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Category Archives: National

Is the sky falling down on the aviation sector?

We all fall down ?

You don’t have to follow Vijay Mallya’s tweets to know that the aviation sector is in trouble.  There is trouble brewing everywhere in the industry which had shown great signs of promise since the liberalization of the sector in 2003.

Let’s look at the state owned Air India first.  Sometimes I watch things on the news and I hear Ron Paul’s words ringing in my head. I don’t even believe in his kind of economics, but the state of the public sector in India is such that sometimes you’d think even a homeopathic dilution of the kind of libertarian thoughts I see around me now would be a welcome change in the scenario.

I am looking at Air India’s financial statements as I speak, and really folks it is not all about high fuel prices , what I have with me is the Annual Report from 2009-10. I do not know why later versions are not available on the site.

This is a quote from the annual report for 09-10, which makes it clear that the problems run deeper than high fuel prices. It is mismanagement coupled with deception.

“Operating expenses declined by Rs 23,157.8 million due to a decrease in fuel prices by 29%”

They go on to say how this and other declines in operating expenses were offset by increases in expenses largely due to interest paid on newly acquired aircrafts and borrowings for working capital.

It’s true that fuel prices have since shot up, but it is also clear that while fuel prices are exacerbating Air India’s problem, they are also serving as a carpet under which more endemic defects are being swept under.

Attached with the Annual report is the Comptroller and Auditor General Review of the Annual Report.  Back in 2010, the CAGR has stated that AIR India understated their losses by around 54 percent. A couple of instances have been highlighted by the Auditor.

1)      Air India has been recording its maintenance expense as prepaid expense. That is, the lump sum the company pays for maintenance is recognized as expenditure and deducted from the revenue only when the maintenance work is actually carried out. While this may seem fair at the first glance, the auditor points out that as the need for maintenance is accrued for the hours already flown by the aircrafts, and not when the work is actually carried out. This is an expenditure that has already occurred and should be recorded as such.

2)      Deferred Tax Assets – These are assets which would be recognized as tax credits on future income, but to claim them as assets, there has to be a possibility of taxation in the future, that is the company should have some profits in the future which are taxable. There was no reason to believe that such profits would arise making the entire deferred tax assets phony.

Which brings us to the question of why the government is in the business of running an airplane business in the first place? Many arguments are being made including one that Air India connects remote areas of the country which private operatory wouldn’t cover.

Does such coverage have to come at the expense of huge losses to the tax payer? Does the entire badly managed business which has never known how to survive any kind of competition let alone the fierce competition seen in the civil aviation sector today have to maintained for this purpose? If a certain route is indeed that important, wouldn’t subsidizing a private player to fly that route be more efficient an idea? About the employment Air India generates, remember that the employees haven’t been paid for over quarter of a year now. How long are these operations going to be maintained on the shoulders of a purely welfare claim which also they fall short to achieve?

Looking at the entire market place, we see that it isn’t just the public sector but also the private sector which is in trouble.  Since the liberalization in 2003, which allowed private players in civil aviation, competition in the sector has been intense, with each player looking out for itself by slashing prices despite rising fuel prices and vying for the most profitable routes (except Air India ? )

Air India does not have the same incentives to maintain profitability as the private sector has, so it isn’t surprising that the government has been accused of pulling Air India out of profitable routes and allowing the private sector airlines to fly them. If there is no incentive to run a profitable business, why run it at all? Just for a few under the table deals and kickbacks that the collusive moves provide to someone high up in the bureaucracy? The tax payer money being lost here, in all probability belongs to an honest lower middle class Indian who may never even see the skies from the comfort of a plane seat.

Kingfisher’s troubles are a well-known fact. A luxury airplane in a price sensitive economy where competition was driving abnormal profits to zero! I guess nobody cared about in-flight entertainment or ‘personally selected’ airhostesses for their two-three hour flights; they just wanted to get going at a low price.  The highly leveraged buy-out of Air Deccan to create simultaneous low-cost operations did not work out too well either. It was badly timed with competition from Jet which acquired Air Sahara, sky rocketing fuel prices and the 2008 recession which did not bode well for any of the players. Indigo has stood through in this environment as a lone example of success, driven by well thought of strategic decisions in fleet acquirement and slow and steady expansion into the market. These however are examples of a competitive market doing what it does best, rewarding better decision making. What Air India which doesn’t even pretend to be interested in a profit is doing flying around with these players is beyond me.

