Fuel Price Imbroglio - 3

Another thing we need to look at is improving the public transport facility. The public transport in all the metros and most of the Class A towns have long since broken down. Once the backbone of the middle class transportation needs, today it has degraded to such an extent that they dread to use it. What we need is major investments in the public transportation infrastructure. Once this is achieved, Public Transportation can be subsidised to induce people to use it as against driving in their own vehicle. Concurrent to this, we can do some major town planning by having designated areas for offices and industries. This shall ease the planners job to have highly efficient transportation from residential areas to the offices. This is not an utopian concept, but needs lot of planning. Town planning is a concept that is not in the lexicon of Indian governments.

One of the reason fuel is highly taxed in India is that the revenue from the taxes goes towards meeting the ever spiralling non-plan expenditure, or in other words this goes towards paying the rent, bloated salaries of government employees and the various ministers. This segment is totally unaccountable and have zero productivity. For decades, government has been giving lip service to reducing non plan expenditure and downsizing the bureaucracy but hardly anything has been done, and will not be done. The common man, who pays the salary indirectly of these government babus, hardly get any service in return from them and frankly, then why should he pay for it. Stop recruitment in government sector for a decade, reallocate the existing staff and make it lean and mean. It is possible. The Indian private sector was overstaffed during the pre reforms era. During 1990's they made a conscious effort to restructure, reorganize and computerize. The results are there for everyone to see. They became fighting fit and ready to take the transnationals head on at the turn of the century. The competency of the Indian private sector didn't happen overnight. It was a well planned strategy that bore considerable fruit. We need to replicate this in the government services.

One of the bizarre policy of the government is that each household will be given only 8 cylinders per year and for extra they have to pay more. It is a basic rule in economics that the same product cannot have dual pricing in an undifferentiated market. This is one thing that is doomed to fail as the implementation depends on unscrupulous LPG distributors, who are veterans in diverting cylinders and hoarding (remember their diverting domestic cylinders for industrial purposes at a higher price creating scarcity in the lower priced domestic sector?)

In the short term, there is very limited options for the government other than raise the price. One thing they can do is to allow rupee to float against the dollar, which will result in rupee appreciating to the band of 36-38. This will reduce the burden of import cost as the oil payments are in US dollars. Why no one is talking about this option is beyond reason?

Another option is to diversify some of the funds that is being underutilized or wrongly utilized albeit with the avowed purpose of helping the poor like, loan waiver for the farmers, NREG (where the leakage is ridiculous with hardly 15% reaching the beneficiaries, free power to farmers and other social sector programs that are white elephants). I am not for a moment saying the poor should be punished. But it is a known fact that they anyway do not get the benefit of any of these schemes as they should. It is the middlemen who are getting fatter. Till we find an effective mechanism to ensure delivery of social sector programs efficiently, let us scrap them. The money saved can be diverted to meet oil imports which indirectly spurs growth.

Last but not the least. Crack the whip on tax collection - Corporate tax, sales tax, income tax, excise duty and customs duty. There is a leakage of more than 60% on tax collection. Even if we can get 1/3rd of this, it will more than make up for the current deficit and then it becomes a habit.

Government taking the stance that there are no options other than rising the prices is an excuse from the controlled economy era. The need of the hour is plugging the leaks, improving efficiency and increasing productivity. All Manmohan Singh and P Chidambaram have to do is ask their Laloo Prasad Yadav how to do it. He did it with Railways (though it was started by his predecessor Nithish Kumar). Better still, handover the Finance Ministry to Laloo! This is not as crazy idea as it sounds. We have had enough of an economist and a financial whizkid (mis)managing our economy. Let someone who is rustic and street smart have his turn. He, at least can't do as much harm.

Fuel Price Imbroglio - 2

What are the solutions to the fuel pricing problem? There are two aspects to this - managing the demand and finding ways to pay for the imports. Let us look at demand side scenario first.

