Railway Budget 2015: Analysis

Suresh Prabhu’s maiden railway budget - presented yesterday - evoked contrasting responses from opposite sides of the political spectrum. Modi, expectedly, called it a “watershed budget” while the former railway ministers Nitish Kumar (1998-99, 2001-04) called it “A passenger-less train” & Dinesh Trivedi (2011-12) called it a “Statement of intended pipedreams” Both, however, had a word of praise for the Railway Minister calling him “efficient” & “brilliant” since Prabhu - as the power Minister in the Vajpayee govt. – has a reputation of being an effective reformist. The Economic Times was bang on when it chose to describe the budget as “Present Tense, Future Perfect”.

Indian Railways is the 4^th largest railway network in the world -1.14 lakh Kms long - carrying 21 million passengers daily & 1 billion tonnes of cargo per annum, with the support of 1.3 million employees. Obviously, if funded adequately, it can have a multiplier effect on the economy & create more jobs. It can ensure the well-being of future generations since it is more environment friendly; incidentally, annual consumption of fuel by the railways, is only 7% of the fuel used by the road sector.

Populism of the last 20 years, courtesy railways being handled, mostly, by an ally of the ruling party, has destroyed its financials, leaving it with a low investment surplus that led to the consequent congestion, overutilization & drop in safety standards. 

While previous budgets were low on vision & high on numbers, Prabhu’s budget was glaringly high only on vision; numbers with detailed timelines on project completion would have been more comforting. The Minister’s job is to get the railways back on track which he promised through 3 documents, 4 goals, 5 drivers & 11 thrust areas. Some of the important policy pronouncements follow:

Passenger fares unchanged:

Passenger fares - 25% of railway receipts - account for a loss of 26000cr per annum. While analysts demanded an increase in passenger fares, the opposition expected a fare reduction to account for the drop in fuel prices. What they failed to note is that the drop in fuel prices has been more than countenanced by an increase in electricity procurement costs at Rs 7/- per unit. The Minister has proposed a bidding process for buying power, henceforth, leading to a saving of Rs 3000 crores per annum. Prabhu, therefore, had reasons for not increasing passenger fares.

Last year, Indian Railways (IR) raised fares by 14.2% which led to a drop in passenger traffic by 4.6 crores - particularly in non-suburban non-PRS segment. Perhaps, some of the passengers have shifted to budget airlines or roadways. To entice passengers back, Prabhu has employed the two levers of improving customer service & enhancing the advance reservation period (ARP) from 60 to 120 days. In 2013 when ARP was reduced from 120 to 60 days, it led to an increase in the sales of budget airline advance bookings. The Minister, clearly, is trying to reverse the effect though the ostensible reason cited for the change in policy is to reduce the influence of touts

The Delhi electoral results & the impending Bihar elections by the end of the calendar year must have imposed additional political restrictions on the Minister. A rise in rates would have given the opposition another handle to beat the government, already under pressure of the land ordinance issue. The Minister therefore chose discretion against the valour of increasing rates. However, he has created some additional revenue streams which is welcome.

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Some additional measures announced by Prabhu to gain revenue: sweat assets by increasing confirmed seats in trains that run packed throughout the year by adding coaches from trains with lower occupancy levels; increase the no of coaches from 24 to 26 & add more general class coaches; & increase speeds from 110-130Kmph to 160-200Kmph to ensure faster turnaround. The shrewd Minister also realizes that while increasing the normal suburban tariffs is a political hot potato, charging more for A/C coaches & push-back seats added to these trains can help in gaining more revenue. He has quietly announced introduction of the same without talking of the attendant pricing.

Freight Tariff Increased:

66% of the rail receipts of 1.83 lakh crores flow through freight. Prabhu has increased the tariff for Iron ore & steel by 0.8%, coal by 6.3% & cement by 2.7%; the latter two could see a pass through to the consumer stroking inflation. The Iron & steel industry - plagued by weak demand & cheap imports - would absorb the rise. 

Dinesh Trivedi has argued that since IR accounts' for only 36% of the national freight traffic a strategy to gain share, by reducing tariffs, would have been more prudent. The Minister avers that it is more of slab rationalization & not necessarily a hike for only an additional Rs 4000 crores shall be generated through this measure. 

Some additional measures announces by the Minister to raise revenues: timetable for goods trains; increase loaded goods train speeds to 75 Kmph & empty freight trains to 100Kmph; & increase axle loads to 22.82 tonnes.

