Delhi Metro; systemic losses

Pricing the Metro tickets low is ridiculous; is it a social service effort?
01/10/2009


Is Delhi Metro a costly mistake? Well, it surely will become a national heritage once it gets completed, but would it qualify on the strictest parameter of becoming a financially sound public transport model? Or has it been set up just to beautify Delhi’s landscape on taxpayers’ money? Let’s see some interesting facts.

The concept of metros has never been a profitable business proposition internationally. There are 135 metros worldwide but only four metros have been successful in making profits. These are Hong Kong, Taipei, Singapore and Tokyo. The Kolkata Metro is another example of a staid loss maker. If the financial year 2004-05 saw it incurring losses of Rs.43 crores, last year stood at Rs 48.6 crores (It earned Rs.48 crore from passenger traffic against operating costs of around Rs.91 crore in the same year). In other words, tax payers are paying for the inefficiencies of metro’s employees and processes. The Delhi Metro railway project is purportedly one of Delhi’s brightest projects. The first phase of Delhi metro is complete and the total cost stood at around Rs.10,571 crore. The estimated cost of the second phase is Rs.8,118 crore. In spite of having the lowest fares compared to other metros internationally, Delhi metro has earned operational profits of Rs.398.69 crore. Since there is hefty capital investment and certain amount of operating cost involved, it seems that it will take many years to make net profit.

Claude Jeanrenaud, Council of Europe member, writes in his report, Funding of Urban Public Transport, “Urban public transport systems are systematically loss making,” the reason clearly being pricing travel tickets lower than true cost in an ostensible effort to cater to lower income groups, a clearly misdirected strategy at the cost of other taxpayers. Delhi Metro was not and should not be considered a social service effort, especially when it is not free money that is going in. It’s time to price its tickets higher; ruthlessly!

A new revenue model?

Is the Indian government missing out on billions?
15/10/2009

One of the fastest growing nations, India faces a severe problem when it comes to effective and adequate revenue generation. For example, the government succeeded in generating only Rs.6,279.49 billion as gross tax collection while the proposed budget expenditure is Rs.9,532.31 billion in the budget year 2009-10. The country faces a budget deficit of Rs.2412.73 billion, which is 4.4% of GDP, a figure high for an emerging nation (in 2009, China’s budget deficit stood at yuan 111 billion, which is just 0.4% of the GDP). Since taxation is the major revenue source, the Indian government keeps attempting to look at increasing as well as ‘innovative’ ways generate more money. We looked around, and think we have one which will qualify in their standards. And that is to bring net based companies under an organised tax structure – beyond simply service and profits tax payments – on a narrow premise that we’re forwarding.

As a case study, search engine Google follows a unique revenue model with innovative products and services. It has AdWorks, which is a pay per click advertising program. This allows advertisers – on Google search and on other Google sites – to present their advertisements instantly to people who are looking for information similar to what the advertiser has to offer. And the advertiser pays Google for every click that surfers make on their links. Moreover, it has Ad-Sense, which allows Google to place clients’ advertisements on partner sites, wherein the partner sites earn part of the per-click payment. This unique double combo revenue model helped Google earn $21.79 billion in the FY2008, up from $16.59 billion in the last year. Even in the last quarter ending June 30, 2009, Google generated astounding revenues of $5.52 billion despite all talks of an economic slowdown. Yahoo is another internet service provider that generates a hefty chunk of money following a very similar revenue model. Yahoo Inc. generated $7.2 billion in the FY08 compare to $6.9 billion in the last year. In the last quarter ending 2009-06-03, Yahoo generated $1.57 billion.

There are thousands of other search engines, internet service providers, online news portals and community networks that attract millions of surfers and earn billions of dollars for simple clicks.

The critical issue is that a significant number of these clicks that generate the above said billions originate in India – where surfers clearly use national infrastructure (routers, cross-country transponders, transmission lines, and the works). We propose that the government taxes a small part of the revenue that various international and national net based companies earn through the pay-per-click route. That is, we’re proposing that in the same way as Google (through their Ad-Sense module) pays a part of their earned revenues to partner sites – if the click on Google’s client’s ad was made through the ad displayed on the partner’s site – Google should also then necessarily pay the Indian government a part of that pay-per-click revenue earned, if the click has been made inside the national boundaries of India.

