Speculative "I-said-so"...

I know, I know...every charlie in town is saying he had seen it coming. But it took a Twitteroor to precipitate matters, to shake the foundations of IPL. But, why now? Is the government trying to get even with Lalit Modi because he had the gumption to take on a minister in the government? Or, is there something else? Mocha is also throwing its hat into the ring with its version of what might have brought government tolerance to its tipping point (read here) . For a smart man, Lalit Modi has been quite foolhardy in his choice of enemies. Consequently, he may have bitten off more than he can chew...he is now being force-fed humble pie.

Games People Play

The ownership mess surrounding the Kochi franchise of the Indian Premier League, along with all its suggested subterranean filth, is what happens when you put together all the unholy elements of Big Business, Bollywood, Betting syndicates and Ballot champions into a box and shake hard. Now that this vile-looking genie is out and at large, it’s time to raise some issues, ask some questions:

1. Is Lalit Modi going to come clean? He has painted himself into a bit of a corner by forcing the new Kochi franchise to reveal its shareholding details. Now all the other franchises might have to follow suit; plus, the government agencies are reportedly investigating the web of companies that camouflages the real shareholding. Some of the powerful franchise owners might not be happy with Modi for precipitating matters. Things were going smooth so far and, for some inexplicable reasons, Lalit Modi has rocked the boat. Unpardonable.

2. The Income tax department has already showed up in force and any information they get gives them a handle. Some leverage that.

3. This raises questions over Lalit Modi’s managerial capabilities. Or, as they say in India, his ability to manage the “environment”. If he had wanted a certain corporate house to be awarded the franchise (as has been speculated in media), existing Indian management ethos (adopted wholesale from the Indian political narrative) would have expected him to have delivered the result. No questions asked about the means adopted; the ends matter more than anything else. He had managed to have his way so far; what went wrong this time? Time for the ungainly heave-ho, going by unconfirmed reports that a BCCI factotum is likely to be installed alongside Lalit Modi?

4. Why was Kochi selected for the franchise and not Ahmedabad as had been planned a year ago? Did Shashi Tharoor influence the decision? Was there any quid pro quo? The story of how a South African model was denied a visa by the ministry of external affairs – reportedly on a request from Lalit Modi -- remains incomplete.

5. Was Lalit Modi under pressure from Narendra Modi to scuttle the Kochi deal?

6. Clearly, not all IPL team owners have stumped up hard cash. They could be just faces on hire, proxies lending their names for a fee to some moneybags who prefer staying in the shadows for the obvious reasons. How does IPL rid itself of this stigma?

7. Going by reports so far, only the IPL organizers seem to have made any money so far. Most teams still seem to be languishing in the red zone. So far, the league looks like a one-way funnel for pouring in cash with no guarantee of returns. What’s the big rush then for acquiring a franchise? Valuation game? Or, is there a pay-off somewhere else?

8. Sunanda Pushkar’s role is likely to come under closer scrutiny – getting a 5% sweat equity stake, apparently “undilutable in perpetuity (sic)”, according to some news channels, is bound to raise some eyebrows.

War Of The Lords

What an unholy row! The unseemly spectacle of India's two financial sector regulators locking horns in public, and sparring with flailing fists, can only spell disaster for the country’s financial sector and its "orderly" development.

These two regulators should also realize that, with this spat, they have played into the hands of the government. It is well known that North Block in New Delhi, which houses the Finance Ministry, is keen to play mid-wife to the birth of a new super-regulator for the financial sector.

Pranab-babu’s Budget speech in February had promised a new super-regulator for the financial sector but was conspicuously silent on the details. Since then speculation has mounted about this new creature and its genetic make-up. The latest spat between securities markets watchdog Sebi and the insurance regulator, Insurance Regulatory and Development Authority, has now fuelled rumours that the ministry might use this seemingly intractable row to insert itself and lay the foundations for a government controlled super-regulator. SEBI and IRDA will then have to report to this new organization.

