Whiplash

I want to fly the Dreamliner. Imagine that the latest fracas in the
long running ill fated shotgun wedding soap opera of Air India and
Indian Airlines is that erstwhile Indian Airlines pilots want to fly
the Dreamliner. Bah, so what is the big deal if they want to fly the
jet? Why aren’t they being allowed to fly it? How can that be the
sticking point to hold all of us to ransom? Air India pilots don’t
want them to fly the planeas it impairs their career progression. Like
petulant children, they are squabbling over a new toy. Mera hai, nahin
mera hai (Mine, it is mine). Simply told, the no brainer merger was
between two airlines which flew different types of aircraft – Boeing
by Air India and Airbus by Indian as it was called just before the
merger. Incidentally Indian Airlines went ahead and conducted a
massive rebranding exercise, rechristened as it was from Indian
Airlines to Indian with everything from livery to uniforms and plane
tail logos only months before the 2007 merger .

Before you could say Praful Patel, the merger was initiated and that
is the genesis of the downslide. Actually it is more like a fall from
a cliff for the merged entity. Saddled with debt, courtesy two massive
yet disparate aircraft renewal programmes, the airline has never been
able to achieve what was meant. Which was fleet rationalization,
integration, synergy, savings. The report card says F. How can an
airline which earns 26 crore daily and spends Rs 62 crore fly? It is
losing money hand over fist. And fuel cost at Rs 14 crore daily is not
the only reason for the red swathe across the books.

Mismanagement across the board is a more honest appraisal of the
situation. The Chicago Tribune reported the other day that Boeing
South Carolina is preparing to deliver the first Dreamliner to Air
India in June. As part of the merger process, it is believed that Air
India pilots had agreed to allow cross training. The minister Ajit
Singh is faced with a piquant crisis, the pilots refuse to talk to
him, even as they show scant respect to the Delhi H.C order.

A merger made in hell. Resulting in incessant pain for flyers.

Whiplash

I want to bite the bullet, but I can’t. Not because it doesn’t taste
good, but because it is distasteful. Heh, what does that mean? Bullet,
why does one want to consume it like a pill? Simply because, India now
has increasingly no other course, but to undertake third, fourth
generation reforms instantaneously. Paani saar se upar ho gaya hai
(water level has crossed my head and I am drowning) is the most common
refrain in industry, markets and even sections of the bureaucracy.
We need to get a move on, this delusion that we are a market no one
can ignore cannot carry on. As someone said being on auto pilot is
good for it means that that the pilot has realized that he is safe so,
he has switched from manual to auto mode.

But the drift in government is now bordering on the ludicrous. On
Thursday, we saw manifestation of this sad phenomenon yet again. The
Cabinet and the worthies who frequent such meetings decided to
mothball the insurance FDI plan to hike it to 49 %. Once bitten twice
shy perhaps after the FDI in MBRT (multi brand retail trade) fiasco
which was first ratified by the Cabinet in the last week of November
even as parliament was in session and led to widespread consternation
and then being kept in suspended animation.

Ditto this time with insurance. A weak Govt unconvinced of its own
actions will always see ogres lurking in the shadows. Avoiding an
action replay, it decided to keep the bill in abeyance. It is clear
that this Govt has no appetite whatsoever for anything forget reform.
For years now global insurance majors and their Indian partners have
been pleading for a hike in FDI from 26 to 49 per cent. The right wing
BJP which should have logically supported this move is also caught in
a quandary. One of its top leaders – Yashwant Sinha – heads the
standing committee on finance. Its verdict is that by jacking up the
FDI, you will expose India to the vulnerabilities of the global
market. Fair enough, if you remember the 2008 meltdown when insurance
companies using high fangled derivative instruments went belly up.

But all this still doesn’t change the fact that India is capital
starved and has better best practices to deal with fraud than most
nations. The case if for capital and regulation which comes inbuilt.
The case is for biting the bullet even if it is unpalatable. Question
is who will do it? Not this lot for sure.

Whiplash

During his darkest days in prison Andimuthu Raja never ever allowed
himself to be cowed down. The term in Tihar didn’t break his spirit,
at least not outwardly. Maybe the long hours spent in solitude in the
night may have given him time to introspect, but his external demeanor
was always positive. It appeared as if he had a Teflon coating. In
court, it was the usual Raja dressed in white in summer and black in
winter. His body language one of an aggressor, his tone one of
confidence personified. By keeping himself busy playing badminton
inside the jail premises, and reading up on his trial, he was always
preparing for battle as it were. A trained lawyer himself, when push
came to shove, he even pushed senior criminal lawyer Sushil Kumar
aside and started arguing his own case before Judge O P Saini in the
CBI trial court.

Raja even today believes that he did the right thing, he reckons that
key members of the Govt were on board viz. all the decisions and that
it was done to break the telecom cartel that existed and as a
consequence bring down tariffs. What one cannot condone is that Raja
aided and abetted by R K Chandolia conjured a scam out of thin air,
after all he sold air waves to a handful of operators, many of whom
weren’t even in the telecom space. In fact a couple of them were from
the realty space. It is Raja’s supreme confidence that belies his
present status. A sea of red and black, supporters swarming outside
the Patiala Court Complex and later in the evening Tihar Jail was a
power statement from Raja. It was as if the Raja of Tihar was emerging
from his palace.

The DMK never consigned Raja to the rubbish heap, his proximity to
Kanimozhi probably responsible for that. Raja was the principal
architect of the January 10,2008 spectrum scam, his brazenness while
doing that is now well established. Over the last 15 months and even
before he went to jail, he displayed the same devil may care attitude.
People forget that Sanchar Bhawan was raided by the CBI while Raja
was a sitting minister. People forget that CBI filed an FIR against
unknown persons while Raja was a minister. Despite all those travails,
Raja was unruffled, Captain Cucumber. It is only when the Supreme
Court came down like a ton of bricks after the damning CAG report that
all hell broke loose.

Now Raja is back, a sneer on his face, eh poda (hey you, move in
Tamil) on his lips as he returns to make a political statement. That
is politics – up one day, down another and back, call it the yo yo
syndrome.

Whiplash

So, Shahrukh Khan gets it wrong again. At least that is what the
Mumbai Cricket Association says. SRK himself is furious on the
wrongful portrayl of the much blown out of proportion incident by the
MCA officials. He reckons that his daughter Suhana and other children
were being manhandled by the officials. The Knight Riders in fine
fettle this year in the IPL pulled the chestnuts out of the fire
virtually by suffocating Mumbai to a 32 run defeat and I guess there
must have been much bonhomie amongst KKR supporters who would have
wanted to celebrate by getting on to the playing field.

That SRK is hot headed is a given, but at the same time, he is careful
of doing the ‘wrong’ thing in public. He is conscious of his public
persona and knows that he figures towards the top of the popularity
index. At KKR games, people often want to see SRK and not the match,
such is his personable appeal. Over the day I have heard many
uncharitable remarks – he is under pressure because Aamir and Salman
have bested him at the box office, SRK is a boor, he is constantly
behaving badly, why is he doing this to himself et al. Shahrukh Khan
is a star, his actions and comments are constantly watched. Whether it
is his spat with best buddy Salman Khan or thrashing Shirish Kunder or
now the very ugly altercation at the Wankhede stadium, the hot headed
Khan has lately not been on his best behavior.

His psyche was obviously been brutalized with the harrowing interface
with American immigration officials which led to him making – My Name
is Khan. His films, much hyped, have not been commercially as
successful as the other two Khans, his peers – Aamir and Salman
bhaijaan. The dramatic Rs 100 crore net of tax big number at the B.O
was something that eluded the Khan. But with an extremely stylish take
on Don, SRK breached the box office. Suddenly one hears that SRK is
doing five films, one sees him at all his games and mercifully his
team is actually doing well this season and has a shot at the trophy.
SRK has changed over time, one can sense that. A seven hour long
interrogation by the Enforcement Directorate in Mumbai obviously not
helping him mentally. My most recent interaction with him was at the
F1 circuit. In a melee, he was gracious enough to break free from the
fetters of his bodyguards and onlookers to touch base with my kids. He
even blessed my son.

After that, he has had another run in with US immigration officials.
These things can play and prey on your mind. SRK has to rise above
this. He is a star, a star larger than the celluloid he graces. The
greatest romantic hero of this time.

Whiplash

Oblivious, impervious or simply delusionary. Wonder which tack is
right for the self congratulatory mode that one found UPA’s
constituents in on Tuesday night. Secure and comfortable in their nest
that they have the math in their favour, they continued to delude
themselves by heaping lavish praises on themselves. From UPA
chairperson to the PM to Pawan Bansal, the attitude was one of
complete disdain. By bringing Mulayam Singh Yadav and Laloo Prasad
Yadav on board the dias, they were sending out a terse message to the
opposition, perhaps even cocking a snook. It was virtually like
putting out a neon sign in our faces – catch me if you can, we are in
power and we will remain in power till May 2014. This attitude was in
your face on Tuesday night and I reckon that this Government and its
principal, the Congress sleep soundly at night knowing fully well that
no one can rock the boat.