There has been lot of clamour for holding the price line, adjusting the cutoms and excise duty or revising the Sales tax to make Petrol and Diesel cheaper. What proponents of these measures dont understand is that by doing so, we are not curtailing demand. In fact we will be encouraging people to spend more of fuel, which is the last thing the nation wants. Fundamentals of economics tells us that as price goes up, demand comes down and vice versa.

The second argument is that increase in price of Diesel will lead to inflation and that of Kerosene will affect the poor man adversely. The first is true in one way, but subsequent governments have done precious little to manage the demand for Diesel. HSD or High Speed Diesel, which is a middle distillate is the biggest culprit as far as import of petroleum products are concerned. We just do not have sufficient middle distillates. But the Governments could have done something long time back. They could have banned production and use of all Diesel cars and also that of generator sets of low capacity used for domestic purpose. Diesel is highly subsidised. Why should this subsidy go to rich guys who use a Diesel Mercedez, or Indica or Tata Sumo? Similarly the people who use domestic gen sets are again the rich. Also, it is a known fact that gen sets and diesel cars are the biggest polluters. A law making all cars and gensets petol run would have led to better management of HSD. Also, poor planning on the Power generation front has led to almost all Industrial units running captive generator sets run on Diesel to ensure continuous supply of stable power. Governments have slept since 1980s on augmenting the Power generation and distribution capabilities. Free power to rich farmers, demand supply gap, power theft (the transmission loss in India is 40% which is laughable as more than half of this is due to theft), delays in new power generating stations and sheer bad management of the distribution front has led us to a virtual crisis. Take care of power generation and distribution, diesel demand will come down drastically.

The case of Kerosene is funnier. Every political party makes a hue and cry if Kerosene prices are increased, saying the poor man is affected as he depends on it for lighting and cooking. No one has any statistics how much of the very highly subsidised Kerosene is used actually by the common man. Most of them dont get kerosene at all from the Public Distribution System. It is a big racket. 40 -60% of low priced Kerosene goes towards adultrating Petrol and Diesel in a big way. Increase the price of Petrol and Diesel while holding the Kerosene price, and the guys who are doing the adulteration are the happiest as they make windfall profits.

India's energy demands are growing, no doubt. But have anyone given a thought to the waste in hydrocarbons in the country. Most of our roads are congested leading to huge traffic jams and wastage of petrol and diesel. Instead of taking 10 minutes to cover 15 kms in a city, it takes close to one hour. 50 minutes of engine idling is a colossal waste. Take the case of our highways. The average speed that one can maintain in a highway is less than 60kms per hour, more likely 45 kms per hour. In any decent half developed country, one can easily cover close to 80 kms per hour. This means each trip takes twice the time. Again a waste of precious fuel. Most of our heavy vehicles have such obsolete engines that they are all fuel guzzlers. No legislation has been done on this. Finally, the check posts on the state boundaries. It is a regular sight of heavy vehicles running their engines, waiting in the Sales Tax checkposts, Motor Vehicle checkposts and Octroi Collection centres for hours together. These checkposts dont serve any purpose, are the nerve centres for massive corruption and delay transhipment of goods by hours. A lorry takes 17 days to travel on an average from Kashmir to Kanyakumari. And this after 60 years of independance. What a crying shame. And the fuel lost? Millions of Kilo litres. And, anyway why do we want check posts within the country? Removing them will do more for national integration than anything other single thing. Let us also not forget the biggest consumer of Diesel - Indian Railways. They consume 60% of the diesel in the country. And this is because of the slow pace of the electrification. If railway electrification has been done on a priority basis (almost 90% of our power comes from non-hydrocarbon based generating stations), we will not be facing the resource crunch on diesel.

The Golden Quadrilateral, 6 laning of the highways, the north-south and east-west corridors would have gone a long way in solving some of the problems mentioned above. Despite his many follies, Atal Behari Vajpayee was spot on in focusing on the above. But this government, in a pique, has put the project on the backburner, which is a crying shame.