Interestingly, online ad spending is on rise in India. The online ad expenditure in 2006 was around Rs. 2.1 billion, which increased to Rs. 4.5 billion in 2007. The same is expected to reach Rs.22.5 billion by the end of 2009. There are 2.707 million internet hosts while the country has 80 million internet users; even this is increasing drastically. Today, online advertising contributes $300 billion to the American economy (2.1% of the GDP). What say the Indian government partakes of some of it?

Why Iran will survive!!

IRAN : INNER STRENGTH

Iran’s changing strategies would perhaps bring back its old glory
06/09/2009

Reacting to a question on whether Iran can survive against western threats during a press interaction, the Iranian Ambassador to India, HE, Seyed Mehdi Nabizadeh avowed that such an old culture and dynasty can not wipe out so easily. Though it apparently seemed an emotional response, an in-depth analysis exemplifies that Iran has been incorporating certain intellectual and effective policies which are likely to bring a tectonic shift for the nation. Apart from some of the attributes such as democracy, strong economy, energy hub and a strong military power which made it influential in the region, there are many other areas on this land yet to be explored as it experiences rapid transition. To begin with, Iran though along with many other anti-American nations is affected indirectly due to oil price decline, its proactive response is credible enough to praise and effective than some of the worst affected economies. Some of the immediate policy response were to prepare an annual budget, taking into consideration the new international prices to avoid the budget deficit, policy to increase more reliance over domestic tax income, reduction of increase in money supply and controlling inflation, creating institutions of funds for increasing absorption of the running domestic and international capital and most importantly forming a committee for analysing the results of the crisis over the country and initiation of adequate policy needs to confront the same.

A report by Harvard Polytechnic Massachuset published in the Washington Times stated that the world attention has been mainly diverted toward the progress of Iran in the nuclear field, whereas Iran presently is one of the ten developed countries of the world in the field of Stem Cells. Moreover, it also enjoys the highest place from the point of view of growth of scientific papers in the region as well as in the world. The number of world class scientific papers of Iran is around 26,000. According to a report by International Statistical Institute, Iran holds first place in the seven fields of mathematics, mechanical, polymer, chemistry, chemical engineering, nano technology and medicine in the region. It also reached 19th from 52nd in the world in the field of nano-technology during the last five years. It is one of the three important dam making countries of the world. It ranks among the ten countries of the world to have got access to the satellite production and launching technology. Iran is also progressing rapidly in the field of space technology. Interestingly, it also proved wrong to those who thought Iran to be not a foreign investment friendly country. During 1992-2009, it attracted over $34.6 billion of investment from abroad. Its trade with foreign countries amounted to a whopping $150 billion between 2000 to 2007. Iran also invested $62 billion abroad.

Now Iran is initiating an international exhibition of press and news agencies to be held in Tehran this year too to expand cultural dealings, interactions and sharing its thoughts on some of the significant issues with media. This would definitely help in reshaping its negative image across the world. All in all, Iran is doing substantially well. This might not bring back its old glory it had during the Ottoman Rule but importantly progress in Iran is beneficial for all; Iran itself, the Middle East region and the world broadly.

Neigh-bros!

INDIA : NEIGHBOUR

India can learn from some of the unique attributes of neighbours
13/09/2009

Learning is a continuous process of gaining or inheriting knowledge and skill. There is no class or caste bar when it comes to learning from someone. However, the same is also applicable in trans-national relationship; especially a country can learn a lot from its neighbours. Many of the Latin American countries have gone democratic because, the big neighbour the US, inherited it successfully. Many preferred capitalism because it turned out to be a successful economic system in the US. Similarly, if European countries are somewhat equally prosperous and united, it is because each strived to learn lessons from neighbours. Even in Asia, China is perhaps a classic example. It's incorporation of positives of capitalism - initiating liberalisation and privatisation led by Deng Xiaoping after he found that neither the socialist command economy favoured by Communist Part of China (CPC) nor Maoist ideology of shifting from socialism to communism as exercised in agriculture but failed had actually worked in favour of an economy unique in itself. Initiating reforms in a communist country like China was not easy!