Other Initiatives

“Bullet trains” have been put on the backburner citing the likely receipt of the feasibility report only by the middle of the year; “semi bullet trains” at 20% higher speeds which can run on existing tracks, without an engine to haul them have been pushed, instead, which is welcome. Huge capital costs, perhaps, has been thus avoided. Obviously, he had no other option.

The Minister has secured 40000cr gross budgetary support but his plans for securing investments of 8.56 lakh crores during the next 5 years seems ambitious. Indian or foreign private sectors players invest basis expected returns, which an organization like IR, not in the pink of health, cannot promise. Reworking the concessionaire agreements is a solution but that shall be time consuming. Investments through SPVs with the states – sitting pretty on higher devolution of funds & coal auction proceeds – or with central ministries like Oil & Coal are more likely to fructify. Attempts to attract MPLAD funds would be only partially successful.

The Minister, faces an enviable task & is exploring all possible sources of revenue. He has offered stations & trains for corporate branding, proposed Railway display network in 2000 stations to unlock advertising revenue potential & offered development of stations on “as is where is” basis, to exploit the space and air rights on concession basis.. Setting up of a PSU, Transport Logistics Corporation of India (TRANSLOC), using surplus land & partaking in the logistics explosion in India, is a welcome initiative, through it shall bring IR in direct conflict with other govt. organizations like TCI & Gateway Rail. 

His plans to use automatic ticket vending machines with smart cards, billing through smartphones, outsourcing cleaning activities etc. shall help in reducing the manpower of the railways progressively adding to the long term health of the organization. IR's 1.3 million employees account for 35% of railway expenses & the 1.36 million pensioners - which 5 lakh more to be added during the next few years - account for an additional 18.6% of expenses, which makes this step extremely significant. He should bring IR's salary & pension expense to revenue ratio more in line with international practices.

Prabhu has tried to genuinely create a national movement for IR revival. He has involved various stakeholders NID, NIFT, IIT- BHU, and IIT- Kanpur etc. for specific programs. Simultaneously, the tech modernization campaign shall involve vendors like TCS, Infosys, Wipro & Zensar that have the expertise on transportation solutions, which they have successfully deployed at the clients end, abroad.

What did the Minister Miss out?

Critics have argued that the Minister would have been well served by corporatizing the organization which he did not. Perhaps he will, at a later date after he cleans up the account books & brings greater transparency.

Analysts expected the Minister to sell the surplus land holdings – a global practice – to fund infrastructure growth. The minister rightly stated that railway land is not properly demarcated & there are problems of encroachments. Since selling would lead to controversies, monetisation was apparently seen as a better route. Digitalization of land has, however, been taken up as a project.

The 12^th 5 year plan targeted an operating ratio of 75% while Dinesh Trivedi’s budget in 2011-12 planned a fig of 84%, both of which were belied. The fig of 88.5% suggested by Prabhu could be torpedoed by the 7^th Pay commission recommendations which shall entail an additional outgo.

Creation of a regulator & inviting private players to compete with IR on a common track - for which they pay user charges - could have transformed the ecosystem which he did not. Hiving of railway schools into Kendriya Vidyalayas, hospitals to the respective states - or create a central organization - & Railway protection force into the CISF could have helped IR to concentrate on its core business. Similarly, hiving off "Rail Neer" to compete with Coke's Kinley /Pepsi's Aquifina could have been another initiative. Creating a lean & mean organization concentrating on its prime business with a profit motive should be the aim. Non profitable routes insisted on by the states should be subsidized by the respective states.

Finally Railway budget is a relic of the British era which needs to be dispensed with; an entry in the finance budget indicating the budgetary support to IR would suffice.

Conclusion

Prabhu dream of transforming India through the railways is visionary but he shall be constrained by the challenge of executing the plans through the hard-nosed railway bureaucracy & successfully raising finance. Only “Prabhu” (Lord) can help Prabhu (Minister) succeed.

Movie Review: Badlapur

The movie “Badlapur” set aptly in a town by the same name is a story of Badla (vengeance). “Don’t miss the beginning” says the opening frame & quite rightly so. The director gives a hint of what is to be expected when he quotes an African proverb “The axe forgets, the tree remembers”, perhaps, indicating that the perpetuator forgets while the victim remembers. The revenge saga thus endures. Welcome to the noir world.

