“When you reach an obstacle, turn it into an opportunity”
-Â Â Â Â Â Â Mary Kay Ash, Founder of Mary Kay Cosmetics
1.   What Inspired This Idea
I had just landed in Goa for a friend’s wedding and was welcomed with the news that I had
“When you reach an obstacle, turn it into an opportunity”
–Â Â Â Â Â Â Mary Kay Ash, Founder of Mary Kay Cosmetics
1.   What Inspired This Idea
I had just landed in Goa for a friend’s wedding and was welcomed with the news that I had been mistakenly assumed to be on an earlier flight. In the melee of boarding over 40+ people that had arrived on the flight (that I was noted to be on) and instead of calling me to check whether I had missed my flight or whether I would be boarding another flight, the “cool” wedding planner decided to assume that I was not attending (only if he knew that my friend would cause some serious body harm if I had infact done that).
So with the wedding venue almost 90 minutes away and the closest car atleast 60 minutes out, it gave me time to research whether someone had thought of something better than the manual process of making excel lists and ticking off who had or had not arrived for a wedding or a meeting even after RSVPing (yes, those that show up unannounced deserve to be waiting at the airport!). There were a few blogs from Bizzaboo and Plannerwire and the only thing that came closest to helping with event management was Eventbrite, but it didn’t cover all the aspects I mention below.
I like Tony Fernandes. He is the CEO of Air Asia with a spunky attitude which has made him one of the richest people in Malaysia. Here is an individual that turned around an unsuccessful airline and has made it the
I like Tony Fernandes. He is the CEO of Air Asia with a spunky attitude which has made him one of the richest people in Malaysia. Here is an individual that turned around an unsuccessful airline and has made it the best low cost airline in the world two years in a row in just over 13 years! Then he challenged his fellow rival in the airline and F1 racing league, Sir Richard Branson, to a duel which he won and got Branson to… well this picture is worth a 1,000,000 words
Yes that is Richard Branson (right) in an AirAsia cabin crew uniform serving Tony Fernandes (left)
    He is also the owner of a the English football team, West Ham United, runs a group of budget hotels under the brand name, Tune Hotels and when he has time off from doing all this, he plays the Donald Trump equivalent in the Asian version of The Apprentice. About a year back, AirAsia teamed up with Tata to create a budget airline for the Indian skies under the name AirAsia India. Their pricing and business model that has made them so successful in South East Asia and which would be, in my opinion, a boon for travellers in India, was going to be implemented at the launch of their airline.
    Alas, Tony didn’t know that the same authority that decided to grant him a license to fly AirAsia planes in the Indian skies was also responsible for fixing the prices that an airline could charge on a flight! Last year DGCA allowed airlines to provide ala carte pricing to customers allowing them to opt-in and out of services that they would like to have during their travel. (A copy of that order is available here). At that time the move was welcomed by all industry players, the rules of the game were simple and the industry could finally start clawing back from the precarious financial position that they faced with a running net loss of over Rs. 10,000 crores for the last fiscal (as an industry).
    So when Tony decided to charge customers for check-in baggage – as allowed in the DGCA order and as charged to the 5.1 crore passengers carried on AirAsia flights in 2013, his executive team would have expected to jolt his competition but none of their probability analyses would include intervention from Big Brother, DGCA themselves! As per the order given on the government website there is no requirement for AirAsia to get DGCA’s approval to charge a particular fee to their customer as long as it doesn’t violate the checklist given in the order. From what I can understand, AirAsia India was within its right to charge its customer whatever fee it wanted as long as it was transparent and it didn’t interfere with the base pricing of the ticket – AirAsia India didn’t do any of those – so why did the DGCA intervene?
    To prove a point (what it is, will be a mystery) DGCA forced AirAsia to offer 15 kgs of free check-in baggage to customers and made it reduce pricing for other things too. Such myopic moves from the regulator would be one of the primary reasons why AirAsia’s plans to breakeven by October 2014 have now been pushed off to December 2014 (they don’t mention it most probably to avoid the wrath of the regulator). Tony Fernandes expressed his anguish to the Times of India calling his entry into the India Airline industry his “worst reception” and when such a statement comes from the 2010 Forbes Asia Businessman of the Year – it is time for us to be disgusted and appalled at the over-reach from the DGCA.
