Thursday, August 30, 2007

UP move on large-format retail store

Following an attack on a few Reliance Fresh and Spencer Daily stores in Lucknow, the Uttar Pradesh Chief Minister Mayawati has ordered a closure of all large-format retail stores.

The hooliganism was organized by a sitting Rajya Sabha MP Banwari Lal Kanchal of the rival Samajwadi Party and his organization UP Udyog Vyapar Mandal.

There has been a lot of anger against large-format retail chains across several states. Some states have resorted to violence - most notably Ranchi in Jharkhand, near Kolkata in West Bengal, Indore in Madhya Pradesh. There have been several demonstrations in Tamil Nadu.

In West Bengal, the ruling partner AIFB has promised not to let Reliance Fresh in and has said it will demonstrate (and perhaps also indulge in violence) in front of Reliance Fresh stores.

For a while, I was under the impression that it is not possible for state governments to control who sets up what kind of shop and what can be sold there. I was wrong. An archaic and bad law in the form of Agriculture Produce Marketing Committee Act exists in all the states. This seems to be a state subject and hence you have roughly 30 variations of this act, state to state.

This act has primarily been used till now to determine to whom farmers can sell foodgrains. Vegtables, fruits and such have been left to open market purchase and resale. However, I fear this law can be (mis)used by left leaning governments to impact organized retail from selling agricultural produce.

This will affect shops like Reliance Retail from selling vegetables, fruits and may probably even be extended to cover milk. Such a retail shop then will be forced to only sell groceries and FMCG products.

The state variation in such a law can also determine where agricultural produce selling shops can be opened, the size of the shops, licenses for such shops etc. This will be an extremely retrograde step.

It may be worthwhile for the central government to enact a law which at best controls only foodgrains (even that should be avoided, if at all) and release the rest of the agricultural produce from the state list and abolish Agriculture Produce Marketing Committee Act across the states once and for all.

Tuesday, August 14, 2007

The need for Indian Cricket League

The BCCI - Board of Control for Cricket in India - has been a monopoly, controlling professional cricket played in India. Similar organizations do the same in other cricket playing countries, but in countries like Australia and England, the cricket boards are professional bodies.

In India, on the other hand, BCCI is filled with all the undesirable elements in the society - led by the politicians. BCCI's aim is supposedly to promote and manage cricket. They fail miserably in this aspect. Cricket promotion in the country happens on its own, through corporate involvement and television coverage. BCCI merely extracts its annual income from television rights and sponsorship of matches. They pay a portion of this to the players, but rarely explain what they do with the rest of the money.

BCCI office bearers are supposed to be honorary, elected members. So they cannot draw huge salaries. But, they also deal with more than a billion dollars each year. Huge presidential suites, massive expense bills, and financial mishandling is the norm. BCCI top honchos also act as bullies when they deal with television companies and their own players.

You cannot find a single good thing they have done in the last 10 years. No new statium anywhere to speak off, no pension to past cricketers - though there were fancy statements thrown around, but nothing concrete has happened, no cricket scholarships for under-16, under-19 kids. Nothing. They have increased the salaries to players playing in International matches, and also the domestic matches. But that is nothing compared to their earnings.

They have fought paying taxes. They put enormous strain on the cities that hold cricket matches and do not adequately compensate the city administrations and police force during that period.

The stadia owned by the constituent state cricket associations where International matches are held are extremely poor. They are concrete blocks with very poor civic amenities such as toilets. Food served is invariably poor. Crowd control is horrible - the policemen whack spectators with lathis. Ticket sales is pathetically organized. You will have to stand in long queues for days and may still not get a ticket, while bulk of the tickets are siphoned off and given for free to politicians and other VIPs. Tour schedules are poorly organized. As a comparison, tour schedules in Australia and England for the next year is made available well in advance and tickets can be bought over the Internet.

BCCI do not publish annual reports. They do not have a vision statement, or a list of their accomplishments. Heck, they don't even have a web site in this age! They do not issue press releases. They do not explain any of their actions to the people of India.

Every year they conduct elections. Horsetrading abounds, making Goa legislative assembly a sweet place. The current President is a Minister in the Union Cabinet, handling an important portfolio - Agriculture. He had to be brought in to check the growing clout of the previous incumbent, who was considered extremely autocratic. BCCI has never been democratic.

In all, it is amazing that despite BCCI, the national team wins a few matches.

It looks next to impossible to clean the system from within.

It has to be done from outside.

While I have no special sympathies for Zee's Subash Chandra, the Indian Cricket League (ICL) floated by him could very well shake the board to change its ways.

ICL seems to be quite motivated and willing to spend money.