So, everyone be damned, the people can go take a hike. Dang, the
mountains are a good place to go to at this juncture given the sultry
heat in the capital, but one needs to have a pocketful of cash, and
not a hole in your pocket to actualize that dream. Prices in the real
economy are rising constantly, the spike in Consumer Price Index
(urban) 11.10 per cent for April is something that has all of us under
the cosh. A mismanaged economy which has practically gone into free
fall, a rupee which is being hammered out of share – ab tak chappan –
as I sit down and write this and a general policy freeze which now has
investors acutely worried. Throw in retrograde and regressive measures
like GAAR (general anti avoidance rules) and retrospective taxation
and you have a Molotov cocktail. Lob that at the middle class with
petro product price hike and you have a combustible experience.

Meanwhile RBI Governor D Subba Rao and his board are holding a board
meeting in the cool climes of Mussorie, hopefully concerned about the
mayhem in the forex markets. There appears to be a run on the rupee.
Exaggeration, oh, I think not, foreign investors don’t like policy
uncertainty or paralysis. I bet my bottom dollar that they are
teaching the Govt a lesson by pulling out capital. Bah, we have done
very well, we can do better though, we don’t care – so say those who
guide our day to day destiny. Sorry, the squeeze is such that I may
have to cancel my summer holiday plans. While Sonia, Manmohan, Bansal
& Co enjoy their celebratory dinner.

JAGAN – THE NEW CENTRIFUGE

It is emerging rapidly that Jagan Mohan Reddy will be the next
centrifuge of any coalition that takes power at the centre. While the
Congress dithers on Telengana, suspends its own MPs and essentially
makes a hash of things, the Andhra pot continues to boil. Why will
Jagan be the new centrifuge , one may ask? Won’t the BJP as the
principal opposition party be the big brother in any new formation? Of
course it will be, but the math across the poll map of the country
provides insights into what maybe the final outcome in 2014. Yes, 2014
is a long way off, so why am I getting off the blocks so early.
Simple, a mini referendum is set to take place in the same Andhra
Pradesh on June 12 when 18 assembly segments and 1 Lok Sabha seat go
to the polls.

There is every possibility that Jagan, all fire and brimstone against
the Congress so far will side with the BJP in the next round. And once
he does that, then he becomes a very powerful player in whatever form
and shape the new combine takes. Nitish Kumar, Navin Patnaik,
Jayalalitha, who knows Mamta Banerjee and the wild card in the pack –
Jagan Mohan Reddy all aligning with the BJP will see a major
regrouping of forces. So, I am not getting ahead of the curve, but
looking at an emergent scenario. An emergent scenario which doesn’t
portend well for the ruling dispensation either in the state or the
Centre. Interestingly, AP state assembly elections took place in 2009,
so the state goes to the polls again in 2014, along with the general
hustings. In 2009, Y S Rajasekhara Reddy returned to power with 156
seats, a much reduced mandate from the stunning win in 2004 when he
garnered 185 out of the 294 assembly seats.

The four states which return the maximum number of MPs to the Lok
Sabha are Uttar Pradesh, Bihar, Maharashtra and Andhra Pradesh. All
told they return 80 plus 50 plus 48 plus 42, making up a round figure
of 220 MPs. Both in the 2004 and 2009 general elections, Congress
used the rump provided by YSR in AP to come to power at the centre. In
2009, YSR brought in 33 MPs while in 2004, he returned 29 MPs. In
2009, the Congress bagged 206 seats, the highest number of MPs came
from AP, followed by UP 21, Rajasthan 20 and Maharashtra 17. Ditto in
2004 when the Congress came to power with 145 seats. Andhra and YSR
delivered in spades with 29, Maharashtra 13, Gujarat 12 and Tamil Nadu
10 were laggards in comparison. The point here is that Andhra Pradesh
has been the differentiator, in many ways the killer application that
has brought the Congress back to power and then help it retain power.

Unfortunately YSR’s untimely and at one level slightly mysterious
death muddied the waters for the Congress in AP. Habituated with
shooting itself in the foot, the Congress went and queered the pitch
for itself rapidly thereafter. When YSR’s son and heir Jagan Mohan was
projected as the claimant to the throne, the ‘high command’
neutralized him by electing a consensus candidate instead – K Rosaiah.
Since then the ruling party has hurtled from one crisis to another in
Andhra. A state that practically guaranteed success for the Congress
since the elevation of YSR as CM is now more or less a millstone
around its neck. Things have come to such a sorry pass that there are
no takers for the Congress candidature in Andhra for the by polls now.
Recent reports suggest that several Congress candidates have backed
out because public sentiment is so intense. Public sentiment is
intense not just for the creation of Telengana but increasingly for
the anointment of Jagan Reddy as the CM of the state. In this vacuum,
YSR Congress holds sway in Andhra politics now.

By keeping the issue of Telengana in suspended animation, the central
government has only created that many more complications for itself.
Soon after YSR’s death, Jagan declared his intent to take over the
mantle, but this was unacceptable to Delhi. In a public revolt against
K Rosaiah, Jagan made it clear that it was now or never. By November,
2010 Jagan walked out of the Congress. Impatience being his bugbear,
Jagan should have realized that a vulture is a patient bird. But the
impetuosity of youth and eagerness to grab power tripped him. Many
yatras later, including a fabled train journey to Delhi, he still
awaits what he believes is rightfully his. Politics at the end of the
day is about elections as Team Anna may have also realized to their
chargin. Electoral politics is also about playing the waiting game,
engaging with the hoi polloi and striking at the right time.

In May 2011, Jagan swept Kadapah, his family’s pocket borough by five
lakh votes, the other contestants lost their deposits. Significantly,
his mother Vijaylakshmi, equally cut up with the Congress, also won
the Pulivendula assembly seat by 85,000 votes. The banner of revolt
had been thrown flush in the face of the Congress in Delhi. As if all
this wasn’t enough, home minister P Chidambaram on the fateful night
of December 9, 2009 bunged in a big ugly monkey wrench in the mix by
announcing that the Indian government would start the process of
forming a separate Telangana state, pending the introduction and
passage of a separation resolution in the Andhra Pradesh assembly.
This resulted in protests across both Andhra and Rayalseema and MLAs
from these regions submitted their resignations in protest. Under
pressure, on December 23, the Government of India announced that no
action on Telangana will be taken until a consensus is reached by all
parties. Coastal Andhra and Rayalaseema region MLAs started
withdrawing their resignations while MLAs and ministers from Telangana
started submitting their resignations, and demanded that the Centre
take immediate steps to initiate the process of bifurcating Andhra
Pradesh. Since then the drama of mass resignations has continued non
stop. Also it has brought pain, suffering and misery on the people of
the Telengana region in AP. Lives have been lost, dislocated and in
many cases virtually caught in a time warp.
Accentuating the pain and problems for Andhra was former home
secretary Gopal Pillai’s damaging announcement on December 11, 2009
where he said that Hyderabad will be Telengana’s capital. Already
under a fusillade of fire, he hastily retracted his statement soon
after. The best barometer for the future of Andhra/Telengana came in
March this year when K Chandrasekhara Rao’s Telengana Rashtriya Samiti
scored big winning four of the seven by polls. The Congress is loath
to bifurcating the state, the constituents that make up the state want
it. The Srikrishna Report has come and gone. Throw Jagan into the mix
and the numbers 33 and 29 LS MPs look more and more remote even as the
hustings loom large on the radar. A new strain of regional jingosim
has come to the fore just as it did many years ago when NTR grabbed
centrestage with the Telugu bidda pitch. Now take that strain and
split it into two – a man who reckons he has been wronged and cheated
– Jagan and the messiah of Telengana politics – KCR. The high tide
will lift and bring in all these boats. Don’t see too many Congressmen
on them though.

INDIA ACCORDING TO GAAR

The World According to Garp was a bestselling novel written by John
Irving. In the book Irving famously wrote – In the world according to
Garp, we are all terminal cases. The rupee is once again taking a
dive, as capital flows out of the stock market. In an institutionally
driven market, foreign institutional investors get the heebie-jeebies
when policy mavens unveil new laws. In fact, it borders on a kerfuffle
when the new laws impact FII transactions.

Eh, now you will wonder what Irving’s Garp has to do with the Indian
stock market? Where am I going with this. Convoluted, perhaps, but
FIIs have been hit by a close relative of Garp, he is called GAAR.
Simply put, it means General Anti Avoidance Rule. But the genie that
was released from the bottle by the Union Budget in India spooked
investors to such an extent that money began to flow out of the
markets in a hurry. This resulted in FIIs pulling out money, the
trickle became a flood very soon. GAAR overnight emerged as the new
dreaded demon.

What GAAR does is that it allows tax authorities sweeping powers to
question any transaction with retrospective effect. Let us examine
some data now to bolster this argument. Events, liquidity and
valuations determine the course of stock markets. Almost overnight, as
the year turned, foreign investors found the Indian market which they
had ignored right through 2011 as under bought, driven by attractive
valuations, and reasonably decent third quarter earnings numbers from
corporates.

In the first three months of 2012, money came gushing in from bulge
bracket foreign investors – Rs 9469 crore worth of equities was bought
in January followed by a phenomenal Rs 23,236 crore in February and
finally Rs 6526 crore in March. All told approximately $7.84 billion
was pumped into the equity markets alone in 2012. The worm began to
turn in the immediate first flush of the Union budget. And since then
the trajectory has been downwards. In April, the figure is negative,
though negligent, but the rupee is closer to Rs 51.78 versus the
greenback.

