Uttarakhand disaster : An analysis !

Uttarakhand floods are the consequences of excessive human intervention in nature's scheme. Increase in human activities of encroaching into nature produced such  brutal result. Demand for energy and needs of ever increasing population have forced the human to exploit natural resources without considering its impact over the environment. 

Cloud burst which is considered as the main reason for this disaster is not new to Uttharakhand. For the people and Governments who argue that cloud-burst was the main factor behind the incident there are many references to the past which show that such a heavy rainfall is not new and more than the rainfall his year was recorded in the previous years.  Uttarakhand region witnessed such heavy rainfalls as the records show that Uttarakhand has recorded single-day rainfall in excess of 400 mm several times, including 450 mm in 1995 and 900 mm in 1965. Cloudbursts, floods and rapid swelling of fast-flowing rivers aren't uncommon. 

But this time the flood waters were loaded with thousands of tones of silt, boulders and debris from dam construction, found no outlet. The routes they took in the past, including ravines and streams, were blocked with sand and rocks. The waters deluged towns and villages, submerging many buildings under several feet of mud as shown in the given picture.

Many of the constructions in the region are illegal and tourist hotels that raised were out of penny's greed because constructions were built on sloppy ridge areas in which the digging is completely banned. This was evident from areal view of the image given above. Neither the radar technology nor the well equipped with seismology driven equipment were installed to predict the disaster forehand.

Development in hilly areas and along rivers, growth of illicit tourism, lack of an early warning system, ineffective evacuation plans, ineffective disaster management techniques, large scale deforestation, indiscriminate construction of hydroelectric dams and global warming are the main causes of the floods.

Empowering the disaster management authorities is at the need of the hour in all states especially the seismic zones and hilly areas. Use of modern technology for an aerial survey with the help of meteorological departments and experts on the pertinent matters can help mitigate the situations. Development should not come at the cost of our environment. More construction activities does not mean more development, rather they should be people oriented. Redevelopment to small scale industries like cottage industries will be apt and construction of small hydel power projects rather than big dams should be given priority.  An environment friendly ecosystem should be given the highest priority.

India's National Manufacturing Policy ..

Manufacturing growth in India is much below than what it should be. The employment and output generation in organized and unorganized manufacturing sectors exhibit a major imbalance. The share of the industrial sector in GDP has stagnated around 20-21% from 1991-92 to 2002-05, and thereafter actually declined to about 18% in 2010-11.India has, for various reasons, failed to expand its manufacturing base and capitalize on employment creation in the manufacturing sector. Several earlier attempts have not yielded the desired result of promoting growth in the sector. But the key to success will be policy implementation, but there are several challenges.

 India is also not known for exports of manufactures and in a number of manufactured goods the country is not internationally competitive. National Manufacturing Council (2004) came up in 2006 with the National Strategy for Manufacturing. It not only identified a set of 12 challenges facing the sector ranging from general framework conditions such as macro-economic stability, and strengthening education and skill, infrastructure development to the needs for specific policies for promoting investments in technology and innovations and for increasing the usage of ICT in the manufacturing sector, and improving firm level and specific industry level competitiveness.

The targets for the manufacturing sector in India :
(i) It aims to increase the share of the manufacturing sector in India's GDP from 15% to 25 % by 2025.
(ii) Creation of 100 million new jobs.
(iii) Aims at improvising local value addition by ensuring that the industry has most of the components, spare parts and raw materials locally available.
To achieve these goals the policy prescribes five issues :
(i) Encouragements to foreign investments and technologies,
(ii) Improving the competitiveness at the firm level,
(iii) Reducing the compliance burden on procedural and regulatory formalities of the industry,
(iv) Encouraging innovation
(v) Effective consultative mechanism to ensure mid-course mechanism.

The National Investment and Manufacturing Zones (NIMZs) are being developed s integrated industrial townships with state-of-the-art infrastructure and land use on the basis of zoning, clean and energy efficient technology, necessary social infrastructure and skill development facilities. These can lead to significant cost savings as well as improved productivity from :

(i) Increased supply chain responsiveness because of manufacturing consolidation near suppliers,

(ii) Decreased time-to-market as companies can more effectively leverage the capabilities available with vendors in the cluster,
(iii) Better and cost-effective availability of labor and also reduced talent recruiting efforts because of the power of clusters in drawing labor,
(iv) Lower logistics costs.

 With the size of NIMZs at least 5000 hectares in size and with administrative structures including four entities, an SPV (Special Proposal Vehicle), a developer, the State Govt and the central Govt the labor policy has been designed in a flexible and liberal manner to promote productivity by reducing the rigidities in the labor market and ensuring protection of workers' rights. 

