The Tribune, Chandigarh, India

Fiasco at Eden Gardens
Negligence compounded by politics

The fiasco surrounding the International Cricket Council cancelling the impending India-England World Cup match at Eden Gardens, Kolkata, marks an avoidable embarrassment for the Board of Control for Cricket in India and is a first in the history of Indian cricket. While there have been instances of matches being called off due to unplayable pitch conditions, as was the case at the Ferozshah Kotla in New Delhi in December, 2009, to have a match being cancelled for the stadium not being complete in the stipulated time is something unheard of. Last-minute efforts by ICC President Sharad Pawar and Union Finance Minister Pranab Mukherjee have apparently failed and the most likely alternative venue may be Bangalore.

BCCI is an extremely cash-rich organisation and the Cricket Association of Bengal (CAB) has also done well, thanks to the enterprise shown by Jagmohan Dalmiya over the years. That is what makes this situation even more surprising. The original date for completion of this stadium, and Wankhede in Mumbai, along with three stadia in Sri Lanka, was December 30, 2010. However, all five venues were given an extension till January 25, 2011. But according to the ICC, an inspection of Eden recently showed that the venue would not be ready in time, forcing the cancellation.

While it must be emphasized that the sanctity of a deadline must be respected, there are also undertones of a political game being played between the BCCI authorities and Dalmiya, who has been at odds with the body for a long time now. If it is true as is being suggested that none of the other four venues (which have been cleared) were in any better shape than Eden, it smacks of politics. Whatever be the final outcome, there can be little doubt that the Eden episode has left a bad taste for which the BCCI and the CAB cannot be absolved of blame.

Tablets of a new era
Local content will optimise experience

The latest in technology is the tablet, a portable personal computer that uses a touchscreen as a primary input device. Modern tablet PCs are essentially bigger than mobile phones and smaller than laptops. The electronic tablets have become the latest and the most convenient way of accessing the wide world beyond the physical reach of the users. In many cases, the tablet is like a laptop without the bulk, with Internet connectivity and many freebees thrown in, including phones and cameras. In a year since iPad was launched, millions of such devices have been sold throughout the world. The official launch of iPad in India signals a new interest from the company that has sold most of the tablet computers in the world and set the standard for others.

It is not just the device but the entire eco-system built around it that has made it such a success. There are thousands of applications built for users of these devices, which provide information, entertainment, utility and even road directions. While Apple is the market leader with its remarkably intuitive and smooth interface, it was a closed tightly-controlled system. It is increasingly being challenged by the Android operating system, made freely available by Google, and adopted by most of the tablet PC makers. Windows has not made a significant impact as yet, and RIMs BlackBerry tablet, with its own operating system, is not yet available to customers.

Tablets are more suitable for users who receive information than those who input it. Not surprisingly, they are an overwhelming majority. For users in India, there is a paucity of local content available, both in English as well as local languages. There is, thus, an urgent need to generate subject matter suitable for a new generation of IT-savvy users. The Indian consumer responds well to anything that he feels has utility. The tablets, which are e-book readers, multimedia platforms and browsers, too, are an ideal platform with which users can enrich themselves even as they stay connected. The tablets are here, we must make full use of their capabilities.

Thought for the Day

Corruption is worse than prostitution. The latter might endanger the morals of an individual, the former invariably endangers the morals of the entire country. — Karl Kraus

ARTICLE

Sustainable inclusive growth
Need to focus on rural economy
by S. S. Johl

The classical growth model states that the agriculture sector is the prime mover of overall economic growth and development of the agrarian economy through the process of generating wage goods (capital) and surplus labour as the sector moves on a higher production curve through the medium of improved production technology and management efficiency. Here overall factor productivity improves to generate surpluses of agricultural commodities for the market. There are also an improvement in productivity per worker through the modernisation of production technology and better management techniques and skills. The labour employed in the sector is also rendered surplus successively.

