Let me explain.

First, the basics of power. We get electricity through to our homes due to three stages – power generation (at the power plant – thermal, hydel, nuclear etc), power transmission (through all those wires and transformers you see along the highways) and power distribution (at your local power plant, local transformer in your colonies etc.). That said, let’s move ahead.

We have all heard the following data ad nauseam time and again –

a) The growth of the economy, calls for a matching rate of growth in infrastructure facilities. The growth rate of demand for power in developing countries is generally higher than that of Gross Domestic Product (GDP). In India, its around 1.5 times GDP. That is, if our GDP is growing at 8% annually, we need to increase our power output by 12% (10% atleast).

b) India is planning to nearly treble its electricity capacity to almost 450 GW by 2020 from around 167 GW currently, which means a yearly addition of nearly 23 GW for the next 9-10 years.

c) In spite of rapid power generation, figures available with the Central Electricity Authority show an average power deficit of 6.4% across the country in November. The national average of peak hour shortage during the month was 8.7%. The deficit was highest in the western region, where peak hour shortage was at 15.6%.

d) The Electricity Act 2003 repealed a old legacy of 1910 and another of 1948 and had, in one stroke, forced the inevitability of total reforms in the electricity sector. The best beneficiary of the Act being the industry – large and small – and the commercial establishments which had been hitherto bearing the brunt of the SEB onslaught in terms of high tariff, unstable supply, impossible conditions and the wrath of a state monopoly. After the Act went through, generation of electricity did not require any approvals from any body so long as the same is used for own use. The new-found freedom allowed commercial and industrial users to set up their generation facilities and the industry was supposed to install power generation capacities to profit from the paucity in the country.

I thought there was a definite need (and hence a business opportunity) to set up power generation plants, supply uninterrupted power to consumers and make a lot of money.

Till I read this article in the Economic Times –

“Cash-strapped state power utilities have cut offtake from thermal power generators, hitting their output and driving down tariffs in the short-term market. State power utilities, which buy the entire output of thermal power generators such as NTPC, Adani Power and Monnet Ispat, have cut off take because of a cash crunch and are resorting to load shedding, industry experts said.”

“NTPC sells most of its power under long-term power purchase agreements. With states back tracking, the company’s net profit has taken a hit, rising only 1.12% in 2010-11. The situation is grim at electricity trade markets too. Private power producers such as Adani Power and Monnet Ispat say states purchase power at 11 a unit during elections, but resort to load shedding in the normal course. A top executive at Monnet Power said the company was forced to sell electricity at 0.50 per KWH in January, as there was no demand from states.”

Think about the article for a while.

You’d probably think that SEBs being a part of the State Government are being subject to discrimination, since the State has only so much money to buy electricity, after doling out a million sops to the aam aadmi (these sops sometimes include laptops and TVs).

You’d also be inclined to think the issue to be simplistic – why not buy power and pass on the costs to consumers? Why should the State Govt. have any say in this? The SEB supplies me power, and if I use that power for 24hrs a day, I pay for 24hrs a day. Why is the SEB reluctant to buy power, when I, the consumer am willing to pay for 24hrs of uninterrupted power supply?

The issue is a little more complicated than that.

Tariff increases have continuously lagged increases in costs of fuel and salaries (due to obvious political pressures), and widening inefficiencies (transmission and distribution losses, power theft with 18% pilferage and faulty metering) have added to the woes of SEBs. Sum total of all cash  losses of SEBs and distribution companies in India have jumped 4.4 times between FY07-09 to Rs. 2.5 trillion, and expanding by nearly Rs. 1 trillion a year (In A Raja’s standard, 1 lakh crore). The SEBs are losing money on almost every unit they sell. With increased growth come increased losses in case of SEBs.

To arrest these losses, many state-owned distribution companies are suspending power supply for hours, even in the winter when demand is low, because they are unable to pay for power. This has forced many generation companies to scale back production.

And then there is the newly set up Central Electricity Regulatory Commission (CERC), which is supposed to manage tariffs and transmission. Why are they not able to solve this problem? Simply because they only have a say in inter-state transmission of electricity and not intra-state distribution, which is in the hands of the state SEBs. So, we have more committees and lesser solutions.

So, what are we doing about all this?

The Union Ministry of Power is working on a set of guidelines (to be ready in 2-3 months), which will address issues of SEBs such as collection and billing efficiencies, long term power purchase agreements etc. However, we do know in India, there is no dearth of reports and laws and guidelines (and committees and GoMs and empowered GoMs). Implementation of these guidelines would probably take another decade.

What is the bottom line? The collateral damage is that suppliers (i.e., power generation companies) are seeing their payment cycles elongated on an ongoing basis and are having to scale down on ambitious projects to generate electricity. In the long run, its bound to hurt everybody.

I personally don’t see a bright road ahead for these power generation companies for atleast the next 2-3 years. And I need not feel sorry for them, because in the end, I would be one who would be suffering. And that’s the bottomline, because some committee said so.

General data on current power generation companies: NTPC (current capacity 33GW, 75GW by 2017), NHPC (current capacity 5GW, 10GW by 2016), Tata Power (3GW), Reliance Power (everything is in the air, and in planning stage. Supposedly planning 35GW. Good luck with that), Adani Power (current capacity 2GW, planning 17GW by 2016), Lanco Infratech (current capacity 2GW, 18GW in planning), SJVN (current capacity 1.5GW), Torrent Power (current capacity 1.7GW), JSW Energy, Monnet Ispat among many others.

However, looking at this issue and understanding it through the lens of Hindu Mythology is a little unique (and hopefully enlightening!).