Varun Dhawan (Raghu), a 22 year old from Pune with stars in his eyes & with plans to pursue a career in Europe learns from his Tamil girlfriend Yami Gautam (Misha) - one year his junior - that she is pregnant. He skips his foreign plans, marries Misha & seems to have a cosy life working for an ad agency when disaster strikes. Misha & her son Robin while returning from a market errand have their car hijacked by two bank robbers, Nawazuddin Siddiqui (Laik) & Vinay Pathak (Harman). The police chase, expectedly, behind the speeding car & in the enduring melee the boy drops dead on the road & in an adrenalin rush Laik shoots an intemperate Misha who dies in hospital in Raghu’s hands transforming the latter into an emotional wreck. Raghu has been wronged by destiny & the audience starts to sympathize with him.

The police arrest Laik not before he had successfully allowed Harman to escape with the booty and the gun - obliterating any traces of evidence. The accused does not reveal the identity of the significant other despite several violent attempts by the police. Laik thus comes across as a loyal friend. He is subsequently sentenced to 20 years of imprisonment. Raghu seeks out the identity of the killers but to no avail.

Raghu, therefore, engages the services of Ashwini Kalsekar – a detective - to get some leads in the case & she does not disappoint. She learns from Laik’s mother (Pratima) about Laik’s prostitute girlfriend, Huma Qureshi (Jhimli). Raghu approaches Jhimli & promises her his son’s insurance money of 35 lakhs in entirety if only she can help him with the identity of the other perpetuator. She fails & fumbles & he punishes her with sexual violence. Raghu has starting to turn psychic & the audience begins to wonder what happened to the loving & gentle husband he once was.

Time rages on & Laik makes many unsuccessful attempts at escape. Meanwhile after spending 15 years in jail he is detected with stomach cancer & his life put on a notice period of 1 year. Divya Dutta (Sobha), a divorcee, who runs an NGO takes his case to Raghu seeking his mercy to enable Laik spend his last few days, happily, with his mother. Raghu rebels, initially & relents only after Laik’s mother bribes him with Harman’s identity. Raghu

who had shifted to Badlapur after the death of his wife & child – to work as a foreman in a factory - travels back to Pune to find Harman - a wealthy restaurateur  married to the glamorous  Radhika Apte (Koko).  He befriends the family & post revealing his true intentions indulges in a fake sexual encounter with Koko to destroy Vinay’s family. Thereafter, he appropriates Laik’s share of the booty, hammers Koko to death & smidgeons Harman to pulp, revealing a new sadistic trait of his

personality. The manipulative side of his personality is revealed when Raghu plans a rendezvous with Sobha to provide him with a convenient alibi to escape the accusation of murder, much to the latter’s chagrin.  The audience has been taken through the violent swing in Raghu’s messed up character; his sexual depravity was seen earlier & now his moral degradation, manipulative instincts & violent psychic predilection appears to startle the viewers & perhaps they start to detest him.

Laik had kept the identity of Harman a secret with the notion that post release he can take his share & along with Jhimli move to salubrious climes. Understanding that death is near, he dreams of enjoying the last few months with Jhimli.  While Harman has not deceived him – perhaps there is still “honour amongst thieves” – he is now left holding the bucket. The money has been usurped by Raghu; Jhimli - though still well disposed towards him - has found a new paramour who appears to be indulging her though not respecting her. Laik’s soft mature side is revealed – before he walks off from Jhimli’s life -when he threatens Jhimli’s patron that being a murderer he would kill if the latter ever attempted any violence against Jhimli. The audience starts liking Laik though he is lascivious & not of a perfect make. You make judgements while sifting through shades of grey.

Laik wants to avenge the loss of his booty & therefore attempts to kill Raghu but fails. Raghu too, surprisingly does not kill Laik even when the opportunity presents itself on a platter. Therefore, perhaps, Laik has a change of heart & reveals to Raghu that it was he, inadvertently, who had shot the former’s wife & not Vinay who was innocent.  The secret that Laik has guarded for 15 long years is revealed & Raghu’s long wait to identify the killer of his family concludes. Does Raghu regret his act of killing an innocent Harman? He doesn’t appear so.

Laik then makes the ultimate sacrifice. He pleads guilty of killing Harman & Koko so that Raghu can get a second chance in life. Surprisingly, the futility of revenge & violence is thus revealed through the most unlikely of characters. The audience, understandably, who detested Laik earlier & were sympathetic towards Raghu, have their feelings completely reversed. The director has done the unimaginable.