Another initiative of Vajpayee was the interlinking of rivers. This has its roots about half a century back. I cannot talk of the environmental issues, but genuinely feel a cost benefit study should have been done, because of all the three modes of transportation of goods - air, rail and water- waterways remain the cheapest by a long way, apart from being the most fuel efficient.

I was a Sales Officer in Hindustan Petroleum Corporation during the Gulf War in 1991 when oil was scarce. We all ran a SAVE OIL campaign, creating awareness amongst the various categories of consumers - motorists, industries and household customers - regarding methods to reduce wastage of precious fuel. It was very effective. Why are we not doing something like this? ...................to be continued

Fuel Price Imbroglio - 1

Everyone and then their uncles have written about the high prices of oil, the fuel price hike in India and its impact on the economy. Let me look at from another angle. After all I had been once an Oil marketing man myself during my stint early in my career with Hindustan Petroleum Corporation(and I shall try my best not to do a Government bashing).

The core issue is that we are large scale net importer of oil that has to be paid in US Dollars. Any increase in global oil prices will increase our import bill substantially. This should not a major problem as India has record foreign exchange reserves.

The second issue is that higher prices of Diesel will lead to increase in transportation costs that will ultimately result in higher inflation. Also any increase in the highly subsidised kerosene will adversely impact the poor (how far this is true is another question. the cooking and lighting pattern of the poor have changed during the past 2 decades).

Fine so far. What people do not know is that Government, both central and state, have taxed the fuel products to such an extent that nearly 40% of petrol and diesel prices goes towards central and sales taxes. In fact, it is said that Governments welcome a chance to raise the fuel prices as it means the taxes will increase and they will have more money in the coffers (Even the left front governments, who calls for a hartal everytime the fuel price is hiked, refuses to reduce the Sales Tax to ease the burden on common man. Such is their hypocrisy).

One of the reasons for the high global oil prices is the increase in the energy demands of emerging nations, of which India is the leader. Now, don't mistake me, I am not going to be a George Bush and tell you that we should use less energy. But this point of increased use of energy comes in to consideration while discussing the solutions.................to be continued

The Edsel Disaster

Marketing Disasters and the 'Edsel' Model from Ford is synonymous. So why was Edsel such a failure?. When the car was launched, it was supposed to change the way people looked at cars. But in the end it was destined to be doomed. Murphy's law worked overtime. 'Anything can go wrong will' and it did. Wrong concept, poor quality, disastrous marketing, wrong timing - you name it and Edsel had it.

Ford Edsel was supposed to be the 'car of the decade' when launched in 1957.

But half of the models sold proved spectacularly defective. If lucky, one could have got a car with any or all of the following features: doors that wouldn't close, bonnets and boots that wouldn't open, batteries that went flat, hooters that stuck, hubcaps that dropped off, paint that peeled, transmissions that seized up, brakes that failed and push buttons that couldn't be pushed even with three of you trying.

In a stroke of marketing genius, the Edsel, one of the biggest and most lavish cars ever built, coincided with a phase when people increasingly wanted economy cars. 'It was a classic case of the wrong car for the wrong market at the wrong time.'

Unpopular to begin with, the car's popularity declined. One business writer at the time likened the Edsel's sales graph to an extremely dangerous ski-slope. He added that, so far as he knew, there was only one case of an Edsel ever being stolen.

The saddest part was that US Automakers never learned the lessons from the Edsel disasters. They continued to make large, fuel inefficient, poor quality cars throughout 60's and 70's leading to the Auto Industry being taken over by the compact, efficient, sleek small car manufacturers from Japan.

Thank you Shane Warne

Much has been written about Shane Warne's captaincy in the IPL. There has been an earlier post from me on this.

