My Angle on the Union Budget 2019

I would rate the budget presented by FM Piyush Goyal, a solid 4 out of 5. The budget managed to do the difficult dance between fiscal prudence and a sustainable, stable but progressive tax policy. More importantly, it provided security to two of the weakest links in India’s growth story i.e. the unorganised work force and the marginal farmers.

It is a common gripe amongst taxpayers that they do not get the benefits of paying taxes which they pay honestly (or otherwise) but various data sources suggest that we have one of the lowest tax revenues to GDP ratios in the world at ~11%. Compare that to Mexico who at 16% was the lowest amongst the OECD countries and most of these countries in this list are developed economies unlike India, where even the most basic infrastructure is being developed. The developing and growing economy is being supported by 6.8 crore taxpayers paying 120+ crores, which is dismal. Until we get to 30% tax revenues to GDP, we as tax payers will continue to bear this burden.

Unlike previous governments, I am happy with the way this governemnt has invested and spent my tax rupees and the change it has brought is visible. In the last 12 months, I visited at least 15 cities that can be classified as Tier 2 or beyond and I travelled to these places by planes, trains and automobiles. I have witnessed the benefits that these infrastructure investments have brought for the people who live in Bharat. Some of the areas that have seen the biggest ROIs are:

  • Connecting North East India with the rest of the country via rail & highways
  • The massive highway construction program
  • Upgrading the intra-city railway network, cleaner and better-equipped railway stations
  • Faster, more efficient and punctual intra-city railway services
  • Sanitation, electricity and home construction coverages

No money has been spent mindlessly. Almost all major urban centres are set to have intercity metro services, the defence spending has improved our security infrastructure and we now have a space programme that will put an Indian in space, with technology that will be developed within the country. These are all developments that I, as a taxpayer, am extremely proud and shall continue to support, with my tax rupees.

In the same vein, the Rs. 6,000 rupee direct cash transfer to farmers should be looked at as the start of an experiment that has its roots in the immortal words of late Rajiv Gandhi who had inferred that only 15% of the money given for welfare of the poorest and weakest sections of society actually received those benefits. This statement was made in 1985 and since then, the situation has barely gotten better.  In fact, the elected representatives have looted everything from seeds, urea and fertilisers that were meant for farmers. So a direct deposit of Rs. 6,000 would actually be equal to Rs. 40,000 benefit that the government would’ve had to dole out in order to achieve the same outcome. The only people that are making the most hue and cry about this are those that have made a living on such ill-gotten gains. However, this time the money will not be fattening the pockets of middlemen who have stolen my tax rupees. Instead, this will be the beginning of the process of plugging the gap. I am supportive of the initiative because the direct benefit transfer has saved us over Rs 90,000 crores according to UIDAI as well as the ancillary gains of the accurate welfare amounts reaching the intended recipients have been significant. Therefore, with this direct income support, it will be yet another nail in the coffin of the middlemen.

My only real grouch with the budget was the lack of support to the VC ecosystem, especially the VC funds. Other than the Rs.10,000 Crore fund of fund allotment (which is extremely difficult and complicated to avail) there hasn’t been any incentive for investors to put money into VCFs. Investing in VC funds is a new phenomenon for most investors, therefore, a tax incentive like offsetting tax on capital gains from real estate or listed securities by investing into SEBI registered VCFs would have provided a boost for investors. Secondly, reducing the tax on gains from VC funds to those from listed equity funds or even lower would have been a positive move.

However, in the end, the government did it’s best to support the ones that needed it most and modestly rewarded those who have contributed to the nation. There was a clear message that the government will encourage consumption but in a way that it directly benefits the targeted beneficiaries. I (as a taxpayer) am extremely satisfied and hope that the successive governments learn and follow the same path.

Lobbying for lower taxes can wait.


Predicting 2019

Brad Feld, Fred Wilson and BillGates’ new year blogs inspired me to write this post today.

To the cosmos this is just another day but to humans this is that time of the year where they expend a tremendous amount of energy in planning, changing and predicting how the next 365 days are going to be. I did not see the value of this futile exercise until last year when I put my goals down on paper and then announced them on my blog and all my social media handles. I know for a fact that I have missed out on achieving several goals that I had set out for, but the ones I did achieve had a different sense of achievement.

