Chaitanya Patel

Let’s not go back to the ugly pre-reform past and use the state’s coercive powers to raid businessmen. That seems to be the message from finance minister finance minister Arun Jaitely to tax sleuths. “The department must equip itself with state of the art technological skills, including in the area of analyzing digital evidence”, he said at an interaction on Tuesday.

His statement will soothe frayed nerves of businessmen who are petrified about rampant raids. Sometime in 2011, top CEOs were so miffed over tax sleuths landing up in their premises that they complained to a senior minister in the UPA government. Not surprisingly, senior bureaucrats in north block, that houses the finance ministry, dismissed their charges as baseless.

But there is always a lingering suspicion on what motivates the state’s machinery to descend on businessmen, and the lack of transparency raises questions on the intent of these operations. It’s no one’s case that tax evaders must go scot free. Arun Jaitely’s simple point is for taxmen to make creative and intelligent of technology to establish audit trails of transactions, and that makes eminent sense.

His predecessor P Chidambaram too reckoned that raids were blunt and opaque instruments of tax collection. A modern tax administration must end such practices. The annual information return helps spot potential taxpayers by looking at their spending pattern. Banks, mutual funds and registrar of companies furnish information on their clients to the tax department. It’s matched with a person’s income tax return to see if she has paid the right amount of tax.

The coverage of information returns can be broadened. Eventually, every financial transaction must tagged to the permanent account number (PAN), which is the tax department’s unique identifier. A PAN, that is fool-proof, and an efficient tax information network will help establish audit trails, and improve compliance.

Isn't it appalling that less than 3% of people in India actually file their tax returns. Worse, only a miniscule admit to having incomes of over Rs 10 lakh a year. This means those of us who are paying tax bear the brunt of high tax rates for those who do not pay. That’s unacceptable. But certainly, for a country that launched economic reforms way back in 1991, the answer is not raids.

Nexus killer, OnePlus is planning its India foray. In the last 3 months, the country has seen a great number of cheaper Android devices launching – right from Gionee to Xiaomi.

OnePlusOne : Launching in India Soon

“When we started OnePlus a little over half a year ago, we needed to race against time and focus on what we knew best. Our team primarily consists of North Americans and Europeans, which is why we launched there first.

Over the past months, we’ve seen tremendous interest from India, despite not having launched there. We have many customers in India purchasing to the US, and then asking a friend to bring it over or trans-shipping it. Some have even purchased the device from scalpers. Looking at our traffic, India ranks number 8, outweighing many of our launch countries.

It’s safe to say that we’re interested in India. Being such a young company, we also know that India is a huge challenge. We’re all about creating a great user experience from end to end. We understand that there are lots to learn, consider and set up before we can officially launch in this vast country.” [From official forum].

OnePlusOne Spec

•  2.5 GHz quad-core / 3,100 mAh battery
• Snapdragon 801 MSM8974AC chipset
• 3 GB RAM.
• 5 MP front camera
• 13 MP Sony rear camera sensor
• Custom CyanogenMod.

OnePlusOne price is where it gets interesting : 16GB model costs $299 and 64GB costs $349. Though the current way to buy one is invite-only, we are guessing that OnePlusOne price in India should be around 16-18K.

The post The Nexus Killer, OnePlus Will Soon Launch In India appeared first on NextBigWhat.

Prime Minister Narendra Modi is back from Brazil after last week's big announcement of a BRICS (Brazil-Russia-India-China-South Africa) Bank, New Development Bank, to be headquartered at Shanghai with an Indian at the helm. Now, the word is out that the Modi government is going ahead with negotiations to set up a SAARC Bank.

It was in the works for some time and P Chidambaram may seek the credit for the new venture as well. But when the negotiations are done at Thimphu in Bhutan later this week, it would be in keeping with the new government's commitment to the diplomatic dictum of "neighbourhood first". After 10 years of complete neglect by Manmohan Singh, Modi turned the government's attention to the neighbourhood by inviting South Asian Association of Regional Cooperation heads of government for his swearing in and then by choosing Bhutan for his first foreign trip. Soon, he announced a satellite as a gift to the SAARC nations.