Whether they succeed financially or not, if they help in achieving a sensible administration and a change of constitution in BCCI, it will go a long way in reforming the game in India.

(Strangely, ICL's website is also down now! So can't link them.)

Titanium Di-oxide mess

Every move by the Government in Tamil Nadu is extremely politicised. The weakening of the ruling party DMK has caused this.

In particular, the Government faces vocal and mostly meaningless criticism from its partners and supporters - PMK and the communists.

The job of these two parties is not offering constructive solutions. They merely instigate local people, issue statements condemning the government move, and eventually force the government to backtrack on such projects. The (Chennai) satellite township project and the (Chennai) airport expansion project both have been killed because of such intransigent behaviour on their part.

The latest in this series is Tata's attempt at setting up a Titanium Di-oxide plant in southern Tamil Nadu, in Sathankulam in Tuticorin (Thuththukkudi) district.

Titanium Di-oxide is used as a pigment in paints and coatings to provide the white colour. It is used in antimicrobial coatings because of its disinfectant characterestics. Being a light and strong metal its alloys can be used in various engineering constructions and biomechanics.

Large titanium deposits are available in Sathankulam in the form of its ore ilmenite. It has not however been exploited so far. No company has put forward a sensible proposal to mine the ore and convert it into a value added product. Some limited mining rights have been given to few companies and they are known to be exporting the ore.

During the last AIADMK regime, Tata Steel with their mining and processing expertise asked for the license to set up a mining cum processing operation. Nothing came of it. The current DMK regime signed an MoU last month with the Tatas allowing them to set up a mining and processing operation.

AIADMK protested. But then, PMK and the communists also protested. Vijayakanth of DMDK protested. Sarath Kumar, another actor turned politician protested.

The government have stated that land will be acquired at market rates. The government will not invoke a Singur like operation and acquire land and turn it over to Tatas.

Tatas want 16,000 acres of land, to ensure they will have a solid supply of the titanium ore for a reasonable time to come. The government is suggesting that only 315 acres out of this is likely to be fertile land. The communists and PMK disagree with this.

The other concerns are that
(a) Tatas are asking for too much land.
(b) The mining operation will result in sucking the water completely from the nearby regions and convert the place into barren lands.
(c) Tatas cannot provide employment to all those who will be surrendering (read: selling) their lands.
(d) Pollution will adversely impact the local ecosystem.

The government announced that it will send a fact-finding team and ask the local people about their opinion. Each opposing political party said they will also send a fact-finding mission of their own. So yesterday (Monday), there were as many as three fact-finding missions talking to people. Each mission will deliver an entirely different version.

Any industrial activity of the type envisaged will result in some pollution. It is fair on the part of the Pollution Control Board to ask what measures Tatas will undertake to deal with the pollution caused and how to minimise the same without affecting the people, flora and fauna nearby. Water issue should also be dealt with. Tatas should come up with their views on how the nearby areas will be affected and what they intend to do.

Being a coastal land, Tatas can be told not to use the ground water, but to set up a desalination plant for all their water requirements. They can also be asked to ensure that water table not be tampered with, so that far away agricultural lands are not affected.

What could be the benefits of setting up such a plant? The southern Tamil Nadu is poorly developed. There are not many jobs for educated youth. Agriculture is an unsustainable job creator. The Rs. 2500 crore investment from Tatas can help in kickstarting the manufacturing sector in south Tamil Nadu. Provided the livelihood issues affecting the nearby people are taken care of, this project should be welcomed by all.

However, the short sighted political parties are making the life very difficult for the ruling party and the government.

A sudden suggestion has come from CPI that instead of getting a private company, the Union Government should be asked to set up the Titanium plant. If that is done, somehow the pollution and land acquisition problems will go away. This exposes the communists' double standards about what they want in West Bengal and what they will settle for in other states. (Shouldn't the Union Government be asked to set up an automobile factory in Singur instead of Tatas?)

The Union Government is in no position to set up new industries. When was the last time, they undertook industrial projects to the tune of Rs. 2500 crore?

Tamil Nadu has achieved significant manufacturing growth in the last decade because of automobile and auxillary manufacturing units near Chennai. Something similar has to be done in the south and west Tamil Nadu. Will our politicians make this happen?

Sunday, August 12, 2007

TN Government to offer cable TV connections

In a recent interview, the 2006 Nobel Peace Laureate and Economist Mohammad Yunus said "business should not be the business of government. Business should be in the hands of the private sector."

But there are times, when one has to welcome a government initiative in starting a business - that too in the service sector.

The Tamil Nadu State Government has decided to set up a business venture to offer cable television connections to homes. This may look quite strange to people living in other states who have not been following the affairs of Tamil Nadu carefully.

Here is a quick recap.