Let me explain.

I’ve been reading “7 Secrets from Hindu Calendar Art” by Devdutt Pattnaik (btw, brilliant book) where he lucidly explain the mysteries behind the myriad calendar arts that we see on a daily basis of atleast 100 or so Hindu Gods. Some of his explanations can be used to understand why men will never understand women.

Here are a few excerpts from the book -

The right side in Indian art represents the soul and intellect while the left side, with the beating heart, represents movement, hence matter and emotions. The left side represents change while the right side represents soul. Since change is undesirable, the left side became the inauspicious part (inauspicious in the sense of attaining Nirvana) and the still right became the auspicious part of the body.

(In the Ardhanari-eshwara image, Parvati merges to the left of Shiva. I am also given to understand that the wives are advised to sleep to the left of their husbands).

Shiva dancing in the Nataraja pose. In this dance pose, he raised his left foot above the ground and pointed to the moving left foot with his left hand, while standing firm on his right foot. The left side is that of the material world, while the right side represents the spiritual world. Shiva stands on his right foot because he is firm in spiritual reality. Shiva indicates (through his left hand) that our fears and insecurities emerge because we do not understand the nature of material reality – that it is transient, that it arouses and it depresses amongst stormy waves of positive and negative emotions.

The Sanskrit word for measurement is ‘maya’ – that is why the Goddess is called Mahamaya, the great one who can be measured and evaluated. She is classified using words, limited by thoughts, and measured with scales. Suddenly, she is evaluated and judged. These forms, names and evaluations enchant us, entrap us, delude us, stir our passions, make us happy and sad because they are never still. That is why this material world of changing forms is often referred to as maya, the embodiment of delusion. She is the world that we experience. As she keeps changing, we struggle to control her, hold her still and make her permanent, but we fail, for her essential nature is to transform.

As you would gather and deduce from the above excerpts, women change all the time. This has been reaffirmed through Hindu Mythology. That is the reason we men can never understand them. We are still and serene. The women change every second – enchanting us, entrapping us, deluding us, stirring our passions and making us happy and sad in weird sinusoidal curves we can never begin to understand. We men, just can’t seem to catch up with change. It’s like the Heisenberg Uncertainty Principle. If you can determine her emotion correctly, you can’t be sure of her action and vice-versa (For the uninitiated, Uncertainty Principle states our inability of not being able to determine the speed and position of the particle at the same time).

P.S -

1) This is probably the reason why eating/writing with the left hand is forbidden by our parents during our young age. Not because it was dirty to do so, but because the right side implied stillness and the left, never ending change (which is obviously undesirable). But then the wisdom got twisted during the ages, and now it is just dirty. That’s it – no questions.

2) The book is absolutely brilliant. Here are some other excerpts which relate tangentially to the topic at hand -

Shiva represents spiritual aspiration, the desire to focus on the soul within. Parvati represents material aspiration, the desire to focus on the family and the world around. Hindus have always sensed a tension between the two goals.

By holding the right toe with the left hand (Baby Krishna’s image usually), God is connecting the spiritual with the material, the intellectual with the emotional.

Why is the male form used for the spiritual subject while the female form is used for the material object? Material reality is that which is contained within space and time. That which cannot be contained by space and time is spiritual reality. Material reality has form’; hence, it is measurable and is ‘contained’ within a ‘container’. Spiritual reality is formless and immeasurable; hence it is not containable. The human male physiology, for example, creates life outside itself. On the other hand, life is created within the human female’s body. Thus, the female form best represents the container, the source of all things material. The woman becomes the symbol of material reality, making man the symbol of spiritual reality.

The Upanishads, ancient Hindu scriptures dating to 500 BC, constantly refer to these two truths: a truth which changes and a truth which does not change. The existence of one, points to the existence of the other. In change, we seek permanence. In restlessness, we seek restfulness. In movement, we seek stillness. In sound, we seek silence.

In symbolic language, the male half represents the formless divine known in Vedas as Purusha, in Vaishnava manuscripts as Narayan and in Shaiva manuscripts as Shiva. The female half represents the divine that has form. The female form in Vedas is known as Prakriti, in Vaishnava manuscripts as Maya and in Shaiva manuscripts as Shakti.

In image after image, we will find the continuous discourse between the left and right side of images, which in effect is the discourse between the material and spiritual halves of reality. Krishna will always be shown sucking his right toe or placing his right foot over the left leg, reminding us that our life is a continuous dialogue between the divine within and the divine without, between God and Goddess, for without either there is neither.

Read these links first -

a) What is the Jan LokPal bill about? – A brief (in my view, very simplistic explanation – don’t get too carried away)

b) Absolutely brilliant article by Pratap Bhanu Mehta – Of the few, by the few

c) Difference between the Draft Lokpal bill and the Jan Lokpal bill (did you ever know that there were actually two?) – Differences matter

d) Good read by Acorn (Nitin) – The politics of hunger strikes

e) A compelling and fascinating read of the issue by Retributions (Rohit Pradhan) – Importance of Constitutional morality

f) An alternate view (very good!) – Why are links b), c), d) wrong? by Deepak Iyer – Diving into the Anna Hazare debate

I don’t think I am as learned as the folks above to comment on the nuances of the Jan Lokpal bill. Nor am I trying to diss the entire movement against corruption here. Hear me out -

a) Jan Lokpal Bill+Anna Hazare’s fast – God sent opportunity for Congress. They just need to say – “Yes, we willl involve the civil society in drafting the bill”. They just need to say it (no timeframe,if you’ll notice). They’d just garner huge media support for being the government which listens to its people (and thereby garner votes in the coming assembly elections). Anybody seen through this ruse yet?