In that context, India has many to learn from its neighbours. To start off with, Bhutan, perhaps India’s closest neighbour possible, have some things unique to teach India, if fact, the world. No other country in the world perhaps witnessed such a peaceful transformation from monarchy to democracy that took place in the country in 2008. 100 years of monarchy went democratic silently. Credit goes to His Royal Majesty Jigme Singye Wangchuck, en spite of peoples' request the King democratised Bhutan simply for the sake of the future generations of Bhutanese. The speech of the incumbent king, Jigme Khesar Namgyel Wangchuck, delivered while inaugurating the first parliamentary session in its capital was unique in itself. We are so engrossed with Obama’s speech that we forget the fact that a 28 year old king can deliver such a revolutionary speech – rare in India! Another aspect to learn from Bhutan is infrastructure and architecture that the country has to offer. A tiny country surviving by donations can have better infrastructure than its donor. India had financed Bhutan's first two Five Year Plans (Bhutan is grateful for the fact though). India’s donation to Bhutan has gone up from just Nu.107 million to Nu.10 billion while Bhutanese government urges Indian authority to improve its infrastructure, what an irony!!! The kind of architecture Bhutan offers to the world remind us that architecture and wealth are not necessarily synonymous. Similarly, Pakistan may be its biggest headache for India but there is lot to learn from it especially when it comes to handling international politics and world diplomacy. It is such a country that can host world’s most dangerous terrorists like Laden, Baitullah Masood or Dawood Ibrahim and terror organisations while it can also maintain good relationship with world’s most powerful countries who spend billions of dollars to find and kill them. It’s not easy to do. India has also a lot to learn from Sri Lanka. Despite being a tiny and poor nation it has proved that if a country truly wants, it can overthrow world's dangerous terror group, LTTE.

Learning is something that helps always, that which enlightens the thought process and keeps learners updated. For a country aspires to be a leader, it should also have the temper to learn from its fellow brethren leaving apart personal enmity, hatred and ego. India has ample scope to improve. Let not that aspirations go in vain.

Europe's fret is US' greed

EUROPE : INSECURITY

Is fining US firms deliberately reflecting it’s insecurity?
20/09/2009

Rules are meant to be broken. Well, this might be a famous aphorism in Asia but aptly inapplicable in Europe. Europe is a classic example which, on one hand, can attract big MNCs but on the other hand, can be too harsh on them when they indulge in fraudulent activities or bribery. Apparently, it is unique in itself in treating the MNCs.

The case of Microsoft is a famous one. The IT giant was heavily fined when it failed to meet the regulatory norms set up by the European Commission (EC). In 2008, the antitrust regulators fined a whopping $1.3 billion for not being able to comply with the antitrust laws since 2004 and thus bringing the total amount of fines on Microsoft to a gigantic $2.5 billion. In 2009, EC imposed a fine of $1.45 billion (£1.06 billion) on American giant, Intel Corporation on the ground that illegal anticompetitive practices of Intel would harm the continuation of a healthy competitive market. The EC, in fact, has gone unique in this century with its antitrust activities. It fined Archer Daniels Midland, along with 13 other leading pharmaceutical companies, which the EC suspected were seeking to control the European vitamin market. The most horrifying one was when EC blocked the $43 billion merger deal between General Electric and Honeywell on the ground that American firms are targeting and buying European firms to retain their growth. Surprisingly, the deal was allowed by the US regulators.

Recently, BAE Systems, an European giant engaged in the development, delivery and support of advanced defence, security and aerospace systems, has been given a deadline this month to negotiate with the Serious Fraud Office (SFO) for being allegedly involved in bribery in relation to the sale of aircrafts and air defence equipments to Czech, South Africa and Tanzania. This would mean that if BAE systems fails to negotiate with the SFO, as the director Richard Alderman avowed, it will end up paying a fine of millions from the £2.5 billion-plus contracts with these countries.

The region has always been a bright prospect for MNCs since decades. It is flooded with Foreign Direct Investment inflows. With new opportunities, South-eastern Europe as well as Commonwealth of Independent States are becoming more attractive. According to UNCTAD, these states attracted around $69 billion dollar foreign investments in 2007. The region is further attributed with one billion consumers.