The government meanwhile is trying desperately to limit the damage, by
talking to foreign investors at all levels, convincing them that this
retrospective law is not meant for genuine investors. But to no avail
yet. Finance minister Pranab Mukherjee and finance secretary R S
Gujral have both denied anything sinister behind the introduction of
GAAR. While GAAR will in all probability come into existence from
April 1, 2012,
I asked my friend senior Supreme Court Advocate Homi Ranina what the
implications of this law was. Ranina cut to the chase by saying, “The
guidelines will only be known when the Finance Bill is passed in the
third week of April. WE don’t know under what circumstances GAAR will
be applied. The plan is obviously to weed out tax avoidance in
offshore transactions, in the main the large cross border deals.”
On Thursday, finance secretary Gujral offered some inkling of the way
forward when he said that the law will cover those FIIS which are
investing through tax havens. Importantly, he said it could be
applicable from 1 April, but would not carry out the scrutiny of
earlier transactions. The underlying credo behind GAAR from what one
gathers in finmin is that it will counter aggressive tax avoidance
schemes and will target transactions or arrangements that do not have
any commercial substance or consideration other than achieving tax
benefit. Significantly, he indicated that private equity funds will
come under GAAR’s ambit.
This could be extremely worrying and annoying for if the entity cannot
prove substantive interest in say a offshore haven like Mauritius, its
tax residency status will be rejected. Complicated. Very much. Till
such time as the Finance Bill is passed, the GAAR overhang will be the
sole talking point amongst the foreign investor community – both
direct and portfolio. Many reckon that PEs that fail to demonstrate
substantial presence in Mauritius will have to pay tax on profits, as
per GAAR and this will override the Indian-Mauritius tax avoidance
treaty.
When FIIs met Finance Secretary R S Gujral recently, he articulated
that General Anti-Avoidance Rule (GAAR) provisions would be invoked
only in case of "impermissible arrangements". He had stated, “If they
are in a permissible arrangement, clearly they are governed by the
particular treaty and GAAR does not get invoked at all. If it is an
impermissible arrangement, then GAAR gets invoked and the treaty does
not help them."
What is interesting is that FIIs are allowed after many policy flip
flops to invest in India using an instrument called participatory
notes through sub accounts. These instruments mask the identity of
actual investors and speculation has persisted that it is used openly
for the purpose of to round tripping, essentially bringing back money
salted overseas by the rich and powerful into the country. The colour
of money in the stockmarket is all the same and P Notes allow
politicians and businessmen to bring back their black money, it is
said. When the govt banned P Notes the last time round, there was a
veritable panic as FII money dried up, then the floodgates opened and
all was well. Now GAAR is the new dragon slayer.

For now one waits for clarifications from the finance ministry which
dissipate the clouds that hang over investors’ minds. FIIs have assets
under custody of more than Rs 10 lakh crore, or 17 per cent, of the
market capitalisation of India's equity markets. FIIs are also big
investors in Indian government and corporate debt which too is seeing
capital outflows due to this GAAR bogey. India also needs to realise
that is not the only investment destination, investors have other fish
to fry. Already there is talk that Indonesia will replace India in
BRICS. India can be ignored at your own peril, but India too needs to
contribute if it wants to better itself. By looking at regressive and
retrograde policies which lack consistency, the purpose of moving
forward is defeated. A capital; deficit nation like ours satrved of
funds for economic development needs to be forward looking. Yes, we
need to be jingoistic too, but if we want to improve the lot of the
last man standing, we should be progressive. So should our policies
and attitude. Money is the fastest traveling thing in the world, here
today, gone tomorrow. Remember that.

Whiplash

Adarsh stands for ideal, Satyam for the truth and look what we have
done to both. Ironically, both became symbols of corruption, greed and
malfeasance. Yes, greed as Gordon Gekko remarked famously in Oliver
Stone’s epoch making flick – Wall Street – is good, but not at the
cost of destroying everything that good stands for. B Ramalinga Raju
founder of Satyam, revered and feted by business magazines as the
iconic corporate leader proved to be a fraud.

Not only did he commit fraud in his quest to make his tryst with
greed, he also undermined India’s well built image as a software
powerhouse, a nation with soft power sharpened on the whetstone of our
intellectual horsepower. Adarsh and Satyam go against the basic
underlying credo that underpins India. It is to the government’s
credit that it effected an immediate damage limitation exercise by
cauterizing the wound and turning it around through the sale to
Mahindra & Mahindra.

Adarsh being a fantastic cocktail of abuse of power through collective
collusion between bureaucrats, armed forces officers and top state
level politicians. But look at what we have done since. In both cases
investigations have dragged on. While the CBI has arrested the
perpetrators of the Adarsh scam, the real big fish are still out of
the dragnet. Meanwhile a judicial commission appointed by the state
has whitewashed the basic premise of the probe – that the land did not
belong to the Army, nor was it meant for Kargil War widows – what a
joke. Insidious and crafty minded people managed to get the better of
the state by blatantly disregarding coastal regulation zone and floor
space index norms.

This in your face type of scam is scary because it shows that people
don’t care. Why? Because they know they can get away, rule of law is
sound, but prosecution is weak. Raju is a classic example of a
scamster getting out on bail. Yes, he spent 32 months in the slammer,
obfuscated by a longish spell in Nizam’s hospital. The Adarsh brigade
may well follow suit. Conviction is a long way off and the politicos,
bureaucrats and officers involved will be hoping against hope that
they too follow suit.

All hail the new God. The God of greed, slain at the altar of ideals and truth.

Govt sweeps its muck at SC’s doorstep

The Presidential Reference in the matter of the 2G Supreme Court
judgment, cancelling 123 licenses, after being opposed by the Deputy
Chairman of the Planning Commission, Montek Singh Ahluwalia was
finally cleared by the Cabinet and then filed before the Supreme
Court. A reading of the Presidential Reference shows that it is
nothing but an angry expression from the government that has been
besieged with bad publicity after all its defence starting in 2008
about the 2G scam being a policy decision in the interest of the
common man fell flat on its face with the 2G judgment.

Further, the government’s defence such as the ‘zero loss’ theory
floated by Telecom Minister Kapil Sibal was taken apart when the
judgment cancelling the licenses clearly upheld the fact that spectrum
was indeed a scarce resource, and further, that the beneficiary
companies had offloaded their stakes for a huge profit.

Throughout 2010 and 2011, government spokespersons such as Manish
Tewari, Jayanti Natarajan (now Minister of Environment), and later,
Salman Khurshid made valiant attempts to defend A. Raja by taking a
stance that no wrongdoing had occurred on his account. This too was
trashed as the Supreme Court held that Raja and officials of the DoT
had acted in an unconstitutional and capricious manner and further,
that their action was against public interest as well as the
principles of equity.

With nowhere to hide, and threats of bilateral and international
litigation pending at their doorstep from companies such as Telenor,
Sistema, and possibly Etisalat and Bahrain Telecom, the government has
decided to sweep its garbage in front of the Supreme Court’s door.

The Reference, which seems to be lazily and unthoughtfully worded,
makes assertions which could not have been further from the truth. For
example, it makes bizarre claims such as that spectrum was allocated
to eight cellular mobile licenses in 1994 and 34 cellular mobile
licenses in 1995 on a first come, first served (FCFS) basis. This
flies in the face of the fact that the Reference itself claims in the
opening paragraphs that the eight CMTS (cellular mobile telephone
service) licenses in 1994 were selected based on rankings received by
them on a technical criterion and were required to pay a fixed license
fee determined by the government. Similarly, in case of 1995, the
selection was based on an auction across 18 circles for 10 year
licenses. Clearly, there is no occasion for determining the FCFS
allocation of spectrum, leave alone implementing such a disastrous
scheme when only 2 licenses existed in each circle.

In another part of the Reference, a comparison is made between
licenses of the pre-2001 era with the ones awarded in 2001 (17
licenses in the fourth cellular mobile multi-stage bidding and 22
licenses awarded for limited mobility) along the lines that a
one-time, non-refundable entry fee was payable in both cases. This
belies the basic understanding of the telecom sector wherein licenses
awarded in 1995 and 1997 were required to pay annual instalments and
not a one-time, non-refundable fee arising out of the bid that had
been placed. It is only in case of the 2001 licenses that a one-time,
non-refundable entry fee was to be paid.


The Reference also makes a desperate attempt to convince the Court
that spectrum has never been paid for upfront. It hopes to portray
that the Court’s order of February 2, 2012, cancelling 123 licenses on
account of first come, first served (FCFS) is no different from what
was occurring before 2008. In its desperation, the Reference claims
that upfront payment for spectrum has never been made till 2001.
Surely, the authors must then be able to explain why the fourth
cellular mobile operators made the upfront payment of Rs. 1,658
crores, or why is it that on migration from limited mobility to
Unified Access Service Licence, the basic service licensees of 2001
had to pay an additional amount which allowed them to provide full
mobility and acquire CDMA spectrum of a corresponding amount.

