Friday, May 30, 2008

Fuel prices - the strange truth

Another fuel price hike is imminent within a couple of days. While I had always argued for de-regulation of retail fuel prices, I recently came across some interesting information on oil price dynamics in India.

I always assumed that fuel prices are artificially low in India. Let us test this hypothesis. The US (where gasoline ie petrol prices are market driven) retails petrol for $3.6 - 4 per gallon. One gallon = 4.5 liters and 1$ = Rs 42.6. Doing the math, we get Rs. 34 - 37 per liter of petrol. In Delhi (which I believe has the lowest fuel price in India), it retails for Rs 43 / liter. So how can it be under-priced??

The interesting answer is that petrol is underpriced in India from the point of view of oil-marketing companies only, not from the end-consumer point of view. And the guy who keeps all the cream is (no surprises here!) the Government of India.

Here is how it works (all numbers for example only) - petrol price (at international prices): Rs 100. Landed cost in India: Rs 105 (price at which the oil cos refine / buy the stuff). Taxes paid by oil companies (like IOC, HPCL and BPCL) to the Govt (incl. excise, customs and sales taxes): Rs 40. So oil companies' cost: Rs 145. Retailing price: Rs 120. Loss to oil co: Rs 25. Loss to consumer: Rs 15. Gain to big brother GoI: Rs 40.

GoI is a well meaning guy. He wants to make sure that he gets votes. So he takes this Rs 40, and distributes it as largesse to various deserving sections. The only hitch - his agents (the political honchos and bureaucrats - guys in charge of making sure it reaches the right people) - keep Rs 39.5 out of this Rs 40. So they can stash it under their mattresses / maintain their multiple mistresses / send their kids abroad etc etc.

Nice scheme.

Also another reason why oil prices in India will never be de-regulated (at least not while the Congress and their brethren in bed the Communists are in power). Hopefully this will change one day!

Monday, May 26, 2008

A happy end to a long saga

The Bharti - MTN story has finally had a happy ending. First, a disclaimer - Bharti Airtel has been (and remains) one of my favourite stocks, so anything I say here is obviously biased :-)

While in my humble opinion, the deal would have been good for Bharti had it gone through (it would have given Bharti the chance to replicate its low-cost model elsewhere i.e. MTN has much lower margins than Bharti even though it gets much higher ARPU or revenue per user), it is better that Bharti decided to put its foot down when the MTN board reneged on agreed terms and wanted a reverse merger. I think this is a story that MTN has played out multiple times in the last few years - it has dallied with every large mobile operator you can think of - but has always gone back on its word when the rubber hit the road. It would be tough for anyone to take MTN seriously from now on.

Except our dear friend, Mr. 'Power' Ambani, who will gladly jump in and do anything to see valuations rise as he huffs and puffs to demonstrate his victory in sibling rivalry. Anything except improve his companies' operating performance, that is. Even then, tough to see how he would agree to make RComm a subsidiary of MTN.

I think this also demonstrates the high quality of management at Bharti, who were able to walk away from a deal which they could have done, because it went against their desire to make Bharti a truly global company, instead of merely making themselves richer. I think they have done the right thing! All the best to them...

Thursday, May 08, 2008

Flicks on a flight

Come to think of it, most of the really good movies that I see are on Jet Airlines flights from Europe to India.

I saw Paris, J'taime last time around.
This time, I started the flick feast with 'There Will be Blood'. In one word - mind blowing. Daniel Day Lewis creates such an intense character that it is tough to rivet your eyes away from the screen. There is blood, of course, and oil, and religion, and greed. Extremely intense and dark movie - a must see.

Next up, I checked out 'I am Legend' (only for Will Smith). Not impressive at all.

And finally, when it was almost too late, I started watching a movie that I have been wanting to for a long long time - Manorama, Six Feet Under. I liked the movie tremendously, especially Abhay Deol's believeable character. However, great tragedy struck, since just 20 mins from the end of the suspense thriller, the plane began its descent, and the movie was turned off :-( So till now I am festering in curiousity about whodunnit.

Anyone who has seen the movie, please call me up asap. Otherwise I may have to go to Europe again!!!

Wednesday, May 07, 2008

Scrambled thoughts...

I met up with some friends in Venice. These are very nice, educated, intelligent people. What they had to say about what they hear about India left me feeling weird - I didn't know whether to laugh or be concerned about the massive ignorance about my country. Sample a few gems:
  1. The main newspaper in Verona (a small Italian town, with a population of 300,000 - about the size of Dwarka in Delhi), carried a full front page article on the "moral outrage" that IPL cheerleaders have caused in India
  2. A lot of people believe that all 5 star hotel gyms in India have a sign over treadmills saying "Please do not run over 10km / hour because that will cause a power cut in our hotel"
  3. Indians do not like sports. They do not exercise, and they do not lead healthy lives
  4. India is a bad country to do business in - the Four Seasons hotel in Mumbai had to get 201 govt. permits to install 201 taps in their 201 hotel rooms

I feel great anger at these perceptions. No one talks like this about China - this is because China performs while India only promises. I want my country to perform as it is capable of. I want people to talk with awe and envy when they speak about my country. I am proud about my country and I will refute anyone who thinks otherwise.

This is why I feel inordinate anger at Manmohan Singh. He is criminally wasting the energy of a billion people. He is harbouring Arjun Singh, whose sole ability is that of licking his master's (or mistress') heels, and a gift for screwing up a billion people. He is harbouring Anbumani Ramadoss, who is worried about what Mallika Sherawat is doing on screen, instead of who is manufacturing spurious medicine. He is advocating salary cuts for CEOs, so that his cohort can make more money as feudal overlords of licenses.

I would rather have Mayawati as PM. At least she says what she means.

Sunday, May 04, 2008

Fantasies for beating the merciless summer sun

  1. Swimming in cool, originated-from-melted-snow waters of the Jhelum river in Manali
  2. Sipping absolutely chilled beer in a cool, dark room with the TV playing a light romantic comedy in the background
  3. Showering for 2 continuous hours in cold, underground tank stored water (slipping into a tub full of the same water while reading a nice book also merits the same rank)
  4. Putting ice cubes in the air cooler tank, darkening the room, and lying on a straw mat on the cool floor
  5. Making lots of money speculating in the stock market / winning a huge sweepstakes, and buying yourself a month long luxury holiday to Switzerland with the same
  6. Sitting under a leafy huge peepal tree in a huge garden with bright green grass, on a hammock, and sipping cold nimbu paani
  7. Wearing an ice-vest (idea courtesy Australian cricketers)

Other ideas welcome...