While I introspect on the reasons behind the misses, one of the serious flaws in my goal setting was the lack of thought in predicting the status of the economy and events in 2018 and how they would affect my goals. For example, if I would have predicted that there would be a slowdown in venture funding due to the collapse of the angel investment ecosystem, I would have known that achieving 10 new investments for AVF would amount to nothing but a pipedream. Not foreseeing that set me off by 80% on that goal. Therefore, this year it made better sense to put down my predictions first and then plan my goals with those predictions in mind. So here goes:

I believe that 2019 will be a fantastic year for India, (that is) if India continues to enjoy a single party majority after the May 2019 assembly polls. I would prefer a strong leader like Narendra Modi to continue to lead the country instead of a council of ministers with their own agendas clouding the judgement of the prime minister.

The chances of Modi’s return are high as there are strong signals that the economy has gained momentum and is continuing to grow much better than what was expected post-GST implementation. Banks have seen better recovery from NPAs than what was predicted and with stronger balance sheets they will be out lending once again. There is also a good chance that the RBI will reduce interest rates due to lower than expected inflation on the collapse of crude prices. These events could flood the market with liquidity which is an ideal scenario for the incumbent party before an election because it improves the views about the incumbent in a short-lived public memory. With all this in mind, I believe that Indian GDP should grow at 8% in 2019.

The uncertainty over global trade wars have reduced significantly, and a buoyant Indian economy would lead to a record year for the stock market indices. I believe that this would percolate to the start-up ecosystem through an increase in M&A activity and many Indian corporates would setup CVCs to keep up with innovation and justify their high valuations. I believe that the government will bring in clarity to the use of Aadhar verification which will help to revive Fintech activity and implement guidelines for bringing cryptos back to India. The guidelines may not be along the lines that crypto purists would appreciate, but it will be a significant step ahead in comparison to the current situation. This is also going be a pivotal year for the start-ups raising money as we will see a rise in the number of active funds looking for deals and that will quickly fill the vacuum created by the angel networks. The better-informed entrepreneurs will avoid the “large” & distributed format angel investment networks and instead choose to have closer relationships with their funding partners. Entrepreneurs will seek funding partners like professional investors like VC funds, super-angels and family offices and we should see in rounds that have a smaller number of “professional” investors but with a larger investment per investor, and this trend will continue. The loss of good investment opportunities to professional investors will drive out the marginal angel investors that make up the bulk of India’s angel networks. These marginal angels will also experience their first round of write-offs which many of them aren’t prepared for, so they’re going to leave in droves.

The serious angel investors will demand much better deal flow and portfolio services to continue to invest their capital, something that will be difficult for marginal angel networks to achieve since they have not built these capacities. I believe that the angel networks will start to shut down – marginal ones at first and the larger ones becoming marginal, eventually ceasing to exist in following years.

When it comes to the overall Artha portfolio I believe that LenDenClub, Coutloot, ChaiBreak, Fynd, Karza Technologies, BabyChakra and X-Prime to have a headline sort of a year which will firmly put them in “pole” positions in their respective spaces. If they do not convert this year of opportunity into something substantial, then I believe a golden opportunity would be lost, forever.

In terms of where I would like AVF to invest, I am excited about the prospects of e-Sports and its growing popularity across the globe and in India. I think it would be interesting to evaluate an esports company for investment as I believe that this format can generate massive scale in a country where the average age group will be below 30 for the next 10 years. 

Statistic: India: Average age of the population from 1950 to 2050 (median age in years) | Statista
Find more statistics at Statista

I would also like to see founders developing sustainable business models from the opportunities that the Ayushman Bharat health insurance scheme provides for rural healthcare. Healthcare has been a very small portion of Artha’s portfolio and this year could be a good time to increase our exposure in the space.

So, here are my predictions for 2019.

I wish you and your loved ones a very happy 2019!


Gir's Sons have India Roaring, on the Cricket Pitch… and Off it Too!

Investment advisors have been selling the potential of 100 crore Indian consumers to investors across the globe for the past 20 years with excellent success – for the advisor. But, investing in that potential has always led to investor gloom and doom. The potential was always there but somehow India always found a way to overpromise and underdeliver, just like the Indian cricket teams that left with tremendous promise for Australian tours, but those expectations almost always came crashing down like a house of cards.