The Presidential Reference thrown open a Pandora’s Box. Pandora’s Box
in Greek mythology contained all the evil of the world, although at
the same time, it had one other item – strangely called Hope which was
not released to the world, even as all the evil was. The Reference
puts at stake the entire India investment of Maxis Aircel, which owns
22 licenses across the country. Tatas get hit twice – 17 of their
licenses fall under suspicion since they were awarded between 2001 and
2004, but all of the 19 licenses again need to dodge the legal bullet
since they are beneficiaries of dual technology spectrum in 2008.
Similarly, in case of Reliance, whose licenses are under the legal
scanner now both due to their vintage of 2001 till 2003, and later
because they also received dual technology spectrum.

The companies that are least affected are Vodafone, 12 of whose
licenses are going to require a clean chit from the Supreme Court, and
Bharti, whose 8 licenses out of the 22 are in serious trouble.

This move by the government is expected to plunge the sector into the
kind of uncertainty that it has never seen before.

If, perchance, the Supreme Court decides to hear the matter, the
government will be in no position to defend any of these licenses
since it is the one that has sought the opinion. As a result, it will
be up to the private parties’ lawyers to provide defence against the
Court’s enquiries and legal attacks from those who have initiated the
original PIL. With the government out of the defence ring, the legal
balance could seriously tilt against these companies in the coming
days.


Experts believe that the dual technology licenses are the most
vulnerable if the review occurs since those were not only given by
former Telecom Minister A. Raja, but in fact have already been in the
eye of suspicion. In fact, the Cellular Operators Association of India
(COAI) has filed a petition, questioning the legality of such dual
technology licenses, which is already pending in the Court.


All in all, the situation in the telecom sector could get much worse.
The government inexplicably at one level seeks to protect its rights
to executive decision and policy making but through this Reference has
placed the most fundamental issues at the Supreme Court’s doorstep.
All eyes now towards the President’s Office and the Supreme Court.

COMMISSIONER ON THE RUN

Even as yet another IPL is upon us much reminiscent of the Invasion of
the Body Snatchers, one wonders on the efficacy of the League its spin
off benefits and value in terms of deliverables. Fatigue seems to be
the operative word for the bulge bracket cricket league. But in all
this din, hype and hoopla of a new season getting underway, the
loneliness of the progenitor of the league is not lost. Now living in
exile in London, sought by various Indian agencies, a red corner
notice against his name; the scion of the KK Modi business family has
seen fame, adulation and now the depths of anonymity – all in the
space of a couple of years. Modi assiduously worked to create from
ground zero a global cricket league on the lines of the English
Premier League, NBA, NFL and perhaps the F1. And he did good, his ego
rubbing people the wrong way along the route.

Over the last few days, one touched base with Modi, now declared
bankrupt by a London Court for not being able to pay Rs 53 lakh to a
security agency. Adding to his woes is the case against former Kiwi
cricketer Chris Cairns where once again he has been trumped. One tried
to peep into his mind, understand how someone like him used to the
spotlight lives in the shadows of London. The brashness has dulled,
his answers are more cryptic and measured. Sample his take on the
creation of IPL, “There seems to be wide misconception that the IPL
was the direct result of the ICL's launch This is completely untrue. I
had begun my own work on a League way back in 1996 and actually
announced and launched a 50/50 format. Initially, we had the approval
of the BCCI but they then had a change of heart so for over 11 years I
worked behind the scenes to fine tune the idea.
So when I and my colleagues moved onto the Board late in 2005, we
already had a decent plan. But our first task was to get the BCCI
finances and Marketing in order and then I followed with the league
concept. “ He believes that initially there were many naysayers, but
as head of marketing for the BCCI and someone who had raised a billion
dollars for the organization, they finally green lighted the project.

And it sure did capture the imagination of the cricketing and
marketing world. Brendon McCullum’s roaring megaton replete with power
hitting ignited the inaugural tourney. Well, the League was on its
way. But the best laid plans of mice and men often go awry. Owner’s
pride became neighbour’s envy. Being brash has a price. One has to pay
for rubbing people the wrong side. This is the genesis of the fissures
between Modi and another powerful board satrap N Srinivasan, a
successful businessman himself. As long as Sharad Pawar was a fixture
in the board, Modi could walk on water. Pawar out meant Modi out. The
equation was simple. Modi himself will tell you, “As for what changed,
well the plan I put together and the way we executed it - became the
talk of the world and I guess some people wanted to embrace it as
their own.” So, next stop Srinivasan in, Modi out. In the murky world
of cricket board politics, it doesn’t take long for a star to be
jettisoned. Jagmohan Dalmiya knows that better than anyone else.

Does he miss his million dollar baby? After all, he can’t remain
unaffected by all the accompanying acrimony, the long laundry list of
cases against him and generally how the whole ball of wax has
unfolded. The cookie crumbling rather badly for him. Modi is
diplomatic when he says, “The IPL was - and is - a tremendous
tournament and there is an immense sense of pride at what I was a part
of. So of course I miss the event but the accompanying issues are
something anyone in my position could have done without - and I'm no
different.” Which brings us to the next question, what happened in
those last few days and hours with Srinivasan? Why did things get so
out of hand that he had to sack him as IPL commissioner over e mail?
Modi’s response is muted, “That's pretty much a question you would
need to ask others. Since my departure, the BCCI, largely through the
activities of Mr. Srinivasan, has thrown countless, false and
unsubstantiated allegations in my direction, without any level of
accountability. All of them, have been strenuously refuted by me with
support from substantiated and irrefutable evidence to qualify my
position.” Accepting his karma, Modi says that although it all came
to an abrupt and totally unjustified end, he would rather focus on
what he achieved by bringing the tournament to life in the first
place.

Actually in retrospect if one evaluates the war against Modi and
tabulates the milestones as it were, the real trigger would be Modi
being bested by Sanjay Joshi in the Rajasthan Cricket Association
elections. Board politics runs on votes, just as politics runs
anywhere else in the world. Once Modi was ousted from RCA, and he
didn’t have a formal position in the board, a massive erosion in his
equity took place. That was the catalyst that accentuated his decline
and demise as it were. Again Modi displays candor when he says, “I
suppose that was an issue, yes. The IPL was successful and I was in
the public eye, which some people didn’t seem to like. We had created
a successful product and they wanted a piece of the front-line action.
There were definitely certain people using their status within the
Indian game to make life difficult when, instead, they should have
been enjoying the moment.”

Ironic that Modi who was the toast at cricket grounds for bringing
cricket and entertainment together in a spanking new format is now the
outsider, externed from his own country. Powerful vested interests
within the board seizing the palace and overthrowing the crown prince
in a putsch. Modi, however, maintains that he is a patriotic Indian
and he misses his country very much. He looks forward to the day when
he can return and ‘hopefully that moment won't be too far away.’ Is
something cooking then, is there back channel diplomacy at work to
call off the hounds and allow him to return? He is not willing to
answer any of those queries, in fact, he is being extremely careful
about what he says these days. Modi had many powerful friends
including those among the franchise owners who can play interlocutors
on his behalf. His father K K Modi is a well known industrialist.
Between all of them, there could be a sweetheart deal in the offing
paving the way for Modi’s return.

It is clear that the IPL is struggling, the board and the broadcaster
trying hard to breathe life into the afflicted entity. Season 4 was an
unmitigated disaster. Controversy over Modi’s ouster and subsequently
have left a bad taste in the mouths of the hoi polloi. Many reckon
that IPL was being run like a secret society, one which thrived on a
peculiar type of crony capitalism. Modi was obviously the lynchpin of
the operation, his own larger than life persona domineering. Learnings
for Modi from the debacle: “It would be that we live in a society
where performance and success doesn't always work for you. And neither
does it guarantee you the chance to continue performing or
succeeding! Vested interest sometimes took precedent over the good of
the product and I was simply not ready to accept that. “

Quotes

‘I simply did what was right for the IPL. The success of the
tournament in South Africa was the result of relentless work from a
world class team of people. We had to keep the IPL afloat after the
first year and all the owners supported me. But they only have so much
say and like most sporting federations - a few people who were feeling
left out, ganged up together and they found a natural ally within the
Government. But we kept the IPL alive under near impossible
circumstances.’

‘Srinivasan certainly wanted things done his own way. I pushed back on
some important issues because Mr. Srinivasan was - and still is - the
owner of the Chennai Super Kings and I considered that certain demands
such as trying to hand pick the umpires list in 2010, was a conflict
of interest and not in the interests of the league as a whole. ‘

‘I can only comment on how we approached the format and one of the
strongest elements of the whole IPL concept was to make it innovative
and therefore appealing to the fans, broadcasters and sponsors on an
ongoing basis. But you can only be innovative if you innovate! So we
set out to constantly monitor our product, and analyse how we could
improve and move things along. We weren't trying to re-invent the
wheel with every move, but we did try to keep things fresh. We made
sure we worked with all of our franchisees and partners and I'm sure
the recent issues with Kochi and Sahara haven't helped the preparation
process.’

‘I am in touch with all of the franchise owners. They were and have
always been, good friends and I shall be glued to the TV to see how
their teams fare.’