As a result, when the capital and labour move to the secondary and tertiary sectors, that stimulates growth in these sectors, and the economy is put on a higher growth path. No doubt, the capital investment mobilised from outside does provide exogenous stimulation, but in an agrarian economy the role of agricultural growth in providing a solid base to the growth process of the economy cannot be denied. In India, more than two-thirds of the population is directly dependent on agriculture. With the growth of this sector lagging behind the overall economic growth of the country, the exclusiveness of this large segment of the population increases from the development process.

It is, therefore, essential that the agriculture/rural sector must register a matching growth to make the growth and development of the country inclusive in its nature. Further, substantive growth must take place in rain-fed areas for the sake of inclusiveness, because the poorest sections of the rural population live in these areas. Growth in these areas on a sustainable basis reduces the yearly fluctuations in the over all agricultural production of the country.

No doubt, in the agriculture sector in India, productivity levels per unit of land have gone up owing to the improved production technologies, adoption of high yielding varieties of crops and higher use of inputs such as fertilisers, pesticides, water, power, machinery and labour, productivity per worker trapped in the agricultural/ rural sector has remained low due to various natural and man-made constraints. Sufficient surplus labour has not, therefore, moved out of this sector due to the non-availability of matching off-farm gainful employment opportunities. In developed countries and also in many developing countries, farm workers are getting older while young people are moving out. In developed countries, even the overall growth of population is going negative.

In India, in spite of substantive development of the secondary (industrial) and tertiary (services) sectors of the economy matching gainful employment opportunities have not been generated to absorb the surplus labour moving out of the agricultural/rural sector. Hence, whatever labour moves out that ends up in slums in the urban areas, where the people live under unhygienic conditions, with no clean drinking water, sewerage or power facilities. For instance, Ludhiana in Punjab alone has 180 such colonies, where it is difficult to find even a few matriculate youth who can be trained for employability.

On the other hand, the agriculture sector cannot fully absorb the rural labour and farming population gainfully in agriculture. Except during the planting and harvest seasons, farm workers remain underemployed or suffer disguised unemployment. All this is evident from the decreasing size of the operation holdings. For instance, in 1980-81, average operational farm size in India was 1.81 hectare, down from 2.30 hectare in 1970-71. In Punjab, the average operational size of the land holdings was 2.89 hectare while in Haryana it was 3.78 hectare in 1970-71.

In 2001, this was reduced to 1.33 hectare in India and 2.32 hectares in Haryana. It is only in Punjab that the holding size increased to 4.03 hectares due to reverse tenancy and large number of village youth moving out to foreign lands. In rest of the country, the holding size has decreases continuously. Further, the farm size distribution shows that in 1981, farms below two hectares were 74 per cent of the total farms in India. The percentage of farms in this category increased to 81.8 per cent in 2001.

This shows that in spite of all the programmes and projects as well as development of industrial and services sectors and overall accelerated growth of the economy, the pressure of population on land in the agriculture sector is increasing, especially in the rain-fed areas. Consequently, the economic development of the country is bypassing these segments of the economy.

It needs to be realised that the income problems of farmers and rural populations cannot be resolved within the agriculture sector alone. First, the rural economy would need to be diversified and second, the agricultural production pattern would require to be diversified and third, within the production system cropping pattern would need to be diversified. It is only then the rural and agricultural economy would move on a higher growth path that would fuel the inclusive higher growth of the economy. Planners and policy makers, therefore, must realise that the agrarian economy of India cannot achieve the objective of inclusive higher growth without diversifying the rural economy and within that. the agricultural economy of the country.

In order to diversify the rural economy, industrial and services sectors, small and clean units and ancillaries should be encouraged to shift to rural areas. The affluent, if any, from these units must be treated on their premises without polluting underground water and disturbing the healthy ecology of the area. For this purpose, if need be, capital subsidies should be given to such units. Further, substantive tax concessions should be given to such units for at least 10 years to begin with. Necessary condition should be that these units would employ at least 80 per cent of their employees from the local population within the radius of say 10 kilometers. This would help turn the small farmers into part-time farmers. This would increase rural incomes and capital would flow to agriculture for mechanisation and other improvements.