b) And Anna Hazare could have opted for a simpler approach than fasting. Dial Nira Radia. Anyway, I admire Anna Hazare for what he’s done but I want pile-ons like Chetan Bhagat on TV yesterday to shut the hell up. He says “What are we debating about? Let’s pass the Lok Pal bill already”. Dude – are you nuts? We live in a democracy and the emotions of the mob-like sentiment is not always right. The bill (v2.1 anyway. There have been 3 versions since yesterday) has a detail on the participants in this civil committee – they want ‘Nobel Laureats of Indian origin” on the committee. Those guys are not even answerable to the Indian public (and this body, by the way, is not answerable to anyone in India – not the judiciary, parliament or administration). I hear the argument ‘if not this, then what?’ To them my question is ‘After Anna Hazare, what?’ What if this group consists of Barkha dutt kind of ppl after Anna Hazare passes away. I don’t know – is this issue too complex – just to think of effect of effects?

c) Anyway, I personally think this ‘fast-unto-death’ amounts to blackmail (do this, or else).Anna Hazare is a man with high integrity. But what if someone else with public-face-integrity but machiavelli-behind-the-scenes does this? What if someone does a fast-unto-death for banning cigarettes/alcohol in the country? How would you react then?

d) And missed calls as a sign of protest? Really? It’s Dilbert-level-ridiculous. Anyway, my take is that the Congress will capitulate by tomorrow and accede to Anna Hazare’s demands of involving the civil society to draft the bill. Getting it passed in the Lok Sabha and Rajya Sabha – yeah, good luck with that. No problem – we can start another missed call and a email chain campaign. We are brilliant that way, no?

e) Chetan Bhagat simultaneously appeared on 3 different channels at the same time yesterday. Is it 2012 already? On one channel he says “How can we play IPL when Anna is fasting?” Well, how can anyone buy and read 5.someone or One night at call center when Anna is fasting. We’ve got a meme here I think. From #forSachin, we have moved on to #BecauseAnnaIsFasting

f) And now we have a ‘Jail Bharo’ andolan. Civil disobedience of the yore, if you remember. Excellent. We fight against the British. Now, we fight against our own politicians. Back then, the British left the country. Who should leave the country now? Maybe Congress will step down. BJP will come to power. So?

g) With the momentum with which this is moving, let’s just hope it doesn’t result in anarchy. Political orchestration of anarchy won’t take much time at all. However, the only positive (long term) that I see is the chance for political entrepreneurs who can promise deliver corruption-free government. Forget the Bottom of the Pyramid. We have a 500 mn middle class population willing to vote for anyone who can deliver a corrupt-free government.

Your thoughts?

Actually, let me take a step back.

I was 6 months old when we won the 1983 World Cup. The only memories of that World Cup win is through multiple re-runs of Mohinder Amarnath trapping Michael Holding LBW and running like a nut with a wicket in hand towards the dressing room. The other enduring image was of Kapil Dev running back to take the catch of Viv Richards. And the final memory of that World Cup win was Kapil Dev lifting the cup. Those were good memories. The bad memory – Re-runs of interviews ad nauseam with Madan Lal, Mohinder Amarnath and the like.

We have come far. 28 years to be exact.

Ardent cricket fans of my generation (which included my friends and I) started watching World Cup cricket actively since 1992. The 1992 World Cup was a disappointment. We didn’t even reach the semi-finals. The 1996 World Cup was a mixed bag. We saw the blooming of Sachin Tendulkar into a great force, single handedly winning matches for India. On the other hand, I am still not able to decide which was more farcical – the Eden Gardens crowd going ballistic or Vinod Kambli crying off the pitch. The 1999 World Cup was very similar. The match with Zimbabwe (which eventually cost us a place in the Semi-finals) looked very shady. Sachin Tendulkar carried the burden yet again, scoring the highest runs in the tournament. The disappointment in losing the 2003 World Cup was not that great – we came across an Australian team which is easily the best side ever to have played cricket till date. I don’t remember any match of the 2007 World Cup (strangely?). I only know that we didn’t even make it to the Super Sixes.

Disappointments. Disenchanted fans. In the midst of all this, we had match-fixing scandals, ball tampering allegations, political shenanigans, the Chappell saga and the lot. I don’t know what kept our spirit going. What made us to continue to watch cricket, just like nothing happened? What made us believe in a team which disappointed us constantly? What made us trust the administrator who spouted the line ‘we are looking to build for the next world cup’ after every World Cup loss? (the building took 28 years to build, eh?)

Self-belief? Nope. Patriotism? Nada. We don’t watch any other game with as much zeal and enthusiasm as cricket. I believe one man held fort. One man made us believe that we could win. One man pushed his boundaries so that we could be a part of the action. One man made us hope against all hope. No, I am not talking about Shiv Sundar Das. The 1994 Titan Cup. The 1996 World Cup run getting machine. Desert storm of 1998. Playing through his Father’s death in the 1999 World Cup. Failed captaincy (captaining a team which wouldn’t even fit the India ‘C’ side today). A constant run-getter throughout his 21 years of international cricket, a delight to watch and a character to vouch for. Do I even need to say the name?