-MAIL TODAY,8TH APRIL 2012

Whiplash

Indian Paisa League, Indian Performance League, Indian Fatigued
League, call it what you want, the annual cricketing tamasha is back.
A whirligig devised by impresario Lalit Modi who was used by the
cricket board to break the back of Subhash Chandra’s Indian Cricket
League and then dumped to the rubbish heap of history by a conniving N
Srinivasan is trying desperately to breathe. Cricket fatigue stems not
just from the players themselves, but from the entire eco system that
Modi built around the bulge bracket league. Dang, it is now beginning
to hurt. Hurting advertisers, sponsors, viewers, spectators, franchise
owners who try desperately to keep their chins up, the entire ball of
wax.

One can argue that even at the cost of playing too much cricket, the
league has thrown up exciting talent. Talent like R Ashwin, Maneesh
Pandey, Umesh Yadav, Paul Valthaty and so many more, but it has in the
process turned Indian cricket stars into a bunch of tired, weary and
exhausted players. Yes, the money is good. After all Vijay Mallya who
doesn’t have money to pay his pilots and cabin crew forked out in
excess of $2 million for power hitter Chris Gayle.

At the core of Indian Jaded League’s problems is scheduling. With the
ICC giving no clear window for the tourney and the brash and imperious
BCCI sticking to its guns of playing in the abnormal heat of April and
May, half the ‘firang’ players are not available for the first half.
Last year was a sure shot recipe for disaster, a sublime World Cup
fell headlong into the drudgery of the League leading to boredom all
around. In many ways, this is the make or break season for a tiring
IPL, even B Town has decided that it is no longer afraid of the
cougar. Sajid Khan’s Houseful 2 is going to be released on Friday
itself going eyeball to eyeball with what was unthinkable a couple of
seasons back – IPL.

I may still be proved wrong, one power hitting exhibition may well
ignite this season. Yawn, but if the ratings don’t zoom, it will be
zzzzzzzzzzzzzzzzz.
So sorry, I fell asleep…

INTERVIEW - CHRISTINE LAGARDE

What strikes you about the 56 year old International Monetary Fund
managing director Christine Lagarde is her singular poise and bearing.
Speaking softly in her accented English, she will tell you that she
may be the first woman to helm the Fund, but what matters to her is
that she is not the last one. She displays complete candor when she
says, “I suppose it gives you added responsibility. And you have to
grit your teeth a little harder, because you want to demonstrate that
yes, we can do it and other women can do it after me. It’s demanding.
But it’s also a great challenge, a great task and a great job.” A
former synchronized swim champ who is keen on scuba diving and power
yoga, her athletic frame belies her age. After cutting her teeth as
chairperson of Chicago based law firm Baker & McKenzie, she is known
to be called an Americane, her powers of persuasion backed by a lack
of pretension make her a powerful negotiator in the world of high
street finance. In an extensive conversation with SANDEEP BAMZAI, she
reckons that capitalism will survive repeated stress tests that it is
being subjected to.



*You have been saying since late last year that the global economy has
entered a new "dangerous phase". On the face of it, markets seem to
have calmed down in the last couple of months and there has been some
movement from policy makers in Europe to ease the immediate crisis.
Are you any more comfortable with the global scenario today than you
were, say three months ago?
We are not out of the danger zone, but we have avoided the worst. Just
a few months ago, the recovery was in danger of being derailed. Things
have improved—Thanks to strong policy measures—in particular by the
ECB and European countries. Recent economic indicators suggest an
uptick in activity, mostly in the US. But let us not get ahead of
ourselves. Gains could easily be reversed. Major economic and
financial vulnerabilities remain. We need to use this breathing space
to build on what has been done.

*As far as Europe is concerned - a fresh rescue fund for Greece has
been put in place. However the rescue comes with such stringent
austerity conditions that it could push Greece into an even deeper
recession and perhaps even a deeper debt trap. Do you think the
measures being taken with regard to Greece can turn counterproductive?
The Greek government’s new program is explicitly designed to bring
forward Greece’s projected recovery. What are the overall objectives:
it’s growth, competitiveness obviously, and jobs, alongside
sustainable public finances and stable banks. What is crucial is to
increase employment. Unemployment remains high at 18% with youth
unemployment at almost 45%. Fiscal adjustment is essential but it
needs to be smart so it does not snuff out recovery and it must be
done in a way that is fair—for example the rich paying their taxes.
Still, we need to also recognize that the Greek economy is set to
contract further in the short run. The strategy aims at minimizing the
impact on the poorest and most vulnerable. A social spending review
will identify core social programs that should be strengthened to
better support individuals in need. Fiscal adjustment should be done
in a way that protects the poor and most vulnerable, and shares the
burden fairly across the population.

*Are elevated oil prices adding to the problems of the global economy?
And given that the reason for oil price spike seems to be tensions
with Iran - what is the IMF’s view?
The possibility of sharply higher oil prices, driven by
geopolitical-related supply concerns, is a certainly a key risk for
the global economy. The impact on oil prices would be quite large if a
potential or actual disruption in oil supplies involving Iran—the
world’s third largest exporter of crude oil—were not compensated by
increased supply by other oil producers. A halt of Iran’s exports to
OECD economies without offset from other sources would likely trigger
an initial oil price increase of around 20-30 percent, with other
producers or emergency stock releases likely providing some offset
over time.
The IMF is seeking more funds for itself ($500 billion) and s also
asking Europe to increase the size of its firewall. What is the
objective behind this? Are you fearing that other nations may need a
bailout?
The IMF is there to help all its members and we take this very
seriously. We estimate a global potential financing need of $1
trillion in coming years in an adverse scenario. To play its part, the
IMF would aim to raise up to $500 billion in additional lending
resources. Right now, we are consulting the membership. Our financing
is for all members, Euro area or otherwise. Boosting the Fund’s
lending capacity is about two things: Supplementing the resources
Europe will be putting on the table, but also to meet the needs of
“innocent bystanders” affected by contagion, anywhere in the world. A
global world needs global firewalls.
*You have asked other nations in the world including perhaps emerging
economies like China and India to lend more support towards Europe.
How successful has that pitch been?
We are discussing with all our members options for increasing Fund
resources. Emerging markets such as China and India are very important
members and part of these discussions. These resources would be to
help all our member countries, not just Europe.
Emerging market economies will play a bigger role going forward. This
is obvious, and cannot be ignored. Look at the IMF high table – for
the first time ever, there is a deputy managing director from China
and now the secretary of the our executive board is from China. The
proportion of Indian economists at the IMF is double of the Indian
quota. The human and managerial talent from emerging economies will
play a significant part. In fact, the head of the Asia and Pacific
Department at IMF is also an Indian. Asia’s share of capital and
voting rights is going up. The shift of power is taking place as I
look at the quotas. I think advanced economies need to learn from the
way India and China have handled the pressures lately.
*Are you disappointed with India’s economic performance? A lot is
being made domestically of the policy inaction that has pushed growth
rate and particularly investment rates lower…
Indian authorities have said on several occasions and in several
documents, India has the potential to grow at 9 percent, but reaching
those growth rates will require substantial reforms in several areas.
The 12th Plan Approach Paper has identified the right areas for
reforms. I agree that infrastructure especially power and investing in
education and health care, are key. Together with enhanced social
programs, raising agricultural productivity is also very important to
make growth more inclusive. We think also labour market and financial
reforms would boost growth and help create more formal sector jobs and
allow India to capitalize on its demographic dividend. India has
generally pursued a very inclusive reform process, seeking broad
consensus on reforms, which takes time to build, but usually pays off
by reducing the probability of backtracking.
*India seems to be stuck with a persistent problem of inflation. Even
today, after 13 interest rate hikes, we can’t say that inflation
concerns are over. Does that worry you?
The RBI has done the right thing by tightening monetary policy to
fight inflation and we support the resolve at combating inflation that
they have shown over the past couple of years. We also agree that
pausing is currently appropriate as growth has also slowed. Because
inflation has been elevated for some time, it may take some time to
bring it down to the historical averages prevailing in the mid-2000s.
Fiscal consolidation will also help reduce demand pressures. And
finally, easing some bottlenecks, for example in the food supply,
could help deal with the structural pressures on food prices that we
have seen in recent years. The 12th Plan is expected to deal with the
latter. So, the Indian authorities are rightly fighting inflation on
several fronts.

*What can the government do to revive growth and investment?

India is a supply-constrained economy. Bringing back high growth will
require removing those constraints. Reforms that can address this
include those needed to improve infrastructure (e.g. mining, land
acquisition, and energy pricing), the Goods and Services Tax, and
further advancing financial reforms (especially boosting the
development of the corporate bond market). Fiscal and financial
reforms should also be implemented to increase resiliency and make
growth more inclusive. More than anything else, addressing problems in
the power and coal sectors are the immediate priority given the
linkages across all sectors in the economy.
*How do you see the 2012/13 Budget?

