Finance

Air India and Indian Airlines – sucking in public funds without any end

The Indian airline industry is going through a period of losses, where the competition between the various airline companies has led to severe losses for many of those involved. So, for example, Kingfisher is facing huge problems in running a full service network, and was unable to run the low cost converted Air Deccan. However, a lot of this is also due to the management and decision making within an organization, and if you consider the performance of the others such as Jet, Indigo and GoAir, you would start to think that the power of good management is key. Both Indigo and GoAir are seen as great performers and even in this loss making industry, they have turned in profits in the past.
The airline industry is a very strange industry, where there are huge capital investments in terms of buying new planes, the pilots to fly these planes are also typically very well paid compared to other industries, the portion of fuel in terms of expenses is very high, and you need to keep on flying planes in a tight turnaround to ensure that you are making more money than you are spending. Further, you need to keep your costs down without compromising on the many regulations necessary to ensure the safety of passengers.
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The coal scam – one round of outrage, the next when the CAG report comes ..

A few days back, there was a leakage of a report that was supposed to be a draft CAG report on the coal sector. If people were surprised at the number of zeroes outlined in the 2G scam, the coal scam as outlined in the draft CAG report was many times larger, figures that are huge and which also give a sharp reminder of the huge amount of money and benefits controlled by politicians. The report outlined a loss to the public exchequer through the process of granting coal mines to private sector companies, with the allocation of mines being done through the Ministry of Mining, which was also coincidentally one of the portfolios held by the Prime Minister during part of the time period mentioned in the report.
There was some amount of pressure, but then the Government showed portions of a letter from the CAG which quoted his despair at the report being leaked to the media before it was ready, and also that there might be changes in the report based on the ongoing discussion, with the current Minister of the department stating that there was no problem (at least in this particular case they did not blame the report on some policy decisions taken by the NDA Government). Of course, the next day the Times of India published the full text of the CAG letter to the Prime Minister, which sought to portray that the distress of the CAG was over the leakage of the draft report, and that the report did not drastically change from what was published in the draft report.
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Economic condition of India going downhill, with the Government sitting by and letting it happen ..

Major economies such as countries in Europe and the United States are going through a major upheaval, with a strange combination of low rates of economic growth, low interest rates, as well as high deficits. These high deficits have prompted pushes for austerity measures and other means of reducing the debts; which is contrary to the conventional wisdom whereby Governments pump in huge sums of money for schemes so that they can try to force employment, and thus try to kick-start growth. However, with huge debts, Governments are not able to do such measures, and consequently, global economic growth is slow, with few exceptions – China and India are the notable exceptions, with China having the larger growth rate, but India also having a decent 8%+ growth rate. Well, make that 7%+ now.
And this is the main problem. The current Government has, over the past couple of decades, inherited an economy that just needs more decontrol and it will keep on growing. However, for all those who say that India is fast ahead on the path to a high degree of liberalization, a review of the past 2 years shows the extent of the impact that Government policies have on the market.
Inflation is a terrifying word, having a huge impact on politicians as well as the citizenry of the country. For normal citizens, or the ‘aam admi’ in Congress speak, a high rate of inflation means that items they have taken for granted suddenly become more difficult to get. This could mean that driving a car gets difficult for those who have to travel long distances because of higher fuel prices, or families have to suddenly start thinking whether they can afford to take the holiday (either domestic or international), or families have to start wondering whether they can still afford to enjoy fruit or meat to the same extent that they used to, and so on. Inflation, when you consider the high levels of inflation that have been ongoing for the past several years, wreak a tremendous impact on families, sending those on the edge right into the poverty line.
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