Saturday, December 29, 2012

NaMo - The Commodity

   Going through the news on Google for the last few days, it came to me that Narendra Modi is probably the highest selling commodity right now. Well, I mean Narendra Modi, the name.
With the amount of response the name generates, not only are tens of blogs and news articles, both positive and negative written about him everyday. In fact, he might soon or even already be the most talked about person in India.
   Browse through the news and there are all kinds. Sample this

  1. Narendra Modi likely to reach Delhi for NDC meet
  2. Will fulfill any responsibility given to me by party: Narendra Modi
  3. Narendra Modi keeps away from Nitish Kumar at NDC

   And one of the news, which apparently has been taken down (or headline changed) since stated: Commercial sex worker gang raped in Narendra Modi's Gujarat. 
(an equivalent news is linked here ) The news contained nothing about NaMo, it does not even mention him in the news.
   I am sure you would have seen similar news before on web/ TV/print. The point is anything associated with Narendra Modi raises eyes and ears. In commercial TV terms it is good for TRP. 
   Newspapers and news channels have realized this for quite sometime now and ensure that anything and everything even remotely related with Narendra Modi shall be captured and published. After all, people esp. netizens want to know more and more about NaMo. And this helps increase the number of hits the website and webpage gets and ultimately drives up the advertisement revenue. 
   Even if it means, only saying he shook hand with someone or chose not to, he reached a party office or is just expected to reach some event. Never mind news where he has no role, it is just an incident that happened somewhere in Gujarat.

Saturday, September 15, 2012

LPG Subsidy Cut - Is there more to it than what meets the eye ?

Manmohan Singh has finally started taking the desperate steps of economic reforms, when news rumours were strife that Congress party itself is opposed it. I say it was Manmohan as the decision was taken at 7 Race Course road, his residence and workplace. Official government release said, limiting subsidized LPG cylinders to six a year will reduce the under recovery to OMCs by 5300crores and a 5 rupees increase in diesel price will reduce the under recovery by Rs. 15000 crore. 
       Even if we keep the argument around its economic sense away for a while, the step of reducing LPG subsidy hasn't stopped intriguing me. Most of the household I know use about a cylinder every month and I also know that 350 Rs a month is a lot to them. This is the amount an average household using a cylinder a month will have to shell out extra in addition to the impact that would come with increase in diesel prices.
       A quick look at the internet tells that there are 14 crores domestic gas consumers. Even a simple calculation tells that 4900 crore (14crore X Rs. 350) would be recovered only if the government had said, every household would have to take one un-subsidized cylinder! But government hasn't stopped a that, it further said, that for the remaining year you would get only 3 cylinders at subsidized rates. So even if you have used only 2 cylinders so far this year, you would still get only 3 and not 4 cylinders at subsidized rate.
       Govt has further noted that total under recovery owing only to LPG subsidy would be 32000 crore for the full year after the subsidy cut. That is, total subsidy without govt. action would have been 37300 crores. On an average it is Rs. 2664 per person for the full year, or the subsidy on 8 domestic cylinders. By simple calculation, 2 cylinders per consumer would be sold at market rates and that shall reduce the under recovery by 9800 crores. 
       But that is only the beginning of the story, as a huge amount of these cylinders are not used for domestic purpose. By a moderate estimate 15% of these are used for commercial purposes. It was an obvious issue, as commercial cylinders are so much more costly owing to the fact that they are sold at a profit. Compared to a domestic cylinder they are sold at a profit(19kg cylinder sold between Rs 1400 to 1500) which is about Rs 700 per cylinder.
Plugging this leak is what I think is the unsaid and probably the biggest benefit of this subsidy cut. So doing a quick arithmetic again, you get a profit of about Rs. 9000 crores taking the total gain(under recovery plus profits) for OMCs to approximately Rs. 19000 crores. This is a full year figure and so the figure for remaining part of the year is Rs. 10000crores.
      The government is obviously downplaying the figure they would recover. The biggest question though with this government is will it do what it is supposed to do - GOVERN? Because even plugging these leaks wouldn't be simple as Indians especially the enterprising units are smart they would find some ways to work around this limit. 
     Lastly, it looks like that our politicians are the people most impacted rather than the common man who has to arrange only Rs. 2000 a year. How would these people arrange for 200 un-subsidized cylinders which is an increase of whopping Rs. 70000 to their annual budget ?