I welcome the increase in capital spending and indirect taxes and
initiatives to improve spending efficiency—e.g. pilots on the use of
the Aadhaar (UID) to transfer LPG and kerosene subsidies directly. We
look forward to seeing the fruits of these changes in reorienting
spending from indiscriminatory fuel and fertilizer subsidies toward
capital and social spending, both needed to boost growth and make it
more inclusive. Consolidation remains crucial to rebuild space in case
the global situation should worsen, to reduce inflation pressures, and
to free savings to support growth.
*Is the consolidation in the 2012/13 Budget sufficient?
The important thing is to move India back toward a credible
medium-term path of fiscal consolidation. But delivering such targets
will be the real challenge. Actions taken to broaden the base of
services taxation and reverse excise rate cuts taken during the crisis
are important, and so are measures to reduce the subsidy burden. And
improved targeting may take some time to produce real savings in a
country as large as India. Keeping spending under control,
liberalizing diesel prices, and securing the passage of the DTC and
GST are crucial.
*What is the long-term prospect for India?
India is a bright star with many strengths that will serve it well,
including India’s great entrepreneurial spirit and talent. I welcome
the initiatives to scale up the use of the Aadhaar—India’s Unique
Identification system—which should ensure maximum impact of government
money on the lives of people who need it the most. India also has an
important role as an important voice to the world on behalf of
emerging and developing economies.
As I said earlier, reform is difficult in any country, and in a large
and heterogeneous place such as India achieving consensus can take a
long time. The Budget reiterated the government’s commitment to many
important reforms to taxation and the financial sector and the Fund
strongly supports those. We hope the government can build on those and
move forward with other structural reforms, such as to facilitate
infrastructure investment and liberalize the labor market.

HONEY, THE RATINGS ARE SHRINKING

Arre, yeh kahin ghate ka sauda toh nahin (hope this is not a losing
proposition) is the hot button whisper that one can hear increasingly
in IPL circles. Away from the hype and hoopla of the big cricket
whirligig, a deep undertone of cynicism dogs the bulge bracket Indian
Paisa League. Bottom line is that if you reside in India, you can run,
but cannot hide from the clutches of IPL. For team owners, sponsors,
advertisers, broadcasters, viewers, spectators and all those who form
the IPL eco system; the cricket economy has a buzz about it. Many
reckon that it is the early birds who actually got the worm. For
instance, Emerging Media (Rajasthan Royals) coughed up $67 million
for 10 years.. Let me do the math for you. At $67 million, the
franchise is a steal, for it works out to $6.7 million per year. If
you adjust that for today's exchange rate, it is Rs 34.17 crore. Shah
Rukh Khan also paid a relatively small sum of money in Season 1 -
$75.09 million. Have these franchise owners and others of their ilk
made money over the last four years? At $370 million, this is the way
it breaks down for late entrant Sahara. As a latecomer even after
getting a haircut by putting the board’s knickers in a twist, it has
to basically fork out $30 million or thereabouts per year. Now that is
a lot more than $6.7 million per annum.
Fatigue across this eco system is the single biggest threat percept to
this whirligig. Cricket fatigue impacts players, it hurts ratings and
consequently singes sponsors and advertisers. It also hurts gate
receipts because Bharat Army constituents don’t turn up at the stadia.
The linkages are too strong and fortunes inter-twined and inter
linked. For the franchises, it could well be like Sisyphus as he
attempts to roll the boulder up the mountain. Sisyphus, King of
Corinth, was given an assignment to roll a great boulder to the top of
a hill. Only, every time Sisyphus, by the greatest of exertion and
toil, attained the summit, the darn thing rolled back down again.
Ratings in season 4 were 25 per cent down from the previous year. The
World Cup that preceded the tourney responsible for the slip. This
season may well be worse, for India’s cricketing fortunes have taken a
massive dive, several top of the line foreign players will join in the
second half and a general ennui seems to have gripped the cricket
economy, grappling as it is with a perceptible economic downturn.
Chins may be up across the IPL, but look at the reality. The opening
ceremony ratings were a meager 1.1 which is a shocker, though I must
confess I was astonished at the enthusiasm shown by the Kolkata crowd
at the Eden on Thursday night when they stayed through the
thundershower to watch Irfantastic, one pull shot made the match as he
flat batted De Lange over mid wicket. At another level, Vijay Mallya
is a classic example of being hit squarely in the eye by the slowdown,
his airline Kingfisher needs immediate resuscitation. Yet the lure of
the game made him bid an excessive $2 million plus for Chris Gayle.
Despite not being able to pay his pilots and cabin crew.
How do the franchises make money is then the million dollar question. Simple.
The franchise owners are subsidised by the Cricket Board and its
extension IPL. This is the way it works: Broadcast revenues for one
were subsidising the franchises till the end of Season 2, but in
Season 3, Lalit Modi showed his worth as a marketer. He worked his
numbers in such a way that by clinching a panoply of new deals, he
managed to double the central revenue pool. Each franchise owner was
given Rs 67.5 crore from this pool in year 2. But with the catalogue
of new deals - YouTube, Colors, Karbonn, Maxx, MRF, vRock, et al; Modi
managed to make this particular revenue stream closer to Rs 130 crore
for each team owner. Now, believe me that was a God sent. So, if
Rajasthan Royals has to pay a fixed cost of $6.7 million only and in
turn is getting Rs 130 crore from the central revenue pool, then that
was a positive start. There were other revenue streams that opened up
when the tourney came back to India.. Of course, there is the
operating expenses part, which is equally heavy, but if you are smart
and some of these franchises are, then there is no way you can lose
money. Entry cost is critical, the lower the better. That way the
arithmetic is in the black and not in the red. People who bought the
franchises earlier and cheap stand to benefit. But even Mukesh Ambani,
who paid the most – $111.9 million or approximately Rs 447 crore –
forks out only Rs 44.7 crore as franchise fee annually to BCCI.
What are the major heads that one needs to look at? Revenues and
expenses obviously. Under revenues there is - broadcasting rights now
read central revenue pool, team sponsors, other income which is gate
receipts, in stadia advertising, merchandising sales, media tie-ups
and prize money. Under expenses there is - franchise fee, stadia fees,
team eco-system expenses, which include sales and marketing employee
cost as well as players and support staff payments, team promotion,
travel and hospitality cost and other variable expenses. Team
sponsorship also improved over time and the general average was
closer to Rs 40 crore for each team with Mumbai Indians and KKR
leading the way with Rs 50 crore or thereabouts. This was up from an
average of Rs 24 crore in the first couple of years. Even when the
league shifted to South Africa, logic suggested that the team owners
lost money. I must add that several clubs were given additional
handouts by IPL reimbursing them for hospitality and travel expenses
incurred in South Africa. While some of these figures are in public
domain, others have not been quantified.
The broadcasting revenues were directed to a central pool, 40 per cent
of which went to IPL itself, 54 per cent to franchisees and 6 per cent
as prize money. The money will be distributed in these proportions
until 2017, after which the share of IPL will be 50 per cent,
franchisees 45 per cent and prize money 5 per cent. IPL signed up
Kingfisher Airlines as the official umpire partner for the series in a
Rs 1o6 crore deal. Wonder whether he is still in a position to
continue given Kingfisher’s present financial health. DLF coughed up
Rs 200 crore as title sponsor for five years, and they too are not
keen on continuing after their contract runs out this year. Pepsi paid
$12.5 million to become the beverage partner. Of this, $2.5 million
went to the eight franchise owners every year. In 2008, it is believed
that teams like Kolkata Knight Riders, Mumbai Indians and Delhi
Daredevils earned around Rs 20 crore from ticket sales alone as the
capacity of their home stadia was larger. With ticket prices going up,
KKR (Eden Gardens), MI (DY Patil stadium), DD (Ferozshah Kotla) are
expected to earn in excess of Rs 25-30 crore this year from gate
receipts. All this if the crowds come in droves.

A research firm IIFL had prognosticated that BCCI would make revenues
of Rs 1,000 crore from IPL 2011.According to them the bulk was to come
through franchisee fees of Rs 656 crore. An estimated Rs 198.5 crore
was to come to BCCI from broadcaster SET Max. Central sponsorships
account for close to Rs 53 crore flowing into BCCI's coffers, while
the online rights for this edition will account for Rs 65 crore, said
the report. For broadcaster SET Max, the report suggested that
advertising revenues will touch Rs 939 crore, largely because of
pre-selling 80 per cent of the inventory on the basis of client
expectations from the property's previous edition. IIFL noted that 80
per cent of the inventory was pre-sold at Rs 5 lakh per 10-second
spot. It further estimated that the remaining inventory is likely to
sell at Rs 3.5 lakh per 10-second spot, thanks to a 20 per cent y-o-y
drop in ratings. Each IPL match allows 45 minutes of ad air time.
According to the report, the drop in ratings was attributable to
‘viewer fatigue following the euphoria of the World Cup, and also
large-scale personnel changes in the teams which has diluted some of
the loyalty built up over previous seasons. In any case, this fatigue
factor ensured that SET Max made a lot less than Rs 939 crore, in the
vicinity of Rs 700 crore only. According to data from TAM Sports, a
unit of TAM Media Research Pvt. Ltd, the average rating for the first
37 matches of IPL’s first three seasons was 4.81, and in season 4 this
dropped to 3.26. From the ratings perspective, IPL as a property was a
disaster.

The clarion call for battle has been given by B Town this time. Sajid
Nadiadwala is going head to head with IPL by releasing comedy caper
Housefull 2. I remember producer Vashu Bhagnani once telling me that
‘cricket is all hype, log kitna cricket dekhenge (how much cricket
will people watch), they need a break from it.’ While other B grade
releases dot April, Priyadarshan’s multi starrer Tezz is being
released on April 27 followed by Kunal Deshmukh’s Jannat 2 on May 4.
Ramu’s Department starring Amitabh Bachchan and Sanjay Dutt hits
theatres near you on May 18 when the IPL ‘fever’ will be peaking.

