He was the smiling face of Infosys, infusing a livelier spirit and a louder passion as he went about hiring and training tens of thousands of youngsters who power the IT bellwether called Infosys Technologies Limited. He was also the first among the non founders to take on this larger, public persona, and over time became a face and a voice instantly recognised as he interacted on the larger issues of education and training systems that are seen as a weak link in India's growth story.
And he achieved this presence and recognition while working in a company that has titanic founders like Chairman and Chief Mentor N R Narayana Murthy, former Co- Chairman and now head of the Unique Identification Authority of India Nanadan Nilekani, CEO and MD S Gopalakrishnan, and COO S D Shibulal. So on Friday, as Infosys announced its results, the embedded announcement that Pai is leaving the board and the company came as shock for the markets.
Riding on the back of Infosys results that were seen as lower than market expectations and a guidance for growth lower than that projected by analysts, the Infosys stock fell an incredible 9.59 per cent to close the day at Rs. 2,988, down Rs. 317 on the Bombay Stock Exchange. The BSE IT Index was down 6.4 per cent as Infosys dragged sentient and the entire IT pack down. Some saw Pai in the mould of an over ambitious leader who had lost out the race for the top. Others said the exit was a result of succession battles that were still brewing within and would be a blow, coming at a time when the company is preparing for life without the active leadership of Narayana Murthy.
Murthy turns Chairman Emeritus in August, when his term ends. In interviews through the day, Pai himself was quoted as saying that he was leaving to make way for younger leaders who would take Infosys to the next level. " I sent the official mail to Murthy at 10.30 pm last night. Today at 7.45 am it was discussed at the Board Meeting.
I told the board I would like to go," 52- year- old Pai was quoted by PTI as saying. He said he was demitting office to " make way for change". It marked the end of a 17-year career in which Pai got the space he needed as he grew in stature, starting out as Chief Financial Officer and then voluntarily and unconventionally moving to human resources.
He was designated "Head - Administration, Education and Research, Finacle, Human Resources, and Infosys Leadership Institute". Pai himself said had no aspiration to be CEO or COO of Infosys though he was asked by Narayana Murthy if that is what he sought. " I said 'No'. I don't have such aspirations. I spoke to board. I felt this being the (Kannada) New ear, this would be the right time," he was quoted as having said. Also announced on Friday was the exit of Mr. K. Dinesh, member of the Infosys board and a co- founder of the company, A three- member nominations committee is working to present a succession plan and names to fill the positions of CEO, COO and CFO. The board of directors has scheduled a meeting on April 30 to finalise the new leadership line up. Infosys employs 1,30,820 people and reported revenues of Rs. 27,500 crores for the year ended March 2011.
Showing posts with label Business News. Show all posts
Showing posts with label Business News. Show all posts
Friday, April 15, 2011
Sunday, April 10, 2011
SB deposit rate: RBI must review its policy
The Reserve Bank of India (RBI) freed fixed deposit rates 15 years ago and banks have shown great maturity and judgment in determining their individual bank’s structure of fixed deposit rates. There has not been any deposit interest rate war among banks, although banks have offered different rates taking into account the maturity structure of their deposits and their liquidity position.
The Savings Bank Deposit Interest Rate continues to be fixed by the RBI. Despite periods of surplus funds or tight liquidity in the banking system, the Savings Bank Deposit Interest Rate has been unchanged, rock-like for the past eight years at 3.5 per cent per annum.
From time to time, the RBI has mooted the issue of freeing the Savings Bank Deposit Rate, but on each occasion the RBI has backed off. In October 2010, the RBI indicated that it would present a Discussion Paper on deregulation of the Savings Bank Deposit Rate, but such a Discussion Paper has, not as yet, been put out in the public domain.
Savings Bank Deposits account for about 25 per cent of total deposits. The proportion of these deposits is generally higher for public sector banks and new private sector banks. The public sector banks have vociferously argued against the freeing of the Saving Bank Deposit Rate. These banks fear that freeing this rate will make Savings Bank deposits volatile. It is claimed that banks provide free or heavily subsidized services to Savings Bank accounts. Some banks opposed to freeing the Savings Bank Deposit Rate raise the bogey that if this rate is raised or freed it will work against the objective of attaining financial inclusion (i. e. bringing in more people into the organized banking sector).