Though fining MNCs is not a new phenomenon, it's unique way of treating MNCs is giving scope for debate. Undoubtedly strictness proves that the region is having stringent regulatory framework but sometimes its over-reactive regulatory approach seems to be biased against foreign firms, especially Americans. Many a time, American firms are ending up to be victims of Europe's strict regulation. It has also been witnessed that Europe often ends up debating the US vs Europe on issues like the GM crop. The US too fined £500 million to German's Siemens for bribery. However, fining the BAE system indicates that laws are common for all in Europe but the examples of Microsoft, Intel, GE and others epitomize that Europe is apprehensive of American firms and their aggressive approach. Does it mean that Europe is insecure? Hard to conclude but still debatable.

Making sense of democracy

PHILIPPINES : ELECTIONS

dynasties remain influential in the Asian politics
27/09/2009

Philippines is all set to elect its 15th President. The country has scheduled to hold the Presidential, legislative and local election on May 10, 2010. A formal colony of Spain and the United States, Philippines has lot of hope from the upcoming President as the country has been hit hard by global recession. It further aims to revive its economy with a fresh election and a new president. Unfortunately, the reality doesn’t seem to be as glassy, as people of the country are expecting nothing drastic out of this election as the same old corrupt and greedy dynasties are going to end up running this beautiful south Asian country.

Family dynasties bind the politics of this land. Since its independence in 1946, politics has been dominated by old, powerful and rich dynasties. For example, Gloria Macapagal Arroyo, the incumbent President is from the very influential Diosdado Macapagal dynasty. Her father Diosdado Macapagal had ruled Philippines from 1961 to 1965. And very surprisingly, her two sons are also following her. They are already members of the nation’s lower house of parliament. What is more horrifying is that there are estimated 250 political families’ nationwide occupying positions at all level- at least one political family in every province, according to the Centre for People Empowerment in Governance, a nonprofit group that examines people participation in politics. It further says that 160 of the 265 members of Congress are from these clans. The Philippine Centre for Investigative Journalism also says that two-third of the members of Congress are from political dynasties. The Isabela province was dominated by Dy dynasty for decades. The influence of dynasties is so much so that it reminds the common Philippinos of the reintroduction of the electoral politics that was there in America in the 20th century where only the wealthy used to control the government. However, if closely viewed, it is not the case of just Philippines; there are many other Asian countries where politics is dominated by a few dynasties. The outgoing Prime Minister of Japan, Taro Aso is the grandson of a former PM while his wife is also the daughter of a former premier. Moreover, a quarter of parliamentarians and 40% of the legislators of the ruling Liberal Democratic Party (LDP) belong to influential political families. The same is the case in Bangladesh, China, India, North Korea, Pakistan, and Sri Lanka.

However, the issue is not that removing dynasties will guarantee good governance and transparency but that would certainly ensure and encourage the entry of fresh and new talents in the politics. This would certainly break the age-old bureaucracy- perhaps for a better democracy. Though, fortunately, Benigno "Noynoy" Aquino III is expected to make his debut in the upcoming Presidential election and seems to have been gaining popular support, unfortunately he is not being promoted for his charms but because of sympathy he has gained for his mother, Corazon Aquino, who died last month, who was Philippines’ democracy icon who overthrew dictator Ferdinand Marcos. Well, can we expect change here?

Health ads in unhealthy US

HEALTHCARE : AD SPENDING

Obama and his lobbyists not only shake but also shock the world…
25/10/2009

Anything associated with the US surprises or shocks the world - be it its hyped space missions, interference in world diplomacy or booms or bursts in its economic activities. Even President Obama, recently, grabbing the Nobel peace prize surprised many while flabbergast the rest. Congratulations to him for his noble intentions and most importantly his ability to convince people across the border, though people are still waiting to see Obama and his administration working effectively other than making frivolous speeches. Moreover, the trend of healthcare ad spending in the US is going to shake rather shock the world. Surprisingly, Obama is giving more attention on how innovatively and effectively he can convince people to accept the plan rather how innovative and effective the plan actually is!

