Heralding a fierce electoral battle in the crucial battleground State of Uttar Pradesh, which sends 80 members to the Lok Sabha, the BJP’s prime ministerial candidate, Narendra Modi, and Samajwadi Party (SP) chief Mulayam Singh pulled no punches in criticising each other on Sunday, even as Aam Aadmi Party (AAP) chief Arvind Kejriwal equated both as “enemies of the people.”Mr. Modi addressed a rally in the State capital in which the former Chief Minister, Kalyan Singh, rejoined the BJP after a gap of five years, raising the party’s hopes of enhancing its appeal to Other Backward Classes voters.Getting a majority of seats in Uttar Pradesh is essential for Mr. Modi and Mr. Singh to fulfil their ambitions for the prime leadership position at the national level. The latter has joined the 11-party non-BJP, non-Congress alternative.Mr. Modi pressed the point that the SP and the Bahujan Samaj Party (BSP) were supporting the UPA government at the Centre and hence were equally responsible for its “all-round failure.”“They are misleading the people by wearing the veil of secularism to conceal their failures,” the Gujarat Chief Minister said. Questioning the SP chief’s track record, he said: “In one year of the rule of your son [Chief Minister Akhilesh Yadav], more than 150 riots took in Uttar Pradesh, while there was not even a single riot in Gujarat in the past 10 years. Not even a curfew was clamped there. Don’t compare Gujarat to Uttar Pradesh on development,” he said. “Though the heat of elections is yet to be felt, there is a wave in favour of the BJP because of which ‘Sabka Vinash’ [rout of SP, BSP and Congress] is certain ... For them secularism is all about vote bank to mislead the people.”Speaking in Allahabad, Mr. Singh said Mr. Modi had presided over the “mass murder” of Muslims during the 2002 Gujarat riots.“You presided over the mass murder of Muslims and after that, your leaders apologise to the community,” he said, referring to BJP president Rajnath Singh’s recent statement that the party was willing to apologise to the community for any mistake.At a rally in Kanpur, Mr. Kerjiwal trained his guns on Mr. Modi, Mr. Yadav and Ms. Mayawati.“Only AAP can give an honest government. If you all, Hindus, Muslims and people from other castes come together and do not come under the poisonous influence of other parties, then I can assure you that this time your [people’s] government will be formed in the Centre.”
3)CCTV cameras in DTC buses soon
In an effort to enhance security on its buses, particularly for women, the Delhi Transport Corporation has decided to equip them with automated public announcement systems and CCTV cameras. It would also continue to deploy Home Guards on the night services.The Corporation has drawn up plans to make regular announcements that would encourage women to complain to the conductors in case of any misbehaviour or untoward incident.To begin with, the facility would be provided in 300 buses and later expanded to the entire fleet. In addition, nearly 200 buses will be brought under CCTV surveillance from within.The process for this exercise has already begun. “By the end of the month, both the services may well be in place,” said Debashree Mukherjee, chief managing director of DTC.She said to provide safer travel for women, the DTC is also open to adding more buses on its night services (11 pm to 4 a.m.) “if there is a demand”. At the moment, there are 900 such buses already running on 90 routes.In the aftermath of the December 16 gang-rape case, the Corporation had also started providing two Home Guards on the night services and DTC would continue to pay their salaries, the CMD said.Ms. Mukherjee said of the 11,000 buses that are required in Delhi, DTC would run 5,500 while an equal number under the Orange cluster scheme would be provided by DIMTS (Delhi Integrated Multimodal Transit System).“We are in the process of replacing 1,800 old buses. Out of these 300 to 400 will be air-conditioned buses. The tendering process is on.”In collaboration with DIMTS, DTC will also be equipping 3,000 of its buses with the GPS system shortly. “GPS has already been installed in 1,200 buses and it gives the exact location and speed details of the buses, thereby helping in their monitoring,” the CMD said.
