[sgiitk]

Now they are easing on Contract Farming. A must for mega Retail!

[samarjitdhar]

I had always felt FDI in aviation was a non-starter given the global gut the world is going through. Even in retail it would probably take a lot more time for things to firm up. Specially when a lot of states have opted out. Funnily the CM of Congress ruled Kerala while praising the huge benefits of FDI in retail has said it is not good for Kerala . They have opted out too. A severe lack of infrastructure, over dependence on monsoons, politically motivated corruption at the grass root level will always throw insurmountable challenges for even behemoths like Walmart and I suspect the veterans at Walmart know about these things very well.

Originally Posted by harishpr

When private sector makes profit, it's shared with its shareholders only;but when they start making heavy loss and get close to bankruptcy, shouldn't the loss be limited to those shareholders.?? Why should general public bear the loss, an let their tax money used.

Which validates my point, privatize their profits, socialize their losses. Curiously all free market proponents who hate socialism remain hugely silent when such things happen or are demanded for. This form of socialism is perfectly okay. For the record, I am all for free market as long as there are proper regulations and everybody plays by the rule.

Originally Posted by carboy

Big deal. Tomorrow, if I start buying vadapavs at 8 Rs & sell them at 5 Rs to keep vadapav prices in check, will you recommend that Govt bail me out?

Wonderfully put. Did Mallya tell his customers that he is intentionally discounting the ticket prices so that he can recoup them from the income taxes we pay? Customers assumed that was part of his business strategy, he has deep pockets and flew with his airline. Why should the rest of India now pay for his ridiculous business sense?

Originally Posted by carboy

And from my point of view, KF ruined everything by buying a great airline (Air Deccan) and running it to the ground. Deccan was cheap, provided decent service & actually kept lower end prices in check while making a profit. I, for one, hope KF closes down and Mallya is also sued by banks, shareholders for running his business to the ground. If he is bailed out with public money, it will just mean that rich guys can just take my tax money and do what they want with it.

I also hope that all the public financial institutions recoup their last penny by selling whatever they can including his Armani suits. Nobody bears a grudge against this guy or his riches or his flamboyance but my beef is this King of Good Times just acts the Cry Baby of Bad Times demonstrating a total lack of maturity or dignity.

Originally Posted by Wild Phoenix

.......
Not talking about the hot air hostesses.

While others have debunked the rest of your arguments. Seriously??

[apachelongbow]

Originally Posted by harishpr

Your point of view makes sense to those flying regularly. But why must all Indians (majority of them not flying even once in lifetime) bear the cost of saving KFA. This holds good for AI as well.
When private sector makes profit, it's shared with its shareholders only;but when they start making heavy loss and get close to bankruptcy, shouldn't the loss be limited to those shareholders.?? Why should general public bear the loss, an let their tax money used.

Well in that case why must I as a tax payer pay for subsidizing mid day meals for village children for example? Are my non existant children going to the village school? Why must I bear the cost of rural electrification and water works scheme? Am I staying there? As a nation we must all pay for the greater good of the nation. A healthy aviation sector is good for all of us.
However I fully agree with you, that private sector players must not be bailed out. If they are responsible for their profits, they have to look out for their losses too.

[harishpr]

Originally Posted by apachelongbow

Well in that case why must I as a tax payer pay for subsidizing mid day meals for village children for example? Are my non existant children going to the village school? Why must I bear the cost of rural electrification and water works scheme? Am I staying there? As a nation we must all pay for the greater good of the nation. A healthy aviation sector is good for all of us.
However I fully agree with you, that private sector players must not be bailed out. If they are responsible for their profits, they have to look out for their losses too.

Well, I'm glad you agreed to my point partially. I'm happy to pay for the mid day meals since it's helping kids with their basic needs (roti, kapda and makaan) since I don't find time to adopt or feed kids myself. If government is providing free meals to kids using our tax money, I'm very happy. But flying isn't a basic need for most of my fellow country men, so I question the need to bail out. Even if government doesn't bail out KFA, Mallya won't come to streets. He has lot of other businesses to lead a lavish life. At the most, other airlines would hike rates, but it will never hit common man, since majority of airlines thrive on corporates or businessmen.

[samarjitdhar]

Whoever it was that called Vijay Mallya a smart cookie . Indeed he is only that he has made the entire nation specially the PSU banks dumb suckers. All this was achieved through special kid gloves treatment by the PSU banks under political pressure because of his political connections.

