The Ideal Buyer for Air India

Apparently the Indian government has finally decided that selling Air India is an option. I am not super confident that anything will come of it. For starters, right now there is only a cabinet resolution; which gives them a lot of wiggle room to back out of it later on. The working group, not yet constituted, could come up with impossible sale conditions. Parliament might scupper privatisation. Union politics might make the government do a hasty U-turn.

Also, as someone whose cynicism with regards to Arun Jaitley grows every month, the fact that the original announcement was made by him, makes me even more doubtful that anything will ever happen. The man seems to be trotted out every so often on to television to make the BJP palatable to liberals, and then nothing actually happens. Do you remember how:

  • before the Lok Sabha elections, he said that of course Parliament could legislatively repeal Section 377? Then when Shashi Tharoor brought in his private member’s bill, the BJP voted against it.
  • two budgets ago, he said that starting the next year, he would cut corporate tax rates by a percentage point every year? I’m still waiting.
  • he decided to not legislatively bar retrospective taxation, after all that sound and fury, instead just promising that he would never do it?

So when Jaitley says that selling Air India is a desirable objective, I for one suspect that this is just a new round of talk before meeting with funders, and actual action will be short on the ground. Of course, this assumes that anybody actually wants to buy Air India, which is a bit of an ask. So far, we have had the fun spectacle of seeing Anand Mahindra saying he isn’t brave enough to take it on, and its shareholders panicking at the thought that Indigo might be.

Which is the biggest problem, really. Even assuming that Bharat sarkar is sincere in wanting to sell Air India, and not just making suitable noises; and that union opposition is overcome, then what? Nobody who was accountable to shareholders, or had any sense, would buy it.

That doesn’t mean that nobody would buy it. There are people who aren’t accountable to shareholders, or who can defy them, and who don’t have sense. Ratan Tata, the past few years have shown us, comes close to that happy situation. But even he is surpassed by a certain class of dilettante airline operators. I speak, of course, of Arab sheikhs.

In the past few years, the Middle Eastern airlines have recklessly and cheerfully expanded. They run half empty flights to the United States, introduce new and unprofitable sectors just for the prestige of running ‘the longest flight in the world’, and are engaged in an arms race when it comes to just how ridiculously luxurious they can make their first class product. Alas, as oil prices have fallen, some cost cutting has started taking place, and maybe even the Middle East 3 won’t be brave or foolhardy enough to buy Air India. Emirates or Qatar Airways might just buy Air India to replicate the Etihad – Jet model and run shuttle services to Dubai or Doha as applicable, but I wouldn’t count on it.

Though the ideal buyer for Air India, in my opinion, isn’t Emirates or Qatar. It’s Saudia – the national airline of Saudi Arabia.

Why, you ask? This is not because I am a fan of Saudia (I have never even travelled on it) and feel that nothing would improve Air India flights like a no-liquor policy. It is more that I feel that the greatest contribution the government of India could make to world peace is to saddle Saudi Arabia with an airline that haemorrhages money every year, will give its owners severe grief when it comes to human resources issues, and pit the irresistible force of Ravindra Gaikwad against the immovable object that is the Ministry for the Prevention of Vice and Promotion of Virtue. Every riyal Saudi Arabia spends on keeping Air India aloft, will be a riyal they are not spending on setting up radical mosques or bombing Yemen or doing the dirty on Iran.

Maybe the way to get this to happen is to get Qatar Airways to express interest. And then Saudi Arabia would try to buy Air India instead, out of pure spite for Qatar. After which, we could try to add on persuasion by suggesting that running Air India would be the ideal way for one of the surplus princes to occupy himself.

One can dream.

On Chequebooks

I used to work for Standard Chartered Bank, and so my salary bank account was with them. Even after I left, this continues to be my main account. This was partly because I already had mutual fund installments set up to be debited from it, and I was too lazy to go through the rigmarole of shutting them down, and starting fresh ones from a new bank. There is a moral here in how excessive paperwork prevents customer churn.

