Subsidised fuels???

The Administered Price Mechanism (APM) was supposed to be dismantled from April,'02. The decontrolling meant PSU refineries would no longer get 12% assured return on their asset plus operating cost. Like any other organization, they would have to earn their own profit. The product prices, too, would be liberated from government control. The market forces of supply and demand would decide product price. But the high volatility in the crude price since the days of gulf war and an upwardly moving trend could destabilize the economy in a free market scenario. Especially, any movement in the price of major fuels like petrol, diesel, LPG and Kerosene would significantly impact the inflation level, affecting the industry and people's lives alike. A policy decision leading to northward moving prices can greatly undermine the political aspirations of the ruling party, even if the decision is imperative in the long term interest of the country. As a result, govt settled for only partial liberalization of the fuel policy, keeping the control on the prices of four major fuels with itself. As per the revised guidelines, the fuel prices were to be reviewed every fortnight based on overall trend in crude price movement.

No doubt, the policy was aimed at insulating the economy from the volatility in the crude prices. But, is it the best way to protect the interests of the country? Are there any drawbacks of govt controlled fuel prices?


It has been observed that govt is always hesitant in its response to a rising trend in crude price. Apparently, political compulsions force the govt to hold back even on justified fuel price hike. As a result, the PSU oil marketing companies have to bear the loss running into thousands of crores of rupee. This loss is partly compensated by the govt in the form of oil bonds being issued to these PSU OMCs from time to time. Upstream oil companies like ONGC and GAIL share a portion of this subsidy burden. The rest is born by the PSU OMCs themselves. In short, the PSU OMCs are protected by the govt to keep the fuel prices under check in times of rising oil prices. This approach has made entry of private players into the business if oil marketing extremely difficult.They can not compete with govt dictated low prices, when their input cost is constantly moving up. Big names like Reliance, Essar and Shell had set up huge network of retail outlets throughout the country anticipating total deregulation of the oil sctor. They all are now forced to keep their fuel outlets shutin the absence of a level playing field. We all know how much important the entry of private sector is for any industry in terms of better productivity, advanced technology and nurturing talents. In the absence of external competition, the letharic PSU culture would thrive even more, while the govt still continuing to provide financial support.
Secondly, if we dig a bit deeper into the issue, it turns out that it's the tax payer's money only, which is used to pay for the fuel subsidy. In a way, the salaried class, accounting for 70% of the direct tax collections by govt, is paying for the indulgence of the affluents and the industrial usage of fuels. The high income class (individuals and business) is well known for its tax evasive antics. Hence we have a situation, where the middle class man is marginalised and the elites get to enjoy a subsidy.
Most importantly, our subsidised fuel is still costlier than it is in US and UK. The PSU OMCs combinely make underrecoveries to the tune of Rs 1 lac crore a year on the sale of four major fuels. Still, the petrol costs Rs 47 a litre compared to Rs 35 a litre in US (at an exchange rate of Rs 47 a $). We need to look into the price build up of these products to analyse this discrepancy. In India, refinery products are priced based on Import Parity Pricing (IPP) formula. IPP means the total cost of importing a product from a reference location. It includes such components s as freight, insurance, import duty etc. The retail price is arrived at by adding to the refinery gate price, variuos excise and other duties, transportation costs and retailer's margins. We can see that the main differentiaters between fuel prices of different countries would be the duties and other levies imposed by the govt. The taxes account for app. 55% of the retail prices of petrol and diesel in India. Why does the govt have to tax the fuel so heavily? Is it because it can not make direct tax laws strong enough to cover the high income tax evaders?
Evidently, an Indian is still paying much higher for a subsidised fuel than others without a subsidy. The govt needs to rework the whole pricing mechanism and slowly move towards complete decontrol of the oil sector in the long term interests of its citizens. The issue needs to be addressed in its totality keeping in mind the interconnectedness of various aspects.

Debate over debacle!!

The recent remark by India's cricket coach Gary Kirsten that fatigue from too much cricket caused India's early exit from the T20 world cup has evoked strong reactions from across the cricket community. At the moment, nobody seems to concur with him. Former cricketers, both Indian and foreign, think India just had a few bad days with none of its batsmen clicking. That coupled with few tactical errors got India down in crucial games. Though it's always difficult to pinpoint the exact cause, I agree with the observation made by Kirsten, though not with his recommendation of holding back players from IPL.