Varun Dhawan who made his name in slapstick comedies makes a dramatic transformation. Nawaz is outstanding displaying shades of sleaze, aggression, venality & vulnerability - a treat to watch. He is cheeky yet witty a must watch for all aspiring actors. All the characters are well etched & the layered screenplay haunting. Less of misogyny would perhaps have made the movie more palatable. The director, Sriram Raghavan has wielded the microphone for many classic thrillers: Jonny Gaddar, Ek Hasina Thi & later Agent Vinod. However Badlapur appears different from his earlier servings for it is of the psychic thriller noir genre.  This dark brooding film reminds one of Anurag Kashyap’s “Ugly” & the raw in your face depiction of “Gangs of Wassseypur”.  Great film!!

Movie Review: “Baby”

Neeraj Pandey serves us a delectable fare “Baby”- a spy thriller - after an impressive response to his earlier contributions: “A Wednesday” – the story of vengeance inflicted by a common man who turns vigilante - & “Special 26”- a con film dealing with the famous gold heist of TBZ Mumbai in the 1980’s. Seeing our secret service agents on screen, for once, we are inclined to believe that the Indian intelligence personnel are no less deadly than those who represent Mossad. The film is bereft of songs but no complaints on that count for it would have been an unnecessary distraction from the main plot.

The movie begins with a voice over indicating that post the 26/11 attack in Mumbai & the carnage thereof, an elite 12 member counter intelligence team dubbed “ Baby”- a 5 year project - was assembled with the intention to detect & destroy foreign modules. This team of brave-hearts is led by the redoubtable Danny Denzongpa (Feroze) with Akshay Kumar (Ajay) providing him able support. The dapper Danny - a patriot - reminds one of the roles he essayed with aplomb in “China Gate” while Akshay reprises a role played in “Holiday” minus the romantic track. Both of them are, indeed, impressive.

Team “Baby” has many successes to brag about but unfortunately, 8 of its members are lost, in the line of fire.  The first half shows one of its team members, Rakesh, compromised by another, Jamal, who has turned rogue. Rakesh is being tortured in Turkey & the grisly images transmitted on the mobile with co-ordinates, perhaps, to encourage the agency to take the bait. Akshay reaches the site, finishes off the captors & captures the rogue agent. Ajay finding no chances of saving the severely pummelled asset, Rakesh, calmly pumps bullets into the latter – difficult calls that agents are forced to take in the pursuit of duty. Reminds one of a similar situation Gregory Peck faces in “The Guns of Navarone”. The question, however, that is left unanswered: Why did Jamal turn rogue?

The movie gathers pace when Ajay succeeds in retrieving information from Jamal that a blast was planned in DLF Mall, Delhi & his team succeeds in defusing the bombs planted. Jamal, commits suicide after revealing that the agencies across the border are planning more of such terror attacks. The rest of the movie is a chase to prevent the ghastly plans from getting implemented.

Enter Rasheed Naz (Maulana Mohammed Rehman) who etches a role, glaringly similar to LeT’s Hafiz Sayeed, with his usual anti India rants & pro Kashmir pronunciations. Kay Kay Menon (Bilal), a dreaded terrorist, with an even more menacing look is helped to escape, by his handlers, from an Indian prison to travel to the Middle East & close loop on the terror plot. Akshay leads a team of Rana & Anupam Kher (Shuklaji) & succeeds in killing Kay Kay. Surprise surprise,  Maulana is the unexpected prime catch & bringing him back to India forms the reminder of the film - an edge of the seat thriller with traces of ARGO- that involved bringing American citizens back from Iran- & D Day – that dealt with bringing Dawood alive back from Pakistan.

The movie, though, raises some uncomfortable questions: How & why are educated Muslim youths attracted to the Jihadi cause? They are shown attracted first through the offer of scholarships & later radicalized by showing them footage of Gujarat pogrom et al. While physical meetings were essential earlier for indoctrination, Social media has now made the process much easier. The Bangalore case of @Shamiwitness of Mehdi Masroor Biswas is a case in point.

There are some moments in the movie which are worth treasuring. A Minister, when asked for permission to allow covert actions in Nepal & the Middle East demurs, prompting Akshay & Danny to offer to run an unofficial operation - giving the govt. the cover of plausible deniability. When the Minister asks Danny if we are doing enough for the secret service agents, Danny remarks that, as a country, we don’t but the true blooded patriots still don’t care. Hats-off to such unknown faces, whose heroic deeds find no mention in the news, whose success is not celebrated & whose failure implies the tragedy of torture & a grisly death. Akshay ‘s wife Anjali (Madhurima Tuli) reflects the collective feelings of better halves of our secret service agents & the precarious lives  their lead with the constant parting line “Bas Marna Mat”  (Just don’t die) 

The importance of gatekeepers in the Indian bureaucracy is hilariously brought out by Murali Sharma, a pompous PA to the Minister, who constantly talks about the Minister being busy but Danny always has his way in fixing appointments. Similarly, there is a scene which is a sarcastic commentary of the laziness & lethargy of our times. “We, as Indians, have a reputation to protect” says Danny asking his subordinate to delay sending a response to a mail query; a faster response would have been seen as suspicious - sabotaging the plot.