Anyhow. Right from the time I got the StanChart account, I faced a fair bit of mockery from people like Skimpy and Swami about how difficult it was for me to find ATMs, how I would never be able to pass a cheque in a small town, and so on and so forth. These days, the situation has flipped. My StanChart account is actually more convenient than an HDFC or ICICI account (perhaps not SBI).

This is because of three reasons:

  1. Debit cards and credit cards are accepted everywhere regardless of issuing bank, so the gap between an HDFC and a StanChart is closed.
  2. My balance and assets under management with StanChart have built up to a level where they give me unlimited free cash withdrawals at any bank’s ATM in India. So the ATM gap is closed.
  3. The major problem with StanChart is that cheques are only payable in forty cities in India (and that counts Gurgaon, Panchkula, Secunderabad and so on as separate cities). But now that electronic funds transfer is widespread, that doesn’t make much difference. You can just take someone’s account details and wire money to them instead of going through the nonsense of sending a cheque, having the recipient carry it to the branch, deposit it, and then wait three days for clearing. And – this is the best part – StanChart gives free EFT. HDFC and ICICI charge 5 rupees for every transfer.

(On the other hand, I have to pay Rs 250 to receive a foreign currency remittance. This will continue until I reach the truly rarefied echelons of private banking. Oh sigh. Then again, I don’t know if ICICI and HDFC manage to sting you for this too.)

Now as several people on my twitter timeline have pointed out, this is remarkable lunacy. Charging for electronic transfers and keeping cheques free encourages people to use cheques instead of EFT. This wastes:

  1. Paper
  2. The time of the guy receiving the cheque
  3. The time of the people working at the branch and operations back offices, who’re now processing cheque clearing when they could be doing something better with their time

This may be because ICICI and HDFC think that the convenience is worth 5 rupees per transaction. Moreover, there are so many old people who’re forcing them to maintain branches anyway, they might as well fleece internet users until the older generation dies off. The five rupee EFT charge is just the latest in the list of ways in which the older generation is screwing over the younger generation (other, more severe examples include fiscal deficits, ecological pollution, and tiger momhood). Or it could just be because they treat internet banking as a profit centre, their product managers are determined to show revenues somehow, and nobody on top has made the connection between EFT charges, people shifting to cheques, and higher operations costs. Which it is, only someone from the banks can tell us.

Assuming we lived in a sane world, everyone used internet banking, and actual cheque operations could be brought down to a minimum, the fees would actually reverse. You would have to pay to use chequebooks (oh, and I think ICICI and HDFC also charge for additional chequebooks in a year or something, while StanChart doesn’t. Snort.) while EFT would be free.

In such a world, cheques wouldn’t serve a functional purpose as much as an aesthetic one. You would give someone a cheque if you wanted to make a ceremony out of handing them over (white) money. Actually, this is already done with the giant cardboard cheques at cricket matches and quizzes, but I was thinking of something more understated and classy.

Because of the huge back office costs a bank would incur in maintaining cheque clearing operations, cheques would become ridiculously expensive, like annual fees on a top-of-the-line invitation-only credit card. Probably more expensive, honestly. They’d be offered only to really rich private or premium banking customers, and as such would be really good-looking cheques. They wouldn’t be the ostentatious prize ceremony cheques, but regular sized cheques on really nice paper – thick and creamy, with lots of embossing.

They would be to electronic funds transfer what a Vacheron Constantin mechanical movement timepiece is to a quartz digital watch: very good-looking and made just as functional at ridiculous expense. You could draw them out of a coat inner pocket and sign them with a fountain pen, and the aura wouldn’t be ruined by low-gsm paper. Or, for that matter, say “I say, Ram Avtar, be a good chap and fetch me my chequebook, would you?” They would be neo-Edwardian cheques.