    On what authority (and research) did DGCA intervene in a company’s pricing strategy? Will they be responsible for repaying the losses created by the consequences of their actions or is it the responsibility of businessmen to cater to their whims and fancies instead of their customers?
    The DGCA would be better off monitoring the state of operations of an airline that has seen its cash balance fall to less than the revenue it earns for a day and infact has borrowed from travel agents to keep its engines whirring. They should get their babus cracking down on the predatory pricing charged to the customers wherein a full service airline like Air India and a no-frills competitor like Indigo have the same fare between two cities. Instead they are stressing out the new player that is doing what the DGCA should have been doing – breaking up this cartel.
    Was the DGCA sleeping when Kingfisher was racking up fantastic losses and not paying its staff or the airports or taxes or for fuel? It took them an age to decide on the course of action for the now defunct airline? What is it doing to recover that money or will us tax payers be subsidizing those losses too?
    Please DGCA it is time that you focus on what you can do right. You and other regulators and government authorities are better off governing not “ruling” the entrepreneurial class.
(This is my first post on a series of posts about the undue stress placed on entrepreneurs by an overzealous regulator and they not only make business difficult, in some cases they destroy ambitions altogether. Look forward to your comments and suggestions on this post and for what I should cover in future posts)
I must start this article by stating that I have been using a Blackberry for the past 10 years and I will continue to use one for the foreseeable future. It’s only using a Blackberry that I can punch out
I must start this article by stating that I have been using a Blackberry for the past 10 years and I will continue to use one for the foreseeable future. It’s only using a Blackberry that I can punch out a 3 page email in under 5 minutes flat and I still receive emails on my Blackberry faster than any of my friends and while my friends may make fun of my “oh-so-yesterday” device – I am not one to jump ship on someone so quickly.
So while I may not be in the market for a new device as of now, I eagerly look forward to new Blackberry devices, hoping, praying and wishing that they finally get their marketing plans right and give the market what it really wants. The company has been doing very well under interim CEO, John Chen, by focusing its efforts on the enterprise market, promoting its QNX platform and launching new phones in partnership with Foxconn at multiple price points in the overcrowded smartphone market as it looks at selling its devices to the 85 million strong community of BBM users to buy its phones (BBM is available cross platform now)
These changes have definitely helped the company’s fortunes as the struggling smartphone pioneer delivering Q1 results that have surprised the market and the stock rallied 34 percent in the month of June 2014. The company launched a low cost device in Indonesia call the Blackberry Z3 (which is now getting available in all markets) and has announced a partnership with Amazon that will bring the Amazon’s appstore to Blackberry and allow the enterprise device maker to focus on regaining leadership in its core market.
Blackberry’s India strategy for the pricing of its devices is bewildering and confusing though. First they launched the Z10 device in 2012 at the same price-point as an IPhone which almost guaranteed the failure of the devices launch. Later on, it priced the Q10 and Z30 phones at even higher price points (oddly the Z30 was priced at almost the same price as the Z10 when it was launched) which only led to a faster exodus of Blackberry’s customers to rival phone makers. However, the Z3 was going to be its game changer, I likened it to the Blackberry Curve that was an instant hit with young professionals and teenagers and expected Blackberry to launch that phone at the same price point it had launched this phone in Indonesia of under $200.
However, whoever did the research and decided the price point for this device be put at Rs 15,990 made a grave and fatal mistake. For starters Z3 is priced Rs. 1000 less than the Z10 device and Rs. 9,000 less than the Z30 device. A comparison between all 3 devices is available here and it is clear that the Z3 is going to cater to the mid to low segment of the smartphone market and with that assessment I agree with Anupam Saxena of Times of India and Nandagopal Rajan of Indian Express who have given the phone good reviews but complain about the phone being priced out of the market.