It is strange that such a disagreement was not sorted out in the High Level Coordination Committee on Financial Markets, an informal body created to specifically sort out similar issues of turf between different regulators. In fact, the coordinated action by Reserve Bank of India and Sebi recently against Bank of Rajasthan proves that this apex level committee can stymie designs of those who want to profit from regulatory arbitrage. However, there could be one possible weakness: this organization lacks legislative teeth. Various committees have recommended that the HLCC should either be given legislative powers or a super-regulator be set up.

This has become necessary since institutional activities and products increasingly straddle multiple markets today. Also, as the recent crisis has shown, achieving overall financial stability – which means ensuring that risks in each and every part of the inter-connected financial system are within manageable limits – has now been accorded greater importance than ensuring the stability of the banking system alone. And, it is believed that a super-regulator with a 30,000-feet-helicopter-view alone can perform this job. But, the important question that arises is: is the government the right agency to undertake this responsibility? And, if all the regulators in the financial system are to report to this omniscient regulator, what are the consequences?

Conclusion: there should be a widespread debate before finalizing the DNA structure of the yet-to-be-born institution.

Too Many Wise Men?

How many men does it take to run the economy? Numerous, going by the number of experts voicing their opinion in Delhi.

The multiple lines of economic command have been visible for some time now. If there were ever any doubts, one had to only tune into the babble of eco-speak emanating from Delhi soon after the wholesale price index numbers for February were announced. There was understandable panic because the inflation rate was nudging the treacherous double-digit mark. But, going by the comments made, it would seem that there were many more people out there in Delhi who knew what the Reserve Bank should be doing and when it should be timing its next action. And, then came the unexpected RBI rate hike to quell some of the inflationary flames. But, instead of diminishing, the decibel level actually went up by a few notches with the experts now holding forth that RBI needed to implement another rate hike.

But, what has been described above is only a symptom of a larger trend in economic policy management. Over the past few years, the number of ecocrats has multiplied and with it have the number the divergent views and conflicting opinions. All this is, of course, great grist for the electronic media.

Here’s a look at the chief policy manager and the various people in the economic management team.

· Prime minister Manmohan Singh: An established economist with pucca Oxbridge cred. Gained respect worldwide for having pulled the Indian economy back from the brink of bankruptcy and then steering it out of the stifling, controlled regime to a new liberal and competitive framework.
· C Rangarajan: Another well regarded economist. The former RBI governor is currently the Chairman of the Prime Minister’s Economic Advisory Committee. Obviously, knows his monetary onions well and makes them public as well.
· Montek Singh Ahluwalia: Another Oxbridge-World Bank alum who gained fame as an economic advisor during Rajiv Gandhi’s time. Was Chief Economic Advisor in finance ministry when Manmohan Singh was finance minister. Is currently Deputy Chairman of the Planning Commission. A favourite with the sound-bite hunters on all topics – from the state of the monsoons to the interest rate structure.
· Kaushik Basu: A vociferous champion of free economy, this former don – he taught at Delhi School of Economics and Cornell University – has been recently appointed as Chief Economic Advisor to the finance minister. He is the hunting pack's new quarry.
· Pronab Sen: Chief Statistician, Sen is currently trying to overhaul the way data is collected, tossed and diced, and then the manner in which the decision-making apparatus interprets it. He has also been vocal with his views on inflation and interest rates.
· Raghuram Rajan: Occupant of tenured chair at University of Chicago and a former Chief Economist at IMF, this man has been quietly advising the PM on a number of issues, including financial sector reforms. The super regulator proposed in Budget 2010 – which is expected to supercede all the other financial sector regulators in the country, such as RBI, SEBI, IRDA -- was suggested by the panel headed by him.
· Pranab Mukherjee: The man who, as finance minister, is in the thick of it but does not speak much at all, except to voice the government’s overall concern from time to time over inflation, interest rates and their impact on credit growth and the general well-being in the economy.
· D Subbarao: Governor at RBI, who played an impressive role in launching the fire-fighting operations in close coordination with the fiscal authorities soon after Lehman Brothers went belly up. He is also trying to improve some of RBI’s traditional ways (such as, communication), but unfortunately that is seen as a weakness and he is considered fair game by everyone in Delhi. So, almost every ecocrat has a word of advice for him.

