Monday, March 30, 2015

DBT : Opting out

The Prime minister made a request to the people of India that anyone who can afford to buy the LPG gas cylinder without subsidy should opt out of the direct benefit transfer (DBT) scheme. This will reduce the subsidy burden of the government marginally, he said. The austerity has hit the DBT scheme, and what makes it more interesting is, it came out of the PM’s speech, who was recently not-so-austere on his dresses for special occasions. Let’s take a look at this request in reality.

It is true that few thousand citizens opted out of the subsidies and registered themselves to pay in full for their LPG cylinders. This action is definitely out-standing. But I am not sure, if it is an intelligent economic decision both in the eyes of the “out-standing” consumer and the exchequer.

In poor and developing nations, you always see this “save this/that” or “conserver this/that” movements. With water, electricity, trees, environment, forests, etc. There is always a feeling that something is not right like before and we could make a little adjustments here & there, and that would “fix” the problem and it’s all great from there. For years and years, we in India have seen this “save water” advertisements initially in radios, then on televisions and in the print media. It instructs the individuals to save water usage at home. It asks me not to take a bath in two buckets but to wash myself in a single bucket. The problem with this argument is that – not everyone is on board. The extra bucket I didn’t consume is used by the neighbor next door. On top of that – I do not like him to start with. So what is my incentive to consume less for which I know – will only be used or wasted by someone else. There is absolutely no incentive. Moral comfort – It’s just an excuse. In real-time, it just a strategy that doesn’t work. It never works with human nature at play. The whole thing is a mockery. We should also note that, when these advertisements where played again and again, the water usage by the rich and powerful has only increased and the ordinary people have little water now than say a decade before. In the meanwhile there were no new measures that increased the amount of water for the population. In other words, the government wants its citizens to under-consume the water, but it hasn’t tried to solve the problem at its end. How many liters of water reaches your home every day? How much has it fallen over the years? It is not because we used so much water every single day, but the government has not been able to marshal its resources to provide sufficient portable water to its people. Even partial linking of rivers has not been initiated. Successive governments have sat on it and have provided only lip service during elections.
On the other hand, In developed world, you do not hear these empty rhetoric. Things are planned more efficiently and delivered, mostly by a private player with a intention to profit. There is abundant water for households. There are some studies that say, the amount of water flushed out in American restrooms, is more than the amount of water used by few households in India. It is not a arrogant behavior. It is all about doing what is necessary. The system has been set-up and is maintained that works. This has ensured, that people are not starved of their essentials. Moreover doing it in a better way has ensured, there is minimum wastage. It is a common in the street of our country, where drinking water goes out into the road because a water pipe is broken and it would take days and weeks to fix it. Emphasis is the delivery model - the way water is procured and delivered. They have evolved over time to be better and better. What we need to do in our country is to replicate those ideas and allocate resources. We are not the only country in the world - that uses water!

The giving up of LPG subsidy is just like the “save water” hypocrisy. Why should someone forgo, the subsidy they “deserve”? If you give it to the other guy, why can’t you give it to me? If you are not giving me that money, what happens to that money? I am positive it will be squandered on something else. Frankly, for a family of 4-5 people, the number of LPG cylinders needed would be 6 to 8 per year. But the governments maintains it at 12 per year as part of its vote bank politics. Instead of dealing with those issues, the government is trying to create sympathy and is begging the normal guy to pay for it and share the burden. The ultimate “fix” to this problem is to get rid of subsidies. The market will determine the price.
In fact, the government is in the midst of the LPG cylinder business and the whole thing is messed up.


Friday, March 27, 2015

Freedom of Speech is Freedom of Speech

The supreme court of India has struck down the controversial Section 66A of the Information Technology Act as unconstitutional. This is a welcome decision.

This is one such judicial case on top of other millions, that the courts are spending their precious time on. The ruling is an eventual reprieve, but does it really need an explanation/debating. Everyone who has read civics book in school knows, it is a fundamental right of every Indian citizen to "say" whatever he or she wants. This is his right to freedom of speech. There is no distinction between what he is saying in a microphone or if he is saying something online. It just doesn't matter. Freedom of Speech is Freedom of Speech. Both the Congress and the BJP have encouraged section 66A during their times in power - so there is no good guy here.

