Tamil Nadu Power Crisis - Analysis

Tamil Nadu is facing unannounced power cut (brown out) for past few years. This impacts industrial sector and public alike. There was no clear policy from DMK Government. There were allegations that kick backs were involved in purchase of power from private sector and hence Govt were neglecting its own power generation. The planned maintenance were not co-ordinated aggravating the problem. It wouldn't be unfair if we attribute this as failure for DMK's election loss.

The new CM, J. Jayalalithaa is taking some positive action. She promised to add 10,000MW generation capacity to the system over next 5 years. There are no clear indication whether it includes current projects. In my view it is in right direction but does not go far enough. I hope she and her Electricity Minister aggressively pursue this matter.

According to TN state government's policy document, the current capacity including its share from central pool is10,214 MW (this is excluding renewal energy sources as they are unpredictable in peak loads). The projected demand for 2011-12 is 14,224 MW and for 2012-13 is 15,517 MW. The current average deficit is 2500 MW. It is expected that demand will double in next 5 years based on the projected growth. I hope this explains why I am saying promised 10,000 MW generation is not enough. The Government should develop short term (up to 2 years), mid-term ( up to 10 Years) and long term (up to 30 years) policies. This is not just planning but involves huge investments are needed.


In the short term, Jayalalithaa's pursuit of asking 1000 MW of power for next one year make sense. She is expediting the projects such as the Vallur 500 MW capacity. She is also requesting the Central Government to expedite Neyveli and Koodangulam projects.However this is not under her control. Hence current deficit and projected deficits not likely to go away anytime in near future.Any new project ground breaking now will take couple of years before it is added to the Grid. This forces us to consider saving energy which is good thing in long-term as well. Here are somethings which will impact positively.

- According to policy document from TNEB, the transmission loss is 18%. Reducing it to 15%, to their target will save over 400 MW of power. Apart from bridging the gap, it helps bring down the cost.

- The Government should encourage public to use energy efficient lamps such as CFLs. It can even give couple of them free through PDS. Typically this saves 75% energy cost and produces 75% less heat.


- The Government buildings can adopt similar approach and can meet portion of its demand from Solar Energy generated in that location. Significantly reduces the transmission loss.


- State Government can enforce energy efficient products such as fans, AC, etc in steps. Sales tax can be higher for non compliant energy efficient products.


- Industries can be asked to reduce their usage by following the best practices such as using energy efficient products and meeting portion of their demand from solar energy produced in that location.


- Smart switches/meters can be installed in stages. This will allow the Government to charge premium rate for peak usage (may be restricted for business) and any excess energy generated can be sold back to Grid. This is win-win for both.


- Encourage public to use Solar energy for water heating and part of their needs such as lights, cooking, etc.


- Should enforce other conservative measures such as turning off the street lights on time, turning off unnecessary lights in Government building. This habits should be encouraged to public through proper ads.


- Unplugging electronics such as Mobile Phone adapters save money. Government should initiate ad campaign to achieve this.


- Government should aggressively enforce power theft prevention. This should include political rallies. (Spl. Thanks for ppl who reminded me on this)



The emphasis should be on Renewal energy generation closer to consumption location. The traditional energy resources such as coal, water, Gas, Diesel, etc are limited in natural resource. Depleting them is not a good idea. In a decade or so, we will be having hybrid/electrical cars driving the demand. Government needs to get prepared for it. This is just a sample on what can be done. Hopefully Government addresses these ones and come up with more ways to meet the demand.

Tamil Nadu Debt - Irresponsible answers

Tamil Nadu debt crossed one Lakh Core and it was reported by media. I blogged about it on 3 Feb 2011. As expected it was raised in Tamil Nadu Assembly opposition.

The  fact Tamil Nadu debt was doubled in last five years from about 50, 000 crores to one Lakh Crore. We need to understand 100% increase of 10,000 Crore is not same as 50,000 Crore. This is serious problem and we expected some responsible answers and action plan. However, the answers from the Ministers were irresponsible.

