Unbelievable hypocrisy - Straight from the Hip by J Mulraj
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Investing in India - Straight from the Hip by J Mulraj
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8 FEBRUARY 2010


Last week saw several examples of unbelievable hypocrisy. The Kirit Parekh expert committee, one of many that made similar recommendations on petro product pricing, suggested a hike in prices of petrol (by Rs 4.72/litre), of diesel (by Rs 2.33/l), of kerosene (by Rs 6/l) and of LPG (by Rs 100 per cylinder). The fact that petrol and diesel continue to be subsidised, at the cost of oil marketing companies which are being slowly bankrupted, is amazing; there cannot be a justification for it. The Government says it is worried about the inflationary impact of a hike - well, hello!! - if inflation is kept artificially low through subsidy then it is high time somebody informed the king he wasn't wearing any clothes! The fact that such recommendations have been made by several committees before Kirit Parekh is another example of hypocrisy; their recommendations were ignored by Governments which didn't have the b***s to implement them. Let's see if Manmohan's does.

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Or look at the utter hypocrisy of the Finance Ministry upbraiding SBI for underprovisioning for agricultural loans gone bad, when it was the decision of the Finance Minister to, perhaps justifiably given the pecuniary conditions of farmers, waive them off. And the irony is that it was SBI to whom the Finance Ministry then turned when the Rs 8300 crores follow on offer of NTPC did not find enough interest.

Look at the hypocrisy at BSNL, the world's seventh largest telecom company, wholly owned by Government. BSNL ran as a Government department for 140 years before it was corporatized, without adequate preparation, by a notification in Sep 2000. There were some 350,000 people who had to be convinced to migrate from the assurance of a Government job as a department, to a corporate one. BSNL had some excellent engineering talent, but it was mired in bureaucratic ineptitude which shackled excellence. It took a Rajiv Gandhi to usher in a Sam Pitroda, who left a flourishing business in the US to bring up BSNL, for the princely salary of Rs 1 (which went unpaid). Years later, the Government turns to Sam Pitroda to look into the declining financial health of BSNL and to sort out issues relating to a 93 million line tender of $ 10b.

The tender of 93 m. lines was floated a few years ago and was stalled because of an appeal by the losers, of foul play. The appeal was maintainable only because it is wholly owned by Government and thus subject to a writ of mandamus. Meanwhile private sector companies, not bound by such legal niceties, grew. To now accuse BSNL of mismanagement when it was not allowed to grow, or to go in for an IPO which would have given it financial freedom to do so, smacks of undiluted hypocrisy.

Similarly, executives at the oil marketing companies are being threatened with losing performance pay if they don't perform, even whilst their ability to perform is being undermined by the OMCs having to bear a subsidy burden which belongs to the exchequer.

George Orwell would have been proud of such doublespeak.

The market did not take kindly to the likelihood of petrol and diesel prices being raised, nor to the increase in food inflation. This, again, is idiocy. Correcting something that is structurally wrong is a step in the right direction. There would be pain in the short run, but for gain in the long. Food prices are also undeservedly low; we cannot forever live in a situation where 65% of the population, living off agriculture, get only 18% of national income. To continue to shield the more vocal urban dwellers from higher produce prices, at the cost of the farmers, is to be myopically hypocritical.

In interesting corporate news, RIL is seeking to buy a Canadian tar sands company, Value Creation, for upto $ 2b. The amount of oil resident in the tar sands in Canada is equal to the oil under the Saudi sands and technology to extract it without damage to the environment, is being improved upon.

The market tried to rally mid week but then fell sharply to end the week in negative territory. The BSE-Sensex was down 567 points, at 15,790 and the NSE-Nifty down 163 at 4718.

There could be a rally early in the week. Then worries about the impending Damocles sword of the Union Budget, to be presented end February, will take over. Investors are already expecting a partial roll back of excise cuts which formed part of the stimulus package. In Delhi there are 3 Government blocks, North Block, South Block and Mental Block. If the last enters the first in the preparation of the Union Budget, we are in trouble. Pray that it does not!

J Mulraj is a stock market columnist and observer of long standing. His weekly column on stock markets has run for over 27 years. An MBA from IIM Calcutta, he has been a member of the BSE. He is Conference Head - India, for Euromoney. A keen observer of events and trends, he writes in a lucid yet readable style and takes up issues on behalf of the individual investor. Nothing pleases him more than a reader who confesses having no interest in stock markets yet being a reader of his columns. His other interests include reading, both fiction and non-fiction, bridge, snooker and chess.

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17 Responses to "Unbelievable hypocrisy"
Prakash Shesh
Feb 19, 2010
Brutally well written especially that line on "mental block" in New Delhi Like 
Sridhar
Feb 12, 2010
Really awesome article. Only somehow we should enure that the people ruling read this in an Open TV channel. Like 
chitra moorthy
Feb 11, 2010
thanks, mr. mulraj, for saying it like it should be said Like 
krishna
Feb 10, 2010
Everyone is out to milk the middle income.
The property developers the worst of the lot.
Lodha Group the worst of the worst.
Jacking up prices for apartments. Breaking contracts and deals. Squeezing buyers sellers of property and just generally bullying everyone in the real estate field.
The Managing Director Abhisheck Lodha a young boy in his thirties bullies everyone with the strength of his MLA father behind him.
Like 
G.P.Sangal
Feb 10, 2010
Congrats for Plain speaking. I entirely agree with your comments.

I have separately commented about Shri Pitroda. I wonder why he never went back to his business but devoted his time to several other jobs and activities.
Like 
P.D.Bajaj
Feb 9, 2010
Thanx Equitymaster for bringing to us this coloumn by Mr.Jawahar Mulraj.His logical frank & lucid style is really
mesmerising.Iwas a regular reader of his coloumn when he used to write for TOI on every monday.I used to look for that coloumn eagerly.But somehow he stopped writing for TOI.I have the oppotunity again .Thanks to you equitymaster
Like 
Rustom Dalal
Feb 9, 2010
Excellent! I wish you will mail a complimentary copy to the PMO and the FMO.
Only Obama has the guts to say he does not care for a second term of Office.That is not to say he is doing a splendid job.
Only one more point. Dont believe Govt. statistics. The rural poor are not so poor. Ajit Dayal himself said so.

Like 
marketguru
Feb 8, 2010
Food prices are also undeservedly low; we cannot forever live in a situation where 65% of the population, living off agriculture, get only 18% of national income.But can we assure that by increasing the price of food prices the poor farmers will get their due ?What about the increase of sugar prices? how did it improve the lifestyle of sugarcane farmers? only the mill owners & pawar men reimbursed their election campaigning bill by artificially inflating the prices.Why the economists are so much worried about subsidies given to ordinary people? we should be worry about the subsidy given to large industries which are enjoyed by few billionaires. Like 
Rajeev Ajmani
Feb 8, 2010
I doubt if more than 10% of the Indian population uses petrol. And they must all be in the top 10% by income. Weren't subsidies for the poor? Something is very wrong here! Like 
Jayanth N
Feb 8, 2010
I dont think so government needs b***s to de- control the OMC'c prices. The government has to look into all the aspects before increasing the prices, it just cant implement each and every committees reports. most of people in India are below BPL and cant afford the prices and we have seen classic examples of prices de-controlling with Sugar prices and Plz request to stop all these abusive languages thrown at politics and we have a excellent PM if u guys forgot he is an Economist and have a better knowledge about all these than i , u or someone else. Hope to see all OMC's performing well and deregulations should happen in systematic manner where in its win win for all .................. Like 
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