This is a telling quote from the article in Bloomberg.

The carrier had pledged its brand, a luxury villa in Goa, two helicopters, a Mumbai building and shares as collateral for bank loans of as much as 64.2 billion rupees as of Nov. 30, Junior Finance Minister Namo Narain Meena told lawmakers on Dec. 9. The total value of the collateral, including furniture and fixtures, was 52.4 billion rupees, he said.

Source: http://www.bloomberg.com/news/2012-1...bank-debt.html

This considering that the collateral pledged is the KF brand which is completely intangible and can only add to the losses that the banks are about to book because of this. Who pays for this haircut now? Obviously the taxpayers directly or indirectly. And for SBI if sh*t hits the fan we can see reduced deposit rates, lower returns on fixed deposits, higher interest rates for retail customers. Tell me again which part of capitalism has worked here, isn't this cronyism all the way? FDI in aviation was always a red herring. Not even a peep has been heard till now, gateway to south east Asia, Pacific and what not. Some of the huge pipe dreams that exist only in powerpoints.

[sgiitk]

@samarjitdhar; What about Air India, sucking the banks as well as the exchequer. Also, due to state support (they need AI for freeloading) they distort the market / pricing and make everybody sick, and discourage FDI.

If you ask me dinosaurs like Air India, BSNL and many state run PSUs deserve to be sold off or shut down. Even oil PSUs even though they are making a profit the return is minuscule when looked in context of the capital employed.

As Margaret Thatcher used to say, 'The government has no business to be in business'.

[samarjitdhar]

Originally Posted by sgiitk

@samarjitdhar; What about Air India, sucking the banks as well as the exchequer. Also, due to state support (they need AI for freeloading) they distort the market / pricing and make everybody sick, and discourage FDI.

If you ask me dinosaurs like Air India, BSNL and many state run PSUs deserve to be sold off or shut down. Even oil PSUs even though they are making a profit the return is minuscule when looked in context of the capital employed.

As Margaret Thatcher used to say, 'The government has no business to be in business'.

Agreed sir. But we should be also cognizant that a lot of the ills of government run businesses are because how the businesses themselves were run not because government runs businesses. To say that a business is ruined because government runs it would be a pretty gross generalization. In many cases government runs a business when the private sector feels it would be very unprofitable for them. Case in point is Indian railways which have churned out profits in many years even though there is a high amount of corruption. So the problem lies somewhere else and not entirely because government runs a particular business. In the case of Air India and Indian Airlines the losses started appearing in their books after they were forcibly merged into a single entity and they stopped flying in some of the profitable routes to allow the private players read Kingfisher to start using them. Add to that the lax ways of running the airline where free passes are distributed to all and sundry or flights being used for free at the whims of the powers that be. So it is actually the errant business decisions which have caused losses to the airline rather than the concept that government running a business. Pretty much so for our friend Mr. Mallya too. Should we treat both KF and Air India now the same way. Maybe why not. Both are now sick businesses and it doesn't matter if one is run by the government and the other is run by a wannabe playboy. In both cases I guess to save the taxpayers money the PSU banks should look for ways to cut their losses and get rid of these sickos.

Whether government should run a particular business or not is up for debate as just involving the private sector has its own pitfalls. In many areas the government must provide services such as healthcare. In the US healthcare has been converted into a royal mess by the private sector where there is no nationalized health care at all. Healthcare has become simply unaffordable for around 50 million people in the US and the private sector had already started to kick out even insured folks by citing pre-existing conditions. Sadly India is on its way to emulate the US pretty soon. Where the government doesn't run a business it ensures that services in some form are provided through additional taxes. For example in the US while the government does not provide any telecom services be it fixed line or wireless, the private players charge the customers additional charges as they are mandated to provide these services to the rural areas. Under normal circumstances it is unprofitable for these companies to provide any services to these areas however to recoup any losses (and perhaps book a profit too) they peg on additional charges to their customers. So contrary to popular perception, government has an important role to play in maintaining a healthy business environment. Whether it participates in a business is a decision that must be taken wisely without discouraging private investment.

[ramzsys]

Originally Posted by sgiitk

If you ask me dinosaurs like Air India, BSNL and many state run PSUs deserve to be sold off or shut down.

Air India agreed. Even providing for the neta/babus quota in private airlines will cost less than the losses they incur.

But not with BSNL. BSNL provides connectivity in rural and remote areas with only service as the motive(though this is through the amounts they got through taxing private players for the purpose). Their rural broadband prices are cheaper too.

