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Satellite TV and Badla - Views on News from Equitymaster
 
 
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  • May 4, 1997

    Satellite TV and Badla

    Taxing Foreign TV...

    Facts tell us that our country has major problems of high population growth, illiteracy, dowry deaths, bride burnings, and a lack of basic hygiene. Statistics tell us that India has over 3 million colour television sets and 10 million black and white sets. The government tells us that 100% of the country's land mass is capable of receiving television programmes and that over 90% of the population watches television at some point of time.

    Yet, although we have had a medium to reach across the country and enlighten the people, all we have succeeded in doing is creating a fan club of people who watch with hanging jaws while the Madhuri Dixits and the Karismas of the screen shake their hips. Instead of helping to reduce the population problem, most of what is shown on TV is probably adding to the sexual drive and population growth but let's leave that to some Ph.D. to prove or disprove.

    The launch of Zee TV in India in 1992 has added another dimension to what the idiot box shows us these days. Now the heroines are not only dark-haired but also encompasses shades of blondes, brunettes, and redheads. While Ph.D. students of the future debate about whether this new introduction has given a new fizz to a likely growth in population rates, why can't the government use these new broadcasters of electronic trash to our advantage.

    Yes, there are plans to charge these new DTH channels some fees and charge cable operators another kind of fee but all that is money in the government's kitty and - as we know from past experience - a complete waste of a scarce resource. Instead of taking money from the foreign satellite channels, the government should do a barter deal: our skies are open to you, Mr Murdoch, but only if your satellite beams carry some useful messages on cleanliness, dowry, and population control. For every 57 minutes of prime time prime trash, you need to carry 3 minutes of social and educational material. For every 117 minutes of non-prime time prime trash, you need to carry 3 minutes of social and eduactional material. Is that a deal, Mr Murdoch?

    There is a good chance that this strategy will work. The creative teams of Star and the rest are probably a lot better than the folks from the Films Division Documentary Division who brainwashed us with their images of foodgrains dancing in the wind even as we were busy importing wheat, or who showed us coy couples in the "Hamare Do" series. I'm sure MTV and V channel can convince viewers more easily about the benefits of having only two kids ("Wanna party all night, man?! To the sounds of bhangra, Gandhara, or langda? Cool, just chop it off. And it ain't your hair I'm talking about, man, it sure ain't your hair! You're watching.."). That sort of population control message will probably have more of an effect than what Films Division accomplished in 50 years.

    Now extend that to Bill Gates. The wealthiest man this side of Mars spent 48 hours in India and, for a guy who made US$ --- million each day in 1996, that is a big sacrifice. Let's face it. He came here to do business, not shake hands with farmers and city fathers. So let's trade. Bill, you want the Indian market? Here, take it. But for every US$ 1 million that you get richer by over the next 36 months, 20% will be used to provide PCs, Internet connections, and software to the 80,000 villages in India that have electricity and can be wired up to the world wide web. If you announce that Microsoft has an exclusive mandate for India for the next 99 years, the NYSE will reward you with a possible US$ 100 billion increase in market cap. Your shares will be worth an extra US$ 35 billion, 20% is US$ 7 billion or US$ 87,500 (Rs 32 lakhs) per village that we can wire up. What say, Bill? www.deal?

    I'll tell you what, Bill and Rupert. As a gratitude of our appreciation I'll give you both some software for free for your PCs and DTH channels. I'll get my friends, the battered Indian punters and brokers, to sponsor the creation of a special programme called Bring Badla Back. Its got a BBB rating, guys, just a notch above speculative grade. Even Moody's says so.

    Badla...

    The press and the regulators have brainwashed us that badla is a bad word better left unsaid, never to be heard, and never to be practised. Badla is the opium that operators use to lull our senses as we take the A group shares to new heights and the poison that operators use to push those same pivotals to the depths of depression. Badla is bad and better banned than allowed to be used against us faceless innocents.

    For many years, I believed that story and was happy that badla was banned in 1994. Badla and modernisation of the stock exchanges, in my view, were synonymous. To go into the 21st century and get all that FII money, we had to modernise. And badla was this 100 year old archaic system. Screen trading was the new god, transparency the new religion, and badla the sacrificial lamb.

    But badla is not bad and badla does not affect our attempts to attract foreign institutional investors. Because badla is nothing but a banking system. Someone needed money because he bought shares that he could not pay for so he went to another someone who had the money and did not want to buy shares but did not mind lending it. What was bad about badla was the lack of transparency.

    There were a few large operators (individuals and corporates) who controlled the flow of badla money into the stock market and they used this to their advantage, many times causing wild gyrations in share prices. For example, they would allow bulls to build up huge positions in the market knowing that there would be a large demand for money at the end of every settlement and then, suddenly, close the tap of money supply so that the badla rates rose dramatically as the bulls panicked and sold their shares allowing these suppliers of money to make abnormal gains on their own short positions.

    Or many a time, people who lent money to bulls or bears got hurt as these speculators had over-extended positions and could not meet their obligations. What the regulators should have done was to create a more transparent system that allowed badla to carry on - every stock market has some speculative element to it - and, simultaneously, the authorities should have moved ahead with the high technology of screen trading - which they did.

    The situation today is absurd. Many parts of our economy are flooded with extra funds. The banks have collected an extra Rs 58,000 crores as time deposits between April 1996 and January 1997. Yet, they have given additional loans of only Rs 15,100 crores to corporate India over the same period. The rest of the money is lying in government paper which earns the banks an interest rate of between 7% and 13% per annum. And there is so much money in the banking system that the call money rates have been stuck between 4% and 6% per annum for the past 4 months and have even been as low as 0.5% per annum.

    Yet, on the other hand, the stock market is rearing to go and pierce the level of 4,500 but, each time it makes an attempt to do that, badla rates are 4% per month. Even if you take into account the risk profile of badla financing the case for allowing banks to lend money in some transparent and regulated form to stock brokers and punters would certainly earn the banks more money than the 4% per annum they are getting at present in the call markets and the punters would pay a lot less than the 48% per annum they are paying today.

    This is certainly not an argument for unbridled speculation. Options and margin trading are forms of speculation which the Indian authorities have agreed to introduce in India. Is badla bad only because the man who indulges in it does not wear a suit and tie? Is badla bad because it is Made in India? Is badla bad because the people who indulge in it fought tooth and nail (wrongly) against the stock exchange reforms of the past few years? . Because many companies and individuals cheat banks does not mean that we should close down the banks. Or because our bureaucrats were the same guys who got us into this socialist mess 50 years ago does not mean that we can't trust them with the blueprint for tomorrow's reforms. Systems that worked should not be discarded for the wrong reason.

    The Indian broking community had its fair share of problems and for many years got away with practices that were outrageous. They fought change, but now they have changed. Give them a level playing field vis--vis. Let the punters borrow money at fair market rates to punt. Do you know that many of the FII funds borrow money at 6% in US Dollars to buy Indian shares while Indians pay 48%? And that the foreign brokers in India get lines of credit from their parent companies and their foreign banks at 6% in US Dollars to fund their transactions while Indian brokers pay 24%? How can India ever hope to create a 100%-owned Indian broking firm in this environment? How can the Indian market be driven by Indian money?

    Put the past behind. Call it what you want but bring badla back.

     

     

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