There is nothing wrong in having such a large and high-calibre team of economists in charge of policy management. But, policy direction starts sounding out of whack when all of them speak in different and contradictory tongues.

Why Is A Housing Regulator Absolutely Necessary

Every economic activity which generates substantial revenue, has a competitive playing field and enjoys an extensive interface with customers needs a regulator. It is necessary to have a regulator to ensure that buyers get a fair deal, that there is reasonable competition in the industry and that sellers do not form cartels so that they can extract exorbitant prices from buyers. People commonly mistake a regulator for a government-appointed administrator who will take some arbitrary decisions, mostly on behalf of the powerful and the rich. Therefore, two issues are very critical for imparting some degree of credibility to the regulator: the process chosen for appointing a regulator and the decision of who gets to be the regulator’s boss, or in other words who pays the regulator’s salary.

Many important economic activities in India continue to thrive without a regulator. Housing construction is one such industry, if it can be called an industry at all. The sector is rampant with malpractices and the rules are heavily loaded against the consumer. Sure, there is always the option of seeking recourse in the courts, but the prospect is a deterrent in itself.

There are scores of irate customers who, after having paid good money to builders upfront, are still awaiting possession of their dream homes. Most of these errant builders take money from prospective buyers, start the construction process, divert the money elsewhere (more on this later) and then come back to the customer with a plea that costs have escalated and the customer needs to pay more money so that the builder can finish his construction and the buyer can take possession of his property. Having already coughed up a substantial amount, the customer has no option but to pay up. There are many property buyers in Mumbai who have been waiting for over three years to get that all-important, and elusive, piece of document called “occupation certificate”.

Many builders delay construction when they see property prices rising in the neighbourhood. Having initially lost out, they then delay construction and squeeze out the additional margin from the hapless customers. There are also many builders who divert funds to their other businesses.

Then there is this ambiguous practice of measurement. Mumbai builders charge customers on the built-up area but Kolkata builders still charge for the super built-up. There is no uniformity in the rules. Plus, there are the usual stories of promises reneged, the half-truths about measurements and amenities, the failure to hand over the building to society members, the illegal sale of parking lots.

One can argue that the local municipal laws apply to builders and, by that token, the local corporations can be considered as the regulators. But, going by the track record of the municipal corporations, this would be a grave mistake. Most corporations are over-staffed, inefficient and excessively corrupt. Their duty to the citizenry ends with collecting stamp duty for registering the property, and then wheedling out property tax from these same house-owners every year.

There have been sporadic discussions about the need to for a housing regulator in the past. Maharashtra’s minister of state for housing, Sachin Ahir (NCP, MLA from Worli) had promised in November 2009 that the government would give priority to the proposed housing regulatory authority – the Maharashtra Housing Regulatory Commission Bill has been in pause mode for over a year. But, the micro-structure of the Bill needs to be debated – there has been very little discussion about the Bill in the media and by civil society. For instance, one provision in the Bill seeks to direct every builder to keep aside a percentage of apartments for the middle and lower income groups in every project. We have already seen how builders have subverted this rule (by selling two-three contiguous flats to the same buyer) in the past.

And, why have only a regulator for only Maharashtra? The industry needs a national regulator. It can be argued legitimately that since Maharashtra’s problems are different from the rest of the country, it needs a separate regulator. True. But, by that same logic, Mumbai’s housing problems are very different from Pune, which are very different from Nashik, which are completely unlike those in Nagpur. In addition, a local regulator is kind of beholden to the local politicians, who tend to be closer to the local builders. As mentioned in the first paragraph, if the formula for appointing a regulator and finalizing his reporting structure is water-tight, we might still see some good coming out of the housing industry.

The Gun Barrel And Bengal...