With the rapid rise of Internet penetration in the country, social networking sites like facebook, twitter, google, news-sites are becoming tools in everyone's hand - in the form of their mobile phones. People convey their opinions in a split second. Opinions / feedbacks / comments are all over the social media. This has changed the way conversations happen in human society. During the age of phones, you have to call a person of your preference to say something or to hear something. Now with the global black-board of social media, the concept of posting comments are viewed by many in the next second. It just too much information that flows really too fast. The few smart people are able to jump on this mania to use it to their advantage. A lot of famous people - feed the media with their tweets and facebook posts. I hardly wonder, if everyone reads everyone's tweets unless its a close following. Wonder how long this culture based on virtual connection with "hundreds of friends" would last. It always conveys your presence, but not your proximity. It has reached a point where people think - It is rude to call by phone. Why can't they text message me!!

Somewhere in this midst, there are also instances where the government of India did not "like" or "agree" - what someone told on-line. Arrests were carried out and of course you can obtain bails quickly (they give bails for any crime in our country). It is not about being punished for a mistake - it is about making you go around a horrible system that is chronically slow. Just think about the Man-hours that go through it. It would be better off, had we did something else that would benefit the society. Provisions in this section 66A, is just to please the "superiors". There are lot of online post that insults/discredits friends. You or me cannot walk into a police station and complain or file FIR about that. You will be thought of to be mentally retarded. At the same time, at the orders of the "Government" - and with the only motive to satisfy "leaders", the police would go and arrest someone for saying something derogatory, online. It can only be used to settle political vendetta or to incite fear on the rest of the people. A law provision like that is practically not implementable. With 1.25 billion people in this country is it even possible to control who says what on social media? Can someone sit there and keep checking what someone says about a particular leader or government. The section itself is a "threatening proposition", rather than good intentions.

A society that has free flow of speech, would side-line controversial people over time. In a country like India, where still the human ethics are above legal ethics, there cannot be few bad apples that mislead masses in a way contrary to truth. People are really smart. They can best differentiate what is right and wrong for them and consume then online intelligently. Government has no role to play here.

The right to freedom of speech is supreme for democracy. It is not complex phenomenon that needs some Ifs and Buts. Freedom to speak whatever you want, to convey your point of view - is a birth right. It doesn't have to be trivialized. The people understand it better.

This is what the country needs : Any citizen can say whatever he wants, online included. If it leads to violence (as the government fears) - the first act of violence is punishable. There is clear difference between speech and action. Speech is not punishable, violence is a crime.

In our country, there are political leaders who get arrested for provocative speech. Why arrest them? Let them talk whatever he/she likes to. If he leads a mass to violence - deal with the violence with iron hand. If the violence is dealt with according to law, the society would be lot better. Peace-full gatherings / groupings with an intention of information propaganda is not bad. Everyone has his right to opinion and can propagate his opinion to one or more people. There should be none - who can stop that. The society is well positioned to separate what is good and bad for itself and the country. A bad leader with a provocative speech can't lead a society in the bad path. The society and the people are lot more mature, than what the parliamentarians think it is.

Right now - the right speech is applied selectively. This is well exploited by the modern politicians. Recently there are lot of instances, where you wouldn't know a particular politician unless he makes a controversial statement. The media jumps on them. The ruling BJP has been embarrassed multiple times by its own MPs, making highly controversial statements without any end-effects. It just runs through the news channel as though that was reflection of the party, government, the PM and everyone in power. There is high pitched voices from the opposition who champion for the victim of the hate speech. Everyone is kept busy for 2-3 days. The debates on televisions appear as though the whole country is in the dark because someone uttered this. The person who created the controversy gets some good media time and face recognition with the masses. Usually he stands by his statement for a couple of days, only to be retracted later or to apologize later. They refuse to do that initially - that is the kick. But somehow find their feet later. This has happened over and over again in the nine month Narendra Modi government. It is just a periodic head-ache for the BJP's top political management team representing the government. Instead of dealing with the problems of the country, they end up wasting time dealing with the abstract news item that is bound to die. How many parliament sittings have been washed out to this play. But in our political scene this just doesn't stop. The media is being fed with "hyper" news that it could live-on for a couple of days. Its all about sensation.

The same drama plays out, when new movies come out. It is just fine to make any movies you want to, on any subject. If there are people who wants to see it, so be it. There should be absolutely no restriction. Movies are just freedom of expression. Creating controversies over movies is just waste of time. Politicians are not good judges to decide what the people have to see or not. The censor board just have to rate it to help viewer choose before he goes out to watch it. 

Clear understanding with awareness is what, is needed about freedom of speech. We are argumentative Indians - why deprive society without that pleasure.