The DMK lead by M.Karunanidhi won the state elections in 2006. One of the campaign promises was distribution of free colour TVs to every household. Yes, every household, provided they had a ration card. There was no other condition attached to the offer. You could already have a TV. You could be rich. If you had a valid ration card, you were eligible for the TV. You could of course, bribe the local DMK functionary and ensure that your name got on to the list of beneficiaries ahead of genuinely poor people.

The government actually fulfilled this promise - to a substantial degree. Colour 14 inch TVs have been procured and delivered to the households. Some of these TVs have also found their way to consumer electronic shops for reselling, though.

Nevertheless, the DMK government felt that the TV media was very important. The dominant Tamil television channel is Sun TV, run by Karunanidhi's nephews - Kalanidhi Maran and (then) Union Minister Dayanidhi Maran. The Marans also controlled cable television networking (SCV) in several parts of Tamil Nadu and had also gotten a license to operate DTH services.

The idea was to supply colour TVs to all the poor people in the state who could not afford to buy one and even offer them free electricity to run the TVs (along with the electricty subsidy already being given to them for normal light bulbs). There were allegations that this will result in Marans making a killing through the cable TV charges each month.

Then, the Marans fell out with Karunanidhi's son M.K.Azhagiri. A poorly timed opinion poll in Dinakaran daily, owned by the Marans showed M.K.Stalin (Karunanidhi's another son, and currently a minister in Karunanidhi's cabinet) as a leading contender after Karunanidhi and pushed Azhagiri and Kanimozhi (Karunanidhi's daughter) to nowhere and suggested Dayanidhi Maran as number 2. Azhagiri's rowdy follwers went berserk in Madurai, Azhagiri's backyard, burnt Dinakaran's office there and killed three staff working there. The police watched the entire show from a distance.

Rather than being angry at his son's follwers, the Chief Minister Karunanidhi was apprently mad at Marans and decided to punish them. Dayanidhi Maran was asked to be dropped from the Union Cabinet. Dayanidhi Maran resigned.

The relationship soured further and reached a stage of no-return.

Suddenly Karunanidhi's DMK was left without a TV media, while 14 inch colour TVs were being delivered all over the state. So an announcement came that 'Kalainjar TV', a private channel with the blessings of the Chief Minister will be launched shortly.

It is not enough if you launch a TV channel, to reach the people. You need a strong distribution. Marans control the distribution in most key cities. It is alleged that Marans monopoly distribution of cable was mostly due to DMK's tacit support whenever the party was in power in the last two decades. Now, DMK had to do something to gain the television power.

The last AIADMK regime had wanted to clip the power of Marans' television distribution in the state. AIADMK also has a television channel - Jaya TV - a distant second to Sun TV. Peeved at the position Sun TV and SCV had, Jayalalitha decided to take over all the cable distribution in the state under the government wing, and passed an ordinance. DMK rushed to the Governer to protest against the palpably partisan and illegal attempt. Good sense prevailed and the Governer did not sign the ordinance. AIADMK was shortly defeated in the elections.

Now, Karunanidhi could not attempt to do the same that Jayalalitha tried. So he decided to launch a Government controlled cable television distribution network. This is fairly legal and no one can protest against this move. All licensing conditions will be quickly worked out, as DMK controls the corresponding ministry at the centre. Given that Kalainjar TV is to be launched in September, the distribution company will be launched well before. The Tamil Nadu Cabinet approved the move yesterday (11th August 2007).

Is this move good for the people of the state?

The answer is yes. Though the entire move is driven by political compulsions, it is bound to do good for the people in the medium term. In the long term though, the company floated by the government will lose money, will be corrupt to the core and will eventually be shutdown. But yet, this is required now.

Even in the days of DTH, cable distribution is required because of the inexpensive service offered by them. DTH operators demand up front payment of Rs. 3,000-5,000 for the set top boxes. Cable TV distribution was in the hands of several small time players during the unregulated period and thus not enough investments were made in the infrastructure. When organized players including SCV came in, they came with the political muscle rather than the capitalistic efficiency. Thus, cutomer service was completely ignored and thugs ruled.

Hathway, another cable distributor was banished from Tamil Nadu using the political muscle. Since then, no other organized player has come to Tamil Nadu to offer cable distribution business. SCV has also not increased its footprint because they have no competition and hence no need to expand at a fast clip.

Now, the government entity will be driven to set up distribution business across the state. This will result in a more efficient service offering from SCV, and a more responsible customer service. The prices will be cut, as the government has promised to offer low prices. The growth will immediately prompt players like Zee and others to jump in and offer competing services. In the end, the government service will fail, but would have paved the road for three to four new players who will be fighting in a level playing field.

Customers will certainly benefit from this.