Captured Maoist Deepak (aka Venkateshwara Reddy) is apparently singing. Like a canary. This is what the controlled leaks would have us believe. And, what's interesting, the Indian Express flyer on Page One this morning (read here), has an exclusive line into what he's revealed to interrogators. He has apparently hinted at a power struggle between him and the Maoist leader Kishenji. The story also tries to plant the seeds of future discord (rather insidiously too, but in quite an amatuerish sort of way): apparently, the tip-off to the Kolkata Police seems to have been a "deliberate" leak from someone in the Maoist party.

Now, now...this is such an old and shop-worn trick. The Brits did it during the Independence struggle; so did many others, including Kolkata Police while trying to flush out Naxalites in the 1970s.

But, the story then takes another interesting turn. Deepak has re-confirmed what Kishenji had said in a May 2009 interview to Mint newspaper: that Trinamool did play a critical role in the Nandigram agitation. Kishenji, aka Koteshwar Rao, had also made another stunning revelation then which went largely unnoticed: Trinamool, it turns out, had brought to the table a cache of arms that was substantially large than what the Maoists possessed. An earlier Mocha posting (Time For Another Spring Thunder?) also had a take on it.

I was expressing my disgust and shock about this to a Kolkata resident recently and he seemed to be quite blase about the development. He felt all was fair in this battle to get the CPI(M) out of Writer's Building. Fair enough. The CPI(M) has ruled over West Bengal for 33 years and that is a recipe for disaster anywhere in the democratic world. But, the question that arises then is: will Trinamool give up its hoard of arms once it assumes power? Or, will TMC use them to return the favour to all CPI(M) members who have pursued and persecuted Mamata all these years?

The gun barrel will continue to cast its ugly shadow over Bengal for some more time.

Cloak-and-Dagger In The Deer Park

The story of espionage continues to enthrall and fascinate. At one end of the spectrum is its enduring fascination with the bleak landscape of human character and its infinite capacity for deception. But, at the other extreme, some stories bordering on the absurd also do manage to escape through the chinks. This also has its utility: it shows up the lengths to which people go to serve a nebulous concept called country. For example, imagine an East German spook (probably working for the fabled and reviled organisation called Stasi) spying against a West German scientist or liberal artist. Both are Germans with a similar DNA structure, write and speak the same language, eat the same cuisine and pretty much drink the same beer. So, who is more loyal to whose country?

But here is a story that takes the cake. This story was front-paged -- and headlined How Bambi Met James Bond To Save Israel's 'Extinct' Deer -- by Wall Street Journal. It's about how the Israeli secret service burst some veins in trying to smuggle a certain species of deer out of Tehran on the eve of the Shah's overthrow by the Ayatollah faithfuls. Enjoy.

R-Day Ruminations-I: Crime & Politics

Two stories in today’s Times of India need some kind of response.

The first one is about Sonia Gandhi voicing her desire (read original story here) to keep criminals out of politics. She said this at a function to celebrate the diamond jubilee of the Election Commission. At the same event, prime minister Manmohan Singh rued the fact that the best minds don’t want to join politics because of the unruly elements who populate this space. Both – including many others at the celebrations -- have a point and it is interesting to see how they translate this thought into action.

But, just banning criminals might not cleanse the system of its venality. The rot begins with the way the profession is financed. With little or no accountability, most political parties depend on business for their financing. And, a large part of this is in cash. An accountant recently told me that even new generation entrepreneurs who wanted to run transparent and well-governed businesses – especially in manufacturing -- couldn’t help dipping into the shadowy cash economy once in a while to keep greedy politicians and bureaucrats at bay. Pay-offs are hard-wired into the system of approvals, clearances and licences; denial only begets reprisal and redressal mechanisms are way too effete to deliver timely and meaningful justice.

It all starts here. Untrammelled access to such large pools of cash naturally draws in all kinds. One consequence is the large percentage of political sons and daughters inheriting their parents’ mantle. When large sums of money – held through a web of shell companies in India and abroad – are at stake, most politicians are loath to leave this fortune to a political party or to other political (essentially non-family) successors. Merging the political heir and family heir into the same person is a neat arrangement. Here’s another pointer: nobody seems to bat an eyelid when politicians disclose large increases in their wealth despite not having any disclosed sources of income. One politician even ingeniously explained it as gifts from fans!

