BUDGET - 2010

Budget definitely takes much of the news and newspaper section leaving little room for abused, drugged, raped, abducted and murdered Indians. Such is the phenomena or the euphoria created around the Budget. Over the past few years, Budget just became an annual exercise esp. in this era of coalition politics, when the Govts’ purposely kept the important decisions outside the preview of the Budget and made it merely a Profit & Loss Statement than an Annual Report.

The only Budget that financial pundits remember or would like to think are 1991 Manmohan Singh Budget, 1998 PC Budget and of course, Yashwant Sinha from BJP had been the cynosure for drawing flak from all the six corners of India. The lackluster annual exercise by Pranabda during last year, the analysts and experts had not built any hopes. Will this Budget be remembered for the staged walk out by the Opposition from Lok Sabha, perhaps first or something else? I really liked the fiery style of Sushma Swaraj and her command over Hindi and the way she made her points. As the saying goes, success honours you and destroys you at the same time. She is currently redressing to the later part of the saying. The Opposition walked over one rupee rise in oil prices. It will add to the woes of the inflationary pressures. But then market expected to rise by few rupees, so it was still a breather. Moreover the Govt. should always be thinking in favour of OMCs (Oil Marketing Companies).

Yes the food inflation and food security is one of the biggest concerns for India of today and will remain tomorrow and not the growth or the GDP. 60% of our economy or India is dependent on agriculture, yet we are not in a pitiable state either. If your battered vehicle cannot give improved mileage, then we reduce the amount of petrol which goes into running the engine. But our Govt. has tried to undertake something better. They have increased the tax slabs for individuals, which in other words, increases the real income in our hands.

But this Budget is perhaps one amongst the best with the caveats, Coalition Govt. and the Financial Crisis. The Govt. has been juggling with the lower demand of products and services, lower exports, rising inflation, rising fiscal deficit and to top it all, they had slashed tax rates, duties, cess’ applicable on sundry and all and sacrificing income, still they are able to lower the fiscal deficit and feed the poor developed or perhaps poorly managed schemes for the poor. I liked the renewed focus on Agriculture to bring something positive in this space. Hope they are able to pull this off. Because in India, all the good things are virtue of our politicians and all the bad things are blamed on the monsoon.

The FM made a point throughout his Budget speech to usher in a process of inclusive growth. The inclusive growth can be achieved by bringing the economy back on growth path with GDP of 9 % per annum and to take the government back on the path of fiscal consolidation.

Private players will be issued Bank Licenses. In 2002, RBI cleared few licenses and now after a long lull they will be issuing licenses. Reliance (non-reliable) Bank, Singh (Religare) Bank, Birla Bank, Modi Bank, India (IndiaBulls) Bank some of the leading financial services/NBFC conglomerates will be vouching for that slot. As a consumer, it will become more harassing to entertain few more useless marketing calls from few more useless service providers. At the same time, I hope something better from these new-age industrialized houses to better the customer experience.

Direct Tax Code, General Sales Tax Regime may become a reality for FY 2011-12.

Markets cheered and roared for Pranabda’s efforts which touched an intra-day high of 350-400 points (2 %) at the conclusion of Budget speech and still managed to close at 175 points (1 %) in positive.

With the hope to leapfrog the growth rate of Indian economy in double digits, Pranabda concluded the Budget 2010-11.

Flying on the dusk or Landing into the dawn

Last few month newspapers were flooded with the news of poorly managed Air India and questioned everything for the existence of airports, airplanes, Air India, Indian Airline, the merger, the airline industry globally and in India, the low cost model, full service carrier, babudom, Naresh Goyal, Vijay Mallya, pilots, stewards, airhostesses, the tax structure, regulatory structure, fare structure, running of airline.

Why the airline industry is in such a bad shape? We cannot blame the Indian carriers for this, globally it has been the case of airline industry. Except for Virgin Airlines, which has been profitable since its inception barring post 9/11 period. But can anybody figure out the elimination of airplanes from our lives. The world is trying to assimilate across geographies because of information, communication and logistics. Logistics is featuring because of the airline industry. Why Government’s globally are not trying to focus their attention on airline industry is a question unto itself?