4)The mobile metamorphosis
Change is coming with consequences far more significant than young replacing the old
Visitors at the main entrance of Mobile World Congress fair in Barcelona — AFPOn a cold Thursday morning in Barcelona, Gopal Vittal, the boss of Bharti Airtel (India), lashed out at messaging application firms such as WhatsApp and Line in a somewhat rambling tirade.“Telecom companies are subject to regulation and jurisdictions. Many of these companies [WhatsApp, Line] operate outside regulations and jurisdiction. I think we need a framework by which these companies are subjected to similar jurisdiction,” the Bharti Airtel chief said, on the sidelines of the Mobile World Congress (MWC) trade fair.In many ways, Mr. Vittal and his grievances are perfect snapshots of how the world’s biggest mobile conference has changed over the last six years: a balding middle-aged man in a three-piece-suit complaining about how the 20 year-old upstarts in jeans and t-shirts have taken over at MWC. Here’s another example of how things have changed: in 2009, Facebook’s engineers started showing up at MWC. Back then, Facebook was a rising star but was still far from the powerhouse that it has since become. Everyone at the time thought it was cute that the ‘application guys’ had come to play with the big boys at Barcelona.But here we are, just five years later, and Facebook has acquired WhatsApp for $19 billion with WhatsApp’s messaging traffic now poised to overtake global SMS traffic. More on this, we will discuss a little later. For those unfamiliar with MWC, it is the world’s leading mobile conference, and the most concentrated venue for meeting people in the industry. There are very few other conferences that can compare with MWC’s density, or the number of back-room deals that are struck over endless bottles of Spanish wine.Amazing transformationBut over the last six years, there has been a remarkable transformation in the what ‘mobile’ really means — much to the detriment of the telecom industry. The MWC show used to be a place where, quite simply, telecom equipment and software vendors gathered to hawk their wares to telecom operators.The halls of the Fira Gran Via exhibition centre used to be filled with grey beards and Nordic accents. MWC was a show for all things ‘carrier-grade’ and the exhibitions were correspondingly filled with fiddly equipment like base stations and antennas.Software vendors thronged the halls to sell obscure products with even more obscure acronyms like BSS and OSS. It was not even uncommon for companies to make presentations about products that were not easily discernible! This, of course, was the long process by which integration software was sold around, and then passed off as custom software for telecom carriers.Much of this began to change as the popularity of the smartphone began to rise. Software and application vendors started becoming more important; thereby reducing the average age of the MWC participant.Ericsson and Alcatel Lucent, which used to have the most crowded booths, have now given away to Google—which, for the longest time, had the most crowded booth with its giant slide and Android pins. (The last few years have seen Google stop hosting a booth, with its hardware partners taking over the spotlight, but the change has taken place nevertheless.)“We have no choice but to change, as our industry goes about an entire transformation,” Ericsson CEO Hans Vestberg told an audience packed with his company's customers and vendors at MWC. Mr. Vestberg is right. Much of MWC used to be about all those OSS/BSS system vendors, who were focussed on facilitating services like SMS for telecom companies.In 2009, SMS traffic was at an all-time high, and much of the telecom ecosystem was centered around building products that could help manage text message systems. However, just last week, Facebook paid $19 billion to acquire a company whose messaging traffic is now set to exceed global SMS traffic!Think about it. A company with just a handful of engineers has succeeded in building a platform that essentially replaces and replicates the multi-million dollar systems sold by dozens of multi-billion dollar vendors. The idea of building a ‘carrier-scale’ system, therefore, no longer carries the same connotations it once did.It is clear that improvement in software and the way computing has become cheaper has radically upset the telecom industry’s competitive landscape. As in so many other industries, technology has helped the end-user slip away from telecom companies such as Airtel and Vodafone.All this change has made life very difficult for telecom companies, which are still essential cogs in the system. Not only do they have to navigate maze after maze of government regulation, they also need to continually invest in base stations, and have access equipment installed. The true tragedy is that they need to continue doing this grunt work while watching much of the value and cream on the top shift away to companies like WhatsApp. In some ways, the frustration behind Mr. Vittal’s grievances, if not his exact complaint, is justified.Airtel, for instance, was able to post its first quarterly rise in profit in four years this January on the back of vigorous cost-cutting.But the future doesn’t look too good; in fact, the only way for an emerging market telco to make money off data is by segmenting content types. Or, put more simply, by charging high-consumption data users a higher tariff when compared to their low-consumption counterparts. This is essentially a violation of the principles of net neutrality, and would result in an ‘Internet tax’— something that’s bad for both consumers and content providers like Google and YouTube.Change is coming nevertheless — with consequences far more significant than young people replacing the old — and we can only hope that the incoming telecom system model is economically viable for all its participants and better suited for its consumers.