Of course, none of this will be possible until electronic funds transfer becomes ubiquitous. But then it is only good and proper that modern technology brings about neo-Edwardianism.

Software Development Models and Weddings

In comments, BJ says that he has a fair idea of why I think TamBrahm weddings are like ERP implementations, and asks me to confirm his suspicions with a post on this. I don’t know if he is zinking what I am zinking, but here goes.

As someone who had only seen Arya Samaji weddings (and also one sardar wedding) up until the age of 21, I was utterly flabbergasted the first time I saw a TamBrahm wedding. The whole point of Arya Samaj was that if you were going to involve yourself with religion, you should bloody well understand what you’re getting into. So if you don’t speak Sanskrit, the priest must translate everything, and give a proper explanation while he’s doing so.

In contrast, at TamBrahm weddings (and any religious ceremony for that matter – we did a bhoomi poojan at the Kanchipuram factory with local priests), the involvement of the concerned parties is minimal. They just sit around while the priests chant stuff they don’t understand.

This makes TamBrahm weddings very much like the common, or garden-variety ERP implementation. The ERP consultants are parallel to the priests. Because nobody can understand them, you have to take their word for it that they’re experts and know what’s going on. Then, there is a long and painful period in which the priests/ ERP consultants do lots of stuff that looks impressive, but nobody actually knows if it’s accomplishing anything. Finally, they collect their fees, and leave the company/ happy couple to sort things out on their own.

Extending the analogy, Punjabi Arya Samaji weddings are like installing Windows. You’re given the opportunity to read the whole end-user license agreement and cancel if you’re not happy with it. But everyone is so excited about the bling and cool new features that they skip reading it, or just nod along to whatever the shastri says and install it. After the honeymoon period, you suddenly realise that this thing is taking up far more resources than you’d anticipated.

North Indian Sanatan Dharmi weddings are like the Apple App Store. Everything looks incredibly cool and blingy, but the license agreement is completely opaque and nobody has any clue what they’re getting into.

Living in is like installing and running Linux without a GUI and only with a console. And that too by compiling the source with gcc and not from some cool Ubuntu disc or Red Hat Package manager. It seems hardcore and revolutionary, but when you get down to the specifics, is really just a lot of housework without any bling.

The analogy has now gone far enough. That’s it for the post.

Size Does Matter

For small or mid-sized companies in India, especially manufacturers, it’s impossible to avoid government interference. Whether it’s the town and country department, or the electricity board, or the state industry ministry, or the central ministry which is in charge, everyone will demand some sort of cut or speed money or the other. It is a chronic pain in the corporate arse.

On the other hand, as Sainath keeps pointing out, if you’re a huge company like Reliance, then the government bends over backwards to please you for fear that you won’t invest and generate employment. It gives you free land, builds a road to your factory or airport, gives you excise holidays and suchlike.

The implication is that at some specific turnover between 100 crore rupees and 5000 crore rupees, the government stops harassing you and you start harassing the government. The exact figure is something that needs to be researched, but for obvious reasons, I think it should be called the Yakov Smirnoff turnover.

Ekla Cholbe Na

Tata Docomo’s advertising tagline is “Why walk alone when we can dance together?”

I think the Tata group is mocking Rabindranath Tagore and Ekla Cholo Re. This is to get back at the Bongs for what they did to Tata Motors at Singur.

What’s With Salman Khurshid?

In the past ten days Salman Khurshid has advocated a return to 1980s Comptroller of Capital Issues style pricing, and also done the headline-hogging complaint about Indian CEOs drawing too much pay. The CEO pay issue is truely bizarre and WTF, for a number of reasons, including:

  1. As Deepak Shenoy points out, Khurshid is currently getting free acco in a house that would rent out at 10 lakhs a month if it was on the market.
  2. US CEO compensation is an issue because half of Wall Street has been nationalised and so the government has a right to decide compensation policies. What the hell is the Indian government losing if CEOs are paid too much?
  3. As this Business Standard oped points out (link will decay eventually), it’s not even like Indian CEOs are paid obscene amounts (not only by global standards, but by Khurshid’s own standards). So what is the bogeyman of vulgar salaries that he’s raising? The true scandal occurs in the millions of small companies where the directors or majority partners siphon money out at the expense of minority shareholders and employees, as the Satyam issue showed us.
  4. And culturally, it’s not like Indians resent highly paid CEOs. They want to be highly paid CEOs. The mango man’s reaction to high pay is aspiration, not envy. So what vulgarity?