Some critical issues and challenges to this policy are land acquisition, effects of change in governments, policies on economic growth, corruption, management practices etc. The solution to these issues is the government should provide infrastructure and leave the rest to markets. Creating the required skills and human capabilities among rural migrant and the urban poor so as to make the growth process more inclusive; increasing  domestic value addition and technological 'depth' in manufacturing; building energy-efficient and environment-friendly structures will add up in growth and success of NIMZs.

Change is necessary in many areas for India's manufacturing sector to reach its goals: industrial relations, land acquisition, the regulatory framework and so on. These improvements must happen widely around the country, not only within the proposed New Manufacturing and Investment Zones, for the country to realize its ambitious overall growth and employment targets. A systematic and collaborative process of implementation, involving products, stake-holders and many ministries of government, in the Centre and the States is required to accelerate manufacturing growth.

Oil prices, factors that effects it,GDP

    The infrastructure industry is very important in fuelling the economy. But when it comes to such critical issues as pricing, the oil industry is about as transparent as the crude oil that it processes. The price that we pay for a litre of petrol has no relation whatsoever to what it costs to produce that for Oil Company. Before going to the depth of the topic let us first know about 'under-recovery.' Under-recovery is the difference between the price that the oil company would like to charge for say, petrol, based on its international traded price, and the price at which it supplies the fuel to pumps, excluding taxes. Decisions to increase or decrease retail prices of products such as petrol, diesel and cooking gas are made based on this concept.  

    It is a common perception that under recoveries is losses suffered by state run oil marketing companies; these losses are just 'notional 'and not actually incurred by the companies. But this is because the Government uses import parity basis to calculate under recoveries. For example in case of diesel, the fixed selling price of the diesel is compared to the amount the companies would have paid had they imported the diesel (this will include international price of diesel, custom duties, transportation costs and marketing costs and margins). However, the price thus arrived has nothing to do with the actual cost of producing diesel which will be lesser (considering domestic over capacity in petroleum products refining markets). The way whole thing is projected makes one feel that the Government is making net losses in oil marketing business so as to keep the fuel prices affordable. 

     The critical point to be noted is that under-recovery is not equal to loss for the oil companies because they oil companies import only raw materials in the refineries to produce various fuels like kerosene, petrol, cooking gas etc. The strange pricing policy that is unfavorable to consumers is adopted mainly due to two reasons. The first one is the Govt. encouraged investment in new domestic refineries. This policy was successful in India when it was short of refining capacity and had to import petroleum products. Now the scenario is entirely different with many leading players like Reliance, HP, Essar and many others in the field producing more products and exporting petrol and diesel.. This can be clearly noticed that from that statistics, with 206 million tones in 2010-11, only 154 million tones were demanded. This clearly shows that the policy should be revised and thus decreasing the prices. 

    The second reason is it is difficult to apply the cost-plus-margin approach to each and every product but we can use costing theory here. The scientific approach could mean a loss of protection to oil companies but the numbers show huge profits to the oil companies where the numbers won't dip too much for them if they adopt it.

   With prices of petroleum products raising high and with too much burden on consumers it is now time to reassess the policies. The Government also needs to reassess its taxation policy for petroleum products. Higher taxes on petrol are driving consumers to diesel vehicles which in turn is increasing the subsidy burden on the government.

     Conventional wisdom would suggest that an increase in global oil prices would hurt the oil importing countries and, perhaps, reduce their GDP growth rates — and have the opposite effect on oil exporters. But data for the last 15 years does not corroborate with that claim. The five-year rolling average for crude oil prices and growth rates of real GDP show that economic growth for the US, China, and India — three of the top ten oil consumers — did not suffer from rising oil prices. Nor did the economies of Saudi Arabia, Russia, and Mexico — three of the top ten oil producers across the globe, receive an unusual lift from such a trend. For instance, oil price increased at a higher rate in 2006 compared with 2005. Prices rose by 1.62 per cent in 2005 and 1.87 per cent in 2006. During this period, India's real growth rate in GDP also increased from 5.61 to 6.38 per cent. This only goes to prove that oil prices are just one among many variables which can affect a significant metric such as GDP.

"Digitalisation in India" : a complete essay !

Digitization has sneaked into every aspect of our life. The latest directive of TRAI for digitization of cable T.V is another initiative to bring the advances of technology to our door step.  By considering the factors like providing services, subscriber, the cable operator, industry structure and the industry challenges we can understand the present scenario and estimate the future consequences.

TV viewing services in India is currently provided mainly by three mediums Analogue Cable Services, Digital Cable Services and Digital DTH Services. Analogue cable services have been existing in India for more than two decades in India; however, analogue cable services have limited number of channels and do not have extra features and value added services. Digital DTH services in India have been started less than a decade back and are gaining popularity and acceptance in India mainly because of their superior picture and sound quality. The receptivity is much clearer and all the channels have the same reception quality. As both the signals are received at the same time, there are no issues with the synchronization of sound with video. This is a major constraint which subscribers tend to think over.