If they are indeed serious about ridding politics of its goonda elements, then Sonia Gandhi – and hopefully Rahul Gandhi – will have to bring the broom to campaign finance first. The Election Commission has been trying to introduce a semblance of accountability to campaign finance by putting a ceiling on how much each candidate can spend on his or her election campaign. But, this ceiling is observed more in breach for two reasons – one, the candidate’s campaign bills are mostly picked up by someone else and, two, because nobody monitors how much each political party spends at a broader, national level.

The problem that then arises is this: campaign financing doesn’t stop once the election results are announced because election funding is inextricably linked to post-electoral favours in the form of sweetheart deals, land allocation and lopsided government contracts, which then provides a platform for additional future funding. Perhaps, the EC should also play a role in reducing the size of the government and its capacity to influence business investment decisions. I know this is asking the EC to go way beyond its constitutional remit. Plus, one can’t overlook the additional danger of a megalomaniac EC wreaking havoc. But, some institutional mechanism can be devised in conjunction with other constitutional offices (such as the Comptroller and Auditor General of India) that works to reduce the multiple government approvals – both at the Centre and the states -- that force businesses to generate unaccounted cash.

Many authors and historians have written that the politics of Sixties and Seventies marked the end of numerous Indian institutions. I hope we are able to witness the rebuilding of some of them in this new decade. That’s also a necessary and sufficient condition to end criminalisation of politics.

R-Day Ruminations–II: Cricket and Not-So-Cordial-Entente

Speaking of institutions, there is a danger when organisations with a limited role – particularly in sports and entertainment – go beyond their ken and meddle in unrelated fields. The conduct by Indian Premier League (IPL) is not only most curious but borders on the dangerous.

If reports are indeed true, then home minister P Chidambaram’s outburst (read here) at the wilful boycotting of Pakistani players by the IPL franchisees adds a new layer to this fetid mess. PC denies that there was any nudge-nudge, wink-wink from the government, or any signalling to IPL franchisees to snub Pakistani players. Interestingly, and somewhat inexplicably, filmstar Shah Rukh Khan has also suddenly emerged out of the woodwork to voice his displeasure at the turn of events.

But, IPL is playing an extremely hazardous game if it is indeed over-estimating its clout and trying to use that to influence the country’s foreign policy. Last year, it locked horns with the authorities by shifting the IPL matches to South Africa because the government said it could not provide adequate security for players in view of the impending general elections. What was appalling was IPL’s intractable stand.

First, it refused to pay for and provide private security. Strange as it might sound, here was a private enterprise (admittedly with a sound business model) which wanted the government to spend tax-payers’ money to help it carry on its private business. Cute. But, what was even more worrisome was the fact that it refused to pay heed to the government’s legitimate reason for its inability to provide security: general elections across the country with a gruelling schedule spread over 30 days. The message from IPL was posed like a question: what’s more important, IPL matches or elections?

In this latest display of audacity, there are rumours that the government might have conveyed to the IPL franchisees that the responsibility of ensuring players’ security lay with the League. And, if reports are to be believed, it is this that might have prompted franchisees to give the Pakistani players a miss. Whatever the reason might be, IPL needs to get some reality check. Celebrity status for some of its members doesn’t guarantee immunity from national priorities.

Build Me A Rainbow

If I were a rich man,
Ya ha deedle deedle, bubba bubba deedle deedle dum.
All day long I'd biddy biddy bum.
If I were a wealthy man.
I wouldn't have to work hard.
Ya ha deedle deedle, bubba bubba deedle deedle dum.
If I were a biddy biddy rich,
Yidle-diddle-didle-didle man.

I'd build a big tall house with rooms by the dozen,
Right in the middle of the town.
A fine tin roof with real wooden floors below.
There would be one long staircase just going up,
And one even longer coming down,
And one more leading nowhere, just for show.