However, today’s India is writing a new script, in cricket and as an economic powerhouse. The potential of 100 crore wallets that was entangled in the web of black money, oppressive taxation, poor infrastructure and expensive logistics in finally unlocked. Demonetisation, Digital Payments, GST and Tax Compliance reignited the hope that this was finally India’s moment but building out rural consumption points was expensive, and it took years if not decades. Unlike the previous failures, this time the economy and the cricket team had those two pieces that have alluded an Indian victory. Interestingly both of those pieces, whether it is the economy or the cricket team, find their roots in Gujarat.

The ability to battle ahead on the trickiest of pitches, facing the most abrasive oppositions and weathering the relentless media attack requires grit & determination. That role has been perfectly essayed by Cheteshwar Pujara who not only blunted the opposition but took the fight to the opposition while the others built around him. Prime Minister Narendra Modi did the same for the economy. The PM’s economic policies improved throughput of government subsidies to the neediest through the smart utilisation of Aadhar. He filled the government’s empty coffers by increasing tax revenues through higher compliance and bringing in the fear of evasion. He also took the fight to the opposition by calling out their “Accidental PrimeMinister” and allowing his team to build better infrastructure, bail out the near bankrupt banking sector and amicably improving or destroying the relationships with our neighbours.

All this gunpower required a spark to explode from someone who would have the planning, intelligence and the pace to bamboozle the opposition. Jasprit Bumrah did that to the Australian batsman, while Mukesh Ambani’s Jio did that to the telecom sector, forcing into submission. Jio’s introductory offers were like Bumrah’s deadly bouncers, Jio’s fast and extensive network like Bumrah’s yorkers and their strategy to hook a user to their content ecosystem was like Bumrah’s slow yorker to Shaun Marsh, it bamboozled them.

The results that India and the world has been waiting for are finally here. The cricket team is 2 wickets away from winning their first Boxing Day match in history. It is a moment that 560 million Indians can watch tomorrow on their Internet-connected devices, a first too. This maturing of India’s potential has driven a record amount of FDI into the country, almost $40 billion flowing in 2018, a whopping $7 billion more than China, a first again, in 2 decades.

The results have taken time and we have endured pain, but the victory is near and will be comprehensive.


Making Sense of the UPA vs NDA Economic Growth Debate

A heated political debate has been brewing between two accomplished lawyers, namely the last two finance ministers of India, P Chidambaram and Arun Jaitley. The debate began on the backdrop of the data released by the National Statistical Commission which stated that the GDP growth rate under the UPA was higher than the current GDP growth under the NDA government 
Of the various arguments that have been put forth by different parties of the political spectrum, I  resonate most with the arguments put forth by ET’s Saubhik Chakrabarti in the article “UPA vs NDA: Why higher growth doesn’t matter when followed by policy delinquency“.  
I believe that a lot of economic numbers achieved by UPA were because of the stable platform handed over by the Atal Bihari Vajpayee Government and the steroid (read: debt) fuelled hyper-growth of the worlds’ economy. The mirage of the strong economic power-house created by the UPA between 2004 and 2010 was blown away by the huff & puff of a crumbling world economy.   
UPA entrusted PM Modi with a country that was in turmoil: banks saddled with massive NPAs, high inflation, policy paralysis, low growth numbers, tax terrorism that was driving away FDI, Government-run SEBs that were out of money, runaway spending on thoughtless welfare schemes and most dangerously a demoralised & disillusioned class of entrepreneurs that had been maltreated by the government. UPA’s policies & constant infighting stifled any hope of supporting growth and innovation.  
I find myself sympathising with the Modi-led government because it braved strong headwinds in the global economy, maintained fiscal prudence and smartly bailed out the banking, power and manufacturing sectors from the brink of collapse, to bring India to the position of the world’s fastest-growing major economy. 
I believe that my contradicting views of the two governments are best represented by the contradicting mindset that I woke up with in these two time periods. When I woke up under the watchful eyes of the UPA government, I constantly felt that the worst was yet to come, however when I woke up today to write this post at 4 am, I was certain that the best our economy has to offer – has just begun!  

My Pre-Budget Wish List

As Finance Minister enters the parliament to present his 5th budget… These are the changes that I wish to see!