Again, it is argued that many depositors use Savings Bank Accounts like Current Accounts and moreover, these depositors can easily switch from Savings Bank Accounts to Fixed Deposits. It is argued that if the Savings Bank rate is freed then banks would have the freedom to offer higher rates to larger deposits and lower rates to smaller deposits. This will work against the basic objective of financial inclusion.
It bears mentioning that depositor loyalty is ferociously strong and depositors do not readily shift from one bank to another; this is borne out by the experience of freeing fixed deposit rates. In the case of Savings Bank Accounts one must recognize who is subsidizing whom. As the late Mr. M. R. Pai, the indefatigable consumer activist, said banks are living off the ignorance of depositors.
Once depositors fully understand their rights banks will be in trouble. The larger Savings Bank depositors use this facility as a Current Account and use techniques such as Sweeping Accounts or Multiple Fixed Deposits options under which deposits are moved out of Savings Bank Accounts to Fixed Deposits and back to Savings Bank Accounts without any significant loss of interest in fact these facilities enable depositors to earn much more than on the Savings Bank Accounts.
The bulk of Savings Bank Deposit Accounts are small but very stable and many of these depositors do not use cheque book facilities. Under the present system of an unchanged Savings Bank Deposit Rate, larger depositors enjoy many facilities while the small depositors are inflicted by artificially depressed rates of interest.
It is not advocated here that that there should be a one- shot deregulation of the present interest rate of 3.5 per cent fixed by the RBI. What is suggested is that the RBI should undertake a series of “baby steps”, which, after all, is the present theology of the RBI. Debits to Savings Bank Accounts should be restricted to 52 per year (this was the practice till the 1960s) and any excess debits should be subject to a hefty charge. Again, those depositors opting for cheque facilities should be subject to steep charges (some banks already follow such a practice).
Interest on Savings Bank Accounts should be given only on balances up to Rs 2 lakh on any one day. This will ensure that large depositors with frequent transactions will prefer to maintain Current Accounts or Fixed Deposits.
It should be clearly stipulated that a bank cannot discriminate among Savings Bank Accounts irrespective of the size of the deposit and the rate of interest payable should be uniform for all customers.
Subject to these provisos the Savings Bank Deposit Rate could be gradually freed. In the first stage, the present fixed rate of 3.5 per cent should be the floor and should not exceed 4.5 per cent. Banks would need to be cautioned that the rate offered by them on Savings Bank Accounts should not erode their margins and profitability. Some banks will find it to their advantage to offer higher rates on Savings Bank Accounts and refrain from mobilizing fixed deposits at relatively high rates while other banks would not find it remunerative to raise the Savings Bank Rate above the floor.
The RBI may find that there could be risks in even a limited deregulation of the Savings Bank interest rate; in such a situation it would be incumbent on the RBI to periodically increase or decrease the Savings Bank interest rate depending on the overall stance of monetary policy. At present, there would be a strong case for raising the Savings Deposit Rate. Resorting to a frozen rate, as the RBI has done for eight years, is not reflective of a responsible interest rate policy. The present Savings Bank interest rate is clearly against small depositors and is not in consonance with financial inclusion. In fact the ‘ No Frills’ account holders, who are being brought into the organized banking system with minimal facilities, are being punished by the rigid Savings Bank Deposit Rate.
The RBI has to recognize, that in the area of the Savings Bank Deposit Rate, it has to lead, follow or get out of the way; the present policy of rejecting all three options is untenable.
The Savings Bank Deposit Interest Rate continues to be fixed by the RBI. Despite periods of surplus funds or tight liquidity in the banking system, the Savings Bank Deposit Interest Rate has been unchanged, rock-like for the past eight years at 3.5 per cent per annum.
From time to time, the RBI has mooted the issue of freeing the Savings Bank Deposit Rate, but on each occasion the RBI has backed off. In October 2010, the RBI indicated that it would present a Discussion Paper on deregulation of the Savings Bank Deposit Rate, but such a Discussion Paper has, not as yet, been put out in the public domain.
Savings Bank Deposits account for about 25 per cent of total deposits. The proportion of these deposits is generally higher for public sector banks and new private sector banks. The public sector banks have vociferously argued against the freeing of the Saving Bank Deposit Rate. These banks fear that freeing this rate will make Savings Bank deposits volatile. It is claimed that banks provide free or heavily subsidized services to Savings Bank accounts. Some banks opposed to freeing the Savings Bank Deposit Rate raise the bogey that if this rate is raised or freed it will work against the objective of attaining financial inclusion (i. e. bringing in more people into the organized banking sector).
