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.