This is the year of reckoning for the floundering league. Buzz that
Rajasthan Royals is going to change hands and SRK’s KKR is looking for
a strategic investor is already doing the rounds. The defining moment
for Indian Paisa League has arrived. Make or Break time.

Vested interests take precedence over the product – Lalit Modi

The larger than life persona of IPL impresario Lalit Kumar Modi now
lives in the anonymity of London. With the possibility of returning
home remote in the short term, one could argue that in the murky world
of cricket politics, present BCCI president N Srinivasan seems to have
‘fixed’ him. The man who gave us a well defined new concept called
cricentertainment recently lost a celebrated case against former Kiwi
star Chris Cairns. In an extensive and rare interview with SANDEEP
BAMZAI, Modi, scion of the KK Modi business empire says that he is
‘patriotic India who misses his country.’ But a string of cases and
look out notices prevents him from coming back. Excerpts from a
conversation where Modi covers ground from his battle royal with
Srinivasan and how vested interests got him:

*When the BCCI had its back to the wall with the threat percept from
Subhash Chandra's ICL, they roped you in to create a counter product
which was bigger, better and had their official backing; then they
dropped you like a hot potato, what changed within the board? Was it
the entry of N Srinivasan and the departure of Sharad Pawar?

There seems to be wide misconception that the IPL was the direct
result of the ICL's launch. This is completely untrue.
I had begun my own work on a League way back in 1996 and actually
announced and launched a 50/50 format. Initially, we had the approval
of the BCCI but they then had a change of heart so for over 11 years I
worked behind the scenes to fine tune the idea.

So when I and my colleagues moved onto the Board late in 2005, we
already had a decent plan. But our first task was to get the BCCI
finances and marketing in order and then I followed with the league
concept. Zee, and other broadcasters had heard about the idea and they
wanted us to work with them but we decided that we would work alone on
the set up and then invite them to contest the Media Rights Tender
when we were ready.
As vice president of BCCI and Head of the Marketing cell, I presented
it to the BCCI members and suggested we should launch. There were a
few who believed in it and there were many who didn't. But as I had,
by that time already helped raise over a billion dollars for the
organisation, they decided to approve it. And that led to creation of
the IPL. It had nothing to do with the presence of the ICL.

As for what changed, well the plan I put together and the way we
executed it - became the talk of the world and I guess some people
wanted to embrace it as their own.


*You nursed the IPL as a product, even took on the Govt and relocated
the tourney in South Africa, why is it that the franchise owners did
not support you when push came to shove?

I simply did what was right for the IPL. The success of the tournament
in South Africa was the result of relentless work from a world class
team of people. We had to keep the IPL afloat after the first year and
all the owners supported me. But they only have so much say and like
most sporting federations - a few people who were feeling left out,
ganged up together and they found a natural ally within the
Government. But we kept the IPL alive under near impossible
circumstances.

*Do you miss the million dollar baby and you cannot be unaffected by
all the accompanying acrimony, your thoughts on the whole ball of wax
as it unfolded?

The IPL was - and is - a tremendous tournament and there is an immense
sense of pride at what I was a part of. So of course I miss the event
but the accompanying issues are something anyone in my position could
have done without - and I'm no different.

*What happened in those last few days and hours with Srinivasan, why
did things get so out of hand that he had to sack you as IPL
commissioner over e mail?

That's pretty much a question you would need to ask others. Since my
departure, the BCCI, largely through the activities of Mr. Srinivasan,
has thrown countless, false and unsubstantiated allegations in my
direction, without any level of accountability. All of them, have been
strenuously refuted by me with support from substantiated and
irrefutable evidence to qualify my position.

But although it all came to an abrupt and totally unjustified end, I
would rather focus on what I achieved by bringing the tournament to
life in the first place.

*Losing the Rajasthan Cricket Association elections was probably the
catalyst that compounded your problems, did you open too many fronts
in the cricket world - from Sanjay Joshi to N Srinivasan?

I suppose that was an issue, yes. The IPL was successful and I was in
the public eye, which some people didn’t seem to like. We had created
a successful product and they wanted a piece of the front-line action.
There were definitely certain people using their status within the
Indian game to make life difficult when, instead, they should have
been enjoying a the moment.

*What is N Srinivasan's animus against you? Where did the problem with
him start?

Again, you would need to ask him that, but he certainly wanted things
doing his own way. I pushed back on some important issues because Mr.
Srinivasan was - and still is - the owner of the Chennai Super Kings
and I considered that certain demands such as trying to hand pick the
umpires list in 2010, was a conflict of interest and not in the
interests of the league as a whole.

*Do you miss india, do you miss the fact that you cannot return?

I am a patriotic Indian and I miss my country very much. I look
forward to the day when I can return and hopefully that moment won't
be too far away.

*What happened in the Chris Cairns case which you lost recently?

We have lodged an appeal against the judgment in this case, so it is
not appropriate for me to comment.

*What do you make of IPL now - season 4 was a whitewash - this year
too sponsors, advertisers are fleeing, spectator and viewer fatigue
seems to have set in, what has gone wrong?

I can only comment on how we approached the format and one of the
strongest elements of the whole IPL concept was to make it innovative
and therefore appealing to the fans, broadcasters and sponsors on an
ongoing basis. But you can only be innovative if you innovate! So we
set out to constantly monitor our product, and analyse how we could
improve and move things along. We weren't trying to re-invent the
wheel with every move, but we did try to keep things fresh. We made
sure we worked with all of our franchisees and partners and I'm sure
the recent issues with Kochi and Sahara haven't helped the preparation
process.

*If there was one learning that emerged from your IPLl/BCCI
experience, what would that be?

It would be that we live in a society where performance and success
doesn't always work for you. And neither does it guarantee you the
chance to continue performing or succeeding! Vested interest sometimes
took precedent over the good of the product and I was simply not ready
to accept that.

*Are you in touch with the franchise owners who you were once the
toast of? Or do they give you a wide berth?

I am in touch with all of them. They were and have always been, good
friends and I shall be glued to the TV to see how their teams fair.

-INDIA TODAY, 5TH APRIL 2012

Disequilibrium

The continuous and consistent plan to emasculate credible and
functioning institutions like the Supreme Court, Central Vigilance
Commission, Comptroller & Auditor General, the Election Commission and
most recently the Indian Army is not just a worrying but increasingly
irksome phenomenon. Interestingly, at least two of the government’s
chief problem children currently – Vinod Rai and General V K Singh –
went to the same school and class in Pilani, Rajasthan – Birla Public
School Vidya Niketan. With the executive having failed to discharge
its duty of governance, since nature abhors a vacuum, it is
constitutional and other institutions that have stepped into the
breach to literally keep us sane and safe. Much like Hans Brinker, the
eight year old boy in a Dutch town called Haarlem who put his finger
in the dike to save his town when it was lashed by storm waters. Even
has democracy was failing, democratic institutions have burnished the
image and flame.
A growing catalogue of unseemly rows which have at times escalated
into a virtual communication gridlock between the executive and the
institutions has left a bad taste in the mouth. Regular kerfuffles
have shown that all is not kosher with this government which reacts
adversely when harangued. In many ways it is a travesty that the Army
is now being viewed with suspicion because of its chief’s actions. At
another level, the government is taking CAG Vinod Rai’s many damaging
reports bitterly and personally, forgetting that the same CAG has also
indicted Narender Modi’s Government. The auditor is merely doing its
job. It used to do its job earlier as well, but with the excessive
overhang of corruption and and in your face media, these reports have
a knack of becoming a ‘pain you know where’ for an already embattled
government.
Take CAG’s latest report on the great coal scam. Despite protestations
and a smoke a mirrors type of strategy adopted by the Govt to deride
CAG on its draft report on coal, one hears that Vinod Rai is sticking
to his guns. The tent poles of the final report are being put in place
and as soon as parliament reconvenes in the third week of April, the
CAG coal report will be tabled. And the figure remains very much the
same – Rs 10.7 lakh crore. A few things need to be made clear after
studying the facts. The so called ‘windfall gain’ is the aggregate
over the life of the mine which is 25 years and not the six year
period of 2004-09 during which allocations were made. This draft
report is based on the notified Coal India’s transfer price at the
time of allocation. Least grade quality (lowest) coal has been taken
into consideration while computing these estimates, which I believe in
coal lingua franca is ‘F’ grade coal. The audit has attempted to
estimate the so called windfall gain based on parameters like cost of
extraction and the notified price of CIL at the time of allocation and
as on March 31, 2011.
As mentioned in the files of Government ‘windfall gain’ is defined as
the difference between CIL’s notified price and the cost of extraction
of coal. It is nowhere the audit argument that the ‘windfall gain’ is
equivalent to the loss to the exchequer. The source of the ‘windfall
gain’ is the discretionary allocation of coal blocks without charging
an upfront price. Since there has been no price discovery through a
bidding process, it can only be conjectured what the upfront price
would be. Auctions would have succeeded only in capturing a
significant fraction of the ‘windfall gain’. Value on date is a
function of net cash flows and their timing which is indeterminate .
The cost of extraction would depend on stripping ratios and the
extractable reserve which could vary from 85% to 95% of the geological
reserve for an open cast mine. Extraction ratios vary significantly
within a region and so does the coal quality based on calorific
values or intrinsic energy content.
Faced with inherent uncertainties in estimation, a natural reaction
would be to just elaborate on the dimensions of the problem and avoid
giving any figures. One hears that therein lies the basic conundrum
for the professional auditor as his Reporting Standards require him to
quantify ‘……the possible effect(s), individually and in aggregate’ of
the gravity of an alleged misstatement or a transgression. In such a
scenario, the practical approach is to suggest a figure to the entity
being audited and arrived at some consensus on figures which could be
considered fair and reasonable. The responsibility for assigning a
financial figure lies on the stewards of public property and not on
the auditors who come in late in the game to provide assurance to
stakeholders. This is amply clear from the ritual opening line given
by all professional auditors in signing off an audit opinion and
should be well known to anyone minimally acquainted with corporate
balance sheets. Dismissing a figure suggested by the auditors as
ludicrous is often a ruse to divert attention from the underlying
materiality or seriousness of a transgression.
The chasm between objectivity and subjectivity can never be bridged.
For instance, I disagreed with the big number that emerged from the
CAG report on 2G. My understanding was based on simple facts – that
there were too many basis used for computation including the S Tel
offer in the courts. That there was a loss to the exchequer was well
established and that daylight robbery took place of precious national
resources on January 10, 2008 was irrefutable. The draft CAG report on
coal clearly throws into stark relief that the cut-off date for
switching from the extant Screening Committee procedure to competitive
bidding of coal blocks was decided by the Government to be 28 June
2004. What is pertinent is that CAG’s audit reports go through the
usual legislative process and do not provide any forensic evidence for
criminal prosecution.
Coming to the figure itself, it is based on an elaborate calculation
with reference to the mining costs and notified prices of Coal India
Ltd in a contiguous region, assumption of 90% extractable reserve and
uniform behavior of output (both quality and quantity), costs and
prices over the life of the mining lease of 25 years. The figure would
go up substantially by a multiple of 3 to 5 if CIL’s notified prices
(long term) for coal linkage are replaced by the spot prices in
e-auction or imports under Open General License. Amounts would
increase further on assumptions of buoyancy in rupee values over the
extended time span. Allocations to Public Sector Enterprises would be
revenue neutral only if PSEs do the mining themselves, which is
unlikely. Since fuel prices are a pass through in power tariffs, the
consumer would ultimately bear the burden of the so called ‘windfall
loot’.
The fragments of the aggregate figure are spread over different time
zones and different beneficiaries. A figure of Rs 10.7 lakh crore or
$212 billion will make the presumptive loss suffered by the Government
in 2G look like small potatoes. This Rs 10.7 lakh crore figure is now
set to rock parliament. The Rs 10.7 lakh crore report is armed and
ready in the silos. The order – FIRE – will have devastating
consequences for this Government because it once again covers a time
line of 2004-2009, even if the figures arrived are calculated on the
basis of 25 years.

