Driving to the future - 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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13 OCTOBER 2012

Sadly for India, political leadership is lacking, in terms of preparing for the future. They are too busy politicking, and pointing fingers at each other's corruption and other scandals. Its all a farce - each party knows about shenanigans of the others but remain silent, until attacked. Witness how swift was the allegation against Prashant Bhushan's alleged acquisition of cheap land in Haryana, after he alleged allocation below cost of land by DLF.

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Rating agency S&P is threatening a downgrade of India, to junk status, if the Government does not bring down its fiscal deficit. The Reserve Bank of India (RBI), equally concerned about the burgeoning deficit, is keeping interest rates high, for fear of stoking inflation. High interest rates, in turn, pull down consumer demand (Sep 2012 of cars and motorcycles are the lowest in four years), and with it, industrial production (though this showed a welcome uptick of 2.7%.

To curtail subsidies a responsible Government, not busy with corruption scandals, would take action. There are plenty of options to explore, many of them being thrown up by newer technologies.

Why not start with a non-technological and eminently sensible administrative action, one that does not need to be ratified by a legislature? Why is the spineless Government dithering over the introduction of fuel efficiency norms for two, three and four wheeler vehicles? It was way back in 1975 that the US had introduced CAFE (corporate average fuel efficiency) standards, after the first OPEC oil price shock of 1973. (Inexplicably, though, the US exempts trucks and SUVs from these, where they need to be most applied).

Yet, why is it that India cannot introduce fuel efficiency norms for cars 37 years after the US did? It needs no legislative approval. It is entirely an administrative action. Introducing such norms is a no brainer, and so well within the UPA's capabilities.

One of the biggest reasons for the burgeoning fiscal deficit are the subsidies, and those on petro product pricing the most pernicious. The Government has just recently taken the bull by the horn and raised diesel prices. Yet, a large chunk of the price of fuel to the consumer is in the form of expropriatory taxes, and the Government must start to cut these, whenever the fiscal position permits.

Crude oil prices can only increase over the long term, as sources of crude oil are drying up and we have probably hit peak oil. There are various alternatives, but the Government does not seem to be exploring any of these.

It is the private sector that is doing so.

The Tata group have taken a stake in, and backed, a French inventor, Guy Negre, who has designed a car that runs on compressed air! Readers should view this video on it . Not only is air free (the UPA has not found a method to tax the air we breathe, else we would certainly by taxed on it), but compressed air does not pollute the environment at all. It will surely be introduced by Tata Motors, once it reaches the stage of commercialisation.

Another option to look into, to prepare for a future which is fossil fuel scarce, are electric cars. Technology for this is also improving, and three Danish companies are working on a Modular Energy Carrier Concept that uses bio methanol to improve the competitiveness of electric vehicles. New technologies extend the range of driving on a full charge, to 800 kms.

The drawback of electric vehicles is the time taken to charge batteries, which is far longer than the time taken to fill petrol. An Israeli company, Better Place, has a neat solution for that, mention of which has been made in my previous columns.

A US start up, which was federally funded, called A123 Systems, showed promise in developing a lithium-ion battery for electric vehicles. Unfortunately for it, it ran into financial problems, and looked for a buyer. The buyer is from China, auto parts maker, Wanxiang, who will benefit from the Federal grant for cutting edge technology, and will be able to provide the scale to market the battery to Chinese electric vehicle manufacturers.

Then there are countries experimenting on driverless cars which would not only prevent road accidents (some 108,000 persons die every month in road accidents) but will also lead to fuel savings because remotely guided, driverless cars, can move in close formation and make better use of road space.

Then there is the hydrogen car, which showed a lot of promise, but is stymied by the difficulty in building a network of filling stations. But the dream won't die, as efforts to improve technologies to make it viable continue.

Then there are non-automotive solutions for travel! Consider that, instead of going to office every day in roads that drive your blood pressure up faster than the sensex, what if you could 'beam' yourself to work! A Californian company, Suitable Technologies, has developed a telepresence system that allows a person to be virtually transported. Wow, imagine, there would be no need for special lists at airports of persons exempted from security checks, because he could simply beam himself to wherever!

But the most completely perplexing is the question why Indian cities, led by its commercial capital Mumbai, do not have mass and rapid public transport. Their political leaders have been lazy and myopic in not planning for an underground rail network, something New York city planned 80 years ago, in a manner that it still serves the cities needs, despite a multiple increase in population. As a nation we are overly hungup on private transport, and will pay a heavy price for this folly in future when petro product prices become so unaffordable that the stock of automobiles will create a disposal problem.

They now say it is too late to dig up roads to create an underground system. Okay. Why not an overhead track, as has been developed by Bangkok, a city that was seriously affected by traffic gridlock? Is it because of the need to pad costs to satisfy corrupt officials?

In corporate developments, a Hyderabad High Court has, on a complaint by GMR of a bounced cheque, issued a non bailable arrest warrant against Vijay Mallya, whose Kingfisher Airlines issued the cheque to GMR for use of airport facilities. Coincidentally, the GMR group offices were raided by tax authorities.

The developed countries are following an easy money policy to kick start economic growth, whereas developing ones, such as India and China, more concerned about inflation, have a high interest rate policy. The interest rate differential is attracting some to borrow in $ and repay in Rs. The Essar group has been granted RBI permission to do so and Essar Steel ($470m.) and Essar Oil ($1b.) will borrow abroad to repay rupee loans. This obviously imposes on them a currency risk and one hope they are not caught with an adverse currency fluctuation, as were many companies that had earlier issued FCCBs. Suzlon, for example, is on the verge of defaulting on its FX loans.

Unitech has decided that prudence is the better part of valour, and has sold its 33% stake in the joint venture with Telenor, and agreed to transfer the 45 m. customers to a new Norwegian company. Telenor will, through the new company, be able to bid for the spectrum.

The Government has decided to charge telecom companies for spectrum held by them over and above what the Government has decided is a fair quantity. It hopes to collect Rs 27,000 crores, which would ease its fiscal strain a bit.

Last week the BSE-Sensex dropped 263 points, after quarterly results from Infosys disappointed the market, to close at 18,675, and the NSE-Nifty was down 70 to end at 5,676.

With state elections in HP and Gujarat around the corner, and with the winter session of Parliament set to commence, we are entering laundry season, in which more dirty linen would be publicly washed. The rally is liquidity driven by Foreign Institutional Investors (FIIs). They may not be enamoured by the linen being washed. Probably won't. Selling in a rally is advocated.

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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2 Responses to "Driving to the future"
C K Vaidya
Oct 14, 2012
It is true that automobiles cause a lot of pollution on our roads. But, to say that electric or cars driven by air do not cause ANY pollution is totally wrong. The batteries of electric cars have to be charged by using electricity which has in all probability being produced either by burning coal or a petroleum fuel. Such alternatives should be persued because they shift the place of pollution to a power plant where the pollution can be better controlled and minimised.
The video talk of 'perpetual motion' is quite silly. Energy can not be produced 'out of thin air'. To compress it, you have to expend energy.
Like (1)
Sathish
Oct 13, 2012
The British correctly said that indians can not rule themselves. I do think that india would have been a better place under british rule than it is now. Like (1)
  
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