Things started to change during the Ganguly-Wright era. The commentators started saying “This Indian team has character’, ‘This Indian team is young and aggressive’ and ‘This Indian team has a lot of potential’. Ganguly had this uncanny knack of picking talent – Yuvraj Singh, Harbhajan Singh, Irfan Pathan, Md. Kaif who have all won matches for India, along with improved fielding. The Dravid-Chappell era consolidated the team, but couldn’t move it past a needle. The 2007 World Cup was the final nail in the coffin. We couldn’t get worse from that point onwards. Kumble’s period was too short to have a significant impact (although I do think his handling of the disgraceful Sydney test shaped this team in innumerable ways).

The Dhoni-Kirsten era (and its truly an era to remember) brought in more talent (Suresh Raina, R Ashwin, Yousuf Pathan etc.) to make this team a world beater (although I still do think that we are one world class fast bowler short).  The T20 World Cup, No. 1 Test ranking, consistent performances (and wins) across all formats in almost all geographies. The final frontier remained. The World Cup was the one to win. To savor. A pinnacle to be scaled.

We have always had a batting line-up which was great on paper. They have flattered to deceive for 20 years now. Not this time. We defeated a fragile West Indies, a tenacious Australia and a volatile but dangerous Pakistan. They were all previous World Champions. Only one former World Champion remained. Sri Lanka in the Final. 275 was a formidable target. 275 in a World Cup final, under lights, with a huge home crowd to support/boo you depending on how the scales swing is more like 325-330 in normal circumstances. To be fair, Jayawardene played a master class innings to guide Sri Lanka to a very good score. I guess we were shell-shocked with the huge hitting in the end where we leaked close to 100 runs in the last 10 overs. It was time to show ‘character’, ‘aggressiveness’ and be worthy of champions.

And Champions we became. After the early departure of Sehwag and the sublime Tendulkar (who looked set for a 100, till that ball), Gambhir and Kohli steadied the innings magnificently. Dhoni’s bold move to move up the order (bold and risky – he would have been pilloried if that move had not come off) paid off big time. With that huge six, Dhoni had put a full stop to a sentence. We did it. We scaled the pinnacle. Sachin got his deserved run around the ground. Indians deserved this win after all the heartbreaks of the previous years. The adrenaline ran high yesterday. It is still running high. This is probably the best time to conduct a happiness survey in India. We might just come out on tops.

Yes We Won.

Yes We are the World Champions.

Yes Sachin deserves every piece of the World Cup win.

As for me, I don’t care anymore if we win any other matches or any other tournaments in the future. This was the final frontier for me as a fan. Nothing beats (or would beat) the feeling I had when we won the Cup yesterday amongst a huge crowd of friends. A memory to cherish. A tear to appreciate. And the 1000 watt smile when you get up in the morning that says it all.

Yay! Forget the banality ‘cricket is the real winner’. We are the winners. Let us gloat for a while. We deserve it for 28 years of starvation. We are well and truly the 2011 Cricket World Cup Champions.

In this post, I attempt to demystify the reasoning behind valuations of each of the IPL players that will go under hammer tomorrow. Before that, a brief of some basic rules are in order –

• Each franchise needs a squad of players, with 11 playing at any one time.

• Only 4 players at any time are allowed to be non-Indian.

• The franchises bid on the basis of the salary they are prepared to offer the player.

• The salary offer is valid for three years, although there is the possibility of player transfers in future years.

• Each team must also have four under 22 players.

• Each bid starts with the base fee fixed by the IPL (based on the band), and there is no upper limit.

• Players were grouped into different bands (5 bands) within the auction based on the  expectations of the organisers that they were of similar experience and  ability.

• Each of the IPL franchises can retain up to 4 players in advance of the player auction. Out of these, 3 could be Indian.

• A franchise can bid for up to 10 overseas players. However, during a game, only 4 of these can be on the field while the rest have to be Indian cricketers only.

• There is a maximum limit of $9 million for each franchise to spend at the IPL 4 auction. This means that a franchise which retains 4 players will have less spending money ($4.5million) for other players.

• The maximum size of a franchise team is 30 players.

• Sahara Pune Warriors and the Kochi teams were allowed to sign up to 4 players prior to the auction from a list of players who were not on any team during the previous IPL seasons.

The auction of IPL players is a classic English auction where the franchisee with the highest bid for the player gets the player. It is a simple auction process, with no complications and slimy strategies. However, we cannot just keep bidding for all players. So, what can be a strategy?

The strategy is essentially to have a list of 50 players (the maximum size of a franchise is 30 players, and on average over the past 3 IPL seasons, teams have had 18-24 players in their squad), classify them depending on various factors like batting, bowling, all-rounder etc and then rank them. After the ranking is done, we need to set the minimum and maximum prices that we can pay for each player and move down the list depending on the cash remaining (unless of course, the owner wants a particular player at any cost – in that case, all calculations go out of the window and the remaining players get short changed).

Classification based on batting, bowling or all-rounder is very basic. We all know who ‘bats only’, ‘bowls only’, ‘bats but also bowls’, ‘bowls but also bats’ and ‘genuine-all-rounder’. This requires no further elaboration.