The Finance Minister told the Assembly that there was nothing wrong in going for loans to implement projects and welfare measures. In fact he was proud of what they have achieved. It was disapponting to hear this answer. He was also attributed the increased debt to global slow down. As usual they compare with other states like West Bengal, Maharashtra.

The Tamil Nadu Law Minister Durai Murugan joined the discussion saying no one will loan the money if it cannot be repayed. In my view, The question is not just on repayment. How the revenue is spent keeping the long term grwoth in mind.

The Deputy Chief Minister argued that even developed countries like USA borrows money so nothing wrong in borrowing money.

The reality is States debt is over 20% of GDP which is close the maximum allowed by Central Government which is 25%.  Any downward trend in state economy or additional borrowing will break the limit easily. At the current debt level it works out Rs15,000 per individual.

As my mentioned in the previous blog, the Government revenue is spent on welfare and other fixed costs such as salaries. The borrow money for all the development projects. This limits the number of projects and critical projects are moving slowly.  This is not a healthy trend. General practice is to make some investments from revenue and borrow the money for rest. It is also important to make sure the projects pays for itself from its revenue. Government may able to subsidize portion of the regular expense based on the project.  This Government wants to make money for their family and policies are framed around it. It is unfortunate.

The Welfare projects implemented by this Government are short sighted and questionable which I am planning to cover in coming week.

Ratan Tata Letter

Ratan Tata was leading business and highly respected person in India. When he mentioned about the alleged bribe asked by Union Minister for starting an airlines and  forced him to abandon the project made me proud of him. It all started changing when the  Nira Radia tapes was leaked.

Indian Express released the hand written letter by Ratan Tata to Tamil Nadu Chief Minister M.Karunanidhi.

The letter was written on November 13, 2007 about five months after Dayanidhi Maran was forced out. of cabinet. There were reports that Dayanidhi Maran wanted 30% stake from Tata Sky DTH service at par value for Sun TV. Obviously Tata was not happy with this demand and was being cornered. The Karunanidhi's internal family fight forced Dayanidhi Maran out of cabinet which came as relief to Tata.

A. Raja was appointed as Telecommunication Minister as successor to Maran. This was great relief to Tata. Ratan Tata wrote this letter praising Raja less than six months since Raja took over the new role in Sanchar Bhavan. Certainly this is a great relief to Tata and DMK internal family fight helped him as well. In this letter Tata praised Raja saying "rational", "fair", "action-oriented" leader. He went on to say, on most part Raja's policies on spectrum are "legally sound" and "rational". (We now know rational to whom and how much it is legal).

Ratan Tata also praised Karunanidhi by saying, the history praises the vision, creativity, high growth achieved by Karunanidhi and his party. (The Vision is to make money for themselves, Creativity  in investing the looted money, high growth in Kalignar TV). Tata mentioned that DMK possibly can take credit for the great achievement and significant contribution to the country (Certainly Rs 1760000000000 crore loss to exchequer is great achievement and reinvesting them in other sectors through back channel is significant contribution).

Ratan Tata praised  Karunanidhi for his great vision (may be Free TV which is expected to help Tata Sky) and great equity (may be refering to Dalit card to support A.Raja as Judicial fairness ).He also confirmed that Raja works under the direct instruction of Karunanidhi by saying "can be delivered under your leadership by Mr.Raja". He also requested Nira Radia to deliver this letter in person.

It is very clear that Ratan Tata is happy with Raja and do not want Dayanidhi to get back in Sanchar Bhavan. It is obvious that Tata lobbied for A.Raja since it benefited in 2G spectrum and want to keep it that way. Tata gifted Voltas land to Rajathi Ammal to achieve this goal. I hope CBI extends his investigation to Tata group as well.

Your comments and suggestion are most welcome.

Kalaignar TV - Unanswered Questions?

A.Raja arrest has given a new dimension to 2G spectrum scam. Media reported 2G spectrum money invested in Kalaignar TV and CBI is investigating the money trail. In my view this goes much beyond this and proper investigation will bring them out. Here are some unanswered questions.