Through DTH which means Direct to Home Service, the recipient will receive the signals directly from the satellite on his Set Top Box. The viewer gets a wider range of channels to choose from which can be activated through packages. The picture quality is much superior and the sound is crystal clear. The viewers are also able to watch High Definition content which is set to make television viewing even more superlative. One can now watch his favorite sports action or travel or adventure series in high definition recording it and by replaying it. There is up to 5 times picture quality over normal or standard definition picture quality and the images carry 16: 9 aspect ratios.

With Indian TV market 3rd largest in the world with 146 million households it takes some time to digitize the TV connections. This is the reason why Govt. has ordered to digitize in four phases. The government on its part has been rational on its part by introducing the digitization in phased manner.

• Phase-I : In four metros by December 31, 2011
• Phase-II :  In all cities having a population of over one million, by December 31, 2012
• Phase-III : In all other urban areas (municipal corporations/ municipalities) by December 31, 2013
• Phase-IV : In the rest of India by December 31, 2013

 The government is also furthering its cause of connecting every village with broadband through this digital revolution. The increase in competition between the broadcasters will invariably lead to viewers getting more out of their rupee paid. The users are also set to gain from the fact that digitization enables a more interactive T.V viewing, piggy backing of other value added services like the broadband though the cable network. But the shortage of set top boxes and the issue of hike in the monthly subscription fee by many cable operators brought in a little bitterness to this whole exercise.

Industry structure

The distribution side of the value chain remains highly fragmented - though market structure changing rapidly with a thrust on consolidation. The cable and satellite television market in India had emerged in the 1990s and has since then experienced a strong growth in terms of number of subscribers having grown from mere 400,000 in 1992 to around 90 million today, representing a CAGR of 35 percent for the last 18 years. The channels seen on TV (pay channels or free to air, FTA, channels) are created by different broadcasters and transmitted from satellite to receiving stations (head-ends) owned by MSOs. The MSOs in turn re-transmit these signals through cables to the LCOs (Local Cable Operators), who have their own last mile cable network to individual homes.

Industry challenges

Under-reporting of subscriber base by LCOs (Local Cable Operators) leading to inequitable distribution of value : In the absence of an addressable system, the subscription revenue transaction among the broadcasters, MSOs, and LCOs is currently undertaken either on a fixed-fee basis or on the basis of a negotiated subscriber base. Considering the strong bargaining power enjoyed by LCOs who own the last mile, the distribution of subscription revenue in effect remains heavily skewed in their favour. As per the industry estimates, LCOs declare only around 15 percent of their paid connectivity to MSOs and broadcasters. This not only deprives the MSOs and broadcasters of their fair share of value, but also results in service tax leakage for the government. The lack of trust and transparency in the business models of the industry has also led to frequent disputes between stakeholders and increased litigation incidences.

Non-standard pricing and local monopoly status of LCOs leading to sub-optimal customer service: In a market survey commissioned by TRAI, it had observed that the average monthly cable bill for a subscriber varied widely from Rs. 149 in Kochi to Rs. 322 in Shillong, even though services being provided did not warrant such variation. Apart from this, there are instances where the cable charges are increased by LCOs for a locality arbitrarily. These shortcomings are the natural fallout of the local monopoly status enjoyed by most LCOs and small MSOs who are able to avert competition and thus prevent free market forces to keep prices under check.

Capacity constraints in analog cable stifling growth of new channels and introduction of technologically advanced content: The number of television channels in India has grown at a rapid pace from two in 1992 to 120 in 2003 to around 600 at present. Arrival of a plethora of new channels in the Indian television space in the backdrop of limited bandwidth of the analog cable system, results in allocation of prime frequencies by MSOs to channels offering higher carriage (or placement) fee. Limited capacity, coupled with the absence of an addressable system, has also resulted in limited availability of subscription-driven niche content such as science, golf as well as technologically advanced content like high-definition (HD) channels. This trend is further fed by the inordinate dependence of broadcasters' revenues on advertising(less on subscription) impacting niche content offerings since focus tends to shift on advertisement friendly genres.

Since digitization would bring about full addressability, it would eliminate the menace of under-reporting of subscriber base by LCOs. This will aid increase in subscription revenues for broadcasters. Further, the increased capacity of digital distribution channel is likely to spur greater investments by broadcasters toward niche, targeted and HD content and lead to diversification of their revenue streams. The carriage costs paid by broadcasters to distributors, which currently remain high in view of the limited bandwidth of analog cable, may decrease post digitization. This is all about digitalization in India.