[samarjitdhar]

More fun in the la la land of Tomboy Mallya.

The I-T department issued notices to employees demanding TDS, since the tax deducted by the employers has not updated in the department's system. There is a mismatch in the tax claimed by employees as the tax remains outstanding with KFA failing to deposit the same to the government. "The demand notice will ask employees to clear the dues for processing of I-T returns. Outstanding tax deduction is ultimately the responsibility of employees, who needs to clear the dues," a tax official said.

Kingfisher had deducted TDS from employees account but failed to transfer the same to the government. In June 2011, the last TDS was received from KFA. The I-T department has served them notice as the arrears were over 300 crore for the last two years. The department tried reaching KFA management on the same. But the management did not respond to the tax department's missive. As a result, the Kingfisher account was attached in February 2012 for non payment of TDS.

http://economictimes.indiatimes.com/...w/16829801.cms

Our brainless government doesn't even realize that it is not the employees fault that their lover boy Mallya has not transferred the TDS collected from the employees and not sent it to the government . I can only stare at this news with disbelief.

[joslicx]

Originally Posted by samarjitdhar

More fun in the la la land of Tomboy Mallya.

http://economictimes.indiatimes.com/...w/16829801.cms

Our brainless government doesn't even realize that it is not the employees fault that their lover boy Mallya has not transferred the TDS collected from the employees and not sent it to the government . I can only stare at this news with disbelief.

Its really serious. I am thinking what avenues would be there for employees to handle such a situation. Add to the salary woes (many employees not paid for some time), it just belies belief that that bugger is still walking free. If this is not crime then what is I dont know. But then, for the government, probably all these issues are just between "individuals". Even Kingfisher's debt might be construed as between "individuals". Its total breakdown of governance here.

Kingfisher airlines -- soon to become Dodo Airlines and for good I'd say. Such businesses deserve to shutdown.

[samarjitdhar]

Originally Posted by joslicx

Its really serious. I am thinking what avenues would be there for employees to handle such a situation. Add to the salary woes (many employees not paid for some time), it just belies belief that that bugger is still walking free. If this is not crime then what is I dont know. But then, for the government, probably all these issues are just between "individuals". Even Kingfisher's debt might be construed as between "individuals". Its total breakdown of governance here.

Kingfisher airlines -- soon to become Dodo Airlines and for good I'd say. Such businesses deserve to shutdown.

As per the news report, Mallya is outside the country since Oct 2nd and maintaining a stony silence. Maybe he expects some sort of legal action against him so both father and son duo have fled the shores? Who really knows. Aside from that he seems to have maintained a stony silence since then. So much for a smart cookie of a businessman.

The government has been and is so lenient with him. Imagine getting 2 weeks to respond with a "get well" plan and all they have given till now is zilch. The last date to submit the plan I believe is Friday. Maybe we have gone too OT on this thread here. Might be a better idea to move these posts to a thread titled "Is Vijay Mallya A Sign Of Crony Capitalism?"

We can then continue discussing how nothing is happening on FDI in the aviation or retail front even after the government supposedly opened up the floodgates.

[samarjitdhar]

Getting back on topic, here is an interesting write up of how Walmart is approaching this.

http://timesofindia.indiatimes.com/b...w/16833745.cms

Here are some telling quotes from the article and I think it will need a significant amount of dedication for Walmart to reap any benefits or conversely the farmers get their deserved fruits of labor.

Wal-Mart, by far the most aggressive foreign supermarket operator in India, expects to open its first store selling directly to the public in 12-18 months, and aims to turn a profit in 10 years, something it hasn't managed in China after 12 years.

The above when China is far more organized in terms of their infrastructure and planning. I had read this earlier and was perplexed as to why Walmart has still not been able to make a profit out of China yet. Maybe some China experts can shed some light but I would suspect the small retailers read the "kirana" grocers still do pretty well taking away a significant amount of business from Walmart in China.

Wal-Mart must buy in small batches from small plot-holders in a country where more than 80 percent of farms are under 2 hectares. That means contracting with thousands of farmers will still yield only a few thousand tonnes. In North America, retailers like Wal-Mart can buy from a few hundred farmers who provide hundreds of thousand of tonnes of produce between them.

Which will remain to be a huge huge challenge. Because of our massive population and shrinking land area any form of organized procurement is going to be a gargantuan task. Add to that the challenges of organized storage for mostly perishable commodities. That would need a huge amount of investment upfront.