The Indian team has been on a back to back tournament run since Feb '09. First, the tour of New Zealand, then a series against England, IPL and then this world cup. The rigor of international cricket must have taken its toll by the time Indian team arrived for the T20 event. India's fielding said it all. The fumbles, misses, inability to bend, dive. It was all there for us to see. The fact that team India opted to rest and skip practice ahead of both super 8 matches proves beyond doubt the team was not in the pink of health.


But then, why did Dhoni play it down as a possible reason?
Clearly, there is a conflict of interest between the player's willingness to continue playing the hectic but highly rewarding IPL and performing well in the T20 world cup. No Indian player would openly admit that the fast and furiuos format of IPL has any adverse effect on their fitness level or performance. Even BCCI would support the players in this. Because IPL pays it well too. I am really surprised that none of the former Indian players see any harm in the hectic schedule that the team India is made to go through.

Clearly, holding back players from IPL is not a solution. BCCI would never accept that. IPL can never happen without Indian players. The IPL could be scheduled keeping in mind other international events, so that players get sufficient rest in between tournaments.
Next year, again there is IPL and T20 world cup. I hope India puts on some outstanding performance that its current breed of young and talented players is capable of, instead of making a case for failure analysis.

Deregulation of fuel prices.....for whose benefit?

The recent news about petroleum ministry mulling removal of control over pricing of four key fuel products brought cheer among market players and the PSU oil companies shares rose in unison. logically yes, the move was to allow these companies to adjust the product prices in tandem with the crude price movement to avoid under recovery on ther sale of key fuels. The deregulation was to be effcetive only till the crude price was below $ 75 a barrel.
The crude has already touched a level of $ 72 per barrel and hence the proposed decontrolling may not see the light of the day atleast in the near future. but from a policy point of view, the proposed measure doesn't seem to be in the interest of the PSU oil marketing companies as is being claimed by the ministry. a free market regime would encourage private players like RIL, Essar and Shell to revive their marketing operations. The PSU OMCs would no longer have the protection of oil bonds compensating them for the losses incurred from government controlled prices. A price war would entail and naturally, companies with higher GRMs would benefit. No prize for guessing who's going to extract maximum out of a decontrolled fuel regime.

market corrections: US slowdown or???

The sharp corrections in the capital markets world over during January 08 are attributed to the concerns over a possible US recession and its spill over to the global economies. By now there remains little doubt that US economy is headed for a steep decline. First it was the sub-prime mortgage crisis and credit card defaults, now huge losses by Citi group and Morgan Stanley. The signs are getting clearer as the days pass by. Few will argue that this seemingly imminent recession will have its implications on other economies, both developed and emerging. They will too bear the brunt of US slowdown, given the interconnectivity of global economies in this liberal era. But no one seems to be sure as to what extent a US recession will hit other economies. Particularly for India, analysts seem quite positive. Most of them believe India’s domestic consumption driven economy will sail through this turmoil. Some even thinks India will benefit from a US recession as more jobs will shift towards India. Here lies the contradiction as to then why India’s bourses took a greater plunge than Dow Jones on concerns of a US slowdown??According to financial market data provided by S & P, India was the fourth worst hit market during Jan08 with a correction of 16%. The loss was 12.44 for the emerging markets against 7.83% for the developed markets. 16 of the 26 emerging markets posted a double digit loss. Whereas the Dow Jones corrected by only 6.07%. This clearly indicates there is more to it than what meets the eye. Asian markets, it seems, are being played into the hands of western FIIs. Otherwise why would all asian markets rise and fall in rhythm? If the FII flows to India are at an all time high, so would be the withdrawls. It’s a natural cycle. So whether a US slowdown or not, markets will correct sharply in between scaling new highs. The 'Monkey business in village' story relates to the asian markets more now than ever.

India's thumpatic win against the aussies...