Forget all that. Even if Indian CEOs were paid obscene salaries, and Indians resented this, and Salman Khurshid wasn’t a sanctimonious arsehole living off the public trough, this is India, where we outperform the rest of the world when it comes to innovation in corruption and fiddling accounts. If there’s a salary cap on CEOs, does he really think companies won’t find a way to get the money to the CEOs off the books anyway? Gah.

Searching for a reason for this utter lunacy, I’ve come up with:

  • Salman Khurshid is a moron. This explanation has the benefit of fitting Hanlon’s Razor.
  • Salman Khurshid wants CEO salary to start getting paid out in black money and lots of manipulation in IPO issuing so that the amount of black money in the economy increases. After all black money is the lifeblood of the Congress party.
  • Salman Khurshid is trying to raise money from Indian businesses ahead of the Haryana and Maharashtra elections. “Nice salary package you have here. Shame if anything happened to it.”
  • The whole thing is not for the benefit of Indian CEOs, or the media, but for Sonia Gandhi, who Salman Khurshid is trying to impress by showing how quick he is to catch up with American trends.

Anything I’ve missed?

(Pssst: Sainath gets into the act too, and manages to not mention Vidarbha or the HDI. There’s hope yet.).

Incorporating Heritage

Neel has a blogpost which talks about IIT-D designed board games that incorporate elements from traditional Indian stories into their design. He also laments that most Indian design and architecture does very little to showcase heritage, and picks on malls, airports and railways stations as being the worst offenders. I had some scattered thoughts about this which were too long for a comment, so here they are:

  1. One of the big problems with incorporating heritage into any venture these days is that you put yourself at grave risk of Rajan Zed issuing press releases that you are offending Hindu sentiments. In fact going by past experience it could be not just Rajan Zed but Rajput associations, Jain associations, Sikh associations, ad nauseum.
  2. Railway stations – depends on what you’re defining as heritage. When the British were building stations, they they built gorgeous facades which mixed up Mughal design elements (arches and domes), continental European decoration (the gargoyles at the station formerly known as Victoria Terminus), pre-Mughal construction (red sandstone), and some stuff which was entirely fresh from the architects’ perspective. I think that railway stations in princely states may also incorporate local architecture. It’s probably construction in post-independence India that gave us the horrible concrete blocks with no aesthetic appeal – the same applies to most of the airports.
  3. Airports – we seem to have moved from a situation where there was one single design of ugly concrete blocks being used for every airport to a situation where one single design of curved beams and glass walls is being used. Personally, I find the new one more attractive; but Neel’s point about it not having many Indian elements is valid. Delhi’s airport has made an effort with interior decoration for Terminal 1D, but this The Delhi Walla blogpost seems to suggest that it’s half-hearted.
  4. Malls – yes, these are the most egregrious offenders when it comes to cookie-cutter design and absolute lack of architectural imagination. I think that this is because somewhere there is a design handbook for malls which lays down points on laying out a mall to maximise retail sales which is being followed religiously without either any attempt to run local experiments to see what works better or imagination by architects on how to make it look cooler. [rant done] But even if architects did want to come up with cooler designs, would builders and tenants pay for them? Hm.