The extent system of industry and services concentrated in cities does not attract the rural youth due to paltry wages and the system, therefore, creates innumerable slums with migratory labourers, leaving the rural youth unemployed that creates socio-economic problems in the rural areas leading to drug addiction and suicides. This model would certainly help create gainful employment opportunities at the place and overall growth in these areas would become effectively inclusive in its very nature. However, all this can happen if our political leaders take to development through rational policies.

The writer, a former Vice-Chancellor of Punjabi University, Patiala, is a well-known agricultural economist.

MIDDLE

ATM Study Centres
by Charandeep Singh

I was always a one-night wonder in correlation to my exams during my university days in Patiala. So the evening before my exams was the most crucial one. It was May of 2002 and the electricity cuts in Punjab were at their horrific best.

As usual I whiled away the time during the day with the hope that the evening and the night are all mine. When I was all set for a rocking night of studies, there stuck what I would like to call a “natural calamity”, the power grid had tripped and as a result the power supply had fizzled out.

With it also fizzled out my feeling of being the rock-star as I was the only one left looking vulnerable with everyone around me appearing confident as most of them were through with their syllabus. Even the candles brought from the market couldn’t do the needful, because with every flicker tears clouded my eyes as a testimony to my weak eyesight. I was aghast in despair, and told myself that I was all set for a repeat of this examination after one year.

In those days I was reading a book called The Magic of Thinking Big by David Schwartz, and one of the suggested remedies was that when one was in despair one should take a long walk in fresh air. I was walking in the inner circular road of the university in my contemplative and sad mood when I saw the newly installed ATM of a bank radiating light brilliantly. It was, perhaps, air cooled too.

My grey cells worked. But to study there, I needed an ATM card. Someone patted my back. He was Mr Marwaha, a newly-appointed lecturer of the department. I immediately asked him: “Sir, do you have an ATM card?” He replied in the affirmative. I took the card from him, ran towards my hostel, picked up my study material and sat on the floor of the ATM crosslegged.

I sat at my ingenious place of study the whole night, did my revision and even managed to catch 40 winks in the air-cooled cell.

OPED AVIATION

Even as India emerges as an exciting and growing market, airlines will have to scramble to provide service at low prices to attract more passengers.
Airlines expanding in turbulent conditions
Global profitability may fall from $15.1 billion to $9.1 billion
Vibha Sharma

If airlines want more people to fly, they will have to somehow keep costs down. Photo: Mukesh Aggarwal

For the closely-linked global business that aviation is, the year 2011 will be challenging. IATA, international trade body representing major world’s carriers, predicts global profitability to fall from $15.1 billion to $9.1 billion in 2011, a 1.5 per cent margin on revenues of $598 billion.

Driving this deterioration in profitability are these factors: IATA estimates oil price at $84 per barrel in 2011, up from $79 in 2010. This will add $17 billion to costs, bringing the fuel bill to $156 billion. With oil nearing $90 per barrel, this appears to be a rather conservative estimate.

Globally, GDP growth is predicted to fall from 3.5 per cent to 2.6 per cent in 2011. And topping it all is over-capacity. While capacity will grow by 6.1 per cent, demand is likely to increase only by 5.3 per cent. Therefore, there is a clear mismatch.

Air facts
n At present there are 16 scheduled (11 scheduled passenger airlines, two scheduled regional airlines and three scheduled cargo airlines) and 121 non-scheduled operators.
n The high cost of the fuel is causing serious problems to the aviation sector. ATF constitutes 40 per cent of the operating costs of airlines and the price of the fuel itself is 60 per cent higher in the country as compared to the rest of the world.

In all, while 2010 witnessed “better-than-expected profits but had nothing for shareholders”, profits are expected to deteriorate in 2011, warns IATA.

This is the ground reality as Indian aviation companies go shopping for planes. The industry added 10 per cent capacity last year. However, the capacity was outpaced by an 18 per cent increase in passenger traffic, leading to a shortage of seats and inflated fares in the festive period.