Now, Modi wants to build a bank that will help the neighbours seek an easy loan or fund a mega project. Every new bank, particularly in a semi-feudal post colonial economy, is a bold step towards democratisation of capital. For instance, a bank that plays by the rules is a window to modernity and a guarantee against oppression in any South Asian rural setting. Magnify this rural situation many times and we get a debt-ridden, badly run, South Asian national economy in perennial search of soft loans.

In our poor South Asian neighbourhood, with myriad mutinies and bleeding civil wars, a multilateral lending agency of and by the SAARC countries can be a small, but sure, step in the direction of binding the troubled neighbours together and making the region as a whole gain confidence in itself. A common bank and a common market will, to a small extent, reduce mutual suspicion between big and small neighbours.

Sure, a poor SAARC bank cannot compete with the World Bank, the new BRICS initiative or even the Asian Development Bank. But the thought behind the process seems to be refreshing: to have a multilateral lending agency for the region, which will not impose conditions or seek structural changes in governance to create business opportunities for donor nations. The SAARC bank will not work if it is modelled on existing behemoths that feed huge bureaucracies in world capitals. Also, New Delhi shouldn't try to play the big brother and curtail voting rights or choices of the smaller stakeholders.

Anyway, the SAARC bank cannot be a runaway success as Delhi has very limited resources and its neighbours much less. How much capital can India infuse into a bank that can survive only on the ability of poorer nations to repay their debts? After all, World Bank is always ready with funds and conditions. And institutions like Japanese International Cooperation Agency makes cheap capital available for viable projects if the borrowers provide business to Japanese firms and return the capital with some interest.
But the poor neighbourhood is in no condition to repay huge loans and hence the idea of the SAARC bank is more in the realm of diplomatic optics and real politics than sound business. A regional bank with its mixed bureaucracy that relies on easy visa norms for their travel and negotiations for loans and greater interactions on mega projects can open up, at least, one more small avenue of cooperation and stability.

Sri Lanka is coming out deeply scarred after a protracted civil war in which India too was a party, not very long ago. Nepal's Maoist movement has fraternal and military ties with their Indian comrades and for a long time the Indian security establishment used to talk about a "Pashupati to Tirupati corridor". Bangladeshi territory was always used by various insurgent groups to launch attacks against India . There is no sign of any stability in Afghanistan. Pakistan, of course, is a problem that cannot be clubbed with any other. Bank or no bank, satellite or rocket, Pakistan needs to be treated separately.

In this gloomy situation, the Modi government is doing well by looking at options like common financial commitments for greater cooperation and collaboration among the neighbours. Any strong engagement with a neighbour will primarily benefit India because it has a lot to lose.

And while we are talking about how Snapchat is changing the way we consume content, a small village in Bihar, Dharnai which has not seen electricity for last 30 years has now gone solar-only.

Sun is Cool!

The central grid-based system has failed to provide electricity to over 19,000 such villages in Bihar.However, people have been using solar systems on a small scale to charge mobiles and lights. But the technology available to them was unreliable, providing no warranty or guarantee, and most of the sets have poor batteries that don’t work efficiently.

India’s First Solar Village

With the help of Greenpeace, Dharnai has become the first village in India where all aspects of life are powered by solar.  The 100 kilowatt (kW) system powers the 450 homes of the 2,400 residents, 50 commercial operations, two schools, a training centre and a health care facility. A battery backup ensures power around the clock. [source]

The post With No Electricity For 30 Years, This Village in Bihar Now Runs Solely on Solar Power [Sun Is Cool] appeared first on NextBigWhat.