Pilots, one of the elitist lots of the industry have formed an association and guild to protect their interests because of the wavering health of the giant airline companies. They have grounded their demands and doomed the airline company on 8th September 2009. This is seriously a terrorism as Mr. Naresh Goyal puts it. Although he is one of the most cunning and shrewd businessman in India, who pocketed (in his personal accounts) all the proceeds of the IPO and that too legally. Two colleagues are fired and we go on strike. Oops, its not strike but it’s a mass leave. Although if we dig into the story and then the tide may turn on the other side. I don’t why, but Mr, Naresh Goyal lands himself up in such precarious and teething issues. Earlier one fine day he gets up and fires 800 employees and then in 48 hours, he realizes he was wrong. Why because mother advised in dreams not to do so? Whose mother came to dreams to cover up on the bomb you have fired, only Allah can tell. Again the manner in which employees were fired was a recipe of disaster.

(Should he turn his back and then performing the gesture)

I don’t know, if you call that a good and smart business-man. Certain business decisions are required and are harsh and not everybody likes them. But then there’s a way to approach things. I am afraid, no mother or father came to Mr. Goyal’s dream to tell how to do things in a business. He can definitely author a book, “Seven Habits of Highly Successful Foolish People”.

Other airlines are also treading the same path. Our own sarkari airlines company needs to do few of such foolish things so as to not suck people’s money from Govt’s coffers. But then they say God exists, that is why India is healthy and growing.

Govt. is struggling to juggle and break the coterie of the Union of Indian Airlines. The Union has held hostage the company’s operations and coffers. Some of the employees have the highest level of salaries and perquisites paid by Govt. of India to any officer in any rank in its departments, ministries and even the chief executives of its Navratna.

(Govt. is representing the mascot of Air India by bowing to employees dacoity skills)

Reading the above piece, one feels that employees are the biggest concern of the airline companies in India. But that is not the case except for Indian Airlines, who employee per airplane is more than 500 compared to global standards of 200. But the industry’s concern is the tax structure applicable to the industry.

On August 18, the entire industry wanted to ground the airplanes for a day and the loss of the same to the economy and business would have been in few hundred crores. But luckily IndiGo pulled out of it and hence the attempt failed.

Should Govt wait for such act to be implemented to take further actions? Why is it that when we push ourselves and others to extreme we can expect some result?

A typical Delhi – Mumbai flight ticket structure is:
Fare breakup
Base fare Rs. 599 (18%)
Fuel surcharge Rs. 2,400 (71%)
Psgr. Svc. Fee Rs. 229 (7%)
Airport Dev. Fee Rs. 100 (3%)
Service tax Rs. 7
Service fee Rs. 30
Discount Rs. 4
Total Rs. 3,361

Base Fare is the money earned by the airline company.
Fuel Surcharge ideally should go to the petroleum company.
Airport Development Fee goes to the Airport Authorities of India (the owner of Airport).
Passenger Service Fee (for providing security) and few taxes left at the end land with the Govt. of India.

However indirectly a major chunk of the Fuel Surcharge goes to the Govt. via the petroleum companies.

The Govt. is trying different measures to keep Indian Airlines afloat. They are planning to inject Rs. 5,000 Crore of debt securities, equity securities to keep the airline afloat. Does it make sense to run an airline company by way of subsidies in the name of financial restructuring when we are not able to provide on-ground solutions for Indian junta? The urban class will say we pay taxes, Rs. 5,000 Crore is not a big deal against Rs. 60,000 Crore farm loan waiver, Rs. 30,000 Crore for NREGA and Rs. 10,000 for JNNURM.

A better idea that Govt. can look at – is not to expect any revenue from Aviation sector in India. It’s a huge subsidy burden that the Govt. is carrying on its shoulders. The cost of running and upkeep of airport infrastructure is huge and I am sure, the Govt. wouldn’t be recovering the operational costs for the same.

Add to the fact, the debtors that state oil companies (HP, BP, IOC) are carrying for ferrying passengers in the sky. Airline companies are supposed to pay the Fuel Surcharge to the Oil companies but the payments have been delayed in the past by over six months and oil companies carrying debtors to the tune of thousands of crores and had threatened Kingfisher in the past to pay or else the fuel supplies will be suspended. One can imagine the loot the airline companies are running on the exchequer. On the other side, the high taxes that Govt. has collected from aviation space will be shot as Oil bonds to petroleum companies and as restructuring for our very won Maharaja.

Does it make sense for Govt. to nip private airlines to keep Indian Airlines employees in happy spirit? The mess in the airline industry is in a way wrests on the high-headed Indian Airlines employees. The Govt. and the ministry needs to take the responsibility of the mess that they have created in the airline industry and Indian Airlines. The top management shake up, bottom management twirl up, top-down or down-top business model, no approach will work unless the attitude of the Indian Airlines employees goes through a massive shake-up. A stimulus package may be worked out for the industry in the interim phase till complete reform of the industry in terms of regulation and the working is defined. We should not be smoking bidis when we are talking about Cigars.