The Z3 at Rs 12,000 would have offered a very compelling and competitive case for those looking for low cost Android phones in a price sensitive market like India. Alas, Blackberry India has made another pricing and positioning error and this is extremely disappointing for a Blackberry enthusiast like myself. I request BlackBerry’s team to convene a meeting with its sales and marketing team (separately and then jointly later) and find out the acceptance of Rs. 15,990 for the Z3 in the market – they will be surprised and will be forced to react faster than they ever have before.
The verb "cross subsidize" as defined by the Oxford dictionary is "Subsidize (a business or activity) out of the profits of another business or activity." But what happens if that industry is facing the awesome prospect of losing $27 billion
The verb “cross subsidize” as defined by the Oxford dictionary is “Subsidize (a business or activity) out of the profits of another business or activity.” But what happens if that industry is facing the awesome prospect of losing $27 billion per year from 2017 onwards as reported by the World Bank? To put the number of $27 billion into perspective, it is equal to the entire nominal GDPs of Nepal and Zimbabwe… combined!
In my honest opinion the in-sync folks at Wikipedia have defined “cross subsidization” aptly, as “the practice of charging higher prices to one group of consumers in order to subsidize lower prices for another group.” When I read that definition is immediately reminded me of a heroic outlaw in English folklore, Robin Hood, who is famously known for “robbing from the rich and giving to the poor”. In this post and the many more that I intend to write, it is my intention to bring to your attention the malaise that has spread in the Indian Power setup from the introduction and the subsequent revisions in what many of us see as a harmless line item in our electricity bills.
The current scenario in the Indian power sector is very grim when one concentrates on the sheer magnanimity of the numbers.
 India possesses the 5th largest power system in the world
21% of the power generated by the India power generation companies is lost during transmission
Bangladesh loses a mere 10% in comparison
A World Bank report on June 24, 2014 stated that more than 300 million Indians (the entire population of the United States) still live without electricity today
200 million of them live in villages that are supposedly “electrified”
The same report also stated that the sector was bailed out in 2011 with 1,90,000 crores
That number exceeds the GDP of Bahrain by 10%!
The sector was bailed out in 2001 with 35,000 crores of the tax-payers money
These poor metrics and massive bailout could have all been forgotten if the sector was aiding in “amp”ing up India’s GDP but when a FICCI report in 2013 points out that India loses $68 billion or Rs. 4,14,800 crores of its GDP due to power outages – it is time to sit up and take notice.
In my opinion the CSS (short form for Cross Subsidy Surcharge) is a dreaded dacoit that keeps raids the rich to buy narcotics and give it for free to the poor which give them the temporary high but the dacoit maintains its stranglehold. It should be noted that CSS was introduced by the previous BJP government when it passed the Electricity Act of 2003 and opened the power sector for competition. The intention at that time was to give the government run power companies some compensation for losing its customer base to cheaper and more efficiently run private power producers while they restructured themselves for this competition.
However this well intentioned move, atleast in hindsight, acted like treating a heroin addict by feeding him some more heroin and asking him to cure himself by reducing the amount of heroin he takes… such an approach rarely works! The government run entities latched on CSS like a lifeline and 6 years after CSS was to be abolished it is being used as a ploy to keep out competition and to harass consumers of power that can get cheaper power but that will not be in the best interest of the utility. The utility will tell you that they need CSS to provide free or low cost power for the agriculture sector and residential consumer but subsidization for one industry while upsetting the apple cart for all other industries is preposterous if not just plain illogical.
In certain states CSS is more than the cost of making power! For example TANGEDCO now charges a CSS of Rs. 3.40 to Rs. 3.61 per kwh while Maharashtra charges a CSS of Rs. 2.30 to Rs. 2.75 per kwh and both have increased their CSS in the last year. To see how ridiculous and anti-competitive these tactics are, just open the last annual report of Tata Sponge as available on its website. Their cost of power when they generated it for themselves was Rs. 1.47 but when they buy it from the open market or the utility the cost is upwards of Rs 8 – a large chunk of it attributable to the enormous CSS charges that are forced onto the customers.