  • Personal Taxes
    1. Reduction in number of slabs
    2. IT exemption limit increased to Rs 3,60,000
    3. Top tax slab reduced to 25%
    4. Exemption for equity investment increased to Rs. 2,00,000
    5. Penalty on Income Tax evaders increased
    6. Announce final round of Voluntary Disclosure of Income Scheme
    7. No change in LTCG on listed equity investments
    8. No LTCG on startup investments that are held for over 3 years
    9. Farm income over 50 lakhs should be taxable
  • Corporate Taxes
    1. Flat tax of 25%
    2. Removal of exemptions
    3. Investment in qualified start-up funds (impact & seed) allowed from CSR allocation
    4. Dividend Distribution Tax reduced to 15%
  • Startups
    1. Increase Fund of Fund allocation to Rs. 15,000 crores
    2. Tax exemption for investing in SEBI registered start-ups funds;
      1. 1 crores for individuals
      2. 5 crores for corporates
    3. Removal of IT exemption scheme for start-ups
    4. Increase in allocation for CGTSME loan schemes
  • Power
    1. Removal of MAT on power projects
    2. Utilisation of Coal Cess to encourage rooftop solar projects & rural electrification
    3. Tax and other benefits for banks to lend to power projects
    4. Custom duty on import of solar panels.

Now crossing my fingers (but not holding my breath). Best of luck everyone! 😊

Indian Democracy is Being Murdered by the Congress!

“Such a prima facie view is being taken in view of the fact that the assignment of the huge debt by Congress party to YI was for a paltry sum of 50 lacs. This is certainly questionable and justifiably attracts the allegations of cheating, misappropriation, criminal breach of trust, etc.”

These were the observations made by the Honourable High Court in Delhi, while dismissing the stay order filed by Rahul & Sonia Gandhi along with 4 other Congress leaders. The High Court believes that their conduct is suspicious and possibly criminal and they will have to defend themselves in the trial court.
Guess which entity stands to lose the most amount of money in this case?  No it is not the Indian government. shockingly it is the Congress Party itself!
Basically the mother & son duo was advised or came upon a brilliant idea to invest 50 lakhs ($90,000) and walk away with over 2,000 crores ($300 million) while leaving the Congress party with an 89.50 crore ($13 million) bad-debt write off to deal with.
To say that these moves are motivated by the BJP shows quite clearly that the Congress leadership is completely drunk on the Gandhi Kool-Aid, so much so that they don’t realize that they are defending those that have plundered their own coffers!
The elected officials denouncing the verdict of the court, should be aware that such allegations only muddy the waters for the Congress itself. In fact the High Court mentioned that “the probity of the legendary national political party” was “at stake” in the case“.
The MPs of the grand old party have shown with their classless actions of the past few days that they will sell not only their integrity at the doors of an autocratic, corrupt and out of sync leadership but they are willing to sell the entire nation for protecting one family. The Congress party workers should ask themselves whether the Gandhis are above the law of the land? When a court summons anyone in the country to appear in front of it, does it only apply to Indians other than the Gandhis?
Using tactics to stall any functioning of the legislature for the past FOUR days shows that the Congress’ strategy is to stall the country’s growth using any means possible.
Last week, Congress MPs used a comment from their Rajya Sabha MP Kumari Selja to disrupt proceedings and adjourn the business of the Rajya Sabha… What was the issue?
She was asked her caste upon entering a temple, (PLEASE MARK THAT she was NOT stopped from entering) and in fact wrote “complimentary words” in the visitor book of the temple. Despite which the country burnt Rs. 29,000 a minute to first have a debate on a non-issue and then have the house adjourned! For what? Nothing happened!
If she felt so strongly about her discrimination why was she waiting until now to rake up the issue? Why is a tweet, blog post or some other form of expression missing after the purported offending or was she waiting for an opportune time to use her story?
Now this week there is a new story to disrupt the progress of the country, first the verdict of an Indian High Court is supposed to be under the influence of the ruling party, which (if it were true) taints the UPA & Congress for starting this tradition as the HC didn’t just suddenly decide to give up its independence.
In fact this should be the lowest that Congress has had to stoop to ensure its relevance. The party is a national joke the equivalent of a Rakhi Sawant today. Its tactics only fool those that believe that the public does not understand what is happening.
They can use the Parliament to avoid facing the people, that being said, it serves the same effect as an ostrich burying its head in the sand so that it cannot see the upcoming danger. The truth will come (and should be) brought out by trying the Royal Gandhi family in court.
What we see today in the remnants of a once great party and the pillar of Indian independence struggle is now a bunch of useless, disgraceful, disrespectful and classless MPs wasting away the time of the Parliament at the expense of the exchequer.
They speak of intolerance and their own methods, messages and actions reek of a lack of tolerance. In the last 4 years of the UPA there was hardly any movement due to the various scams of the government with a mute, dumb and deaf PM leading the country and now that such leadership has been thrown out of power the Congress is punishing the nation by using the lowest of low tactics available to it.
Congress party and its representatives really need to introspect and identify what role they want to play in the country’s development and prosperity.
My eyes well up when I think about when I see that the country’s elected officials are cowing away from their responsibility and are in fact putting on sale the democratic fabric of our country. The Indian constitution is being torn, burnt, raped and murdered to further the interests of a few in fact just one family.
If us Indians let this continue we will have to hang our heads in shame when our children asked us, why we didn’t fight to keep or freedom from the tyranny of the Congress.
We shame ourselves, each second we let ignore the damage done by the charade. .