The movie, in short, is a delight to patriots but fails to build up on characters. Rana appears in the first operation at the DLF mall & is conveniently forgotten till he reappears in the grand finale for an operation in the Middle East. Likewise Tapsee Punnu (Priya) who is used as a honey-trap to entice Sushant Singh - an ostensible travel agent but in reality a part of the terror cell operating in Nepal - is also conveniently forgotten till she is brought back in the last parting frame where team “Baby” is seen celebrating. Unlike a traditional Indian heroine who is, unfortunately, always portrayed as damsel in distress seeking a male cohort for protection, Tapsee  gives as good as she gets – pulls her own punches very effectively- a welcome tribute to the liberated Indian women of our times.

The action sequences are well choreographed & the cinematography- especially of the desert dunes – is breath-taking. The movie leaves you with some uncomfortable questions long after it is over: Are we taking enough care of the patriots of our secret services? How do we address the religious polarization & the radicalization of the lunatic fringe which has the potential to maim India? If the US can track down Osama in Abbottabad in Pakistan & hunt him down why do we not do the same?

Perhaps, our countrymen have to do a lot of soul searching. 

AAP: Can it fulfil the poll promises?

AAP’s thumping victory in the Delhi assembly elections held in Feb 2015 – where it won 67 of the 70 seats - is a stupendous achievement, since securing over 95% of the state assembly seats happens only but rarely; it was last achieved by the Sikkim Sangram Parishad way back in 1989 when it won all the 32 assemby seats in Sikkim. “Paanch Saal Kejriwal” has taken the oath of office on 14^th Feb – exactly one year after he left office - & predictably has tried to douse the euphoria of expectations build up during the run up to the elections by promising, perhaps, slower but surer action & singing the lullaby of communal amity. Valentine’s day, this time, had another message from Kejriwal: “Bhaichara” (Universal Brotherhood). Every manifesto has its measures of “Must do”, “Good to do” & “Try to do” promises & Kejriwal’s 70 point manifesto constructed after a very intense Delhi Dialogue with the citizens – a welcome citizen participation in policy formulation – is no less so. What shall Kejriwal attempt to achieve in short term, medium term & long term?

Try to Do 

Kejriwal promised full statehood for Delhi, passage of the Swaraj & Jan Lokpal bills as part of his manifesto. Article 239AA of the Constitution passed in 1991, precludes the government of Delhi from control on the subjects of land, police and public order. Delhi is, therefore, a unique state where the Police Department reports to the Home minister of the national govt., the Delhi Development Authority (DDA) - which owns the land bank - reports to the Union Urban development minister while the Municipal Corporation of Delhi (MCD) is an independent entity. As per Shailaja Chandra, ex-Chief Secretary of Delhi “There are 57 areas under the DDA and about 60 items under the MCD where the Delhi government cannot do anything at all without the Union government's assent. Even for a simple thing like increasing the fine for littering on the street, the MCD cannot change it and only the Central government can do so”  

The demand for “Full statehood” which found a place in all the BJP’s election manifestos till the 2013 assembly elections is glaringly absent in the 2015 vision document. Clearly, the BJP shall deny full statehood to Delhi & shall make every attempt to twist the rule book to its advantage.

Kejriwal’s Jan Lokpal bill – a product of the India against Corruption (IAC) agitation –is very different compared to the Lokpal bill passed by the 15^th Lok Sabha in 2014 & the BJP shall sincerely attempt to stall the former from becoming a law. The Swaraj bill has provisions of REFERENDUM - a vote by the electorate on a single political question referred to them for a direct decision - INITIATIVE– the process by which a pre-determined majority can sent a law deemed necessary to the elected representatives for legislation & “RIGHT TO RECALL” an elected representative if found unfit in the discharge of his duties. Referendum & Initiative, though welcome, if implemented nationally, could find immediate resonance in places like J&K & the NE imperilling the integrity of the nation. The “Right to recall”, another good initiative, is also liable to be misused by the current political dispensation where the winning candidate - in the first past the post system - gets only about 30% of the vote incentivizing the defeated majority to attempt a witch-hunt thereby creating a wobbly polity. Perhaps, such interventions can happen when we further mature as a democracy & succeed in dousing the fissiparous tendencies across the nation inculcated through “nationalism”.