Again, it is argued that many depositors use Savings Bank Accounts like Current Accounts and moreover, these depositors can easily switch from Savings Bank Accounts to Fixed Deposits. It is argued that if the Savings Bank rate is freed then banks would have the freedom to offer higher rates to larger deposits and lower rates to smaller deposits. This will work against the basic objective of financial inclusion.
It bears mentioning that depositor loyalty is ferociously strong and depositors do not readily shift from one bank to another; this is borne out by the experience of freeing fixed deposit rates. In the case of Savings Bank Accounts one must recognize who is subsidizing whom. As the late Mr. M. R. Pai, the indefatigable consumer activist, said banks are living off the ignorance of depositors.
Once depositors fully understand their rights banks will be in trouble. The larger Savings Bank depositors use this facility as a Current Account and use techniques such as Sweeping Accounts or Multiple Fixed Deposits options under which deposits are moved out of Savings Bank Accounts to Fixed Deposits and back to Savings Bank Accounts without any significant loss of interest in fact these facilities enable depositors to earn much more than on the Savings Bank Accounts.
The bulk of Savings Bank Deposit Accounts are small but very stable and many of these depositors do not use cheque book facilities. Under the present system of an unchanged Savings Bank Deposit Rate, larger depositors enjoy many facilities while the small depositors are inflicted by artificially depressed rates of interest.
It is not advocated here that that there should be a one- shot deregulation of the present interest rate of 3.5 per cent fixed by the RBI. What is suggested is that the RBI should undertake a series of “baby steps”, which, after all, is the present theology of the RBI. Debits to Savings Bank Accounts should be restricted to 52 per year (this was the practice till the 1960s) and any excess debits should be subject to a hefty charge. Again, those depositors opting for cheque facilities should be subject to steep charges (some banks already follow such a practice).
Interest on Savings Bank Accounts should be given only on balances up to Rs 2 lakh on any one day. This will ensure that large depositors with frequent transactions will prefer to maintain Current Accounts or Fixed Deposits.
It should be clearly stipulated that a bank cannot discriminate among Savings Bank Accounts irrespective of the size of the deposit and the rate of interest payable should be uniform for all customers.
Subject to these provisos the Savings Bank Deposit Rate could be gradually freed. In the first stage, the present fixed rate of 3.5 per cent should be the floor and should not exceed 4.5 per cent. Banks would need to be cautioned that the rate offered by them on Savings Bank Accounts should not erode their margins and profitability. Some banks will find it to their advantage to offer higher rates on Savings Bank Accounts and refrain from mobilizing fixed deposits at relatively high rates while other banks would not find it remunerative to raise the Savings Bank Rate above the floor.
The RBI may find that there could be risks in even a limited deregulation of the Savings Bank interest rate; in such a situation it would be incumbent on the RBI to periodically increase or decrease the Savings Bank interest rate depending on the overall stance of monetary policy. At present, there would be a strong case for raising the Savings Deposit Rate. Resorting to a frozen rate, as the RBI has done for eight years, is not reflective of a responsible interest rate policy. The present Savings Bank interest rate is clearly against small depositors and is not in consonance with financial inclusion. In fact the ‘ No Frills’ account holders, who are being brought into the organized banking system with minimal facilities, are being punished by the rigid Savings Bank Deposit Rate.
The RBI has to recognize, that in the area of the Savings Bank Deposit Rate, it has to lead, follow or get out of the way; the present policy of rejecting all three options is untenable.
Monday, February 14, 2011
Oil firms look for higher provision in Budget 2011- 12
Struggling under mounting losses and subsidy bills, the public sector oil companies want the finance minister to make a realistic provision in the Budget for subsidies on petroleum products so that the government’s share of the compensation comes through in time for preparing their financial results.
The 2010-11 Budget, presented by finance minister Pranab Mukherjee, had made a provision of a measly Rs 2,900 crore for subsides on LPG and kerosene, which is only a small fraction of what the government will actually end up paying as subsidy this year.
With international prices of crude oil skyrocketing to $ 100 per barrel, the loss in revenue for the oil companies on LPG, kerosene and diesel sales is expected to be around Rs 75,000 crore.