Screw Amendments… Rewrite the Law !

I have wanted to write this post for a very long time but kept putting it off for some good reason best known to the subconscious. However, the attack on e-commerce by the tax-man was the spark that ignited this story. As it is normally the case, some law that was written in goodness-knows-which-generation is going to be used to harass a business enterprise. It doesn’t matter that our PM Modi is racking up air miles in convincing the world outside and within India on a red carpet welcome to capital and services but alas, did someone forget to tell that to the tax man?
So, it all started when I on my daily cramming of articles on Startup Logic read this article on the application of outdated laws to new age business models to a global behemoth like Amazon. The clash has led to a cancellation of licenses for Amazon’s warehouse in Karnataka in addition to the umpteen headaches from the tax authorities and the obvious loss of face. This doesn’t even count the numerous transactions that will be delayed or cancelled due to the diktat.
So while each government has a Finance Ministry which oversees the balancing of the budget, do they have an Economic Impact Unit that offers a perspective on the economic impact of shutting or opening a business unit? Are the tax authorities asked to give an assessment on the positive and negative impacts of their actions and the bigger affect that their actions can have on the country’s image? Or are they just allowed to march in and shut a unit down all in the hope of sweating out a few people and greasing their own dirty palms?
It is high time that the majority government passes a law that mandates the ‘rewriting’ of laws that are over 25 years old. There are just too many cases today where the outdated laws of pre-independence (and some that even pre-dated to the birth of my great-great-grandfather) are being used to harass entrepreneurs, law abiding citizens and even party revelers from enjoying their ‘independence’.
The reason I choose 25 years is because it provides a balance between the generational change in India with the rapid change in the pace of technology and society. Unfortunately our legal system has passed its expiry date on both accounts and it is time for a radical change through the rewriting of this system for the youth of today to believe in the legal system and to agree to follow it.
To know how deep the malaise of outdated laws affect our ‘independence’ and outdate reality, just read this article from India Today. While the article only touches the tip of the ice-berg it should have further gone on to explain how the Indian Partnership Act was passed in 1932 and was last amended in 1983!
Why amend such old laws, they don’t change the intent of the law and neither do they capture the changes in the applicability of the law (can you imagine what a partnership meant in 1932 or even in 1983 versus what it means today?) for that matter imagine what was the intention when the Press and Registration of Books Act of 1867 was written… electricity was a privilege then and we are in the age of the e-book!
These laws aren’t just affecting our entrepreneurs, imagine what intention the Indian Divorce Act of 1869 wanted to achieve versus the reality today? What about the Indian Evidence Act of 1872! I don’t even want to read what those acts say except knowing that their entire intention is defeated when the intent with which an act was written is no longer a reality my generation or even the generation after me can imagine.
There are umpteen number of my friends, family and brother and sisters of my country that are breaking their heads and their spirit against the colonial laws created by the British curb Indians and in a way we are still enslaved to the draconian laws 68 years after our Independence. So Mr. Prime Minister before we attract billions, trillions and gazillions from China to Timbuktu… let’s clean up our judicial system and restore its faith and stature in the eyes of our generation.
A list of laws & acts governing us is available here

