NEWS & VIEWS TODAY = 11th, JUNE, 2012 = COAL BLOCK ALLOCATION = SOME DEFENCE OF GOVT = AUTO INDUSTRY-FEELING THE PINCH OF OIL HIKES = HERO TO GO FOR ITS OWN BRAND = & BAJAJ IS STILL NOT IN SCOOTERS!!

NEWS & VIEWS TODAY

11th, JUNE, 2012

COAL BLOCK ALLOCATION

SOME DEFENCE OF THE GOVERNMENT

AUTO INDUSTRY-FEELING THE PINCH OF OIL HIKES

HERO TO GO FOR ITS OWN BRAND

& BAJAJ - STILL NOT IN SCOOTERS !!

1.    NEWS :-A Report in ET quoting the CAG says – that the Allocation of Coal Blocks was not done in a transparent manner to the beneficiaries. Competitive Bidding procedure was not followed .So, private companies have gained huge amounts in the process – says CAG.

VIEWS :- Competitive Bidding is not suitable for many Natural resourcers. Coal Blocks is one of them. COAL is required by the user industries of Steel and Power – not everybody on earth.  In a competitive bidding, everybody will put in a bid – and they will sell to user Industries at Higher cost. For instance, for coal, coal India is not the User Industry. Therefore, it does not feel the pinch – if the production is lower or higher. It does not also feel if the price of Coal is very high. It may not also feel, if quality is LOW.

But, these are basic concerns for the user industries of steel and Power. 

Estimating the underground coal reserves and their quality even reasonably accurately -  is not an easy task – to permit competitive bidding. We have already seen the KG-D6 gas output fiasco. So, how do you accurately estimate the reserves – for selling it? 

The second consideration is – every user Industry should a piece of it – according to their requirements and capabilities. Huge National Interest is involved in allocating Coal Blocks to actual user Industries based on their capacities of production. Government should have that much freedom to allocate the coal blocks to user Industries.

But, the point is – most of the time – the methods, procedures and the reasoning used are never recorded on file.

It is like – I am the boss, so, I can do anything – kind of approach that   CAG or anyone who looks at such files easily perceives – and that naturally gives rise to all suspicions.

National Interest is never clearly understood or cited in such file notings. Why did you give this block to this company and that block to that company?  One cannot find clear answers to such basic questions. This is the problem. CAG’s observations come after a lot of prodding at lower levels by Audit officers to the Executive Authorities – and all reasonable opportunities to explain their position.

When nothing satisfactory comes up, for all queries of audit at various levels, it becomes a final CAG observation to be placed before Parliament. And, the CAG observation inevitably mentions all the replies given by the Executive so far and why they are not acceptable. So, blaming CAG is absolutely meaningless.

The Coal Ministry has to blame itself – for the CAG observation. At the same time, it does not mean, this is a huge scam. The figures mentioned may be huge (Rs.1.86 lakh crores). The CAG report is – part of this could have accrued to Government. This can be true. There is no need to give it free – if this is the case. 

But, if we go by competitive bidding route – no doubt, Government gets huge one time revenues, but India loses in the long term. Coal becomes costlier; it would be preferable to import coal and use it. Second, if coal is costlier, so will Power and steel be. So, will all the products of downstream Industries be – like Autos, tractors, building materials and so on from steel Industry; and power tariffs, agricultural products, and products of all Industries that use power. In Ultimate analysis, COMPETITIVE BIDDING of Gas, Cal, Power etc – results in India losing out – rather than gaining. The onetime gain that Government gets – will any way be frittered away in some unproductive populist measure – what with the CAPITAL ASSET BASED EXPENDITURE becoming a small fraction of the Budget in recent past.

Considering all this – allocating Coal Blocks to ACTUAL USER INDUSTRIES was the best option – and remains so. While a sort of Revenue sharing or Profit sharing can still be attempted – it should not go the Telecom way – attempting to kill an efficient Industry, through thoughtlessly high licence fee.

2.    NEWS :- There is no waiting period for Diesel cars any more. 8 of the top 12 cars are available off-the-shelf. All manufacturers are reeling under dwindling sales. The culprit is the Huge hike in Petrol / Diesel prices.

VIEWS : Hiking has happened. But, International prices of Oil have come down.  The reduction is not happening. Why? This Blog was always against such steep hikes of petrol / diesel / Gas.  It is easier to subsidize the OMCs – than prop up the downstream Industries – which in effect are – ALL INDUSTRIES IN INDIA. India has not come to a stage where people will buy anything irrespective of price. No. Even onions will not be bought, even tomatoes will be postponed, if they go up steeply. That is the level of purchasing Power in India. People who support oil price hikes are those for whom these take a very small fraction of their pockets. And, the most ridiculous argument is – while hiking, they say, it is not inflationary. 

Everything, including the auto fares go up from next day. How is it not inflationary? I find this argument reflected in an expert view  in the same paper – which says LPG and Diesel prices must be raised. I feel, a 80% Income tax on such rich persons would be in order – at least to make them feel – how it feels for the common man when LPG prices go up from 100 rupees just a few years back to 410 now and proposed to be hiked to over 800. When Incomes go up by that order, it will be OK to price them that way. Not otherwise. What needs to be done is – government expenditure must be made more productive. As the joke goes, under NREGS, we should not be distributing Bolero cars. 

But, if one can live with in the Planning commission standards, (Not for toilets), these price rises may not be inflationary. You don’t need anything in the world to live by those standards. You just need to find where the things are available at those prices; go there by foot and get them! Is LPG in the Planning commission list or not? It does not seem to be.

3.HERO MOTOCORP :-The world’s largest 2 wheeler manufacturer (by volume sales) – is rolling out all its models  under the HERO Brand Name. A few years ago, this writer had wondered,(in a business journal) why Indian manufacturers promote foreign brands – so much, just to boost their sales for some years. And, some day, the foreign Brand will want to sell themsleves rather than supporting the Indian manufacturer’s brand. Will Hero or Honda be the TOPS after the collaboration ends – I wondered. Now – Hero is going all out to build itself. This is good. 

It has also rolled out its scooter”MAESTRO”  under Hero Brand Name. Bajaj on the other hand has killed all its wonderful Brands of scooters – to concentrate on Motor cycles. Soon, Honda and Hero will both be in both Motor cycles and scooters sweating it out for a chunk of the total 2-wheeler market share. I don’t think it is wise for Bajaj to be out of the lucrative scooters segment. Have you ever seen a lady or an old man above 45-50 ride a Motor cycle? And, they constitute the Biggest 2 wheeler Market – if you know how to market a 2 wheeler of their need, to them. It may not be more macho or glamourous – but much bigger market than Motor Cycles.

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