Sunday, March 15, 2015

The hidden cost of lakhs of crores

Recently the spectrum was auctioned for a whopping one lakh crores. The coal block licensing was also sold for two lakh crores. It has been all over the news as a positive story trying to depict how the government has managed to "raise" the money through its auctions, particularly after it failed to get the money leading up to the 2G scam few years before. With the fiscal deficit target fixed at 4.1% for the current financial year, this is a welcome boost to the government treasury.
Just like the famous "Broken window" economic story (Economics in one lesson), the public is being brain-washed to believe how this "new" money was generated that the government can use for people's welfare, also known as the redistribution of wealth. But what is not often said or discussed in public forums has been - who has paid this money and what is his incentive to part his cash. In other words, someone has invested in the auctions and the investor is planning on getting returns on his investment. Ideally more that what he invested.

Lets take a look at the blind spots in these unimaginably high revenue transaction.

In any transaction, there is a buyer and a seller.

The seller economics

The first and the foremost negative of the auction is, there is an assumption that the money raised is going to be put to effective use. What is the government going to do with this much huge sum. Does it have a game plan to make efficient use of this money? Probably not. Usually governments all over the world, and particularly in India collects a lot of money from the haves' and then wastes it in the guise of helping the have-not's. I am pretty sure, this time its going to be no different. Why would the government need this money? Water supply is erratic, roads are horrible and the power supply is not regular - on top of it - the people pay for all these services in the way of water bill, tolls and electric bills. Petrol and diesel - the lifeblood of the economy is heavily taxed. So in-spite of all these earnings that the government benefits from these huge sums are really fat-fat bonuses the government can play with. It would be ideal, if the money is put to efficient use? but if we have to go with past performance, then even this would be perennially wasted on welfare schemes that will not reach the actual beneficiary but will be sucked up by the corrupt bureaucratic system in place. Even if you would want to use this money on capital incentive project like metros in few cities, how would you invest this pan-India money on say developing a particular infrastructure like a metro in few particular cities. What happens to this money is never known unfortunately, except it gets lost overtime. Taking this money to fill a hole somewhere else is a usual way how these are used. Want to pay interest on an already existing loan!

The buyer economics

Now lets talk about the giver The companies that paid for the auctions have to find a way to retrieve this money by doing a business. It so happens, when the cost of doing business goes high (like here) the profits are squeezed. The money is absorbed in through its customer base. If you take mobile spectrum - a huge chunk of people are charged more to retrieve this money from. The companies are left with no option but the charge more for existing services. In the case of spectrum - the customers are charged extra and in the case of coal - the buyers are charged more, who in-turn charge the customers more (with high utility bills). Just imagine - the price is just 10% of what it has been. Then the companies can afford to share that windfall with its customers. It would not be possible for the companies to charge lot more, when they got with less money. The companies are there out there to win more customers with less fees. This money that the company saves - the remaining 90% would be put to use for a different investment that will again benefit its so-called customers. And more importantly - this private money would be invested wisely unlike the government. It will not be wasted. More often these companies have shareholders - who again are common man - who reap the fruits of better investment. In a real free society - businesses do good for the society. In societies that have crony capitalism like in India - the government loots all the money instead of productive companies. What doesn't happen - is the climate of crony capitalistic society being gotten rid off, instead of the government trying to fill in those shoes.

The public get a feel good feeling - where the government "successfully" managed to suck the "extra" money from big corporations and in the process has got ample money to serve its poor but "good" people. The sad part of this transaction is - the public never see the benefits that WOULD HAVE happened had this auction not happened involving such a huge sum.

Inflated prices - of any commodity is bad for society. It merely reflects that the Indian rupee is losing value.

Bottom line the citizens of India LOSE A LOT from these huge deals. The establishment is successful that the blind spots are not highlighted and discussed in civil society. Its all bash the rich and praise the government attitude. The way they are supposed to operate, governments can never do profitable business, they always lose financially. Unfortunately the media and the society in which we operate highlight it in a "non-productive" or "not realistic" approach. Awareness has to spread on who really can make a difference in the way we live our life. Rise in our quality of living is what every citizen wants and there is absolutely no-one who is an exception to it.

Friday, March 13, 2015

The low hanging fruits

The new BJP government at the center and the AAP government in Delhi are voted in for radical change. The so called non-performing Congress government both in the center and the state of Delhi is replaced by these new leaders. We have seen a lot of promises all round but unfortunately not lot of work. This blog would reflect on what needs to be done.

There are lot of talk about what needs to do done. But so far the BJP government has talked the talk but has not walked the talk. Recently I read a business today article whose cover story was  about smart cities in India. There is a ambitious proposal to create 100 smart cities in India in the next 10 years or so. I was introduced to this term my the BJP government's manifesto and hence was curious. I read the cover story by Business Today magazine and surprisingly still didn't understand what it was. There are lot of proposals on what needs to be done but how and when part is completely missing. I am not blaming the article, but the lack of ideas on what it is and even if its feasible is the bigger question. Wonder if its just a talk rather than action. I would like to give more time to the new government and do not want to judge them now. Even though the concept of creating smart cities is good., but the preliminary details of how and when are just as puzzling as what will be done. Wonder if it is a 50 year plan or something. Creating a society that has high-quality of living is what it intends to achieve. I am not sure, if the government can do it as the way its trying to explaining the concept of smart cities.

