panch-tattva talk…after rail budget 2003

Friends,

I reproduce below my observations after the rail budget of Feb 2003 (recorded in my diary on 27th Feb 2003), it is interesting to go through it from the angle that while Laloo is being louded since then for railways performance , the foundation for it was laid by none other than Nitish Kumar who has wrested Bihar chief ministership from Laloo nominee Rabri Devi:

‘ Nitish Kumar , our railway minister presented rail budget yesterday. The budget reflects many positive factors. There has been no increase in railway fares or freights. On the contrary there has been an announcement about reduction in freight on bulk goods, steel and cement etc and on petroleum products. Passenger fares have been reduced for AC I and AC II classes. The difference between the fares applicable for superfast trains and Rajdhani-Shatabdi Trains has been brought down resulting in cheaper fares for these elite class trains. There is a proposal to give discounts on fares during off season period.

All these measures are pointers in direction of market orientation of railways, surely a very welcome thing. There is an indication that people above 60 yrs in age would be given concession as against 65 yrs. This also is a very welcome announcement since it takes care of the people post retirement when the incomes are already under strain due to falling interest rates.

Reading their financial statement for the year it is seen that operating costs have been falling and therefore the earlier working seems to have improved at least finncially. This may be the reason that railways have been emboldened to try improving their gross revenues by increasing competitiveness and generating larger volumes for themselves. Actually most important thing for raiways now is that it my raise finance at much cheaper rate of interest through commercial borrowing, both from within and outside the country. Railways are quite capital intensive and the interest rates are seeking lower levels for its benefit. Not only the rates are down , the availability of capital is almost unlimited, if only the lenders are assured o safety of capital. Indian Railways may definitly give such comfort to lenders.

The only thing that may mar marriage between the two is suseptibility of Indian Railways to resort to populist budgeting at the instance of the political party ruling at the centre. If some how this weakness removed the railways have the capacity to present the moon to the ones who cry for moon.

India’s topography , the size of populaton, the political set up and the docility of people , all provide for the smoothest functioning and rewarding user population. So, let us hope that with due decentralisation and setting up specialised wholly owned subsideries , the railways would do best for its own self and woul be able to provide best solutions to the railway needs of world at large.

The trained man power pool with the railwys is enormous. The entry of railways in the golden era i round the corner. The designing and reserch have to have a big thrust since these are key to improving thecost effectiveness of railways as hey are facing competition from road transport at lower end and from air transport on high end.’

HariOm,

krsnaKhandelwal

panch-tattva talk

Friends,

Grasim is entering personal care products segment with its own brands. This seems strange that a comapny in to commodities should decide to do so but there is some  benefit to it in diversifying this way. Brands require a lot of expenditure to develop and  this expenditure can be written off against the profits of a company. Grasim is in a position to afford it and save on tax. Grasim may eventually spin off the consumer care product business , but it will have shun ‘marwari’ mindset and leave brand building in hands of a professional team. Brand building is possible with deep pocket and with long haul.

SBI has decided to raise interest on deposits by about 25 bps tp 175 bps for different maturities. In the mean time FM has reportedly said that the deposit as well as lending rates should be brought down. I don’t think its just now possible in India. India is a capital starved nation inspite of foreign dollars pouring in. The foreign capital comes with the a fickle character and may not entirely replace Indian capital. Banks are seeing reduced flows toward themselves as a percentage of savings which are being attracted by IPOs, MFs, secoundery markets, and insurance companies. Also the banks have hit ceiling as far as advances go , in terms of percentage of deposits. Banks are being pressed for lowering of charges too besides the competition is growing . In this light the banking sector may not improve upon past performance by a greater degree. I am noticing reports to the contrary which seem to be delusory in nature and with motive behind it.

The world market cap at $ 60682 billion allows India a share of 3.06 %. The three percent mark has been crossed for the first time. Indian enterprise and public are capable of achieving 10% share in a decade or so provided right type of govt policies are ensured in the mean time.

HariOm,

krsnaKhandelwal