Ranking them though is the challenge. How do you rank one player above the other in each of the classifications? What are the factors that can lead you to quantitatively rank one player over the other? Here is where I think Statistics and Regression models play a large part (in determining which variable is significant towards calculation of a value, what variables to-gether contribute towards the valuation etc.). However, as stated earlier, I will skip this part and probably go for a guesstimate of these variables. More quantitatively inclined folks can compare if these variables were indeed significant over the valuation in the previous auction (seasons). The variables, in no particular order are (as you would observe in the variables, we consider a split within variables: one for ODIs and the other for T20s. This is because of a lack of statistically significant player history for T20s. As we go along in T20 matches, only the T20 variable can be considered) –

a)      Experience – Quite a basic variable, in the sense that a great Test player may not be a fantastic T20 player. The number of T20s that a player has played is one of the variables. Here, Experience consists of two variables – one for T20s and the other for ODIs

b)      Batting Strike Rate – This is for ‘Batters’ classification. Many players across the world might not have played a lot of T20s (domestic/international). Therefore, this Batting Strike Rate variable needs to be split into two. We need to consider the Batting Strike Rate1 of T20s and also consider the Batting Strike 2 of ODIs.

c)       Batting Average – Again for ‘Batters classification’. Again, there is a Batting Average 1 for T20s and Batting Average 2 for ODIs.

d)      Composite Batting Variable – This may or may not work, and can be tested for statistical significance. The hypothesis is that Batting Strike Rate 1 * Batting Average 1 = Batting Composite Variable 1 along with Batting Composite Variable 2 should be easier to rank than each of variables mentioned in b) and c) and then reclassifying them.

e)      Bowling Strike Rate – Same as Batting strike rate, but for Bowling.

f)       Bowling Average – Same as Bowling average, but for Bowling.

g)      Composite Bowling Variable – Same as Batting variable, but for Bowling

h)      Indian Player – Hypothesis here is that an Indian player will fetch more value than an overseas player although the ratio of available positions in the side to the number of overseas players is low. I believe this variable is significant only because the Indian players can be used for extensive marketing within the franchisees across India hence bring in more revenue rather than the overseas players.

i)        Controversy-ridden – Hypothesis here is that the audience is more interested in the drama of a player rather than just the player value per se. For example, an affair with a film actress, the slap-scandal, monkey business and various other characters in the player community would fetch a better price than a normal staid player (a normal staid player but oozing with talent is a different issue which will be taken care by variables b-g).

j)        Players under 22 years – These players will get a premium over players with similar performances (variables b-g) but with age > 22 due to the simple reason that demand outstrips supply. There are only so many eligible and good players < 22 years of age and the demand is of atleast 4 years under 22 (with 10 teams, you need 40 players under 22. Do we have so many decent players at all?)

k)      Popularity – Popular/exciting players are bound to get a higher price than players who have similar performance (variables b-g). For example, a player like a Sachin/Dhoni (both of them have been retained by their franchisees though) are bound to fetch a higher price just because of more avenues for marketing and pulling in the crowds.

l)        All-rounder capability – I am not really sure how we can model this variable. As I thought through all these variables, this is probably the most difficult variable to model. How do we blend the batting composite and bowling composite variables and in what proportion? Do we need to blend them with different weights for a batting all-rounder versus a bowling all-rounder? Anyway, I do think all-rounders would add a great deal of value to all the IPL teams and they would be bid at a premium.

Those are probably the 12 important variables to fit into a regression equation,

Price of player = f(12 variables)

The only remaining valuation variable is the range that we’d like to come up with. That’s easier said than done and probably can be commented on once we solve the regression equation (probably attaching different level of confidences to each price would solve the problem – not too sure, haven’t thought this through).

End of analysis.

Do let me know if this analysis made any sense at all (or was helpful in anyway), and if there was any variable that I left out. Also, kindly shower brickbats on this blogpost (and demand that I don’t write such posts in the future if it doesn’t suit your tastes).

P.S: Oh yes. Happy New Year and all. May the farce..er…force be with in 2011 (Vulcan sign)

]]> http://kirandhanwada.com/2011/01/07/ipl-2011-player-valuation-and-analysis/feed/ 3 http://kirandhanwada.com/2010/10/14/india-and-un-security-council/ http://kirandhanwada.com/2010/10/14/india-and-un-security-council/#comments Thu, 14 Oct 2010 08:52:32 +0000 Kiran http://kirandhanwada.com/?p=467 This week has to be hailed as one of the greatest weeks in 2010 for India. Three news items have been splashed across different channels of the media. It was as if we won Independence all over again. Anyway, enmeshed between the news of India’s comprehensive win in the India-Australia test series and the massive medal tally in CWG, the media has hailed yet another great victory for India – winning the UN Security council seat.

India gets a seat on the United Nations Security Council as a non-permanent member after a gap of 19 years via elections in the United Nations General Assembly. India was expected to be voted on following Kazakhstan’s pulling out from the race earlier this year. There is no other challenger from the region.

There. First, we became a non-permanent member and not a permanent member. Second, an insulting fact nevertheless, we won because Kazakhstan pulled out of the competition (am all for equality of nations, but Kazakhstan as a rival? Really?)

 Gee, if you read the media hype and hoopla around the issue, you would really think it’s a great achievement, on par with membership in the esteemed permanent member council consisting of 5 members since 1949 (US, China, Russia, France and UK). You’d be as sad as Arun Lal’s commentary if you had come to that conclusion.

 Some background is necessary here. India has been lobbying for a seat on the permanent council for about 15 years as far as I can remember. We have repeatedly ‘petitioned’ (in other words, beg) with the powers-that-be and the United Nations for this membership. As turned out to be the case, we have been repeatedly declined citing other important matters that are happening around the world like Rakhi Sawant in Big Boss and the mysterious case of Sania Mirza’s overwhelming media appearance versus her dismal performance in any tournament worth its salt.

 Permanent members get to veto any resolution/proposal in the UN – which is primarily the reason nations like Germany, Japan, Brazil and India have been lobbying heavily to get a seat. But why would any permanent member want to dilute their power? Then again, who wouldn’t want to beg?