Protect our Protectors

Before I open up with my views on this highly controversial topic, I must tell you that I grappled with the thought of writing this article for the last 24 hours. My intention here is not to indulge in any jingoism or chest thumping. I am torn apart with this topic and it my intention here to just vent out my thoughts and ask the readers to really think about how we can play our part in shaking up the annals of the government wherein the last gasp of a soldier’s breath is not terrifying enough.   index   The picture above is of BSF Constable Sanjay Dhar from the 192 Battalion who was martyred on July 16th in the Arnia subsector along the India-Pakistan border in Jammu & Kashmir. Reports state that this is the second ceasefire violation since in this week and the third in July by Pakistan. It should also be noted that Late Constable Dhar, four BSF jawans and four civilians were also injured in the firing across the borderand . According to the BSF website this is is the 2ndBSF casualty at the border this year. (Surprisingly the BSF website is yet to update the martyr list or offer condolences on its website to their fallen comrade while UP BJP has –that is just a minor observation) Do you know how the brave men and women of our armed forces are taken to their final resting place? What is the protocol for bidding a final goodbye to those that lay down their lives protecting our nation’s border? I visited the BSF website and the Indian Army to find out the procedure for paying the last respects to Constable Dhar but I was unable to find anything specific. After a lot of effort I finally chanced upon this link which lays out the procedure for a military funeral in this land we call India. (This link was found by Google eventhough the webpage is hosted on the Indian Army website.) During the search I came across a lot of articles, posts, videos that were heart breaking if not gut wrenching. Statistics like 3,987 soldiers had been killed in action from the end of the Kargil conflict in 1999 upto 2012, over 100 soldiers commit suicide each year. In comparison, USA which is actually fighting a war in the hostile territories of Iraq and Afghanistan had lost 6,802 soldiers. The intention here isn’t to talk about how much better the kill ratio is for the US troops but it is definitely to talk about the value the American public has placed on the people that die fighting for their country outside their view and on foreign lands and how little we place on our own soldiers that are actually dying protecting our own borders and our right to lead a life of freedom. Why isn’t the media getting angry about the slaying of Indian soldiers including brutal mutilations (beheadings, castrations, etc)? Why hasn’t the PM or the Defense Minister made a statement to the nation about the destruction of yet another Indian family (does the media even care about the devastated family that Constable Dhar’s untimely death has left behind?) I find it truly disgusting that we have taken the price of an Indian soldier’s life as being worth nothing at all, there is no statement from the MLA or MP of Constable Dhar’s constituency about taking up the case of Constable Dhar to Defence Minister Arun Jaitley’s office. So is Constable Dhar going to be cremated and forgotten in the ever burgeoning scrapbook of soldiers that are Killed-In-Action? It is my fervent request that each person that reads this post.

  1. Send a letter to their local MP to take up the case of this slaying in their sphere of influences
  2. Ask the Pakistani government to apologise for this death and if they cannot

If the Pakistani army cannot stop firing across the LoC, we have no reason to keep talking to them. THIS IDIOPLAMACY OF MEETING THE ENEMY THAT IS ACTIVELY MARTYRING OUR INDIAN BROTHERS AND SISTERS IS ABSOLUTE RUBBISH. It is a well known fact that Indian soldiers protected 93,000 Pakistani soldiers at the end of the 1971 war from being butchered in Bangladesh by the seething public that was seeking revenge for the atrocities that were meted out to them by the Pakistani soldiers. But now that same country is actively supporting militancy in our country, killing our soldiers and we are more concerned about playing cricket with them? We are meeting with them over flag meetings and “asking” them to stop killing our soldiers? I still salute and stand behind the PM Vajpayee’s decision to send the troops to the Indo-Pak border and sending then (and current) Pakistani PM Nawaz Sharif to face the real fear of war with the 3rd largest army in the world and twice the size of Pakistan’s army.The Pakistani PM at that time realized that messing with the Indian elephant will lead to total destruction. However the last 10 years of “idioplamacy” (idiot diplomacy) is a demotivation for our troops and such daily deaths still cannot be taken lightly and forgotten. But this voice cannot reach the Parliament until each one of us does our bit in contacting our MP and asking them to raise their voice against the horrifying statistic of one Indian soldier’s family wailing for the loss of their brave soul – DAILY.   I am going to write to my MP on Monday… I want to suggest that you do the same by finding out the address and writing a letter requesting them to bring this up for discussion in the floor of the house and getting a reply in a timely manner. The contact details for our MP can be found here at These men are putting their lives in danger each day, it is time we take out a few minutes of our time for them. “The value of life can be measured by how many times your soul has been deeply stirred” – Soichiro Honda

DGCA: Now Approves Business Models too?

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)