1. Kalaignar TV went live from concept (to live) in less than four months. Is it possible without misuse of power? (Note that Maran resigned from Cabinet on May 16, 2007 and Kalaignar TV inaugurated on Sep 15, 2007) It is also important to note that A.Raja was replaced as communication Minister after Maran's resignation.

2. The initial investment made to Kalaignar TV is mere one crore rupee with Dayalu 60%, Kanimozhi 20% and Sharad Kumar 20%. Is it sufficient capital? Where did they get the rest of the investment without equity interest? If they acquired non secured  loan and what the loaners got in return?

3. Nira Radia alleges that Maran brothers paid 600 Crores to Dayalu. Maran brothers haven't denied this yet. Is that money found the way into Kalaignar TV?

4. DB Realty funneled money to Kalaignar TV through three legged transactions of 294 Crores  for 30% stake which was latter converted to non secured Loan in 2009-10 which was paid back. Note that 294 Crores figures is reported by various media in wide range of 210 crores to 294 crores). DB Realty is beneficiary of 2G spectrum should be noted here. Why is this?

5. The 30% stake for 210 Crores (lowest number picked here) puts the Kalaignar TV value at 700 Crores in 2009-10. The deal fell through because they could not reach the agreeable price as per report. It may be because the valuation from Kalaignar TV side is much higher. This means one crore investment grown over 700 folds in two years time. Wow, how may of us will get this opportunity. In general, it takes few years to see any profit in high capital business like this.

6. Raj TV helped them to put together the infrastructure. They did not get any equity stake. What Raj TV got in return?

7. The Kalaignar TV bought the Rajinikanth movie "Sivaji" in May 2007 for 4 Crores even before TV was inaugurated.  They bought Kamal movie "Dasavatharam" in the same year for similar amount. This is again with One Crore initial investment.

8. Kalaignar claims he owns only the house in which he lives. Dayalu Ammal is a house wife. If Karunanidhi did not provide her money, where she got the money for investment?  Is it a Benami transaction? If so for whom?

9. Karunanidhi spent lot time defining the programs. If he is not having any vested interest, why should he do that. Chief Minister role is highly time consuming job and requires lot of time to administer. Is he investing time for his personal/family not focusing on public interest? Is it ethical even if it is legal?

Tamil Nadu - Debt Load increasing

Tamil Daily Dinamalar reports that state debt reached One Lakh Crore. This is not larger than 2G spectrum loss but gets alarmingly closer 25% of state's GDP which is the maximum allowed by Central Government. The sad thing is DMK Government wastes its revenue for freebies and borrows heavily for any development. Growing debt will eventually increase borrowing cost and hinder the future growth. This could be painful.

Let us see  the debt load for past few years.

2009 debt -  74,858 crores

2010 debt -  89,149 crores

2011 debt - 1,01,628 crores

 The major revenue sources

Liquor tax - 7,508 crores

Petrol tax - 6,000 crores

Commercial tax - 26, 851 crores

Stamp duty - 4,096 crores

Motor vehicle Tax - 2,400 crores

Other Tax - 41,438 crores

Non Tax revenue -  4,101 crores

State share from Central - 10, 401 crores

 

The total revenue is about 1,02,795 crores.

The Government spends about 51% of its total revenue on salaries and pension alone. This is pretty much fixed cost and cannot back down on this. The rest of the money is spent on Free TV, Free Gas, One rupee rice, Pongal gift, Free electricity,etc.

The Government spends money on Karunanidhi dream projects such as new assembly building, Housing for cine workers (BTW, it is free),  World Classical Tamil Meet, etc. The Government heavily borrows for visionary projects such as Metro Rail, Oganakal Water Project, etc. This restricts Government ability to borrow further and current projects move slowly. This also impedes any new project which could be beneficial to state.

The unfortunate fact is current Government spends its revenue recklessly without any longtime vision. (There may  be  family financial goal to reach) If the  trend continues, the debt could easily double (2 lakh  crores) in next five years with a conservative estimate. This will happen without any significant growth. This will be disastrous to the state welfare. The only solution is fix the mismanagement of Government funds which will  include some painful decisions.

The current five year plan mandates the following

Overall GDP growth of 9%

Agricultural related growth 4%

Industrial growth 9.2%

Service sector growth 10.1%

20  lakh new jobs.