 Last September, speaking at the annual debate of the General Assembly, External Affairs Minister S M Krishna said that “an overwhelming majority” of nations wanted expansion of both permanent and non-permanent seats.

 Who constitutes that ‘overwhelming majority’ is up for international, national, regional and gully debate, and will appear as the 1 crore question in ‘Kaun Banega Crorepati’. Better be prepared.

 Yes – back to our super win as the non-permanent member.

 As many as 187 countries in the 192-member UN General Assembly voted for India, the largest support received by any country for a non-permanent seat in the past five years. India, which has been on the council 6 times in the past, gets to be on the non-permanent member council for 2 yrs again.

 My question is – which 5 nations did not vote for the all-powerful, economic power called India? We need to ‘petition’ them to vote for us again. Secondly, the time period is only 2 years – I get fooled yet again by the media blitz. I thought it was atleast for 5-10 yrs.

Alright. We won. That’s great. What next? What are the immense powers that would be vested on us due to this privilege?

 Following their election, South Africa, India, Colombia, Germany and Portugal will become non-veto holding members of the Council in January with the mandate to impose sanctions, as well as deploy peacekeeping forces around the world.

Hmm. All we get to do is write strongly worded letters and send our military to the remotest parts of the world where nobody has any interest? Does this mean that we spend more on our military just so that some Indian government official sits on a powerless board?

 And here I was under the illusion that we have finally defeated the Axis powers to gain a seat on the moon, in a galaxy far far away. I am sorry. I was mistaken.

 Sources: Times of India, Indian Express, Wikipedia

Sample this:  Sharad Pawar says free gains not feasible

On the face of it, the argument seems to make sense. There is no free lunch et cetera et cetera. We have a situation where some sections of the society are going hungry in many states, food inflation is a frikking 19% and yet the Food Corporation of India (FCI) has found a way to rot quintals and quintals of food grains – rice, wheat etc. Shortage of food obviously then, is a created circumstance to benefit a few. Supreme Court, in its little wisdom ordered that these rotting food grains, instead of being distributed among algae and rodents be distributed among the poor and needy people. But nope. Nada. Sharad Pawar in his Caesar-esque style declared –  I heard, I will not listen,  I will let it rot.

So much for increasing Members of Parliaments’ pay by 300%. Performance-based pay has acquired a new meaning. The definition of CTC, Cost to Country in this case (instead of Cost to Company as is the usual parlance) has gone up by a notch.

2) We have all read that all star players are slowly withdrawing from the Commonwealth Games (CWG) (Bolt, Powell among a lot of them). We might get to a day when the only player left in CWG is Suresh Kalmadi. After tonnes of money down the drain, we will spend even more to resurrect the situation and make the Games a success for ‘national pride’ (never understood the term).  And of course, after Sonia Gandhiji has declared “Corrupt will be punished after Commonwealth Games” (emphasis: ‘after’ – which is of course, in the near future, during my great grandson’s generation), I have nothing to fear.  What I do want to bring to your notice is this bit of travel advice on the CWG website:

A peck on the cheek while greeting a female acquaintance is “just not done” when you are in India. Sole exception: Only if the acquaintance is a model or a beauty queen. Tourists should, however, discuss politics. Most Indians love to talk politics and ‘have an opinion on which they will not mind being contradicted’. But equally, visitors should avoid discussing religion.

True. I wonder if former beauty queens are ok? Oh, you mean Amitabh Bachchan is your Chief Guest? Never mind then. And how do you discuss politics without discussing religion? That’s probably one of the chief conundrums that CWG audience have to solve for an audience prize.  To me, BJP will always be associated with Godhra, Congress with Sikh riots, MNS with non-Maharashtrian bashers, Shiv Sena with its anti-muslim agenda and so on and so forth. Maybe Kalmadi can explain. Or maybe Sonia. Even better, a joint press conference with Amitabh Bachchan, no?

3) Never understood these sentences ‘I can feel your grief’, ‘I dedicate this win to the people affected by XYZ’, ‘The agenda is to have all systems in place for success’ etc etc. among a million others.

4)  I have posted these links of FB. For those of you not yet on my FB list, here are two hilarious videos. Bhangra 101 -

- How to learn Punjabi dance (NOT!) - http://www.youtube.com/watch?v=irQ2zANorxQ

- What not to do when you become a CEO (extremely instructional) -  http://www.youtube.com/watch?v=wvsboPUjrGc

]]> http://kirandhanwada.com/2010/08/23/random-rant-about-pawar-and-cwg/feed/ 1 http://kirandhanwada.com/2010/06/14/karma-and-zen/ http://kirandhanwada.com/2010/06/14/karma-and-zen/#comments Mon, 14 Jun 2010 16:20:09 +0000 Kiran http://kirandhanwada.com/?p=456 1) In the corporate world, you often hear the argument which more or less centers around the Just-World fallacy. Typically, we’d like to believe in a Just-World where efforts result in benefits and hard work and dedication leads to success. Anything contrary to such a philosophy would result in cribbing at coffee corners and many a heated lunches during office hours.

However, more often than not, the world is not fair. In fact, most of the examples that you see in the corporate world is an example of it – ‘A’ in a team works very hard for the success of a project and ‘B’ markets in such a way to sideline ‘A’ and promote himself. In a world where time is short, perception is everything and ‘B’ in this case often gets away with a promotion leaving ‘A’ to be frustrated and resigned to fate.