The Swaraj bill, on the contrary, promises Citizen Local Area Development funds (C-LAD) to Mohalla Sabhas & Resident Welfare Associations (RWA) consistent with Gandhiji’s belief in local self govt.; since both the entities listed are not elected, it could invite repugnancy with the Municipal Corporation Act 1957. Expect, however, Kejriwal to pass all the 3 bills in the Delhi Assembly; If the centre accepts them he gains though fulfilment of promises & if the Central govt. blocks them he is handed over, on a platter, an electoral issue for the 2017 MCD elections. Kejriwal wins either way.

There is, however, a midway course if the centre & the state are keen to avoid a collision course. The second administrative reforms commission in 2005 has recommended that the Delhi CM be made the Chairman of the DDA - without effecting the central provisions - for greater harmonization. Likewise, the current situation where the Home Ministry controls the police forces, in Delhi, through the LG, could be reworked to have the CM conduct monitoring meetings with the Police Chief. Such changes are however unlikely to be implemented since both the parties would stick to their bargaining positions.

Must Do

Expect Kejriwal to implement the 50% electricity subsidy & push for the completion of the CAG audit which he initiated during his last stint. This however shall encounter opposition from corporates who have till date stalled any meaningful attempt at an audit. The anti-corruption helpline shall be active shortly & lifeline water commitment of 20k litres per family shall be implemented too; after all this was one of the pet themes that helped them regain power. Competition amongst the power distribution companies is a medium term strategy while plans to have own power plant at the pit head & achieving 20% of power generation through solar by 2025 are long term plans. 

Water as a right promised shall be an important piece of legislation since access to clean drinking water shall improve the health indices of Delhi, automatically. Charging for water from the first litre itself if the fig of 20k is breached shall penalize heavy users & perhaps accelerate conservation measures which needless to say are welcome. Karan Thapar, on Headlines Today, indicated that water shortage in Delhi is 24% while wastage is 40%. Clearly conservation coupled with reduction of leakages alone shall take care of the shortages. Promise of free water could encourage citizens to fix water meters & control on the water mafia by the govt. shall help reduce leakages substantially. Implementation of the Court ruling that Delhi is entitled to further raw water from Haryana from the Munak canal shall help provide water security to Delhi. Expect, however, resistance from the BJP govt. in Haryana & CM Khattar has already fired the first salvo.

Delhi has a budget of about 40k crores - 85% of which is taxes & 15% plan assistance; 67% of the taxes comes through VAT & Kejriwal has promised a reduction in the same which critics argue could deplete revenues. Reduction in VAT, though, shall lead to greater compliance & affect the “Laffer curve”- helping raise more resources. Reduction in VAT shall encourage “wholesaling” from Delhi enhancing trader turnovers & hopefully taxes. Reduction in IT raids – as promised by AAP - on traders shall accelerate the compliance process. Since Delhi is not a state and hence not allowed to go for market borrowings or levy a cess it might have to depend on the Central Governments mercy unless, hopefully, the 14^th Finance Commission recommends transferring a higher %  of the central’s tax corpus to the states against the current level of 32%. Moreover, with the Implementation of GST, perhaps, from April 2016, leakages would be plugged further giving a further fillip to revenue.

Against this background of precarious finances – where about 50% of the budget is non-plan expenditure - opening of 500 new schools & 20 colleges, providing additional employment to 17k new teachers in government schools, starting 900 additional primary health centres & 30k additional beds would no doubt be impossible to achieve in the short term. Kejriwal therefore has pleaded with the press & the voters to give him space to fulfil his commitments in 5 years. However the promise of regularization of contract workers including 4k doctors & 15k nurses & paramedics, filling up the 55k vacancies in Delhi Govt. shall put some pressure on the govt. budget. The Govt. needs to think out of the box to raise revenues. AAP’s manifesto promised conferring free-holding rights in resettlement colonies – for Rs 10k for original allottees & Rs 50k for non-original allottees - is a scheme that would earn as much goodwill as much as revenue.

Good to Do

Everything that does not come under the “Must Do” & “Try to Do” categories shall fall in the “Good to Do” category.