None of the above goal achieved towards the end of 4th year of current five year plan.

It may be interesting to compare how much Karunanidhi Family assets grown while Government is borrowing. We should also consider how much wealth is accumulated by those MLA/MP/Ministers during this period as well.

Can the public wake up and change the trend?

CVC appointment

The Prime Minister and Home Minister recommended P J Thomas in spite of pending criminal case against him.The Opposition leader registered her dissent against the appointment in selection committee meeting.  So far Central Government defended the appointment as usual. Recently Attorney General G E Vahanvati told that Supreme Court that selection committee is not presented with the facts during their review. I am not sure whether AG things Supreme Court and Citizens are dumb.

It is unbelievable that selection committee will review the file without all the facts in front of them.It is common practice that Service Record of individual official will be reviewed for even a normal promotion. It is unbelievable this was not presented to the selection committee. In a ethical selection process, P J Thomas name should not even been considered for this position. The Home Minister and Opposition Leader confirmed they discussed this issue. Will Central Government will ask AG's resignation or court will condemn him for providing false information to SC? He should be punished for misrepresenting the court and larger public.

Home Minister confirmation of Opposition Leader dissent shows that Prime Minister and Home Minister was keen in appointing him to cover up 2G spectrum. From Nira Radia's tape and other sources clearly shows Dr. Manmohan Singh is a dummy Prime Minister controlled by Gandhi family. He was not able to make his own decision on any key issue which was obvious in 2G scam. Whether  Prime Minister and Home Minister acted on their own or not. They are responsible for the decision. They should resign for making this poor choice. At least they should fix the problem by asking P J Thomas to resign. In case if he refuses, the cabinet should recommend The President of India for his removal.

In the future to avoid this mistake and embarrassment, (should be followed in all constitutional appointments)

1. The selection process should be openly vetted before it goes to Selection Committee. This could be done by Group of Ministers or Parliamentary committee.

2. The Selection Committee (comprising of Prime Minister,Home Minister and opposition Leader) should select the individual on consensus basis. i.e. The decision must be unanimous.

3. When the unanimous decision is not reached, it must go to Parliament for confirmation for simple majority at least. This will give opposition leaders to register their concerns in open forum.

I hope someone pays the price for this mess.

Free Color TV - Receipients

 The electronic waste cannot be thrown out in garbage particularly television sets without proper care. This  could contaminate the environment and hazardous for individuals handling it (particularly if it is not properly handled). I was searching google on recycling television sets. I landed here.

The following paragraph in the article captured my eyes.

"By December, the DMK government in Tamil Nadu hopes that around 1.63 crore households would have received free colour TV sets, implying that more than six crore people would have benefited. This is nearly 90% of state's projected population of 6.8 crore". This costed exchequer Rs 4000 crore.

Typical life of the television set is 7-10 years. It will take at least Rs500/- (this is very conservative estimate and it costs over Rs 1500 in wester countries) to recycle each television set properly. This will cost Rs. 815 crores to recycle those television sets. Who is going to pay for this? Government or pubic? If it is not handled properly, we are waiting for huge environmental disaster in Tamil Nadu. The cost will be double if you consider the privately purchased TVs.

Over 70% of the cases, the Government distributed color Television is second TV to the family. The Times of India article highlights this. As per original plan, it was meant for people who did not have color TV. In reality, I have seen people who are Engineers in Government, Teachers (both Husband and wife work, kids are working in IT), Bankers who fall under upper middle class are receiving these freebies (BTW, they all have larger Color TVs or LCDs).

This money could have better spent if it was invested in power generation making electricity accessible to more people for more time, distributing energy efficient lamps which could alleviate demand, provide better education for kids, clean water, etc. It is sad to see Government spending money inefficient way to cause another environmental disaster.

Wake up Tamil Nadu. Otherwise your kids and/or grand kids will pay for this in terms of their health.