As soon we talk about smart cities, wind goes through your ears on what about land acquisition for it, what about getting land from poor farmer and handing them over to the developers? Handing over the land to some greedy MNC? These things come to the forefront and its often a boring rhetorical discussion where no one agrees.

Bottom line, the intention of the idea is to build a place that is just livable. Not many parts of India are like that unfortunately. For a decent living, lets come up with a list on what we need at home

1. Home with ample greenery around and within parking for 2 cars at least.
2. 24-hours of unlimited power supply
3. 24-hours of unlimited pumped-in portable water supply
4. Park in the vicinity for healthy exercising / recreation / games for children
5. Hospitals
6. Schools/Colleges
7. Quality roads and access to public transport

That's it.

We just have to create "communities" ALL around the country that has these facilities available and move people from else where to here. As soon the government helps to create this, people would be willing to move in with delight. This can be periphery of cities and villages.

Just say, I have the money to build such a community today and want to house 1000 families. Can the government of India assure me of 24/7 power and portable water? No. That is the problem.

What India needs is a "high-standard" living for MOST of its people. It is possible, smart cities can create this in BULK. But nothing stops us from doing it now in smaller cities TODAY.

Instead of coming with huge ambitious plans that don't get completed by say 10-20 years, the government of today should work on supply side of power, water and roads. That's all the people need. They can figure out the rest. The problem today is without the unlimited power, water and roads - any plan to modernize will fail. Innovation should happen in these fields and government should facilitate that. Not sure how Modi's foreign trips are going to make changes to this. There are people who want to manufacture in India, but that should take care of living standards in India. Just imagine a person is rich. He can afford to buy cars and drive. He can afford a nice garden at his home. He can afford a A/C in the entire house. The problem with the current set-up is - There isn't enough power/water/ road to create this set-up. I recently heard someone say, that India's problem is not corruption but lack of infrastructure. which sounds a nice way of thinking and could well be right.
Once we have proper infrastructure all our routine problems "go away". Believe me - it is lot easier. The entire western world has did it.. why can't we. Just that the private entrepreneur with profit motivation can alone do it. The government can't.

Even the Swach Bharat scheme introduced by the government is the symptom of the same problem - lack of infrastructure. No one wants to throw garbage on the street. But there are no dumpsters - that is the problem. No one wants to urinate on the street, when there are good, decent toilets available. Government has to find ways to facilitate the happening of these new changes.

Talking about the uncleanliness in our society is a good thing. At least the government acknowledges that it is a problem. Good start. But the way to solve it is not by make people cleaning them. No one can do it everyday. There can be awareness to not make the place "dirty". But cleaning using a broom by citizens just doesn't work. But instead what woks - Is create infrastructure where in  - it is not possible to throw garbage on street. Make road pavements in cement with greeneries so that no one take a leak there.

There are lot of low hanging fruits the government can pick up on. They will make a huge difference in every citizens life. Modernizing the railways in one great thing the government is trying to do. This is long overdue.

The following would make a huge difference. I would do it, if I was the government.

1. Multiple water projects to convert sea water to portable water. Abundant drinking water supply.
2. 24 hours of power supply. Ensure ALL cities/towns never have a power cut.
3. Upgrade ALL state road's width. make the 2-ways into 4-ways. Make the 4-ways into 8-ways. Make the 8-ways into 10 ways.
4. Complete sanitation within cities. (the villages would solve it themselves)

The municipality and corporations have been utter failures. Non-performers should be fired out and new management with professional skills at the IAS cadre level should take in-charge.

If the government take huge initiatives, the people would behave. It is all in one together. The state government has to do the bulk of heavy lifting. It is very unfortunate that the leadership is slow on making these changes.

What we need is smart communities (areas within cities). keep expanding them. A lot of things needs to be done and its high time we start acting on them.

Coming up with long term ideas are good, but doesn't make a difference except for newspaper fillings. Big ideas start small. We need to demonstrate what we are trying to achieve in a chosen city and see how it goes. Rectify and apply the formula else where. Modernize the way construction is done. The current way of building houses with cement and sand takes lot of money and time. Lot of things should be pre-fabricated buildings.

In the article, it was mentioned Barcelona is a successful smart city. There is lot of history behind that city. I am pretty sure they re-planned it, rather than re-building it from scratch. We need to do exactly that.