In the Oriental way of thought, we believe in ‘karma’. In other words, we believe (and in most cases, rationalize ourselves to believe) in ‘what goes around, comes around’. We want to believe in this principle because we feel in control of our lives – we do good now, we’ll get it back a few year later or maybe next life. On similar lines, how often have we seen someone end up with a misfortune and utter within ourselves ‘Poor chap…however, he/she must have done something to deserve it’? If similar misfortune befalls on us, we cry out loud ‘why has this happened to me?’

It sucks to think the world is not fair. We believe (or want to believe?) in hard work, doing good, being good to ensure that success is ours (karma, right?). We want to believe that manipulation, laziness and taking credit for other’s work will eventually lead to ruin. That doesn’t happen often, does it? This leads to unhappiness and despair. That’s how the world is and probably will be. You are not in control. Get it? Now, suck it up.

2) How true is the statement ‘The more you know about something, the less you know about it’? Sounds Zen? Let me explain.

For example, let’s say you are the best chess player in your family. You beat every family member, young or old in chess. You begin to feel that you are the champ and destined for history-in-making title. You also get a feeling that you know everything that there is to know about chess and how the pieces move. Your family members are encouraged by your skill and set you up in chess tournaments around your city. You meet people who are of similar quality and end up with enough draws or losses to bring you to the ground. Undettered (history-in-the-making, remember?), you work hard to improve your skill. You participate in city tournaments around the country and start doing well but not too well. You work harder and harder and you don’t really seem to move ahead beyond the National Master title. You begin to appreciate the vast complexities of the game and start being humble, understand that you know very little (probably miniscule?) and work even harder.

The first 20 levels of a video game are very easy, the next 5 are incredibly difficult to get by.

The first few days of understanding a system makes you think it’s a piece of cake. The more you work/learn about it, the more complex it gets.

Do the stories sound similar? Every one of us go through the cycle of novice to amateur to expert to master in every field we pursue. Each level is more difficult than all the levels previously combined, till you hit a level beyond which everything becomes easy. Malcolm Gladwell puts it very well in his book, Outliers where he says that to become an expert at anything in life, you need to put 10,000 hours towards that goal.

Why do I tell you this story? I see many thick skulls around today who exhibit an air of superiority on a particular subject, knowing next to nothing about it. I was one such thick skull a few years ago, before reality hit but it took time and a lot of practice to kill my ego and get my hands dirty. If you really want to be great at something (and you can be!), it needs a lot of practice, a lot of luck and humility to learn from others – because, the more you know about something, the less you know about it.

]]> http://kirandhanwada.com/2010/06/14/karma-and-zen/feed/ 4 http://kirandhanwada.com/2010/04/18/what-is-progress-the-arundhati-roy-maoist-saga/ http://kirandhanwada.com/2010/04/18/what-is-progress-the-arundhati-roy-maoist-saga/#comments Sun, 18 Apr 2010 16:42:52 +0000 Kiran http://kirandhanwada.com/?p=436 As I read through Arundhati Roy’s magnum opus article in The Outlook on the Maoists and their plight, I was struck by one thought which was probably the underlying fundamental of the entire issue – What is progress? Rather, how do you define progress?

Some examples of progress are universally agreed upon. For example,

-   The elimination of child labor. It is hard for us to imagine the evil of putting children to work in the coal mines at age six.

-   Better health. Almost all countries are experiencing an increase in lifespan and a reduction in the fraction of their time people spend ill.

-   Increased personal mobility – in the form of better transportation as well as improved modes of communication.

-   Improved quality of living – in terms of housing, food, education etc.

-   Construction of dams for storage of water as well as electricity generation.

Why do we define the examples above as progress? Simply because, it resulted in a greater good for the greatest number of people.

This, by definition, implies that progress is a tradeoff. Almost all the time, progress results in some people/region paying the price.

For example,

- When a dam is built, certain regions get submerged. People in the region will get displaced. Is building a dam an ecological disaster? Why should people who get displaced pay the price when they are neither a part of the decision-making or the benefits that accrue out of building a dam? Is building a dam ‘progress’?

- Landline telephones served most purposes in the 1980s and 90s. There was also a thriving industry of telephone operators/wire fixers/pole installers who used to get regular income from the landline telephone business. Science advanced, mobiles got manufactured by the million and in a matter of few years,  this entire industry of telephone operators/wire fixers/pole installers got wiped out. Is that progress? (Oh yeah, we can all call it ‘creative destruction’ when we are not the affected party alright!)

- Reservations were required during the time India became a Republic to bring in people who were disadvantaged economically as well as socially into the mainstream. Reservations continue till today. Who is to say whether it resulted in progress or not? The ‘General Category’ people however, still pay the price. Were/are ‘Reservations’ progress then?

Coming back to Arudhati Roy’s article, is the Government at fault for granting lands to national and international mining companies that might result in increased employment in the entire region and thereby improve the standard of living? Or, is the Government at fault for grabbing lands from these tribals-turned-maoists, without any sufficient compensation or alternatives and granting them to the mining companies? For a moment, imagine your house was ‘grabbed’ by the Government and the reason given was that there would be a lab that would be constructed in that place, whose sole objective was to come up with a huge medical discovery that would improve thousands of lives – would you give up your house for the greater good? Would you go for legal recourse? (good luck with that!)? Would you complain to all and sundry, media included? Would anyone give a rat’s ass about your complaint? If the answer to all of these questions is a resounding ‘No’, are Maoists then justified to resort to violence to prove their point? (More often than not, the only differentiating factor between developed and developing countries is the way they treat ‘property rights’ – physical or intellectual and a proper legal recourse around this right. In my opinion, ‘Right to Property’ is probably a more important right than the ‘Right to Vote’, but that is a subject of a different blog post).