This anomaly has led to a deathly downward spiral, one where the large users of power find it more feasible to own and operate captive power plants versus buying power from the open market or the utility. This leads to loss in valuable and profitable revenue for the entire industry – the power generator, the power transmission utility and the power distribution utility. The 3 are then stuck with power consumers that get power ridiculously cheap and below cost rates ranging from 0 (yes nada) to Rs. 2 per kwh and in the effort to balance their budgets they have to keep increasing the CSS charges and therefore driving out competition and customers too. This also has an adverse affect on inflation as electricity is a key cost for most industries.
In conclusion new government would serve the nation by ending this madness and abolishing the practice of CSS once and for all. If states want to subsidize power for residential and agriculture they should use their state subsidies budget to do the same and not lay the burden on other industries by charging them what is in effect an agricultural tax. Abolishment of CSS will give power and other industries the much needed shot in the arm (pun totally intended) to spur growth in the industry through an increase in power generation plants which will increase long-term employment and generate an affordable and growth filled future for our country.
A perfect storm for electricity consumers that was created by the policy paralysis of UPA-II, high interest rates and the slow pace of development of power plants as developers faced innumerable headaches and delays in securing 143 licenses and filing
A perfect storm for electricity consumers that was created by the policy paralysis of UPA-II, high interest rates and the slow pace of development of power plants as developers faced innumerable headaches and delays in securing 143 licenses and filing 1982 compliance reports. This storm will reach devastating strength as the states of Delhi, Punjab, Rajasthan, Chhattisgarh, Uttar Pradesh and Karnataka have decided to raise power tariffs by 10 to 35 percent!
The problems in India’s critical power sector have been simmering below the surface for a very long time and the burgeoning Indian population with its increasing usage of technology – from using smartphones to rural electrification schemes that has increased power consumption from 443 kwh per capita in 2004 to 684 kwh per capita in 2011 as per the data compiled by the World Bank.
The problems being faced by the Indian power sector are too many to list out in a single blog post but as a power consumer we should all beware that such large hikes in tariffs are going to be the norm moving forward – unless the government makes some serious and immediate changes to its power policy. If the government is serious about giving world class power infrastructure for supporting the needs of residential and commercial customers, it first has to ensure that setting up a power project is a pain free and an under-table ridden process.
The government should also seriously give a thought to replacing the defunct and often misused depreciation and subsidy based schemes and give power plant developers access to easy, low-cost and long-term debt. Climate Policy Initiative studied the impact high interest costs have on power tariffs, noting that unfavourable debt terms add as much as 32% to the cost of renewable power from wind energy alone! One can only imagine what an impact the adoption of business friendly policies would have on procurement cost of other sources of power. The same report also mentions that access to cheaper debt can reduce the subsidy burden of state and central governments by upto a whopping 78% just for wind power alone!
So while highly recommending power consumers to urge their local representatives in the power corridors (pun not intended) of Delhi to give the neglected power producers the support they need, I also recommend that the power consumers who have an empty roof-top, should look at sourcing their power from distributive solar power generation systems. These systems can provide the consumer access to long term solar power at an affordable and sustainable tariff while giving them valuable ‘day-time’ power – a time when most power distribution companies face tremendous power shortages.
More on that soon…
A picture that says so much about our highly competitive society.
The rat race is well and truly on in all facets of our society. In my opinion the Indian society has a unique relationship with standing in line, the need
A picture that says so much about our highly competitive society.
The rat race is well and truly on in all facets of our society. In my opinion the Indian society has a unique relationship with standing in line, the need to be first and to get something (even if it’s a glimpse of a deity) before the other guy.
This culture most probably finds it’s roots in the times when India was a extremely poor country with limited jobs, food and opportunities. However this behaviour should have subsided as the country grew economically at an increasing pace therefore opportunities multiplied and scarcity was reduced. This transition would support logic and reason.
On the contrary the rat race is getting worse today. The competition begins from admissions for you newborn into a decent preschool to getting a decent job, from getting a decent house to getting on a local train.
Infact we as a people have a weird relationship with standing in a queue to get something (have you seen the queue to get on a plane – even though everyone has a confirmed seat!)
However will this culture continue? Can a growing nation and the plethora of prospects that come with growth provide us the security to happily give up our scarcity mindset and grow ourselves as a people…as a society.. as a nation.