Another thing about heritage is that it’s desirable, but so are many other things (whether on pure functionality or for the wow-it’s-so-cool factor). So some of these are:

  1. Is it functional, innovative, valuable? Neel cribs about airports, but the fact that Delhi’s new airport has inline baggage scanning delights me so much that I hardly notice the lack of heritage design elements.
  2. Is it aesthetically pleasing? Everyone’s taste on what looks good will be different, so this is difficult to measure. But as an example, look at Jet Airways’ long-haul business and first class. Not much in the way of Indian design, but incredibly innovative and good-looking.
  3. Is it unique? This ties in with the crib about all malls and airports looking like each other. On the one hand, using a standard design brings down costs and I think China has built dozens of new airports just by reusing the same design over and over. Delhi’s new airport terminal might be standard curved beams and glass, but that standard design allows it to function on natural light throughout the day and not turn on electric lights until night – which has its own functional and aesthetic appeal. Of course, poor construction of that design is probably what led to the same terminal being flooded during the rains.
  4. Is it designed by Indians or an Indian company or even for Indian consumers? Even if it doesn’t reference existing heritage, if it’s iconic enough it could eventually become Indian heritage – like the Bombay Gothic buildings (good) or the Ambassador (bad). I know that Jagadguru has said that nationalism is the superset of religious fundamentalism which is itself the superset of terrorism, but I still think it is awesome if my national heritage is added to.

Another thing is that heritage doesn’t automatically provide quality. Air India paints Rajsthani chabutras on its aircraft windows but sucks as an airline. There have been so many animated movies about Krishna (Cartoon Network is running five this Janamashtami), but the dialogue and storytelling is usually terrible. 

So heritage is awesome, but only when the companies using it already have the capability to create great products; and also when designers and developers have the space to use their imagination.

Business Bestsellers

I am reading The Game Changer by the totally bonkers Ram Charan and AG Lafley, the (former?) CEO of P&G. (Once I finish, I’ll be done with my to-be-read pile, hooray.) So far it’s been totally uninspiring – they seem to have taken a bunch of different products and processes developed by different companies including P&G, Honeywell and LEGO and used these as examples for an innovation framework which Ram Charan must have come up with. To me, it just seems that they’ve taken random examples of innovation and force fitted them to a nice sounding framework.

Gaurav is doing a business PhD and will point out that actually the thinking behind those examples and the framework could be pretty rigorous and analytical, but there’s no evidence of that in the book itself. It just states that these particular things are examples of the framework, and doesn’t bother to explain why this is so. Now of course putting that kind of rigour into a popular business book will make it difficult to read and unpopular, so it makes no sense. But if you don’t have that rigour, the book is practically useless as a manual. This makes the popular business book the most futile form of writing ever.

Of course, that assumes that the point of the book is to be a manual. What if it’s advertising? Anybody who reads the book realises that there’s more to it and calls in Ram Charan for a full consultancy. But… Ram Charan bills 20,000 dollars an hour. There’s no way every chhappar who buys The Game Changer at an airport bookshop can afford his services.

So the only thing that makes sense is that the book is still an advertisement, but it’s not an advertisement targeted to its readers. Instead, the fact that it has so many readers is the advertisement, which is then targeted to Fortune 500 CEOs – the pitch is that Ram Charan is a consultant whose book on strategy was a worldwide bestseller.

Jet Airways

We now interrupt our current run of TV-blogging to abuse everyone involved in the Jet Airways fashla.

Jet Airways

What the hell went wrong? What were they thinking when they fired people overnight? The only possible answers are colossal stupidity or desperation.

Desperation – we know that they haven’t been paying their fuel bills for a while. And with eight months of running losses, banks were refusing to provide working capital. And with the financial crisis on, raising long term capital looks practically impossible. They’re bleeding cash, and firing their newest employees probably seemed like the quickest way to staunch the flow.

Colossal stupidity – is a stereotype that usually goes well with HR departments and senior managements. But in this case, it looks like they really weren’t thinking the consequences through. They now have Raj Thackeray, the CPI(M), and news channels baying for their blood. That will probably pass, but they’ve lost their reputation as a good employer. When the business cycle improves, they’ll have to deal with not being an employer of choice. (That assumes they’ll survive until then.)