There are some brilliant Investment Myths which go around and have been around for such a long time that people do not even know them as myths..

let us break some of them:

Buy low and sell high: Such a simple statement to make, and impossible to do in real life. Buy cheap and sell dear. People would like to think this is easy to do, but remember whether a share is high or low is something you know only in retrospect. For e.g. if you buy Hdfc ltd. today at say Rs. 2400. Six months later if the price is, say Rs. 3000 and you sell it, you would be right. However if you buy it today at Rs. 2400 and 6 months later it is at 2100, you would be wrong. So it is a nice maxim which is easy to espouse, but difficult to do.

No Risk No Reward (a.k.a Higher the Risk, Higher the Reward)..One of the worst statements that has been espoused by generations of finance professionals / professors. Look at the big runs accumulated – Rahul Dravid, SM Gavaskar, S R Tendulkar, – these were accumulated by KNOWING where is the off stump. Look at the big wealth – Buffett, Soros, Templeton – these have been done by HEDGING the risk, not by blindly punting in the market. IN retrospect THEY TOOK LESS RISK, that is why they are alive to see the power of compounding!

Buy land prices can never come down..after all GOD DOES NOT MAKE THEM ANYMORE: But people’s taste changes, usage laws change, people migrate to a different place…so RE prices can change and vary from place to place!!

Have greed when others have fear, and have fear when others have greed: A very good, brilliant saying again difficult to implement. When the index was 6000, there was a program on one of the Television channels. The 3 speakers were Comrade Raja, Shankar Sharma, and Rakesh Jhunjhunwala. Rakesh said people should not keep their money in savings bank account but put it in the share market. Raja was of course on a spiel about how Americans are here to corrupt (Oh completely as an aside did we hear any Comrade complain about Russia in Georgia?) us etc.

Shankar Sharma told Rakesh “Aha, now that the market has reached 6000, you want the common man to lose money?” and put RJ on the defensive.

However what happened to the market after that is well known! So to be fearful when others are greedy and greedy when others are fearful is nice to say, difficult to implement. as life goes on…we will break some more myths. – See more at: http://www.subramoney.com/2008/09/investment-myths-lets-break-some/#sthash.g8IGOfm2.dpuf

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What is the difference between an ageing rock star and an Uttar Pradesh sugar baron? Ageing rock stars don’t get government subsidy to boost their sales. Other than that, they share the reluctance to read writing on the wall, the unpaid bills, the self-pity, and the blame game.

It wasn’t always so. UP is India’s largest sugar producing state in a country where rising demand and uncertain supply hold promise. UP's 100 private factories is the country's largest concentration of private investment in sugar. Compared to Maharashtra’s cooperative factories, the UP barons have better numbers and a more convincing sales pitch.

When the road shows began in 2005-06, bankers and investors bought the story. The Mulayam Singh government of that time also promised subsidy on capital investment. It triggered the fastest capacity expansion in UP’s industrial history. UP mills topped the mid-cap charts until 2008.

Then the hits became rarer. Today mills are burdened with losses, farmer dues, and unsold sugar. What changed? Mills blame the state government for announcing inflated cane prices that double up as vote catchers and Mayawati specifically for reneging on the investment subsidy. They also blame India’s trade policy, and competition from Maharashtra and Karnataka.

What they don’t tell you is that a retro UP law assures each sugar mill of captive raw material supply by giving it exclusive rights over all cane grown within a 15-km radius. Local livelihoods and land prices are thus permanently tied to the business acumen of the mill. In return, the mill can't refuse. a single stick of cane brought to its gate. In short, cane area reservation was India’s first formal experiment with contract farming.

Logically, it should have worked. Instead the shiny new factories, combined with this law, bred complacency and distrust. There were reportedly 40 FIRs against millers in last eight months alone for recovery of farmer dues.

When cane harvest is low, mills enjoy the benefit of assured raw material and high sugar prices. But it reduces capacity utilization, while farmers feel cheated of their share in profits. In years of good harvest, farmers dump all their cane at the mill doorstep and demand payment. Since mills can’t refuse, they lose money on every kilo of sugar and retaliate by threatening to shut down, like now.