5)A Swift fall in Esteem for Maruti Suzuki
It has been a downhill ride in the last one month for car industry leader and stock market darling Maruti Suzuki which is embroiled in a controversy of its own making. Investors, analysts and the stock market are up in arms over the proposal by Suzuki Motor Corporation (SMC), which owns 56 per cent of Maruti Suzuki, to set up a new plant in Gujarat as a wholly-owned subsidiary. They sent Maruti’s stock plunging by 8.12 per cent on January 28, the day the decision was announced. On Friday, the company sent a clarification to the stock exchanges but it raises more questions than it answers. Not surprising then that the market voted with its feet again sending Maruti’s shares tumbling down by 4.53 per cent.If the original announcement was patronising to Maruti’s shareholders and flawed in its financial logic, the clarification put out on Friday raises concerns over transfer pricing strategies. SMC’s wholly-owned Gujarat subsidiary will operate on the basis that it will neither make a loss nor a cash surplus. If you thought this means that the subsidiary will supply to Maruti at cost, you are wrong.Cars manufactured on contract basis for Maruti by the Gujarat subsidiary of SMC would be priced in a manner that will generate a “surplus” to fund the subsidiary’s capital expenditure, says the clarification. Of course, the company has also very kindly clarified that such price would be lower than what Maruti charges its dealers so that it can build in its margin. But how much lower? And why should the capital expenditure of the SMC subsidiary be funded by Maruti when it has no stake? Investors are agitated over the basic question of why SMC should branch out on its own when Maruti has the financial resources and management bandwidth to implement the project as its third plant. The land for the Gujarat plant has already been paid for by Maruti and it is obvious to assume that its managers, contractors and vendors will play a key role in implementing the project for SMC.The existence of a fully-owned subsidiary of SMC and a partially-owned one, both dealing in the same business, raises obvious questions of conflict of interests. Will SMC’s new products and technology be channelled through Maruti or the new wholly-owned subsidiary? SMC has defended its decision saying that Maruti will benefit from interest earnings on its huge cash resources of over Rs.7,000 crore by not investing in the project. But where is the money now invested? In unquoted units. And what did it earn? All of Rs. 313.40 crore as interest in 2012-13, which is a piffling 4.5 per cent rate.In comparison, Maruti’s return on capital employed, which is a rough estimate of what the cash might earn if invested in a project, was a little over 15 per cent in the same year. How does SMC then say that Maruti will benefit by not investing? If that was bad logic, this takes the cake: Maruti can apparently “avoid all risk inherent in any investment” by not investing in the new plant, according to the statement. If it is not the karma of a corporate manufacturing enterprise to invest in growth, what is?The bottomline is this: SMC’s strategy is not favourable to Maruti and it is shocking that the Japanese multinational can do this to its Indian subsidiary which earns more than what the parent earns in Japan. The strategy is hostile to minority shareholders, and institutional investors, who are already miffed, should carry their protests to the logical conclusion. SMC is trying to have the cake and eat it too; it should not be allowed to get away with it.
6)The clean-up process in United Bank
The Kolkata-based government-owned United Bank of India (UBI) has been in the news for all the wrong reasons. The latest and arguably the most damaging piece of news till now has been the exit of its Chairperson and Managing Director Archana Bhargava. After a brief stint of less than a year at the helm of the bank, Ms. Bhargava called it a day, citing health reasons. Her term was to end in February, 2015.Apart from a terse announcement by the government that her request for voluntary retirement has been accepted, nothing much is known as to what prompted her to take this step, leaving the bank headless at a time when it requires some robust leadership.Ms. Bhargava’s side of the story will most probably be never known, even if she had left after ‘turning around’ the bank.It is not just because that the problems at UBI appear to be too complex to be resolved by a single individual however adept she is, and has the full government support. The reason why Ms. Bhargava may not record her story is simply this. For very valid reasons, public sector executives, especially bankers, see a virtue in remaining in the background. Too much publicity — turning the spotlight on one self — has been counter-productive.Besides, Ms. Bhargava will be remembered as one who started the cleaning up process in UBI. Rescuing a bank is much less glamorous than expanding its balance sheets.The process started by her would eventually lead to fixing responsibility on whose remit the bank allegedly fudged accounts or deliberately misstated the financial position. It will not be easy for a CMD to function in a normal manner, when her entire team of senior management faces one inquiry or another, which will inevitably follow.Media reports talked of a rift between Ms. Bhargava and senior officials of UBI handling the credit portfolio. But based on the bank’s deteriorating financial health and the charge that senior UBI officers did not disclose the extent of decline as mandated by prudent accounting rules, there is no way a new CMD could have taken any other route except to bring the problems into the open.The financial statements of the bank for the December quarter are revealing — gross-NPAs surged three times to Rs.8,546 crore from Rs.2,964 crore in March, 2013, and an unprecedented loss of Rs.1,238 crore .Unflattering financialsClearly if the official announcement of the unflattering financials took most people by surprise, it is obvious that the descent has been over the years. The basic cause might be some reckless lending culture, which led to bad loans and unacceptably high levels of NPAs. Government influence cannot obviously be ruled out. It is reported that UBI has been the designated nodal agency for many socio-economic programmes in eastern India — nothing wrong in that except that it calls for special skills in supervision and follow up, which it seemingly did not have. Also, in those schemes, there is a much bigger scope of government/politicians influencing the credit decisions.No single major defaulter — Kingfisher or Deccan Chronicle Holdings Holdings — has emerged although it is not clear whether UBI has a small exposure on these high profile entities.Large corporate defaults — so common even with much better-run PSBs — would distract attention from what appears to be a collective failure of the UBI’s top management.The ongoing economic slowdown has been blamed for the proliferation of NPA’s not only in UBI, but also in much bigger and better-run banks such as SBI. All banks have been making larger provisions in the December quarter compared to the earlier period. If the slowdown persists, the stress on their balance sheets will naturally increase.The core problemIn the UBI’s case, while the full picture will be known after some time, it appears that the core of its problems relates to not classifying a large number of small loans as NPAs. More intriguing is the explanation some other loans were reported as non-performing assets when, in fact, they should not be classified as such.Certain top officials of UBI have faulted the software, which, according to them, was responsible for the misreporting of loans. Infosys, which has developed this software, has strongly countered the argument, saying that a number of banks have been using it for a long time without a glitch.The government, as the majority stakeholder, has quite a task on hand not only in getting UBI back on its feet but also in sprucing up all public sector banks’ image, which has received quite a hit recently .
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