Tamil Nadu Assembly Election - Alliance in Making

Tamil Nadu election around the corner in May 2011. Except in 1989, political alliance played a critical role in deciding the winner for past three decades. This time will be no different. DMK is spending lot of money on welfare programmes. In my view those were not welfare programmes instead freebies for luring the vote. Opposition is taking the corruption in their hand particularly 2G spectrum scam.

In Tamil Nadu, AIADMK and DMK are the two major parties. Each is having about 30% vote. One of the two party can pull about 5% more (about 35%) based on various factors. I believe anti incumbency and 2G spectrum scam will be advantage to AIADMK this time around. Last assembly election, free Television set tilted that advantage to DMK. I would not discount DMK yet as four months to election and trend could change. It is clear that, these two parties will be leading their respective alliance.

AIADMK already brought in CPI, CPI-M, MDMK and other small parties in their alliance. DMK currently has Congress and VC and I expect them to stay.

DMDK and Congress are two other major parties has some significance throught the state. DMDK already made stance against DMK. With this backdrop DMDK can join AIADMK camp or form a third front. Forming a third front will be sucidal unless it brings Congress onboard. Even with that, they cannot win the majority but can play spoiler role in splitting anti-DMK vote. Based on Vijay Kanth speech, this is unlikely. This will also discredit him in the future. He is likely to join AIADMK alliance and may be trying get maximum seats from them. My sources are confirming this.

Congress did not contest election (except in 1989) on their own in past three decades. During this period, its cadre base is eroding. It is party of more leaders and may have relatively stronger  presence in southern districts. If they go alone or put together its own alliance, it may be a repeat of Bihar in 2010. Considering DMK strength in paraliment, it is unlikely to break away from DMK. DMK support is more important in the backdrop of Andhra Pradesh crisis. Their were indications from local congress leaders that there may be breakaway from Congress to support AIADMK like 1996. I do not beieve that will happen. I do not expect smooth relation between their party cadres at local level though. Congress and DMK need each other in post election whether they win or not. Having said that, Congress will use its 2G scam to get more seats and cabinet positions if they win.

PMK is another force which could poll about 3% vote in northern Tamil Nadu. They were loosing their base because of frequent switching of side. They lost all the seats they contested in 2009 election. Karunanidhi said, they signalled PMK to join DMK. In return Ramadoss, PMK leader said he did not receive any signal. As per sources, they are keeping the channel open from both sides. It will be difficult to predict where they will be at the end. My gut feeling is, they will be with DMK or left out (which I prefer to teach them a lesson).

As expected, DMDK joins AIADMK alliance and barrning any unforseen event, I beieve they will win 150-170 seats. DMK alliance can win 40-60 seats. DMK alliance expected to project "Election Manifesto" as their hero and spend lot of money. DMK government started pushing their welfare programmes beyond the needy people to get the votes. We need to see whether it can be converted to vote at the end. Inspite of all this, there is anti-incumbency trend but can change as we near the election.

Fisherman killing - Government inaction

India wants to be a developed nation and one of the super power by 2020. It is excellent ambition and every Indians should work towards it. It should be recognized, we are growing our economy which will help us to get there but not without any risks. Indians should recognize we cannot achieve leadership position just with the help of economy. We should develop our diplomatic influence and power. Unfortunately we are lacking in that.

We are having border issues with China such as giving stapled Chinese visas for Kashmir and Arunachal Pradesh residents. Recent Chinese incursion into Kashmir played down by our military and Government. I am not suggesting we should go for a war but we need to make our position clear. If needed, we should issue similar visas to Tibetans for the same reason. We need not say about Pakistan. Sri Lanka is being added to this list.

It became very common for Sri Lankan Navy to shoot at Indian fishermen particularly Tamil fisherman. They arrest and torture them for months before deporting them. Indian Government has responsibility to protect its citizens. Our Ministers both in Central and State made comments such that putting onus on the fishermen (One such comment was fishermen entering Sri Lankan waters to catch large amount of fish and paying their price). These fishermen are not sophesticated carrying high tech gadgets to know the borders. It is International law that these fishermen should be treated with dignity and returned to their mother land. Instead they shoot at fisherman for threating eventually killing some. They used LTTE name (In my view LTTE should go but Tamil interest must be protected) in the past for this. We cannot accept those excuses anymore. It must be firmly dealt with.