While one- third of this amount comes from upstream oil firms — Oil and Natural Gas Corp ( ONGC) and Oil India Ltd ( OIL) — which produce crude oil, the finance ministry provides a major chunk of the remaining under- recoveries. The oil marketing firms — Indian Oil Corp ( IOC), Bharat Petroleum Corp Ltd ( BPCL) and Hindustan Petroleum Corp Ltd ( HPCL) — and gas major GAIL India Ltd also bear part of the burden.
The share from ONGC and OIL comes through in time but the problem is that the finance ministry delays payments for the government’s share of the subsidy to the oil companies.
The payments to the oil companies have to be cleared as supplementary demands for grants by the Parliament, since they have not been provided for in the Budget, and this delays the entire process of compensation even further.
As a result the oil companies often have to show losses in their quarterly results since the compensation gets delayed. As the oil companies are listed on the stock markets this batters their brand image. “ We have to literally run around for the money till the last minute,” said IOC chairman and managing director ( CMD) S. V. Narasimhan.
In the latest round of compensation only in- principle approval for Rs. 8,000 crore came through at the time of declaration of the third quarter results. Although this has enabled the oil companies to clean up their books and show a profit, the actual cash will flow in only when the third supplementary demand for grants is approved during the forthcoming Budget session of Parliament.
The delays in the compensation also force the oil companies to go in for higher borrowings as all crude imports have to be paid for in hard cash. However, when the oil firms go in for a higher levels of borrowing, banks start charging a higher interest rate which increases the cost of operations.
Narasimhan disclosed that while IOC had paid an average interest rate of 5.4 per cent during the last financial year the cost of borrowings has gone up to 5.5 per cent this fiscal. “ We have still managed to keep the interest rate below six per cent by taking recourse to higher foreign currency loans at lower rates of interest,” he said.
The 2010-11 Budget, presented by finance minister Pranab Mukherjee, had made a provision of a measly Rs 2,900 crore for subsides on LPG and kerosene, which is only a small fraction of what the government will actually end up paying as subsidy this year.
With international prices of crude oil skyrocketing to $ 100 per barrel, the loss in revenue for the oil companies on LPG, kerosene and diesel sales is expected to be around Rs 75,000 crore.
While one- third of this amount comes from upstream oil firms — Oil and Natural Gas Corp ( ONGC) and Oil India Ltd ( OIL) — which produce crude oil, the finance ministry provides a major chunk of the remaining under- recoveries. The oil marketing firms — Indian Oil Corp ( IOC), Bharat Petroleum Corp Ltd ( BPCL) and Hindustan Petroleum Corp Ltd ( HPCL) — and gas major GAIL India Ltd also bear part of the burden.
The share from ONGC and OIL comes through in time but the problem is that the finance ministry delays payments for the government’s share of the subsidy to the oil companies.
The payments to the oil companies have to be cleared as supplementary demands for grants by the Parliament, since they have not been provided for in the Budget, and this delays the entire process of compensation even further.
As a result the oil companies often have to show losses in their quarterly results since the compensation gets delayed. As the oil companies are listed on the stock markets this batters their brand image. “ We have to literally run around for the money till the last minute,” said IOC chairman and managing director ( CMD) S. V. Narasimhan.
In the latest round of compensation only in- principle approval for Rs. 8,000 crore came through at the time of declaration of the third quarter results. Although this has enabled the oil companies to clean up their books and show a profit, the actual cash will flow in only when the third supplementary demand for grants is approved during the forthcoming Budget session of Parliament.
The delays in the compensation also force the oil companies to go in for higher borrowings as all crude imports have to be paid for in hard cash. However, when the oil firms go in for a higher levels of borrowing, banks start charging a higher interest rate which increases the cost of operations.
Narasimhan disclosed that while IOC had paid an average interest rate of 5.4 per cent during the last financial year the cost of borrowings has gone up to 5.5 per cent this fiscal. “ We have still managed to keep the interest rate below six per cent by taking recourse to higher foreign currency loans at lower rates of interest,” he said.
Wednesday, January 26, 2011
Banks raise bogey of phishing fraud !