Conclusion

Kejriwal, therefore has a fight on his hands while implementing his manifesto. The voters shall be anxiously waiting for the unfolding of the action plans while the central govt. would be keen to muzzle his breathing space for they surely realize that a “Congress Mukt Bharat” would leave a vacuous space for the left of centre, AAP, to, quickly, occupy - that shall not be music to the ears of either the Congress or the BJP. Interesting times are definitely ahead.

E-commerce: What is Jack Ma Thinking?

“Mere Paas Ma hai”                          Sashi Kapoor in the iconic film “Deewar”

Well, Vijay Sekhar Sharma of Paytm could say just that, after Jack Ma, the head of China’s e-commerce giant Alibaba, has taken a 25% stake in the firm. There were speculations that Alibaba would buy into Snapdeal - since Alibaba’s marketplace model is close to Snapdeal. Softbank - an early investor in Alibaba - has already invested in Snapdeal. Ma surprised the market with an investment in Paytm, perhaps, to chart an independent path. Just what goes on in the “mind of the strategist”, Ma, a former school teacher who presided over Alibaba’s $25billion dollar IPO in 2014 - larger than e-bay & Amazon combined - can be understood by connecting the dots across the acquisitions & investments made during the last few years.

Alibaba maintains various differentiated marketplaces: Alibaba, a B2B platform, started in 1999 that connects Chinese exporters to companies globally; Taobao, a C2C platform - an e-Bay equivalent - started in 2003, for individuals & small merchants; & Tmall a B2C platform - an amazon equivalent - started in 2010, that connects bigger merchants like Nike to sell directly to customers. It is a dominant player in the Chinese e-Com market with an 80% share; over $250 billion worth of merchandise moved on its platform, in 2013, generating $8.5 billion in revenue with a 44% margin. It also owns, Alipay - with 300 million users - a payment app that rivals Paypal

Jack Ma has made over 100 investments & acquisitions - buying stakes in companies domestically & overseas – with a method to the madness. The starting point of the investment philosophy - gleaned from the prospectus submitted for the IPO – states thus “We have made, and intend to continue to make, strategic investments and acquisitions to expand our user base and add complementary products and technologies. For example, we expect to continue to make strategic investments and acquisitions relating to mobile, O2O services, digital media and category expansion as well as logistics services. Our strategic investments and acquisitions may affect our future financial results.”

Let us analyse each of those phrases.

Investments to expand user base:

With domestic dominance, Alibaba needs to expand abroad. While entry into India & US – the largest e-com market in the world - has been outlined above, Ma has expanded into south East Asia. A localized version of Taobao – which is otherwise in Mandarin - has been launched to facilitate a better consumer experience. Since only 10% of Alibaba's sale, in China, comes from rural, the company is planning a massive rural penetration drive by establishing about 1000 county centers & 1,00,000 village level service centers. Expect, therefore, more geographic expansion internationally & rural penetration domestically as a key strategy to expand user base.

Complementary technologies:

Ma is planning dominance across platforms: search; messaging; gaming; & social media.

Alibaba, launched eTao, a shopping search engine in 2010 & invested in Quixey – a search engine for apps - in 2013. Ma has also invested in Autonavi – a digital maps company, Youku Tadou – a youTube equivalent - & Sina Weibo – the largest social media company in China. He launched Shenma – a web search service – & Laiwang – a messaging app & since the latter was only partially successful, invested in Tango with 200 million registered users spread across the North America, Middle East, Taiwan & Singapore. With Buy buttons on messaging apps becoming popular expect Tango to lead the e-com marketing drives in the geographies listed. Clearly the investments in search is with an intention to checkmate Baidu & Google & the investments on social media is to checkmate Tencent that owns the popular messaging app, Wechat. Not stopping at that, Ma intends to dominate gaming too.

Alibaba invested in a social mobile gaming platform – Ktplay - &  invested in Kabam  It also agreed to take the cloud-gaming service Ubitus Rovio’s Angry Birds Stella into China. According to market researcher Niko Partners, it is designing a high-end gaming console to compete with Microsoft’s Xbox One and Sony’s PlayStation 4 in China. Ma, therefore, is strengthening both the software & hardware offerings in a bid to transform into a gaming powerhouse.

Complementary products

Ma invested in Fanatics- a Florida based exclusive online retailer of sports team apparel to address the needs of consumers obsessed with sports leagues especially the NBA. He has also invested in istdibs – an art & antiques firm that   connects dealers, designers and galleries to help sell fine art, jewellery, antiques, and other high-end lifestyle goods. Incidentally, Chinese buyers account for 24% of the worldwide art & antiques market. Alibaba investment in Yinman - a high-end online clothing retailer that sells its own branded apparel - is perhaps another attempt to further consolidate its hold on the hi end customers & thereby get higher margins.