It is widely known that we provided arms and funds to eliminate LTTE. Later we promised crores of rupees for Tamil Rehabilitation. No progress so far. Sri Lankan Governments is not keeping its promises on rehabiltation. China and Pakistan now has larger interest in Sri Lanka which  is not good for India. It is time for India to use its diplomatic power to achieve our goals. Indian Government should make it clear that it is not acceptable to kill or torture Indian citizens. We need to protect the fishermen livelihood by providing proper protection through our coast guard and navy. This is mechanism used by China in South China sea and other developed nations elsewhere.

Tamil Leader Karunanidhi sent a telegram to PM for his intervention. In his world, this is very urgent otherwise he would have written a letter. In this electronic world, email and Fax is much faster. I hope some one around him will explain about these technology (He has foremer IT/Communications minister around him for that). For Karunanidhi, this is not as imporatnt as getting a Cabinet position or threat to his family bussiness empire. In that case he would have deputed DMK ministers or leaders to meet Sonia Gandhi or Dr. Manmohan Singh.

Jayalalitha should not stop just issuing a statement. She should fight for people rights. I do not believe retaking "Katcha Theevu" is the solution. Rather we should come up with safe zone for fishermen. In cases they sail out of the zone, we should have proper mechanism to deal with this.  It is time to unite (across political spectrum) and protect our interest.

Doctorate like Freebies in Tamil nadu?

Traditionally Honorary Doctorates are awarded to the distinguished people for contribution in their field or for the public service. In Western countries it is also awarded for individuals who made significant contribution to the institution which awards it. Now it is being awarded to individuals who do not fit any of the above criteria.

We started seeing this degree being awarded to political leaders couple of decades back.  In my view it was not correct but can be justified to some extent. I would say individual likes Anuradha Koirala , Narayanan Krishnan and many others deserve this. They were changing life of many individuals for good. Our Indian Politicians public service is typically self service or family service and would not meet stricter rules.

The recent recipients of Honorary Doctorates took it to another level. Dr.  MGR Medical University conferred honorary degrees on seven doctors, including the CM and Governor's physicians. The Madras High Court questioned the manner in which it was decided. Chief Justices observed  "Merely because one person is a private physician of the governor or a private physician of chief minister, he cannot be awarded the degree. We can't accept that," when hearing public litigation petition filed by advocate G.Velu.

I do not know how to say this other than cronyism. Appropriate regulatory authority such as UGC should implement tougher rules. Otherwise, ministers, MLAs, MPs, mayors, councilors, ward members, their doctors and others should able to get the Honarary Doctorates like freebies.

Where Growth can go wrong?

In the past decade (and still), India was one of the fastest growing economy in the world. It increased number of people in the middle class category and per capita income went up as well. This growth comes with the cost and Government should focus on mitigating them.

The growth spurred real estate boom. This real estate boom shrinks the cultivable land and lakes. This reduces the food production and eventually result in food shortage. Government should work with scientists to produce more with lesser cultivable area and it should be multi faceted approach. I do not see this happening. We are reactive rather proactive in this aspect. The shrinkage of water storage system like lakes negatively impacts ground water. The construction boom created huge demand for river sand and we are using them at much faster rate from river beds than we can replenish. This will significantly reduce Ground water as well. It is time to look for alternative construction material which are green and cost effective.

The growth spurred the usage of technologies. For example, Mobile phones, Televisions and other electronics usage grown exponentially. These waste ends up in the land fill or at smelters. Either one is not a good option. In fact Smelters engage children in the smelting process. Smelting Electronics produce many toxic gases. This pollution will create health issues among the public. Many developed nations puts limitation on amount in those products through regulation and have a Waste Management plan. (I am planning to blog in detail about this later)

We all got used to power cut. The focus so far on electricity production. No doubt we need more capacity. We can focus on consumption side as well to get quicker result. We should encourage people to use energy efficient lights (Government can subsidise and better than freebies) and electronics. I do not see any promotion in this regard from the Government.