Each airline now has ambitious expansion plans for the country’s fast-growing aviation market.

The industry, which has a combined fleet of 419 aircraft, is expected to add 50 more aircraft in 2011, for which it will require 5,000 additional personnel, including 500-700 pilots and 1,200-1,500 cabin crew.

The national carrier Air India, plans to double the size of its fleet over five years, even while it struggles to cut costs and reduce losses. The airline, with a current fleet size of 135, plans to lease 107 aircraft by the end of 2015. IndiGo recently placed order for 180 Airbus A-320 passenger jetliners-the largest single order that evoked collective gasps on the basis of sheer figures involved. Another low-cost carrier, SpiceJet, has also placed an order for 30 Boeing jets and 30 turboprop aircraft from Bombardier

The airlines are trying to return to expansion mode to meet growing demand. However, the question is: How will they get those extra passengers to fill that additional capacity, especially with key costs, including operational costs, heading north?

Indian Airlines have just about managed to emerge from two years of turbulence due to surging costs, excess capacity and intense competition.

The airline industry, more than any other business, is not just sensitive to global economy but circumstances as well, e.g., when Europe froze, business got affected everywhere, including India. This is why the years ahead may turn out to be extremely challenging for Indian carriers as they try to balance ambitions of individual growth with competitive airfares to lure travellers. In fact, keeping airfares in control will be the biggest challenge, both for airlines and the government.

Last year, when airfares spun out of control, public and media outrage forced former Civil Aviation Minister Praful Patel to intervene. The biggest challenge before new Aviation Minister Vayalar Ravi, apart from competing with his predecessor’s suave image, will be to ward off inherent craving of airlines for “predatory pricing” without hurting their financial prospects, apart from making national carrier Air India profitable

Industry sources, however, maintain that there is no way the government can curb airlines on fares because there is no sector mechanism to stop them. Faced with rising ATF prices and other expenses, airlines have no other option. “The government has business interfering in a liberalised sector,” is what they say.

Indian carriers are gripped with challenges that are also impacting the industry across the globe-high ATF prices, rising labour costs, shortage of skilled labour, excess capacity, huge debt burden and intense price competition. It also has to deal with spiralling inflation back home.

The comfort zone for domestic flyers except in business class is between Rs 3,500 and Rs 5,500, and airlines know this well. No matter how good the service you provide is, an airline is chosen on the basis of fares, aviation expert AN Hanfee says.

Today, flying has become more expensive for passengers, thanks to development fees levied at airports. The fare gap between full and low cost is almost non-existent. If airlines want more people to fly, they will have to somehow keep costs down, even with high ATF and other flying related expenditure. With the government watching, the airlines’ biggest challenge will be to manage the growth and rationalise airfares to attract new flyers.

There is a strong case for giving jet fuel declared goods status, attracting a sales tax of 3 per cent, but the issue continues to be in a limbo. States are reluctant to lower sales tax rates on ATF, as they stand to lose revenue without any immediate offsetting benefit.

Indian carriers also have to deal with serious legacy problems. The combined loss of Indian airlines shrank in 2010, but their huge debt burden remains a matter of concern, IATA Director-General Giovanni Bisignani says.

Fortunately, India is the leader in the world’s most interesting region — Asia Pacific. Indian aviation market will grow to 150 million passengers by 2015 from the current 72 million. India is a big market with 42 million domestic passengers, 34 million international passengers and an enormous potential for growth. The current capacity is 117 million seats per year, 0.1 seats for each of the 1.2 billion population. In comparison, the US has 3.5 seats per person.

Indian spending power is set to triple over the next two decades, fuelling continued rapid growth. The good news is that the private airlines have started reporting profits, or at least shrinking losses. “In the face of major challenges, Air India’s position is also improving. However, Indian carriers will still lose an estimated $0.4 billion this year. Also, I am concerned about their $13-billion debt. In a market as rich in potential as India, this precarious financial situation indicates that structural weaknesses must be addressed,” Bisignani explains.