whiplash

The coup that never took place. The coup that got lost in the fog. The
waters have been muddied to such an extent between the Army and the
Executive that a story of this magnitude was bound to pop out of the
cupboard. And it did because this rumour was doing the rounds for
close to a fortnight. A well known website ran a story as far back as
March 13 saying that India’s top para outfit 50 Paras based in Agra
ran two major exercises – one scenario was akin to the Maldives coup
and the other of the recent attempt at a Mutiny in Bangladesh. The 50
Para brigade lost its way in the fog en route to Delhi. A three hour
run between Agra and Hindon where they were to lift off in C 130s took
an estimated four and a half hours.

This has now reverberated across the length and breadth of the
country as an attempt to seize the palace. An unwanted colour and hue
has been given to these Army exercises. These manoeuvres are now being
seen as an attempted coup, given the breakdown in civil-military
dialogue due to the General’s obstinate ways. So, what is the real
story behind the attempt at a bloodless coup? It is unprecedented that
for the first time in independent India a whiff of a coup has been
felt and heard. In the continuing saga of smoke and mirrors, a brand
new dimension has been added. A sinister new dimension at that.

The C word has never cropped up in this country. The dreaded C word
may be omnipresent around the sub continent, but its shadow has
hitherto never been seen here. Media’s job is to report and tell the
truth. A leading daily may have unintentionally extrapolated on the
rediff report and sensationalized the story. Or it may have got it
right because as they tell us the event is dated January 16 this year?
But to run a story of this magnitude may well be a disservice to media
and to national interest. An alert media may have miscalculated
because now it is not just the Army chief, but the Armed Forces which
will be viewed with suspicion. Something that is unthinkable in this
country for our proud and vigilant servicemen have defended our
frontiers with selfless gallantry. A travesty?

Whiplash

The game can be so cruel sometimes is a thought process that emanated
from the little big fella Sachin Tendulkar during his media interface
on Sunday. He quickly added that he had a few posers for God after
completing his 100th hundred, “It has been a tough time for me, what
is it that I lacked, was I short on commitment?” It is clear from
these utterances that Tendulkar’s mindspace over the last one year or
so has been dominated by that elusive hundred.

It was nice of him to come out and speak to the media in the manner
that he did. However, curiousity as always killed the cat. Bah, how
dare one ask Tendya when he is going to retire? Means what, he plays
for India doesn’t he? He plays at the pleasure of Indians, yes Indian
selectors. This is the theatre of the absurd, people will always have
opinions in a democracy. We are still one, we haven’t degenerated into
a mobocracy. I might have an opinion of Tendya, so will the next man,
woman and child. Everyone is free to express it.

Nobody and I mean nobody can take his place for granted in the Indian
cricket team. Is the massive eco system that surrounds Tendya jittery
over these calls for his retirement? Dang, why are we obsessing over
Tendulkar’s retirement? The moot point here is simple – if there comes
a time when he is not good enough to represent India, he will have to
make way for a youngster. There is no permanence attached to his
position in the side. Yes, he is one of the greatest batsmen of his
generation. But the same generation also saw Rahul Dravid, Ricky
Ponting, Jacques Kallis and Virender Sehwag.

They will all have to go one day or the other. Old man river wants to
carry on, so be it, but only if his performance levels are upto speed.
Not beyond that.

Whiplash

The General, calm and composed gives two interviews – one to an
obscure Hindi outfit and the other to leading daily – saying pretty
much the same thing leveling allegations of bribery against a former
top notch officer. The executive and media run around like headless
chickens trying to get a fix on what happened. Parliament goes into a
tailspin. The General decides to leave the capitakl to visit
formations in south west sector and then J & K.

So, you are lulled into believing that at least till Friday evening,
there will be peace and quiet. Phew, you wipe your brow and have a
quiet drink. The General may have gone, but he has lobbed yet another
incendiary device. In yet another leak…yes we leak like a sieve…a
letter written to the PM dated March 12 exposes the inadequacies in
the armed forces preparedness. From air defence to tanks to elite
forces to ammo, everything is a no can do.

Complete consternation all around. Throw in the CBI which gets a note
from the Government with a cutting of the General’s interview to the
English daily, asking for the matter to be probed. Consternation now
equals unholy mess with the General running the executive ragged. Why
is the General sullying the Army’s credo but taking on the executive
in this manner? Smoke and mirrors. Oh yes, but increasingly double
jeopardy at work. It doesn’t behove the General to bring this battle
over age, dignity, prestige and honour into the public domain. It
doesn’t wash well that the most credible institution in the country
silently backs the General in this ugly joust with the executive.

As an aside, why did the PMO keep quiet about this letter from the
General for close to a fortnight? And incidentally what was the
General doing about these failings in the defence arsenal for the last
two years that he woke up to the fact at the fag end of his tenure?
Sad denouement of the times that we live in…

Whiplash

Recalibrate, regroup and reorient. The infantry man is on top of his
game. His tenure may well be remembered for the DOB issue which till
the other day was perceived to be his lasting legacy as the chief of
army staff. But once the apex court turfed out the petition, the
Infantry man reloaded and took aim. Fire, he has and boy has he done
damage. Retracing his steps and strategy, he decided that he should
don a new avatar. One of a crusader. A flurry of leaks and letters,
all more or less blasts from the past. Exposing the defence
preparedness inadequacies, the General has endeared himself to one and
all, except the political class which is at sixes and sevens.

In what is the first direct confrontation between the Army chief and
the Executive, the General has shown inscrutability of a sage as he
strikes at will. Finally on Friday, he issued a statement, suggesting,
perhaps coaxing all of us to believe that the entire fracas should not
be viewed as a joust between the Army and the Govt. Excellent tactics,
first strike, then retreat and come back to fight another day.

Muddying the waters all the time, old letters, older deals, even older
deficiencies – going for broke. And the General has support. Support
from servicemen, ex service men, their families who believe that they
have kept quiet for too long, suffering the indignities meted out by
the executive. It is not becoming of the army chief to indulge in this
smoke and mirrors type of gambit. Dignity, honour and prestige is
attached to his office. It is a shame and a travesty that the last
couple of months of his tenure will be remembered for subterfuge and
military tactics being used against a maladroit and inept executive.
Service before self is the motto of the institution which is deeply
revered in this country. Sadly, it is an institution which is now seen
as taking on the executive. Attention…