In the backdrop of rise in number of cases of phishing in the city, a number of private sector banks in Mumbai have issued alerts through cyber mail, to protect oneself against cyber crimes. Cyber criminals primarily target private sector banks since the percentage of account holders are high- end customers of these banks who carry out huge amounts of financial transactions and money transfers through e- banking channels, Last week, HDFC Bank issued an alert to its customers to guard themselves against cyber criminal gangs attempting to gain access to one's confidential bank details using an online tax refund phishing scam mail to gullible bank customers who easily fall victims to cyber crimes.
There have been reported cases in the city's cyber crime cell of the Mumbai police, where cyber criminals are involved in phishing. These gangs have been sending out fraudulent mails to bank account holders, especially those holding accounts in private sector banks, to steal the account holders web identity and capture his or her personal data like credit or debit card numbers, bank account information and other sensitive financial information.
" The e- mail directs the user to visit a Web site where they are asked to update personal information, such as passwords and credit card, social security, and bank account numbers, that the legitimate organization already has. The Web site, however, is bogus and set up only to steal the user' information. By spamming large groups of people, the cyber criminal counts on the e- mail being read by a percentage of people who actually have listed credit card numbers.
Phishing, also referred to as brand spoofing or carding, where the idea is to throw the bait with the hope that while most will ignore the bait, some will be tempted into biting," claimed a cyber crime official.
Last week, Mumbai's Commissioner of Police Sanjeev Dayal had specifically stressed on the threat posed by whitecollar criminals and cyber crime syndicates involved in duping and cheating and identity theft and hacking, respectively.
In Mumbai, a total amount of Rs 361 crore was reported to have been looted by economic offenders, including white collar and cyber criminals, in 2010 and Rs 180.9 crore in 2009. According to Mumbai police, reported cases of cyber crime have increased by 12- fold since 2006. While six cyber crime cases were reported in 2006, the numbers soared to 76 in 2010.
There have been reported cases in the city's cyber crime cell of the Mumbai police, where cyber criminals are involved in phishing. These gangs have been sending out fraudulent mails to bank account holders, especially those holding accounts in private sector banks, to steal the account holders web identity and capture his or her personal data like credit or debit card numbers, bank account information and other sensitive financial information.
" The e- mail directs the user to visit a Web site where they are asked to update personal information, such as passwords and credit card, social security, and bank account numbers, that the legitimate organization already has. The Web site, however, is bogus and set up only to steal the user' information. By spamming large groups of people, the cyber criminal counts on the e- mail being read by a percentage of people who actually have listed credit card numbers.
Phishing, also referred to as brand spoofing or carding, where the idea is to throw the bait with the hope that while most will ignore the bait, some will be tempted into biting," claimed a cyber crime official.
Last week, Mumbai's Commissioner of Police Sanjeev Dayal had specifically stressed on the threat posed by whitecollar criminals and cyber crime syndicates involved in duping and cheating and identity theft and hacking, respectively.
In Mumbai, a total amount of Rs 361 crore was reported to have been looted by economic offenders, including white collar and cyber criminals, in 2010 and Rs 180.9 crore in 2009. According to Mumbai police, reported cases of cyber crime have increased by 12- fold since 2006. While six cyber crime cases were reported in 2006, the numbers soared to 76 in 2010.
Monday, December 6, 2010
SEBI to tighten vigil on share sale in listed cos
With the recent loan bribery scam allegedly throwing light on insider trading by exposing the nexus between companies and intermediaries like Money Matters, market regulator SEBI is considering greater oversight over share sale in listed firms, especially small and mid- size companies, through large open market deals and QIP (Qualified Institutional Placement) route.
It is suspected that some entities, which could include those related to the promoters or market intermediaries like brokers and investment banks, push up the share prices of some mid or smallsize companies and create heavy volumes on these counters before approaching the unsuspecting institutional investors for a share sale deal.
Such deals are generally done through large-size open market transactions, known as bulk and block deals, or through QIP route where shares are sold to institutional investors at a price generally discovered through book- building process. Sources said that Sebi might look into all the large- size transactions having taken place in the shares of small and mid- size companies ever since the recovery begun on the bourses in March-April this year.
Besides tightening disclosure norms for such deals, the market watchdog is considering enhancing its oversight on developments preceding and following these transactions to keep a watch on share price manipulation attempts by promoters or other market intermediaries, a senior official said.
Sebi is already probing possible frontrunning and insider trading in shares of over two dozen companies, including some blue chips, by entities and persons involved in the case unearthed by CBI. The initial findings, when corroborated with the charges made by the CBI, indicate towards a large- scale front- running deals or shares being purchased or sold in these companies on the basis of prior knowledge about investment decisions being made by large institutional investors.