Back in the last recession, there were a bunch of IT companies which made their layoffs/ salary cutbacks as painless as possible and got written up as case studies. I think Mindtree was one of them. Jet Airways didn’t learn. (But then Ajay Shah has written that nobody in India even understands that business cycles exist and a recession will eventually come along…)

Jet Airways Employees

OK, being told in the morning that you’re fired and you shouldn’t show up for work is definitely a shock. More so, if it happens to 1900 of your colleagues simultaneously. But if their sob stories are true and they are sole breadwinners who have taken out home loans and are worried about how they’ll pay their EMIs, then I have to say that they were idiots. They were on probation. They knew that they’d been hired for a one year period before being confirmed. They knew that house prices were higher than ever before. They knew that they were employed by an airline that was losing money and that job security apart, salary increases were probably not coming soon. And knowing this… they went into debt. FSM preserve them.

Hopefully, the ones shouting on TV about their EMIs were a small minority who the news channels picked to add to the drama.

News Channels

Dear news channels. This is not the largest layoff in India in the recent past. Banks have been shutting down their associated consumer finance/ small business loan NBFCs left right and centre over the past year, and the total layoffs in these have been much higher.

This is merely the largest layoff in India of attractive young people who speak good English. Please insert the appropriate disclaimers. And stop trying to project the temporary plight of young middle class Indians who are otherwise employable as the end of the world. Okay?

The CPI(M)

The CPI(M) is pretty much complicit in bringing Jet Airways to this state. All of last year, they sat in the way of price hikes for petrol, diesel and kerosene. So the oil marketing companies raised the prices of air fuel instead in an attempt to survive. And now Jet Airways is bankrupt and has to sack employees to survive. After this, Nilotpal Basu has the gall to go on TV and say that the CPI(M) won’t allow Jet Airways to operate from Kolkata.

Also, demanding reinstatement? Firing employees isn’t pleasant, but at least it does stem the cash outflow a little. If Jet Airways kept them on, then it would keep losing money until it couldn’t even pay the confirmed employees, who’d been on the payrolls longer. The CPI(M) seems more concerned about a thousand jobs today than twenty thousand jobs next year (and CEOs get abused for thinking in the short term!). (Related reading here.) Either the CPI(M) is (shock! gasp!) a run-of-the-mill political party, concerned only about the next election; or it doesn’t understand reality. Or both.

Oscar Fernandes

Because when he was asked for a soundbite, he smiled and said that he didn’t know anything because he had been at a junket labour ministers’ conference in Bali.

Praful Patel

OK, no abusing Praful Patel. Because he’s actually refused to bail anybody out, pointed out that this is to do with ATF prices, and has generally not played to the gallery.

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Another Unbottled Genie

Along with mobile banking, another sector got a little freer this week. Foreign news magazines can now publish Indian editions:

In a significant further opening up of the print media, the Union Cabinet on Thursday approved a revised policy that would allow Indian editions of foreign magazines in the news and current affairs category.

The review of print media policy permits Indian publishers entering into such agreements to include local content and carry domestic advertisements, both of which were forbidden under previous guidelines.

(Financial Express)

Because I am an impractical libertarian I will now find fault even with this welcome opening up. As the Financial Express also points out, FDI is restricted to 26%, which means that the true benefits of foreign money coming in and setting up professional news organisations will be limited. (At this point, my skeptical alter-ego intervenes and points out that what with the currrent financial crisis, and foreign media organisations not exactly sitting on mountains of cash, there wasn’t going to be a huge amount of money coming in anyway.)

Also, the requirement of five years of prior circulation of at least ten thousand copies means that if News Corp decides to launch a new magazine worldwide, they can’t do a simultaneous launch in India. Oy vey.

It’s a start, though.

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