Progress can be defined, eventually, by who benefits as well as who suffers. As with all things in life, it is a matter of perspective. Is progress that which results in employment and improved quality of living or is progress the disappearance of the familiar, of what we value most and hold dear? Tough question – and there are definitely no easy answers.

With the brouhaha around the new IPL teams and their steep prices, one wonders if it makes economic sense to buy these new IPL teams or has it something to do with human behavior (ego?) to own and run a team. (As an aside, I was talking to my friend the other day and he made a very interesting point. He said “Accountability in IPL is pretty stunning if you look at it. There are no more excuses like ‘building for the next world cup’, ‘team is in transition’, ‘it’s the process and not results’. The results are pretty instantaneous.”)

The following analysis is a guesstimate of what make up the numbers in these IPL teams, both old and new. It is broken up into two parts –

a) Existing IPL team’s economics

b) New IPL team’s economics

a) Existing IPL team’s economics

When IPL was inaugurated in 2008 with much fanfare, the number of teams were restricted to 8. These teams were owned by Bollywood and Indian Corporates alike. The 8 teams were – Rajasthan Royals (RR), Kings XI Punjab (Kings), Delhi Daredevils (DD), Kolkata Knight Riders (KKR), Mumbai Indians (MI), Deccan Chargers (DC), Bangalore Royal Challengers (BRC) and Chennai Super Kings (CSK). Through a closed auction system, the bid winners were declared, with Mukesh Ambani bidding the highest with Rs. 450 cr ($111.5mn) for Mumbai Indians and Emerging Media Group bidding for Rajasthan Royals at the lower end at Rs. 268 cr ($67mn). The sum total of all bid winners was Rs. 2894 cr. which has to be handed over to the IPL management team over a period of 10 years (in equal amounts).

Let’s look at the two different components that make up Profit for any enterprise. Costs and Revenues.

Costs:

a) The franchises have to pay the bid amount every year, spread over 10 years. The team is then to perpetuity by the owner, without paying any more franchise fee.

b) The franchises also had to bid for different players. Stars like Sachin Tendulkar, MS Dhoni, Rahul Dravid etc. command a premium (close to Rs. 1.5 cr each, every year) while unknown players command the minimum (Rs. 8 lakh every year). Depending on the capacity of owner’s capital and different sponsors involved, various players are bid for and paid in full.

c) The bidders also have to take care of the promotions – television and print ads for the teams as well as star players, to keep the marketing buzz going. This involved, for example, Delhi Daredevils roping in Akshay Kumar for the first IPL season (while dropping him for the 2^nd), while the Royal Challengers chose Katrina Kaif. There were other Bollywood owners like Shilpa Shetty and Shahrukh Khan who were spared the Bollywood expense, but nevertheless had to shell out money for other marketing expenses.

Revenues:

a) Approximately 60% of TV rights revenues is distributed among the franchise owners. TV rights with Sony were renegotiated in the 2^nd season for a record Rs. 8200 cr ($1.6bn) to be spread over 10 years (It was initially Rs. 4000 cr for 10 years. However, basing on the popularity of IPL Season 1, the bid was renegotiated to Rs. 8200 cr for 10 years)

b) Revenues from sponsors (Nokia, Wrigleys, Kingfisher, Pepsi, Reebok etc.)

c) Ticket receipts, selling memorabilia and merchandise etc also called Gate revenue.

The following excel sheet gives a snapshot of the approximate profit/loss for each franchise in IPL Season 2.

(Assumptions: Promotion cost@50% of Team cost, Gate revenue@10% of TV rights revenue, Sponsors revenue on average @30% of TV rights revenue – assumptions made in line with other sports franchises across the world – feel free to disagree)

As seen in the Profit/Loss sheet, inspite of very generous assumptions regarding revenue, 7 out of 8 teams are in the red. The assumption on sponsors revenue might be a bit skewed since Mumbai Indians have the capacity to bring in more sponsor’s revenue while the lesser know Rajasthan Royals might bring in less. Nevertheless, the profit/loss sheet gives us a fair idea of how the franchises fared in IPL Season 2 inspite of low entry cost during the inaugural kickoff.

B) NEW IPL TEAM’S ECONOMICS

Sahara Group and Rendezvous Sport are the two new entrants to IPL. Sahara Group won the bid for Pune while Rendezvous won it for Cochin. The biggest downside for these two groups however is the cost. These two to-gether have paid slightly more than what the other 8 had paid combined in 2008. Sahara paid Rs. 1702 cr while Rendezvous paid Rs. 1533 cr bringing the grand total to Rs. 3235 cr.

Assuming all other parameters remain constant (TV rights revenue have to be shared across 10 teams now instead of 8 but with corresponding increase in matches from 60 to 94 in IPL Season 4, I expect the TV rights revenue to be approximately constant; the Team cost will obviously go up due to higher bids and competition for atleast 3-4 star players), the franchise cost per year is pretty steep.

Conclusion:

With the kind of losses that Sahara Group and Rendezvous are supposed to incur, I wonder what would be the actual cost, if the opportunity cost of investing the franchise fee (say, a corporate deposit @8% per year) is included. To think that the existing IPL teams are making a loss with such a low cost base, it is close to impossible to think that either Sahara or Rendezvous are looking to make money off their IPL franchises in the next 4-5 years unless they come up with stunning marketing strategies and make money off them. Buying a stake in the existing teams would have given them far more leverage in terms of better opportunity cost as well as an already established team than buying a totally new franchise.

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