Undoubtedly, an important issue that concerns each American is the turbulent healthcare system. The surprising fact is that though the US spends highest on healthcare; it ranks way behind many European nations. Obama intends to overhaul healthcare with his reform plan which is yet to get through the US Congress and which requires popular public consensus too. That is where the game begins. Americans are bombarded with healthcare ads and similar programs. A recent figure revealed that healthcare reform ad spending reached $114 million mark, a figure believed to be the costliest ever. The Campaign Media Analysis Group, which tracks political ads and national spending on healthcare, states that while $50 million was spent over the course of first seven months, the second $50 million was poured in just last six weeks. And as this 'healthy' debate is at a very crucial phase, about $1.5 million is spent daily on advertising and campaigns. There were 1 lakh commercial ads aired by 49 different groups in last 60 days. Obama himself went to dozen different talk shows to discuss and thus convince people to accept the healthcare reform. Healthcare ad spending on television is a small part of the total money being spent. Over $240 million was spent so far by hospitals, pharma companies, nursing homes and lobbyists. Americans for Stable Quality Care and Families USA promised to spend $12 million and $7 million respectively on ads and activities in support of the reform. Interestingly, Obama succeeded in convincing PhRMA, a drugmaker who opposed former President Clinton’s health overhaul 15 years ago. It also agreed to invest $150 million in support of the reform. However, ads against the reform have also increased tremendously reaching $32 million.

In democracies, organising political ad campaigns to influence people to vote is now an old phenomenon. Sadly, repeating the same in healthcare instead of debating crucial issues like whether to include public insurance option or how Canada is having an effective healthcare system following the same model with far lesser investment — is not going to improve the condition. It will be interesting now to see what next Obama comes up with.

Taste of the thunder

INDIA : AIRSPACE SECURITY

India no more ignores any security glitches
01/11/2009


18th October, 2009. It was an ordinary Sunday for most of the Indians. But then this Sunday marked a historical day for India. For the first time, the country was resilient against those who break the laws. India detained an American Boeing 767. News channels were busy flashing and discussing this unconventional step by Indian authorities. The plane was coming from Fujairah, UAE, Middle East and was headed towards Bangkok along with 205 American marines. And reasons for detaining the plane were that it didn’t follow the guideline of using Indian airspace, it was grounded by Indian authorities at Mumbai airport. The plane took permission from Indian airport authorities but didn’t bother to seek AOR consent and clearance from the Indian Air Force. As per the norms, any military charter plane of any country needs approval from Indian Air Force, necessarily, in order to use Indian airspace. This norm was ignored in this case and hence, detention was the consequence.

However, this incident has certain positive corollaries for India. This has been the second instance of US violation of Indian airspace. The surprising thing is that US military has been repeatedly ignoring the mandatory procedures required for international air traffic. The US military intentionally violates air traffic out of its overconfidence that no one has the gumption to raise a finger against it. But this incident of detaining the American military plane for violating rules sent a strong signal as well as a warning to them. This made it clear that India is not Afghanistan or Iraq. One just can’t ignore the country’s rules. The blow will remain vivid in their minds. Another important thing that the incident conveyed is that India respects superpowers but not at the cost of law and order or sovereignty.

However, there is another important positive outcome. If we look at the recent past, India detained a UAE plane at Kolkata airport which was headed towards China for carrying weapons without prior approval from Indian authorities. In fact, nothing was informed about the weapons to any of the Indian Authorities. Similarly, a Korean ship was detained for suspicious reasons. Well, what do all these 'detention' incidents indicate? It speaks volumes about Indian military, intelligence and defence mechanisms, which are on high alert. It further exemplifies that the country has realised the need, urgency and importance in sophisticating its intelligence and advancing its defence mechanism.

As the country grows, threats from neighbours or interference of countries like China or Pakistan are ought to get loud. Moreover, with countries using and abusing Indian airspace for their own purpose be it transporting arms or transporting army, it becomes imperative for India to be cautious. With Airspace being used extensively for terrorism and other illegal activities, it is important for India to follow all the security measures. Surprisingly, India is rightly doing so. Long live India!