The infrastructure plans are short sighted. We plan the capacity 5-10 years in mind, by the time the project is complete, the capacity will be reached We should spread that 25-50 years in mind. Many of the British constructions are still functional exactly because of that.

I pointed very few major issues but there are lot more. I hope someone from Government takes it seriously and work on it.

Are we marching towards Hyperinflation?

Indian Commerce Department announced food price index jumped to 14.4% in the December 18, 2010 week. This is accelerated from 12.13% from previous week. During the week of Dec 18, Onion is up over 40%, Vegetables up 29%, Fruits 21%, egg, meat and fish up by 20%. The concern is whether food-driven inflation will spread to wider pickup in inflation. I would say not yet, but there is greater risk now. Inflation can get into vicious cycle.
The developed economies are growing in anemic phase. The Asian economies, particularly China and India are growing rapidly. When there is a rapid growth (with imbalance between developed and developing nations) there will be more money supply resulting in inflation. We were seeing that in real estate before the Lehman brother crash. In Asia, real estate is recovered and it is closer to pre-crash level. Now we are seeing food inflation. Food inflation is politically very sensitive and could bring down Governments. Couple of weeks back, China took actions to curb its food inflation as well.
The political leadership is trying to attribute this to excessive rain this year. India banned the export of Onions and started importing from Pakistan. The million dollar question is whether it is seasonal. I strongly doubt it. There is fundamental shift in the economy for last two decades. We were moving away from Agricultural based economy into Industrial based one. The agricultural lands are being converted into housing plots and industrial areas. Many lakes (particularly around Chennai) are now industrial complexes. In nut shell, the cultivable land is shrinking. The cost of labor (due to industrialization) is rising. The agriculture is not profitable and people are moving away from that profession. On the demand side, our population is growing and per capita income is increasing. This drives the demand. This imbalance needs to correct. The outcome will be increase in productivity (produce more quantity with less resources) or reduced demand or combination of both. There is no significant focus on productivity. People are scared about genetically modified produce as well. The Government is trying to control the price by increasing supply through import. The current need is "Government should come up with long term plan such as Green Revolution and it must be multi faceted approach"
In case,  the inflation spreads to other core components. We should watch for this.

• Indian currency will depreciate. Will increase the cost of import.
• People will invest more on hard assets such as Gold, Real estate, etc.
• Interest rates will go up, reducing money supply. This could push economy into recession.
• Bond prices will fall pushing interest rate up
• Could significantly decrease the purchasing power.

I have great respect for Dr. Manmohan Singh as an economist. I am confident he will take necessary measure to curb inflation without sacrificing the growth. Failure to do so now will lead to greater inflation risk. That could potentially bring down the Government.

GSLV Explodes - A setback for ISRO?

It is disappointing that GSLV explodes shortly after lift-off.  Many websites and newspapers titled the news as "Blow to ISRO hopes", "Spectacular failure", etc.  In this case, those editors conveniently forgot the challenges in science, engineering and technology behind this. The scientist, engineers and other individuals make lot of scarifies along the way. Many of the work in ISRO for their passion and dream not for mere money.

I am confident people involved in this will review the data, identify the problems and make it better next time. This is the period in time we should support them. In my view, failure is step forward for the success.

There are indications that some people trying to tarnish the image of ISRO saying, Rs. 150 Crore lost in this endeavour. I would tell those people this is nothing compare to 2G spectrum scandal (Rs 176 Lakhs crore). It is better spent than spending money on free TVs. For India's growth, satellites are one of the corner stone. We should see this as an investement. I would also point to them, ISRO will do its best to test everything before launch. There are certain things cannot be tested on the ground. We should give benefit of doubt to ISRO and support ISRO on this difficult time. It is not new to ISRO and I am pretty sure ISRO will come back with better vechiles and satellities.

Here is video from youtube.

Free Color TV - Is it a best use of Government Money?

In the last Tamil Nadu election, DMK Manifesto was the hero (at least that was the claim). It certainly contributed to DMK's victory. Many of us saw pendulum swinging from AIADMK to DMK after release of this manifesto. The DMK kept his promise distributing free Television sets. Conservative estimates put the total cost for Free TV distribution so far north of 20,000 cores.