Also why are taxes on fuel as high as thirty percent with an additional surcharge when the sector is clearly struggling? Why is Foreign Direct Investment ok in retail but not in aviation? It is easier to see why FDI in aviation would be a good thing. Another area worth looking into would be the high charges paid by carriers for using airport facilities.  Unless the private sector is given the leeway it requires, the liberalization of the aviation sector may come to nothing and people will once again be faced with air travel being a luxury for the very rich.

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Posted by on April 2, 2012 in Economics, India, National, Politics

 

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Narendra Modi – India’s desperation and forgetfulness.

Narendra Modi is a man of many colors. One of them as we all know, is saffron. Moving on, Narendra Modi is also White and Green and an embodiment of the Ashoka Chakra. Narendra Modi personifies the Tiranga Jhanda. You guys think I am mad don’t you? So let me explain.

Modi has been saffron from a very early age. A member of the Rashrtiya Swayam Sevak’s Sangh since childhood and now also the Bharatiya Janata Party’s prime leader, a possible Prime Ministerial Candidate.

In January 2001 Gujarat shook. A 7.7 magnitude earthquake rattled the Kutch region claiming above twelve thousand lives and leaving Gujarat in shambles. Gujarat needed a leader, someone who would step in and take charge. Restore the livelihoods of the wounded and homeless masses. Gujarat needed Modi. In October 2001, Modi came to power and he did work, Modi did commendable work and was praised by many including the United Nations. Modi was a miracle. Or was he ?

In February 2002, Gujarat burned. Every report I read makes it very clear the religion followed by the owners of the burnt bodies. Fifty eight Hindus burnt in a train in Godhra. Seven hundred and ninety Muslims were killed in the violence thereafter etc. Was Modi complicit in giving the hindus a free run ? Was the saffron in him standing out ? These questions have been asked and will continue being asked over and over again. The courts gave Modi a clean chit and he came out smiling. I ask you, how does it matter? How does it matter who he sided with or whether he sided with anybody at all ? People died. Hindu/Muslim/Christian/Buddhist or Atheist is not the question here. People were killing each other and burning while law enforcement did little to nothing for a very long time. If you take religion out of the equation you realize Modi has no excuse left. He has to admit that he did not act effectively to stop the mass burning of his citizenry even when he doesn’t have to admit that he was pro-hindu. He has to admit his inefficiency if not his criminality.

Modi has since been turning white, peaceful, at least to the naked eye. He doesn’t want to be seen as a right wing extremist anymore. He wrote a letter to the public which reminds me of one of the apology letters I used to write in school. Mr Modi those are things that work when you go back to class ten minutes late after lunch time not when you are accused of not enforcing basic human rights in your state.(Also someone ask him what he means by ‘citizens of Gujarat’, it beats me). He is also saintly white because he doesn’t overturn the ghastly prohibition law on liquor. Ofcourse this only leads to illegal and shady liquor sales.

If you think the saffronization ended with the post Godhra riots, you need to read up about Sohrabuddin. It was a fake encounter staged by the police to brand an innocent man a terrorist and kill him. Yes he was also Muslim. The case centers around the involvement of Modi’s right hand man Amit Shah. Who is currently on bail. Now you must know that Modi, the true patriot that he is wants the Prevention of Terrorism Act (POTA) back. POTA which I find similar to USA’s Patriot Act, has a provision to detain a person for 180 days without filing of charges. More importantly, any confession made to the police during this time would be considered as evidence in the court, unlike under other acts. Look at it in this light, putting Modi in charge means getting back POTA and giving this man the power to lock anyone up for 180 days and forcing a confession out of him/her and sentencing him/her for it.

I agree we need strong anti terror inititiatives in India, the combination of Modi and POTA , is not what we need. The Indian people are faced with a bag of rotten choices, corruption or right wing extremism. A dynasty rule or a Hindu Rashtra, how do we choose ?
We must be very careful in making our choices, Hitler too came to power in Germany citing his developmental work and Germany’s need for strong patriotic leadership. Modi I agree is no Hitler. Isn’t Hitler/1000 or Hitler/10,000 bad enough though ?