The win against australia on 10th Feb at the MCG established beyond doubt that India does have that potential to challenge the world champs on any kind of pitch. The fact that Sunday’s convincing win was after a long hiatus of 21 years on that ground is indicative of the strides Indian cricket has made. But then, talent has never been india’s problem. If one has observed properly, India has always had world class batsmen in its armory. Performance apart, Indian batting line up has always looked strong on paper. One would argue that I am looking at the wrong aspect wrt Sunday’s win. It was mainly due to some world class bowling by the India’s current pace trio Ishant, Pathan and srishant. Even harbhajan was quite tactful and showed some great cricketing sense. Ishant, in particular, has been in tremendous form throughout this Australia tour. He was instrumental in the perth test win where he scalped the wicket of inform Ricky Ponting in their second innings and set the tone for India’s win. I fully agree with this conclusion. I don’t want to take any credit away from this young yet tough breed of bowlers India has produced. Still I would say that batting is and will remain India’s stronghold for times to come. The main obstacle in way of India’s getting to top despite abundance of talent is their tendency to succumb under pressure. In my view India has had such solid batting strength as would make any target achievable on any kind of pitch or would consistently set 300+ target. But the same bunch has been found to get bundled out for less than even 150 quite often. It’s a common sight watching Indian batsmen finding it hard to play their natural game after India looses some early wickets. The consistent failure of the batting has put pressure on the bowlers to take the charge and often worked India’s way. But in the long run India will have to depend on its core strength. Since last so many years India has not been able to produce a single world class bowler. But many of its batsmen are among the top run grossers. Six or seven out of eleven would be having atleast one century in their name. even then it is not a coincidence that on one day they can chase mammoth targets but the next day they all r struggling at once. Indian cricket team surely needs mental toughening if they r to perform on a consistent basis. Had Ishant got nervous after being hit for 18 in that over or had Rohit or Dhoni crumbled when Australians were trying to make inroads after India lost 5 wickets, it would have been the same old story.
The professional cricket has evolved much. With the kind of cricket that the Australians are playing, you need to be physically and mentally very fit to push them from the top. Talent alone would not suffice at all.

ISB ranks 20th on global B-school list

The judgment day finally arrived on 28th Jan'08, when FT published the global ranking of top B-schools from around the world. Quite astonishingly, ISB had positioned itself at the 20th place in that ranking. It was a indeed a moment of proud, not just for the ISB fraternity, but for the whole of India as a nation. Not only ISB had surpassed the likes of Duke, Haas, darden and its own ally Kellogs in the overall ranking, it had topped the specific category rankings of highest salaries for consulting and finance.

Until now, people have been keeping their fingers crossed and kept wondering as to where does ISB stand vis-a-vis globally top ranked B-schools. No there wasn't an iota of doubt wrt its world class infrastructure, extremely talented faculties drawn from top B-schools, a diverse student mix, research oriented curriculum. Still this kind of recognition is what's needed to put it on the global map and establish it's true reputation. FT is considered one of the most reliable sources, for MBA aspirants from around the world, of comparative analysis of different MBA program. The criteria used for the ranking are comprehensive and data are processed to make the comparisons reasonably accurate.
ISB is, thus now, one of the youngest institutes to make it to the top 20 and the only indian one in that list. from the very onset it had established a vision for itself to be a globally top ranked, research driven business schools which would strive to groom business leaders who would not only take on the challenges of ever evolving business world but will set new trends of leadership and entrepreneurship. This ranking has substantiated the fulfillment of the vision to a great extent and now will draw in talents from around the world to an even larger extent.

It may prove to be a much required thrust to India's march to becoming a global force to reckon with and will help boost our confidence .

kudos!!!! to ISB, to India.......

just want to be there

When I had the first look at the sms from ISB offering me adm...i just couldnt believe it. frankly I was not so sure of it,though I knew my int performance was much better than that of last attempt..yesss..you got it..i was (or am???) a reapplicant. it was a typical int with ques like how's my profile changed since last attempt, why isb, why not iim, what after MBA etc etc...


well i can relax now..there wont be any more appl essays....being from a technical arena i used to be extremely scared of the word 'essay'. though GMAT and ISB appl process have helped to a great extent overcoming that allergy. now, atleast i can dare to try my hand at any topic, whatever the end result may look like...


during last few days i have put in all my efforts to know more n more about my classmates to be ..i have heard their name...i have read them.....i have seen some of them in the photos of meets...(delhi and kol)..each new acquaintance keeps new element of excitement ..
so the result is i cant wait anymore to be there at ISB......