What stood out was Shane Warne remembering every single of his players name in full and pronouncing it correctly ( A big achievement for an Australian - Try saying Swapnil Asgondkar and you will know what I am telling ). At every post match press conference, he was profuse in his praise of Swapnil, Ravindra Jadeja, Sidharth Trivedi, Neeraj Patel , Yousuf Pathan and so on depending on who performed well that day. He made his bunch of young non entities feel good, recognised their efforts and gave them confidence. They in turn gave their life to him. He also clearly defined roles for each player and led from the front. My enduring memory of the IPL was Shane Warne ensuring he is within the return crease at the non strikers end when the last ball was bowled and then taking off like a rocket to run the single that his team needed to win the moment the ball left the bowlers hand. Professional to the end. When Yousuf Pathan got out, Warne took the responsibility of seeing his team through in the tightest possible situation. Is there any wonder then that his team Rajastan Royals won IPL. There is a management lesson in all these. You dont need high fliers to attain your objectives (the ridiculous experiment of having icons who were paid 15% more than the highest paid player was a well deserved disaster), all you need is a team of performers who are willing to play out of their skins. Whenever Rajastan Royals were in trouble, one of the youngsters put up his hand and took the responsibility of seeing the team through. There was synergy. The adage that sum of the parts is always greater than one holds good in Rajastan Royals Case.

Contrast this with Yuvraj Singh and even MS Dhoni. At the toss, they were not even able to remember the name of the players who have been omitted or selected. It was so embarrassing. What kind of a message were they sending? True MSD did not point fingers after he lost, but said the team as a whole could have performed. But then he could have at least picked someone from the team who did well during the tournament and mentioned it at the prize distribution ceremony.

Back to Shane Warne. Forget his follies and his scandals. Just remember him for being a great cricketer who gave his everything on the cricket field and off it too. He also dispelled the myth that you need fancy computer analyst, high profile coaches and grand strategies to win on the cricket field. He had always scoffed at John Buchananan and his coaching methods. When he got a chance, Warne walked the talk and proved a point or two to the world. He showed to us that cricket is not about personalities, but utilizing the skills available at your disposal to the hilt with passion and determination. Thank you Shane Warne for keeping things simple and untangling the complexities surrounding cricket teams. It is after all a simple game that has to be played for joy. We salute you as a great player and a still greater leader. What a pity you never became Australian captain! Aussies loss is Rajasthans gain

Good and the Bad

We are always quick to jump to conclusions. As a child we ask thousands of questions. We refuse to accept even the obvious things. For example, I have seen children ask, "Why do you say earth is round when it is flat to my eyes?", " Moon looks bright and lovely and you tell me it is full of potholes, silly?","Why should I not wear a black dress to a wedding?", "Is there a god? But then where is he?"

As we grow older, we lose our ability to analyse and question the conventional wisdom. It is as if we are taking the easier way out by agreeing with the norm and are afraid to question the majority. This leads to us not developing reasoning and critical analysis skills that is so essential to succeed professionally.

I shall give an example. Let me start with a rider that I am not one of those atheist guys but quite religious and follow the sanatana dharma. Still, that has not prevented me from looking at some of the quirks in my religion.

We all accept Srirama as the 'Uttama Purusha' or the 'Ideal Man'. But I do have serious questions on this.

Was Rama right in honouring his fathers old pledge redeemed unfairly by his step mother and agreeing to forgo his right to be crowned prince when the whole country was demanding it. What about his duty to the people of his kingdom? He was by and far the most suitable to be crowned the prince of the four brothers. Was he not abdicating his duty to his people which should have come ahead of his duty to his father?

Rama's killing of Bali while he was fighting with Sugreeva (Rama was hidden behind a tree and used bow and arrow surreptitiously while Bali and Sugreeva were locked in a hand to hand combat) was totally reprehensible. Bali was in fact a wise king and highly respected. He was by no means a threat to anyone other than his brother. An eternal black mark in Rama's character.

Rama's treatment of Sita after his return to Ayodhya (based on a silly rumour by one of his people) also does not put him in proper light. To ask Lakshman to take Sita and excommunicate her while she was pregnant reeks of insensitivity.