Improved farm yields was the key to this deadlock. But cane area reservation took away the incentive from both sides. Compared to an average yield of 100 tonnes sugarcane/hectare in Tamil Nadu, an all-India average of 80 tonnes/hectare, and 70 tonnes in neighbouring Haryana, UP has averaged 55 tonnes/hectare. Cane juice recovery is equally dispiriting. This raises cost of production and makes UP sugar uncompetitive.?

Since yields are low and farmers don't trust mills, they compel the state government to announce a high cane price. But only half their harvest fetches this price. The rest is sold for instant cash to the 3,000 village gur kolhus surrounding each factory.

The state government can’t abandon farmers because industry has few success stories, despite injecting Rs 18,000 crore into the rural economy annually. Neither can government annoy the liquor industry which takes cheap molasses from sugar factories. Industry, farmers, and government are thus caught in a web of suspicion and ?half-truths.

Cut to the New Age music streaming from other states. In Madhya Pradesh, around 20 erstwhile gur units have built low-cost sugar factories whose size is commensurate with the cane available. Farmers have freedom to sell and accept the Fair and Remunerative Price announced by the Centre.

Mills pay a higher cane price for each successive month. So farmers have an incentive to stagger harvesting. In UP, the later you reach the factory, the less likely you are to get paid. There are no curbs on sale of molasses. The government has wisely stayed away. Large players like Olam are investing in yield improvements. Sugar production has touched 2 lakh tonnes, a five-fold jump in five years.

Karnataka and Maharashtra mills compete for cane and pay the FRP. Both have approved profit sharing policies based on the Rangarajan committee report. Maharashtra has even begun e-procurement for efficiently buying all the sugar supplied to ration shops. Last week it bought 14,000 tonnes through e-auction platform with 25 suppliers from four states and delivery in 37 districts. Competitiveness is the word everyone is riffing.

Can UP barons get their mojo back? Certainly. Mills are using bank credit, supplier credit from farmers and export subsidies that push up consumer prices to stay afloat. Instead they should push for a free sugarcane market in the state.

The smarter mills have already started improving cane yields - the first step to a new song. The remaining can't even fade into the sunset until they pay their dues. Public memory is not that short.

Iconic typography designer Paula Scher discusses her creative process, including the famous Citi logo. Interestingly, the idea came to her in seconds and that presented a problem for the client. They wanted to buy a process not an outcome. Scher’s process is very much one of combinatory creativity, whereby she combines existing things in new ways.

A lot of clients like to buy process. It’s like they think they are not getting their money’s worth because I solved it too fast.

[...]

How can it be that you talk to someone and it’s done in a second? But it IS done in a second — it’s done in a second and 34 years. It’s done in a second and every experience, and every movie, and every thing in my life that’s in my head.

This reminds me of an old story with many variations. Here is one version.

A giant ship engine failed. The ship’s owners tried one expert after another, but none of them could figure but how to fix the engine.

Then they brought in an old man who had been fixing ships since he was a young [boy]. He carried a large bag of tools with him, and when he arrived, he immediately went to work. He inspected the engine very carefully, top to bottom.

Two of the ship’s owners were there, watching this man, hoping he would know what to do. After looking things over, the old man reached into his bag and pulled out a small hammer. He gently tapped something. Instantly, the engine lurched into life. He carefully put his hammer away. The engine was fixed!

A week later, the owners received a bill from the old man for ten thousand dollars.

“What?!” the owners exclaimed. “He hardly did anything!” So they wrote the old man a note saying, “Please send us an itemized bill.”

The man sent a bill that read:
Tapping with a hammer………………….. $ 2.00
Knowing where to tap…………………….. $ 9,998.00

*Effort is important, but knowing where to make an effort makes all the difference!*

This mini interview prompted me to order a copy of Scher’s Make It Bigger, which looks at graphic design from the vantage point of business.

(image source)

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Brought to you by: CURIOSITY: A curiously unconventional ad agency that helps you stand out in today’s crowded world.