I'd fill my yard with chicks and turkeys and geese and ducks
For the town to see and hear.
Squawking just as noisily as they can.
With each loud "cheep" "swaqwk" "honk" "quack"
Would land like a trumpet on the ear,
As if to say "Here lives a wealthy man."

If I were a rich man,
Ya ha deedle deedle, bubba bubba deedle deedle dum.
All day long I'd biddy biddy bum.
If I were a wealthy man.
I wouldn't have to work hard.
Ya ha deedle deedle, bubba bubba deedle deedle dum.
If I were a biddy biddy rich,
Yidle-diddle-didle-didle man.

-- From the musical Fiddler On The Roof

Had Topol known the extent of extra-constitutional powers enjoyed by builders in modern India’s cities, he would have probably sung a slightly different set of words for this famous musical. Attacking women, defenceless men, elderly citizens keen on preserving the ecological balance is the only vocabulary builders use to counter dissent. But, how come they’ve got away each time?

Obviously, the political apparatus has been co-opted full time. In Bombay, the builder-politician-mafia nexus has been thriving for years. But, earlier, builders knew how to keep their distance, and rarely got into the public spotlight. They were seldom seen, never heard. But, today they want their pictures printed, aspire to celebrity status and even crave for recognition. Their daughters and sons want a piece of the Bollywood action too. Any dissenting voice is seen as a threat to this sublime equilibrium and needs to be silenced, even if it is with brutal force.

Their deep pockets have ensured a safe passage every time. One builder, accused of short-changing the state revenue department by deliberately mis-stating the area of the apartments he’s been selling for years, even crowed to fellow builders that the hullabaloo would quieten down soon after some money was spent – on politicians and on newspaper advertisements! Like the famous playwright Noel Coward said so fittingly: “The higher the buildings, the lower the morals.”

Idiots vs The Book

The “3 Idiots” controversy seems to be dying down – this is evident from the declining column centimetres devoted to the issue and the reduced decibel levels in the television channels. So, in keeping with my predilection for lagged responses, I have decided to wade in when the brouhaha seems to be fading.

First, a disclosure. I have seen the movie but haven’t read the book. I don’t particularly admire Chetan Bhagat or his style of writing or even some of his ideas that seem to appeal to some youngsters. A recent piece he wrote for the Sunday Times of India (Don’t Fix History, Look At The Future, August 30) seemed particularly strange. Anyway, Bhagat cannot be denied his share of adulation. He has many fans across the country and, like every citizen in this country, he too is entitled to his views. And, if he finds support – as well as admiration for his work – then he is jolly well entitled to it too.
But, to come back to “3 Idiots”, my daughter has both read the book and seen the movie. She seems to think that the book is indeed the launch pad for large chunks in the movie. Sure, there are some dissimilarities and some deviations, but that’s cinematic licence. She seems to be convinced that the movie is based on the book “Five Points Someone”, and there’s very little chance that you can use ‘technicalese’ (such as, the legal agreement brandished by the movie director and purported to have been signed by Chetan Bhagat) or spin to persuade a 15-year-old to change her opinions.
Assuming that the book has indeed laid the foundation stone for the movie, then a larger Bollywood malaise seems to be rearing its head again – scant regard for intellectual property. The issue has plagued most musicians and producers over many decades now but Bollywood seems unable to shake off the indolent habit of copy-paste. Sure, there are directors like Vishal Bharadwaj who have juxtaposed famous plays from Shakespeare into a contemporary Indian setting, and acknowledged their true source of inspiration. But, as an industry, by indulging in its addiction for a regular fix of “lifted” tunes, plots and scripts, Bollywood is doing itself great disservice.
If Chetan Bhagat’s claim is indeed true, then it once again shows up a twin-faced Bollywood -- which doesn’t respect intellectual property rights but immediately gets into a huff when pirates hawk a copy of the latest release. If the makers of “3 Idiots” are indeed in the clear, then society should reflect whether it should continue endorsing a revolting persona who has been weaned on easy publicity.