Modi is also the embodiment of the Ashoka Chakra. Tireless work for development and his various ‘yojanas’ or plans which have aided in the rapid development of Gujarat. Critics point out that Gujarat with its vibrant diaspora was poised for development anyway. Nevertheless I give this man credit where its due.
He has also taken hues of green lately, with his latest book on climate change. Good show Modi. I am impressed. Even IPCC chief Dr Rk Pachauri who I greatly admire is impressed by the book.

That is why I nearly supported Modi myself. Until I realized I shouldn’t. I am borrowing a quote already used in this context by a fellow blogger here. Benjamin Franklin’s dictum that “Those who give up liberty to gain temporary safety, deserve neither liberty nor safety. “ You should read the article by Supriyo Chaudhuri its less verbose and really wonderful.

Modi, while embodying all the shades of our flag is really a test of our memory. Are we going to live up to the saying that public memory is short or are we going to move beyond that? Let us be worthy of our liberty.

Share it with friends, let someone come and beat me up for abusing Modi (seriously kidding) :P. Click below.

 
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Posted by on October 31, 2011 in India, National, Politics, Society

 

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Barack n Mo

Hey guys this is an initial attempt at cartooning, so if you like it, leave a comment/rating/share it around, so I’ll be back with more.

 
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Posted by on October 28, 2011 in Humor, India, National, Politics

 

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1, 2, 3, Infinity

The census 2011 will be a herculean task

Its census time guys ! Yeah its not easy to count everyone in  a country whose population easily exceeds the billion mark. The Indian president will be numero uno on the list. After that they’ll have to count everyone ! You , me , that annoying guy who spits paan on the street , the homeless lepr , the aging widow in the village who hardly steps out of her home, the gypsy who hardly stays in one place, the nth holy fraudulent swami, the long forgotten prisoner and so on.

Its no easy task and it does not end with just counting. Data has to be collected on literacy rates, infant and maternal mortality, language , religion, disability, migration , urbanization and a plethora of other issues which for the 1st time will be stored in national population register . Unique Identification Numbers and biometric cards will be provided once this register is completed.  The budgets for these projects run into thousands of crores (2209 crore for the census operation and 3539.24 crores for the NPR) source : NDTV. The census commissioner C Chandramouli seems to be taking his up his job , described by P Chidambaram as the “biggest exercise since humankind came into existence” pretty cheerfully. His website boldly declares “We also count people in India” like its just something they do for entertainment after a friday evening of beer and music.

The very interesting line here is the government’s proud declaration that no information will be collected on caste. Well well , we are removing caste from our political and social equations are we ? I would be the first one to celebrate, I’d probably jump up and down,  run down the streets and hug everyone I meet. I find it a premature reaction though. Does no’t caste based legislations occur ? Isn’t everything from seats in educational institutions to legislative assemblies reserved based on caste. Whence then cometh the need to eliminate caste based data collection ? So, Is the government saying, “We need not know anything about the demographics of the castes but we will still conjure up our wild and wicked fantasies and legislate based on them” . There are lot of notable excuses too, one gentleman at the home ministry graciously turns our attention to the visible problem of dishonesty while reporting caste. My dear friend, If they fool you so well during a census, how are you so sure when you present them proudly displayable certificates of excellence with the alphabet soup of SC , ST , OBC stamped across them? What if I declare that my ancient cult of the Flying Spaghetti Monster, may the sauce be upon him, is highly depressed and oppressed though having a large number of followers and we need reservation to protect us ? Ah maybe that would be fine because they collect data on religions, just not caste. The census website though does declare that they collect data on the SC and ST. Maybe its not politically correct to call them castes anymore.

Maybe this is just a problem which occurs when census activities are started on the 1st of April. All said, I highly appreciate the depth and breadth of this time’s census undertaking. Let us all hope it gives us a large storehouse of data with which decisions to steer the nation can be made with sounder reasoning.

— The bull

 
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Posted by on April 1, 2010 in National, Politics, Society

 

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