If some day, Vijay Mallya, Subrata Roy and Jignesh Shah find themselves facing each other across a dinner table, how will the conversation play out? Who all will they blame for their dramatic reversal of fortunes? A mindless government, vicious rivals, and vengeful politcians? “The tax on ATF was killing…I was just an inch away from the British Airways deal…,” Mallya may crib, gently swishing the wine. Roy, taking a long puff on a Rothmans, could recall the day he said that no foreigner should be the Prime Minister of India. And Shah, a snatak vashi Jain and teetotaller, will possibly order a glass of jal jeera, before blurting out how a cabal of bureaucrats, competitors, and old money ganged up to ambush a Kandivli boy who dreamt big.

The flamboyant and pompous Mallya once justified a mountain of debt as the only way to do business; Roy, suffering from delusions of grandeur, pulled out one rabbit after another out of his hat, letting the world guess for decades how he did it; and Shah – a restless soul, and perhaps the most unfortunate and comparatively less guilty in the parade of India’s failed business barons – overlooked the speed limit signs as he raced to build the next Nasdaq.

There are atoms of truth in what they say at the imaginary chance meeting, but there is a common link that ties the three: all of them dealt with “other people’s money”. Unlike the formidable Danny DeVito in the ‘90s romantic comedy `Other People’s Money’, who even as an unethical businessman wins the day and almost gets the girl, the stories of our disgraced tycoons are lessons for every businessman. Two of them are in custody, while the other is trying to spin a legal cobweb to keep bankers at bay. Shah faces an army of vocal, hostile and rich city investors; Roy’s investors are faceless, almost invisible, but the man is pitted against an unforgiving judiciary; and Mallya – still free and lifestyle largely unchanged – may have to spend a good part of his remaining life waging court feuds.

What do you learn from all this?

• India is changing, even if some find the pace glacial. You can no longer get away with doing what you did in the good old ‘80s. Building fountains over garbage dumps has become a lot more difficult. The tips you once picked up from the lives of your flawed icons, are useless today. You can still manipulate the system, but it’s far more risky.

•  It can be frustrating. While scrutiny has increased, doing business is still not easy as red tapes are still aplenty. Indeed, this is a tricky era for business. 

• Even if you are on the right side of the political divide, damages inflicted by activists, 24/7 news channels, RTI and twitter will kill you. If cops can plan to question a former PM and name the supremo of a 100-year old business house in the FIR, no one is untouchable.

• Our heroes are changing. The young men and women you spot in the B-school and IIT cafeterias are possibly chatting about Sundar Pichai, Rakesh Kapoor, Satya Nadella, and occasionally, Sachin Bansal; chances are that even Vikram Pandit and Anshu Jain may not figure in the conversation beyond a point. Make no mistake. You are dealing with an impatient lot. You will be lucky to attract their flitting attention, but don’t harbour any hopes of receiving their sympathy when you drop the ball.

• They don’t really care if you go behind bars.

Innovation is sweeping agricultural commodity markets and soon it will change the way Indian food, beverage and FMCG companies do business.

Most Indian companies watch the futures market from afar, merely using its prices to benchmark their tenders. Not enough processors also use it as insurance against unpredictable price changes. Now thanks to a new determination to make the market more business friendly and a receptive market regulator, more can dive in.

At the heart of the change lies a smarter way to handle the basic conundrum of a futures contract: how to ensure that prices remain legit without crippling the market.

Commodity exchanges work bit like a public auction, with two-way quotes, to discover the price of sugar, grains, pulses, edible oils and spices in the coming months.

Underneath is the requirement to deliver or pay. Every one holding a futures contract has an obligation to make or take physical delivery of the underlying product or pay the difference between the price at inception and the price when the contract expires or is closed out. The failure to give/take deliveries attracts penalties. This is what keeps the “auction” prices grounded in the demand-supply reality of the physical market. And allows businesses and farmers to take these prices seriously.

Yet, this system would collapse if everyone insisted on giving or taking delivery. It is exactly the same as your bank. In theory, all depositors have the right to withdraw money at short notice. In practice, if we all did that together, there would be a run on the bank. Similarly, if everyone were to demand/give delivery, futures would become an alternative spot market. It would lose its very economic purpose.