These large institutional investors could be LIC, whose Secretary (Investments) figures among those arrested by CBI, as also those investors who participated in share or debt placements arranged by investment banking and financial services firm Money Matters, sources said.
The probe would encompass large dealings and any irregular spurt in volumes or prices of shares of all the companies where these institutional investors had bought or sold shares over the past two years, they said.
Given the sensitivity of the matter and the probe being in preliminary stages, the official declined to disclose the names of the companies, while adding that all the companies whose shares have been manipulated might not be themselves at fault.
It is suspected that some entities, which could include those related to the promoters or market intermediaries like brokers and investment banks, push up the share prices of some mid or smallsize companies and create heavy volumes on these counters before approaching the unsuspecting institutional investors for a share sale deal.
Such deals are generally done through large-size open market transactions, known as bulk and block deals, or through QIP route where shares are sold to institutional investors at a price generally discovered through book- building process. Sources said that Sebi might look into all the large- size transactions having taken place in the shares of small and mid- size companies ever since the recovery begun on the bourses in March-April this year.
Besides tightening disclosure norms for such deals, the market watchdog is considering enhancing its oversight on developments preceding and following these transactions to keep a watch on share price manipulation attempts by promoters or other market intermediaries, a senior official said.
Sebi is already probing possible frontrunning and insider trading in shares of over two dozen companies, including some blue chips, by entities and persons involved in the case unearthed by CBI. The initial findings, when corroborated with the charges made by the CBI, indicate towards a large- scale front- running deals or shares being purchased or sold in these companies on the basis of prior knowledge about investment decisions being made by large institutional investors.
These large institutional investors could be LIC, whose Secretary (Investments) figures among those arrested by CBI, as also those investors who participated in share or debt placements arranged by investment banking and financial services firm Money Matters, sources said.
The probe would encompass large dealings and any irregular spurt in volumes or prices of shares of all the companies where these institutional investors had bought or sold shares over the past two years, they said.
Given the sensitivity of the matter and the probe being in preliminary stages, the official declined to disclose the names of the companies, while adding that all the companies whose shares have been manipulated might not be themselves at fault.
Praful Patel's mess becoming liability for the passengers
Civil Aviation Minister Praful Patel has always been business- friendly. That was one reason it was widely suspected that the interests of the fare-paying flying public would not be secure when he first became Civil Aviation Minister. Unfortunately, Patel has always seemed determined to confirm the worst fears of critics. The mounting troubles of the national carrier and its huge debt is only one part of the mess he has created.
His favoured treatment of certain private airlines and the refusal to distance himself from them is another. The way Air India and Indian Airlines were sought to be made second-class airlines in preference to their private competitors fully bears out the charge of crony capitalism against the Civil Aviation Minister. It is remarkable that the national carrier survives only because of the periodic infusion of funds from the public exchequer. Neither the required efficiencies in operation nor cutting down of the costly flab was a priority for the minister. The more the public- owned airlines slipped into bankruptcy the more it helped Patel's friends in the private aviation industry.
Emboldened by a friendly minister, in recent weeks private airlines have been competing with one another in raising passenger fares on key sectors. The exorbitant rise in fares on productive and most popular metro routes, say, Delhi- Mumbai, and Delhi- Chennai, have caused a public hue and cry. The only person who has reason to be happy will be Railway Minister Mamata Banerjee since a part of the air traffic will feel obliged to travel by rail rather than pay unheard of air- fares. Indeed, it is extraordinary that the price of a Delhi-Mumbai or a Delhi-Chennai ticket should be more than the air fare for a Delhi-London journey.
Clearly, when there is a friendly minister at the helm in the Civil Aviation Ministry, his cronies in the private aviation industry are bound to have a ball. Even in the original home of capitalism such abuse of the ` free market' and such an exploitation of the consumers is unheard of.
Admittedly, forced by the public outrage against the extorionate air fares, the minister has made some noises and threatened to take some corrective steps.
But the problem is deeper. It concerns the total lack of red- lines for the private players going beyond which would attract stern penal action. Unfortunately, Patel has allowed private players, be it the private concessionaires for airport expansion/ modernization, or the private airline operators, a free hand. The result is that the flying public has had to pay an enormous price for the minister's generosity towards private airlines and airport operators. In Delhi, for instance, the private concessionaire for modernizing the airport has violated the original agreement with impunity.