The government’s Rs 2000 crore bailout is linked to performance on some key parameters. Air India’s wage cost is estimated to be 17 per cent of its overall operating costs. The airline had drawn a plan to cut wages by Rs 500 crore, but was able to achieve only Rs 100 crore saving on this account.

Estimates put AI’s wage bill at around Rs 3,600 crore a year. It has 125 aircraft in operation. In comparison, Jet Airways, with 107 aircraft and 12,000-odd employees, has a wage bill of about Rs 1,200 crore. AI, in fact, is not just overstaffed it also overpays its staff.

Indian passenger load increases
Shiv Kumar

After suffering from the impact of the recession for more than two years, India’s aviation sector is poised to show a turnaround. Major airlines like Air India, Jet Airways, Kingfisher, Indigo and Spice Jet have reported healthy increases in passenger load which has increased by more than 18 per cent by the end of 2010 over the corresponding period of the previous year.

The aviation sector has crossed a milestone, ferrying 520.1 lakh passengers in 2010 as against 438.4 lakh passengers in the previous year, according to data available from the Union Civil Aviation Ministry.

The last quarter of 2010 saw the highest number of people flying by air. According to data available from the Director-General of Civil Aviation, the number of air passengers during this period amounted to 147.1 lakh passengers as against 119.8 lakh passengers in 2009.

On the whole, the aviation sector has turned bullish with IndiGo placing the single largest order for jets in the history of commercial aviation when it ordered 180 A-320 aircraft from Airbus Industrie. The Rs 70,000-crore order will be executed over the next decade. The airline has also increased its market share in the month of December tying with Kingfisher for the Number 2 spot with a market share of 18.6 per cent. Jet Airways continues to hog the top spot while national flag carrier Air India is pushed to the fourth position.

With the surge in passenger growth, India’s major airlines are expected to return to profitability in the first quarter of this year, according to the Centre for Asia Pacific Aviation. However, analysts say it would be a while before India’s major airlines return to the pink of health. The country’s three major airlines - Air India, Kingfisher and Jet Airways - have a combined debt of around US $13.5 billion, much of which was incurred for expansion before the 2007-08 recession.

While Air India is depending on the government to bail it out, the private players will have to take recourse to the market. Jet Airways with debt amounting to nearly Rs 12,000 crore would have to raise fresh rounds of capital, according to analysts. And so will Vijay Mallya’s Kingfisher Airlines. The liquor baron’s aviation foray would be requiring funds for working capital apart from purchasing new aircraft for growing the business, according to brokerage houses.

As a result the airlines are going slow on capacity expansion, even though there are signs that passenger growth will balloon over the next several quarters. In all, they will add just 50 aircraft this year to the combined total capacity of 419 aircraft. Some of the aircraft being added will be smaller airplanes like the Bombardier Q400 jets being deployed by SpiceJet. These 78 seaters will be deployed in smaller towns, where the budget carrier is seen expanding this year.

India’s biggest airline Jet Airways, which has a 26 per cent market share, will be expanding aggressively in the global market, according to a grapevine. It will be unveiling new services to cities like Paris, the Middle-East and South East Asia using its Boeing 777 aircraft, say sources. Another private airline, IndiGo, will also launch its international operations in this year. To facilitate its global foray, the airline will be adding 16 more aircraft to its fleet of 32 in 2011 alone.

Meanwhile, all the airlines are showing signs of solid growth, according to the Centre for Asia Pacific Aviation. According to the latest data available, Jet Airways along with Jetlite ended November 2010 as the country’s largest carrier handling 1.3 million passengers. Kingfisher came behind handling 932,000 passengers while IndiGo, with 8,43,000 passengers, took the third spot. India’s flag carrier Air India took the fourth spot with 8,36,000 passengers.

The airlines are also packing in more passengers to increase profitability. According to CAPA IndiGo’s load factor, or the number of seats filled in the average flight, rose to 91 per cent in November 2010, while SpiceJet, Kingfisher, GoAir and JetLite also reported load factors in excess of 80 per cent. However, Air India was a laggard with a load factor of just 76.9 per cent.