This is exactly what happened in India. Futures trading in agricultural commodities deliberately had compulsory delivery to quell unnecessary speculation. But the impact was opposite.

Most parties who trade in futures are in no position to either make or take delivery. They only want assurance that they can offset their contracts at non-manipulated prices. Since hedgers and speculators were required always to fulfil their obligations to make or take delivery, most stayed away, thus reducing liquidity. Volatility increased just before the maturity of contracts as speculators were in a hurry to square off to avoid physical delivery. The absence of speculators did not allow hedgers to transfer their risk adequately.

Hedgers themselves stayed away to avoid making/taking delivery. By definition, hedgers will never (or rarely) want or even be able to make or take delivery for operational reasons. Why should a beverage company be forced to take delivery of sugar on the exchange as well as buy in the physical market merely because it is long?

The same is true for a sugar mill using short positions to hedge its inventory. In theory, the mill can deliver stock against short positions. In practice delivering against futures contracts would leave the firm without the sugar needed for customers, and its regular business would be forced to shut down. Much of the hedged inventory may not even be in the right quality or location to satisfy delivery obligations.

Physical hedgers' unwillingness or inability to make/take delivery is what makes them so vulnerable to squeezes, particularly inventory hedgers with short positions. Since shorts always had to make preparations to fulfil their obligations, they gave up hedging as impractical.

Physical delivery was made worse by the complications of state-level octroi, sales tax and mandi charges. The market became thinner and riskier. In short, compulsory delivery, though well-intentioned, actually hampered Indian companies from using the futures market as a business tool.

Luckily, change is in the air. The market regulator, Forward Markets Commission, has understood that there can be no rise in participation unless the delivery mechanism is dovetailed to the business needs of hedgers – large and small. And companies now have a slew of new options available.

There is the international favourite – “seller’s option”, where delivery takes place only when the seller intends to give delivery. So in case the seller chooses to deliver, say soyabean, the buyer has no choice but to accept the beans. This mechanism has ensured that globally physical delivery is less than 3% of the total trade but the threat keeps prices anchored in the spot market.

Intention matching goes one step further. Delivery takes place only when both buyer and seller say yes. So if a crude palm oil importer wants to sell off his cargo to a Tamil Nadu refinery, the delivery will only happen if the refinery agrees. Else the contract will be cash settled.

Even companies willing to give or take delivery were deterred by the sheer logistical nightmare. To make it simpler and faster, the whole framework has been overhauled.

For instance, there is no more last-day stampede at the accredited warehouse to give delivery. Sellers can start giving deliveries 10 days before the contract ends.

To make it even more painless, companies now don’t even have to reach an exchange-accredited warehouse. They can send the goods straight from their own godown to the buyer. So a soya oil refinery in Indore, for instance, can directly send oil from its own tanks to the buyer, say, a snacks factory. No need to worry about spillage, loss in quality or dealing with third party warehouses. It doesn’t even need to be the refinery’s own tanks. It can deliver the oil from any tank it chooses as long as it meets the quality specifications. The savings in cost is a bonus.

Since such direct delivery is anyway the norm between companies and their suppliers, ultimately futures markets are converging not just with the spot market but also the usual ways of doing business in India.

Terry Eagleton once said “it is capitalism, not Marxism, that trades in futures”. He was right. Businesses in a free market need price discovery and insurance against risk. Now finally, they have the right opportunity to do both.

Retirement mathematics is a very complex one…and who knows that better than me!

I have refined my calculators a million times and sought help from Pattabiraman (of Freefincal fame)…regarding volatility. However instead of doing a PhD in mathematics, let us look at some short cuts….

1. The American belief is ‘you need to provide for 80% of the expenses at retirement….. ok if your expenses are say Rs. 55,000 when you are 50, the chances are that your expenses would be about Rs. 150,000 at the time of your retirement when you are 58 or 60. I do not agree with this calculation AT ALL….even if this is right, For most people as soon as they retire, their expenses INCREASE.