On top of this, Government spends on money on subsidized rice, free houses, so on. Let us dive into details.

The Government needs to generate revenue to meet this obligation. There are not many ways to generate this revenue. Government gets money from Central Government which is collected through Income Tax, State can levy Sales Tax, Commercial Tax, etc. The next option is borrowing money. Tamil Nadu given its position in Central, can do some arm twisting to get more than its fair share. There is a limit for this. The second option is increase the state taxes on various products which are sold in Tamil Nadu. Ultimately Tamil Nadu consumers pay this. This is happening. The major chunk of money comes from Alcohol sales. The next option is borrowing money from various sources. If we do this beyond our means, Tamil Nadu should go bankrupt when it cannot meet its obligation. One hopes that Central Government will rescue the state if that ever happens. If that ever happens, it is making other states to pay for us. This could create heart burns in other states. The bottom line is public needs to pay one way or other. It is not REALLY FREE in that sense.

There are lot of negative consequence on the society. The first and foremost is alcoholic addiction in the society. In general, Governments tax more on alcohol / tobacco and divert the fund to fight addiction and for educating public. Here using it for addicting public on freebies. This money can be used for various things such as building roads, spend on education, address power issues by building new plants to increase capacity, provide clean / running water, toilet facilities and so many things. This should be taken to public in a correct way. At least one courageous person started this. Hats off to him. (http://nallapathivukal.blogspot.com/2010/12/blog-post_18.html)

We all know Tamil Nadu politics runs on cutting (kick back is the appropriate word). The standard rate is 5-10%. Applying the same thumb rule, we are talking in the range of 1000-2000 crore cutting. This may be nothing compare to 2G scandal. Spending this money on infrastructure will bring in more industries and hence jobs, jobs will bring more government revenue. The cycle continues.

This can be used to train people on trade which can fetch better jobs. Government also should preserve the agricultural land otherwise, it will lead to food shortage. This is a different topic to tackle.

This is not the end, DMK has long term vision on this. That is the exactly the reason why they wanted communication ministry in central. DMK Leadership and his family wants to control the whole media in the south. Free TV paves way to capture market share in DTH and cable networks.

Let us encourage people like Mr. Vijaykumar (Read the below blog to learn more about him) and steer the government away from disastrous path.


Thanks to http://nallapathivukal.blogspot.com/2010/12/blog-post_18.html

Did Ratan Tata influence policy or cross the line?

First my Disclaimer, I great admiration and respect towards the Tata organization. I commend Mr. JRD Tata contributions to Society and for the nation. I have great respect for Ratan Tata for his business leadership.

Recent leaks from 2G scandal tapes links Ratan Tata to the certain activities which are not inline with company policies. Let us go through them as we read from various reputed news outlets.

There were rumors few years back that Mr. Dayanithi Maran (then Communication Minister) threatened Mr. Ratan Tata over Tata DTH. It may not be in their vested interest to let him become Communication Minister again in new UPA government. (http://allaboutpolitics.blogspot.com/2006/05/dayanidhi-maran-vs-ratan-tata-question.html)

In this context, if you listen to Nira Radia - Tata conversation, Tata is comfortable with Raja in comparison with Mr. Maran (DMK wanted to retain this portfolio). Ratan Tata wants to make sure he gets the minister whom he can have influence. This is where thinks goes out of control. It is not ethical/legal to influence PM to appoint a specific individual to cabinet and assign specific portfolio. The primary motive is take advantage of the individual for their own benefit. (Here is the transcript released by outlook India. http://www.outlookindia.com/article.aspx?268369)

There are rumors that Tata negotiated a deal to sell prime land in Chennai to Tamil Nadu Chief Minister's wife Rajathi Ammal (or some one she agrees to) for building commercial complex. (http://nallapathivukal.blogspot.com/search/label/Kanimozhi)

I request Mr. Ratan Tata to come out and explain to his shareholders (if not to broader public). He is not a private citizen like most of us. He needs privacy but on these issues. He certainly owes answer to his shareholders.