Now, Now don't jump at me giving weird divine explanations for all these. All I am saying is that there are serious glitches in his life for us to say he is an uttama purusha. It is quite possible that the story has been changed over a period of time and these could be additions. It is known to have happened in almost all the mythologies. They have been mutilated as generations passed by when the stories are passed down orally and every orator using his imagination to embellish (or distort) the story as he deemed fit.

Now to continue my argument that we jump into conclusions quickly, let us take a look at the much hated Ravana. If Rama is considered to be the epitome of goodness, Ravana is the evil incarnate.

Ravana is reviled because he kidnapped Sita. He made a mistake there that has to be condemned outright. But then what about his behaviour after he took her to Lanka. He treated her with respect, never even touched her and wanted her consent before doing so. Evil? I don't think so.

Not many know that Ravana was a great Shiva devotee and he was also quick to learn from his mistakes. He once thought he was extremely strong, went to mount kailasa and lifted it. When Lord Shiva became aware of it, he gently pressed his leg from atop the mountain which ensured that Ravana's hands were crushed under the mountain. Ravana learned his lesson and was humility personified.

Similarly, when he heard about the immense strength of Bali, he went to take him head on, only to be beaten hollow by Bali who casually bound him using his tail and went about his business of praying. A humbled Ravana acknowledged Bali's prowess and made peace with him immediately.

When his brother Vibhishana disagreed with him on the war with Rama, Ravana instead of imprisoning his or punishing him, allowed him to cross over to the other side. That Rama accepted Vibhishana (who could be jailed for treason for siding with the enemy during a war) and used his knowledge of Lanka and its warriors to win the war is another instance that shows the uttama purusha in poor light.

I have utmost respect for the fine qualities of Rama. He was THE ideal man in all aspects barring a few. But spare a thought for Ravana. He is not as bad as he is made out to be. We need to take all the good qualities of Ravana and avoid the flaws in Rama's character.

It is the same in ones work place.We tend to demonise certain people not bothering to understand the good qualities in them while we tend to overlook the negative qualities in some who are acceptable to us because they are nice.

Of contracts

We live and die by Contracts in Business. The amount of time wasted on preparing contracts is phenomenal. It seems half the time of a successful manager is spent on either preparing contracts or making powerpoint presentations. Both hardly serve any purpose.

Incidentally, on powerpoint presentations, one of my friend who is a CEO was telling me that every organization should employ a professional powerpoint creator whose only job will be to create presentations. A novel idea but quite relevant in today's corporate world.

Coming back to contracts. I have held the belief that if the other guy is a crook, there is no need for a contract anyway as he is bound to break it and find out some loopholes in it to make you run around for donkey's years, especially if you are under the Indian court's jurisdiction. If the other guy is a honest person, then there is no need for a contract, as he is not at all likely to break a gentleman's word or an oral agreement.

Either way, a contract is redundant. I remember when I went to sign the contract to become a NIIT Franchisee in 1994, I was asked to sit in a conference room, dumped an agreement running into hundreds of pages and asked to review it in one hour. I didn't touch it but pressed the buzzer for the guys to come back in less than 2 minutes. There they were, couple of managers, a lawyer, the PRO etc etc., all armed with large dossiers and asked me officiously "Mr.Rajan, you can ask any doubts. We are here to clarify them"

I just looked at them and asked "Where do I sign?"

They were flabbergasted and went into a huddle. It was almost comical to watch. "Do you mean to say you have no queries? But you MUST HAVE queries"

Poker faced I told them " I have no intention of breaking any agreement signed by me. I know you would have taken utmost care to protect your interests and if I really want to break the agreement, I can find a smart lawyer who will pick a hole in any agreement. So be good and tell me where I should sign".

A frenetic discussion took place and they left the room. After a while, I was called to meet the CEO, Vijay Tadani, who thought I was not serious as I had not bothered to ask any clarifications on the agreement. They would not have signed the franchise with me but for the fact that I had established my credentials by bringing to the table a DD for Rs 3.5 lakhs.