»Straight from the hip by Jawahir Mulraj

Unbelievable hypocrisy
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 stockmarket columnist and observer of long standing. His weekly column on stockmarkets has run for over 17 years. An MBA from IIM Kolkata, he has been a member of the BSE. He is now India Representative for Institutional Investor. 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 stockmarkets 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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