CUTTING OUT THE MIDDLE MAN

Wal-Mart is trying to learn from the difficulties of local chain operators such as Reliance Industries and Shoppers Stop, most of which rely on middlemen after struggling to establish a strong direct farm supplier base.

Skirting the entrenched network of middlemen, who opposed the government's decision to allow in supermarkets and includes both traders and local markets run by state Agricultural Produce Marketing Committees (APMCs), isn't easy.

States require all farm produce to be sold through government regulated markets, and impose registration and transaction taxes on buyers, in addition to fees charged by middlemen operating in the markets. In some states, including Karnataka, buyers can purchase directly from farmers, but still have to pay taxes and fees both to the APMC and middlemen.

In Maharashtra, where Narayangaon is located, Wal-Mart must truck the produce it buys from Todkari about 20 minutes away to an APMC market and pay fees before delivering it to stores.

"The APMC fee is actually a tax for doing nothing and that is detrimental to direct farming," said Raj Jain, who heads Wal-Mart in India and like the Confederation of Indian Industry, a large trade group, wants to get rid of the APMC system.

Traders were among the most vocal opponents of letting in foreign retailers, a move whose impact will be dulled by allowing states to opt in or out. Under populist pressure, most states plan to keep global operators out, at least for now.

"The government is thinking of cutting us out without even thinking about the families who depend on this. We facilitate trade in these markets. Thousands of jobs across India depend on this," said Rajesh More, a trader at the APMC market in the neighbouring village of Manchar.

There are an estimated 50 million small traders involved in the farm-to-store agriculture business across India, according to the Confederation of All India Traders.

The Congress party-led coalition government in New Delhi defended its decision to allow in foreign retailers as benefiting farmers and reducing dependence on the middlemen network. Congress is also the ruling party in Maharashtra.

"The government has anyway let the foreigners in, which will hurt small store owners, and now they're targeting us," More said.

This part is the most telling section of this article. The bane of our own system which has caused massive price rises and we remain at the mercy of the middle men. Its an eye opener to hear that the existing Indian multi brand retailers still pay these network of middlemen to procure their goods. No wonder the prices offered by Reliance are no different from what we get in the normal market. How on earth is Walmart going to get around this? The governments will cleverly protect this including the Congress ruled states who on one hand show huge solidarity with the Center in their decisions but on the other hand are in cahoots with these middlemen at the state level. So much so that the Kerala CM publicly said that while FDI in retail is good it is not good for his own state . It is clear that the discussion should not be about FDI in retail but how can we eliminate corruption. We already have private Indian players in multi brand retail and even they are forced to pay these fees and taxes to these middlemen officially and the government looks the other way. So why do we think Walmart will do any better? I really find this celebration of FDI in retail pretty premature when we have failed to provide a proper infrastructure, sound irrigation measures, reducing the dependence on monsoons for our farmers to effectively sell their produce. Nor would Sam Walton build these services for our farmers.

This article is reproduced from Reuters so we can eliminate chances of bias one way or the other here. Its a good read.

[Ford5]

Slush gates are open. Walmart and likewise know 10-15 years is all they need to buy their way around. Our country is much too big (just like america) to gather a common point of view, too many people, too many obstructions and lastly corrupt politicians.

Greater good for the country is the promise. It does not matter anyway, because if it did we would be a better country than what we are today.

Even if the whole shebang of elimination of middle man & direct sourcing really fails the existing politicians wouldn't be alive to be help responsible. No accountability of any sort either from Walmart, they are here to do business, pay taxes, put a school or two here and there and claim their profits.

[joslicx]

samarjit

And whats the bit in that article about Shoppers Stop and farm suppliers? Where do they sell any fruits/vegetables in India? I thought they were into apparels and cosmetics and thats one market where margins are pretty huge. This article seems to be poorly written. One advantage of having stores like walmart would be govt getting the sales tax income which it is not getting presently as local businesses/shops simply do no pay that.

[sgiitk]

Originally Posted by ramzsys

But not with BSNL. BSNL provides connectivity in rural and remote areas with only service as the motive(though this is through the amounts they got through taxing private players for the purpose). Their rural broadband prices are cheaper too.

Today many private networks are as widespread, if permitted. Also, BSNL costs us all through Access Deficit Charges, zero or negative profitability, very poor service, and so on.

I forgot the worst case of PSU excess, Coal India, it is due to them that many power plants are unable to run at full capacity. This there are losses to the nation at various levels.