSTN), which will serve as the IT infrastructure for GST introduction. Incidentally, GST transition is the one area where industry is looking for an encylopedia of action steps, not a few lines which they know of.

Nevertheless, there is some forward movement, like in the case of the various, but minor reductions in customs duties.  But what do you make of this one ?  'Augmentation of storage capacity through private entrepreneurs and warehousing corporations has been fast tracked'. Or, 'Issues relating to reconciliation of environmental concern from various departmental activities including those related to infrastructure and mining to be considered by a Group of Ministers'.

Or, 'Membership of various international fora engaged in anti money laundering, Financial integrity and Economic development, Exchange of information for tax purposes and transparency, secured.'  And then the tax proposals, where you expect the most precision: 'System of collection of information from foreign tax jurisdictions to be strengthened. Well, well. All this  is verbatim, including the syntax from the Budget Highlights  from the Government's own documents. Moving On to the next Reel.

2. Plain Promise:

'Government to come up with a comprehensive policy for further developing public private partnership (PPP) projects. On  corruption, the one issue that has rocked the country for the last six months - 'Group of Ministers constituted to consider measures for tackling corruption. Recommendations to be made in a time-bound manner.' Even promises can be drafted with more promise, one would think.

There is also a promise in the Budget documents that discussions are underway to further liberalise Foreign Direct Investment. This would instantly cause the antennas of  those working in the retail and insurance industries to perk up. And maybe now, in Defense too. But the antennas have been going up and down for a decade now. So, take it easy is what I would say. Perhaps that is what you, as someone working in these areas, would say too.

3. The Big Idea Which Actually  Replaces Old Bad Ideas:

Not forcing  India's salaried class to file Income Tax returns and go through this annual tedium. That's really far sighted. But when you think hard, you wonder why it was there in the first place. But then, that's what most economic liberalisation is all about.  And its good. No one is complaining.

Along these lines, generally speaking, observe that  lower  duties and `relief measures' for sanitary napkins, baby and adult diapers have been announced. Now, why did we charge higher duties for something like this anyway. Perhaps it does not matter, considering we are an aspirational nation. Like we aspire for good  homes, cars and clothes and education for our children, we also now aspire for good diapers for them. Someone's done some sharp lobbying here, evidently.

I would include targeting of subsidies in this category for two reasons. One, work has been under way before the Finance Minister Pranab Mukherjee's speech on Monday. So this is among those many announcements which have been revisited. Second, it should have been fixed earlier. Notwithstanding all of that, this is the game changer I am very interested in.

Foreign investment has been permitted in domestic mutual funds. Not really a bad idea for not having it, but  it could  have come earlier. Of course, Know Your Customer (KYC) norms are  always the concern for these things but its the same KYC that applies to equity schemes which has been there for a while. Earlier we were worried about too much capital flows and now we are also worried whether  the flows are  'genuine'.  Lets move on.

4. Being Politically (& Agriculturally) Correct

Every Union Budget will and should spend some time trying to address the problems of those of us who are untouched by the soaring indices or who  benefited from the  $1 million values that apartments in many Indian cities are beginning to command.  But there is not sufficient to conclude with, for example, this: 'Removal of production and distribution bottlenecks for items like fruits and vegetables, milk, meat, poultry and fish to be the focus of attention this year.' Good to hear that.

More specifically, there are various allocations for initiatives ranging from bringing the Green Revolution to the Eastern region (Rs 400 crore) to nutri-cereals, protein supplement and accelerated fodder development. Good stuff, hope the scale is right. And then there is a National Mission for Sustainable Agriculture, where 'Government will promote organic farming methods, combining modern technology with traditional farmer practices.' You would have thought it was already happening...

5. The Ocassional Big Idea:

How about this, "Full exemption from basic customs duty to Crude Palm Stearin used in manufacture of laundry soap.' So it will be cheaper to wash your linen, yes ? Kidding, but the one thing that caught my attention was the exemption from basic customs duty and a concessional rate of central excise to imported batteries for electrical vehicles. And concessional excise duty of 10% to vehicles based on Fuel Cell Technology. We are getting somewhere.

We didn't go whole hog or write a new alternate energy policy - not that the Finance Minister's office would do so - but at least customs duties on solar lanterns have been reduced from 10 to 5%. But at least we record our efforts to put down that Big Idea like this classic one under  Innovations: National Innovation Council set up to prepared road map for innovations in India.

6. The Interval

I know I said five vantage points but now,  this is the most important part. In Bollywood, the Interval is the pause  just after a dramatic Turning Point has been introduced. Its the kind of break that  makes you not want to leave your seat to grab some popcorn or coffee. And yet you do because you want to be munching away so as to better relish the twist in the tale. And use the few minutes to ponder about what would come next. Will the the hero really marry the heroine ? Was he always the bad guy ? Will he die in the second half in spectacular glory  ? Etc.

So instead of a two-hour continuous run, I propose an Interval. One where all parties rise, grab various refreshments, ponder, reflect and settle down  to await the twists in the tale. Note that once the movie is over, you don't really think back and wonder whether the Interval was worth it. Its about getting entertained here and now. And that's what its increasingly about, isn't it ?
 

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