Yet, he has got away due to Patel's kindness. Not only is he being allowed to levy a surcharge on every flier against the original agreement, he has been allowed to build far more in excess so that he can exploit it commercially for his own private greed. If the way the Delhi Airport project is any indication, the Public- Private- Project model for implementing infrastructure project is far worse than the earlier ministry- implemented works. Whether it is the Mumbai airport, or the Hyderabad airport, the public is being shortchanged by the private concessionaires in collusion with the authorities.
Of course, it is not our case that the Government should push the clock back to the pre- liberalisation days. No. But opening up the aviation sector should not have meant an unbridled exploitation of the paying consumer by private parties. Even in the US, the anti- trust and anti- competition practices are punished severely. Here if a couple of private airlines form an informal cartel to milk the flying public, the Civil Aviation Minister looks the other way. Private operators have long defaulted on repayment of bank loans, on payment for aviation fuel to the public sector oil companies.
Yet, they are extended a life- line by the minister.
Shouldn't he be half as concerned about the welfare of the flying `aam aadmi'? Indeed, a free market needs far more regulatory oversight than was the case under the controlled economy. Is Patel listening?
His favoured treatment of certain private airlines and the refusal to distance himself from them is another. The way Air India and Indian Airlines were sought to be made second-class airlines in preference to their private competitors fully bears out the charge of crony capitalism against the Civil Aviation Minister. It is remarkable that the national carrier survives only because of the periodic infusion of funds from the public exchequer. Neither the required efficiencies in operation nor cutting down of the costly flab was a priority for the minister. The more the public- owned airlines slipped into bankruptcy the more it helped Patel's friends in the private aviation industry.
Emboldened by a friendly minister, in recent weeks private airlines have been competing with one another in raising passenger fares on key sectors. The exorbitant rise in fares on productive and most popular metro routes, say, Delhi- Mumbai, and Delhi- Chennai, have caused a public hue and cry. The only person who has reason to be happy will be Railway Minister Mamata Banerjee since a part of the air traffic will feel obliged to travel by rail rather than pay unheard of air- fares. Indeed, it is extraordinary that the price of a Delhi-Mumbai or a Delhi-Chennai ticket should be more than the air fare for a Delhi-London journey.
Clearly, when there is a friendly minister at the helm in the Civil Aviation Ministry, his cronies in the private aviation industry are bound to have a ball. Even in the original home of capitalism such abuse of the ` free market' and such an exploitation of the consumers is unheard of.
Admittedly, forced by the public outrage against the extorionate air fares, the minister has made some noises and threatened to take some corrective steps.
But the problem is deeper. It concerns the total lack of red- lines for the private players going beyond which would attract stern penal action. Unfortunately, Patel has allowed private players, be it the private concessionaires for airport expansion/ modernization, or the private airline operators, a free hand. The result is that the flying public has had to pay an enormous price for the minister's generosity towards private airlines and airport operators. In Delhi, for instance, the private concessionaire for modernizing the airport has violated the original agreement with impunity.
Yet, he has got away due to Patel's kindness. Not only is he being allowed to levy a surcharge on every flier against the original agreement, he has been allowed to build far more in excess so that he can exploit it commercially for his own private greed. If the way the Delhi Airport project is any indication, the Public- Private- Project model for implementing infrastructure project is far worse than the earlier ministry- implemented works. Whether it is the Mumbai airport, or the Hyderabad airport, the public is being shortchanged by the private concessionaires in collusion with the authorities.
Of course, it is not our case that the Government should push the clock back to the pre- liberalisation days. No. But opening up the aviation sector should not have meant an unbridled exploitation of the paying consumer by private parties. Even in the US, the anti- trust and anti- competition practices are punished severely. Here if a couple of private airlines form an informal cartel to milk the flying public, the Civil Aviation Minister looks the other way. Private operators have long defaulted on repayment of bank loans, on payment for aviation fuel to the public sector oil companies.
Yet, they are extended a life- line by the minister.
Shouldn't he be half as concerned about the welfare of the flying `aam aadmi'? Indeed, a free market needs far more regulatory oversight than was the case under the controlled economy. Is Patel listening?
Subscribe to:
Posts (Atom)