Alibaba plans to revolutionize the language market too. It has invested in Tutorgroup which offers language learning courses: TutorABC for English language learning students & TutorMing for Chinese language learners internationally.This supplements Alibaba’s own education platform xue.taobao.com.

Mobile

UCWeb – acquired by Alibaba in 2014 - is one of the biggest web browser companies in China, with more than 50% market share. It also surpassed Opera as the top mobile browser in India last year and now holds a 35% market share according to StatCounter, compared to Opera’s 25%. The move is significant because it builds up Alibaba’s mobile strategy, making it a more formidable competitor to other Chinese companies like Baidu, This shall also help penetrate markets like India.

O2O services

In a bid to integrate online & offline- a brick & click strategy - Alibaba acquired a stake in Intime retail to form a joint venture that shall run shopping malls, department stores and supermarkets. Alibaba’s Tmall.com will have access to Intime’s inventory, broadening the variety of merchandise available, and customers can pick up online orders in Intime stores. This perhaps gels in with Ma’s intention expressed in 2013 to create a delivery network to reach any place in China within 24 hours.

With Intime, Alibaba is targeting high-end consumers, who are often trendy urbanites on the leading edge of smartphone usage. Alibaba aims to get those shoppers accustomed to using its mobile payment app, Alipay Wallet, to pay for goods. Going forward Ma could tie up with telcos to offer location based services the fulfilment of which shall be at physical retail that he has currently acquired.

Digital Media Strategy

Ma is busy creating a media behemoth that encompasses print, TV & digital assets along with the necessary content.

Ma in 2014, has bought a stake in Youku Tudou, & a controlling 60% stake in ChinaVision Media Group Ltd, giving it access to TV and movie content – to retain current users and attracting more. The Hong Kong-based company, China Vision, co-manages the Beijing Times, the biggest morning newspaper in the Chinese capital, and has mainland mobile TV broadcast rights to English Premier League soccer for the next three seasons. Alibaba could add certain entertainment and media content into its instant messaging app, Laiwang - which is currently floundering - to increase the popularity of the app.

This comes close on the heels of its launch of its Ali TV operating system last July & launch of a mobile gaming platform this year to compete with Tencent.

Alibaba acquired Xiami - a major music-streaming service - & by April 2013, began rolling out a functionality by adding a “My Music” tab to users’ of “My Taobao” pages. This allowed Taobao users to play music while they shop online, perhaps with an intention to ensure greater consumers stickiness to the site & propel impulse purchases.

Logistics

Logistics is a key vector in the success for any e-com venture.  Ma, therefore, has acquired a 10% stake, in Singapore post to strengthen the regional logistics value chain in SE Asia. He already has a 39% stake in a US based online shopping platform - Shoprunner based in Pennsylvania - that offers a guaranteed 2 day delivery, for a $79 annual subscription fee, much cheaper than its direct competitor, amazon Prime.  While occasional shoppers might not be attracted towards such a proposition, heavy users find the offer irresistible. Ma, is alos pursuing innovative logistics solutions.

Perhaps, Ma expects taxi aggregator services would evolve into logistics partners. He has therefore invested in Kuaidi Dache, a Hangzhou-based taxi-hailing app – similar to Uber - & integrated it into its e-com payment ecosystem Alipay. He has invested in Lyft – a US competitor in the transportation network & ride sharing space.

Alibaba Group will invest in appliance maker Haier Electronics Group Ltd in a deal aimed at expanding the Chinese e-commerce giant's logistics reach to the millions of consumers in China's vast interior. China's vast interior is expected to see rapid retail growth as more people move into urban areas and their spending power increases. The logistics for large-size goods is the next nut for Alibaba to crack. Haier's Goodaymart online market has some 90 delivery centres, and a vast network capable of reaching counties, townships and villages.

Conclusion

Alibaba is therefore poised to become a true multinational & scorch the e-commerce & related industries space. While Ma has stepped aside as CEO to become Executive Chairman, in 2013, he continues to guide the company he founded into uncharted yet lucrative territories. A mix of e-Bay & Amazon, Ma’s Alibaba already is but his ambitions seem to indicate that he shall not rest till Alibaba also becomes a Google, Facebook, Zynga Walt Disney & Netflix combined. 

For Alibaba's valuation read Aswath Damodaran, Prof., Stern School's blog. 

http://aswathdamodaran.blogspot.in/2014/05/alibaba-china-story-with-profitable.html