Not the Riviera?

Attached are some good reasons to try and cut pollution. For a few days last week early rains and a reversal of the prevailing wind direction cleared Bombay skies to an extent I have not seen in 30 years.

These are views from my apartment - the mountains in the background appear to be the ghats - but that cannot be, can it?

Time to raise fuel prices?

A Foretelling

A glance at the IPL scores will tell you a lot about the India to come. The teams of two of the richest owners, Bombay and Bangalore, are in the cellar and it look likes they have no chance of making it out of there.

Does this mean anything for the scores of businesses that at least one of them is trying to dominate? Will Reliance Retail be in the cellar of the retail business? The entertainment business?

Frankly, I have not been amused by the land grab mentality that is driving our largest groups, driven entirely by their unequal access to capital. The reason that the government and the RBI ought to free up banking is to allow the best retailer to triumph - not just fat cats. But that would dent the contribution train, as we as the job patronage train.

The great thing about the IPL is that everything is played out in double time with the result known in 45 days. Business failures will take much longer to figure out but the result will be the same. The Ambani machines cannot triumph in every sphere and some of the biggest and best PE opportunities of the future will the divestment of these businesses. Let us hope that the founders make their initial attempt truly gold plated so the secondary buyer has lots to play with. And let us see if taking the cap off players salaries will allow the Indians to recover next year. Or will the IPL, like business, have just too many good players for one man to own and will the format itself be too unstable to allow a star team to win. I bet on the latter.

No Gasso in the Carro

The rupee has started its reversal a bit quicker than I thought. The next instalment to this story will be a shocking deceleration of industrial growth and an acceleration of inflation, probably peaking at over 12% around Diwali. In the past, periods of high industrial growth have cratered because of overcapacity driven price cuts and low profitability. This time growth will crater because of no capacity. Unless the government moves fast to hike the price of oil and up the price of electricity, while making both available to those who can pay, industry across the country will grind to a halt. Already electricity boards including the formerly almighty GEB are refusing new connections.

If we really do not get our hands on either electricity or diesel and if the country faces de facto rationing the industrial production will go for a toss.. A low tech business that does not produce for a day a week loses less than 1/7th of its turnover given the inefficiencies of most small Indian companies. A day off for most modern factories built under the liberal regime of the last 5 years loses far more than one day as getting a 24/7 factory back to work takes a day in itself; add up losses from daily power 'tripping' and you could very well have production losses of over 20% of capacity.

Large companies can afford to pay a lot more for electricity, making up for the cost on higher productivity, and that is what they in essence do by running on diesel for 1 or 2 days a week.

Many companies can survive, though with bleating customers, even on INR 70/litre diesel, but will the oil marketing companies have access to the cash needed to lose 100MM USD a day (or more) in order to continue to supply? Or will the credit crunch make banks warier than in the past about lending to sick puppies, whether or not they are government guaranteed? You can be sure that what comes in will be doled out in a 'people friendly' manner so there will be a nice black market created.

The chance of the world's shortest Sardar and his Milanese Sardarni seeing out the term is zilch because waiting will merely subject them to further beatings at the hands of the public and messrs Wretchedury and co. A resignation around August means that campaigning at least will be in generally pleasant weather - absolutely necessary for the gerontocracy who rule us.

Though making the b______ face our music in June in UP would show them what they have bestowed on the country.


Till then expect to see diesel shortages, power cuts and general hell for smaller manufacturers, which will take a nice bite out of GDP.