They start travelling – attending weddings, thread ceremonies, baby shower – with a vengeance! They should be asked ‘what do you wish to do’ – and the real nos. will fall in place…and that is LIKELY to be more, much more than the expenses at retirement.

2. A house in which you live + 1 Million US $….about Rs. 6 crores…now!!

3. the expenses at the time of retirement – annual expenses * 40….so if you are now aged about 50 years and your expenses are about Rs. 1L p.m, chances are your expenses at retirement would be about Rs. 1,75,000 (assuming that is!)* 40 = Rs. 7crores. …see what suits you…most calculators lead you to the 1 Million US $ figure…and if you do a detailed calculation….even more…so START TODAY, NOW!!

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So who profits?
The key question remains, of course, cui bono? Only the terminally brain dead believe shooting a passenger jet benefits the federalists in Eastern Ukraine, not to mention the Kremlin.

As for Kiev, they'd have the means, the motive and the window of opportunity to pull it off - especially after Kiev's militias have been effectively routed, and were in retreat, in the Donbass; and this after Kiev remained dead set on attacking and bombing the population of Eastern Ukraine even from above. No wonder the federalists had to defend themselves.

And then there's the suspicious timing. The MH17 tragedy happened two days after the BRICS announced an antidote to the IMF and the World Bank, bypassing the US dollar. And just as Israel "cautiously" advances its new invasion/slow motion ethnic cleansing of Gaza. Malaysia, by the way, is the seat of the Kuala Lumpur War Crimes Commission, which has found Israel guilty of crimes against humanity.

Washington, of course, does profit. What the Empire of Chaos gets in this case is a ceasefire (so the disorganized, battered Kiev militias may be resupplied); the branding of Eastern Ukrainians as de facto "terrorists" (as Kiev, Dick Cheney-style, always wanted); and unlimited mud thrown over Russia and Putin in particular until Kingdom Come. Not bad for a few minutes' work. As for NATO, that's Christmas in July.

A few months ago ago I had the opportunity to meet India's largest potato farmer. He is also a chemical engineer from IIT Delhi and is a technologist who has invested into tissue culture, food processing, cold storage, retail and every segment of supply chain that the Indian potato moves through. The potato that arrives to the retail vegetable markets of Delhi in the red net bag is largely from his 50,000 Metric Tonne cold storage that the family had invested in decades ago.

He is also the largest supplier of dehydrated potato flakes to major brands fast food brands, and the favorite Alu tiki and Alu chips and Alu bhuja that you have from Haldiram, Leher Pepsi or Bikaner any other are sourced from his farm produce . His brand of packaged ready to cook foods with Aloo mash and vegetable kabebs, is a household name today in the retail stores of north India.

"Only freeing the supply chain from restrictions and helping farmers to be food processors can solve the problem" he said " today there are too many restrictions, political and administrative controls to make low priced competitive markets. "

The soft spoken low profile entrepreneur would perhaps be the best person to advise on the current price rise of potatoes, onions and tomatoes POT and how to raise agricultural productivity to match consumption and reduce prices. Not the babus of the food and civil supplies department who have apparently no clue and have brought back the ESMA , a byproduct of the British days legislation and the prehistoric Essential Commodity Act 1955 that was followed by similar restrictive acts by many state governments. These laws framed during the license permit raj were put on the back burner during the Vajpayee rule and need to be repealed, simply because they are no match for the mobile enabled modern day price discovery oriented commodity trading that has influenced the fruit and vegetable market.

The ESMA has proved ineffective in the onion belt of Nashik because it is ultimately the state laws that govern agricultural movement across the state and the Congress NCP politicians who control the onion mandis were loath to play ball. However even as the government threatened to import potatoes and onions looking at the festival season demand ahead, the price of tomatoes started shooting up. Can the government really control the movement, pricing and distribution of these vegetables and keep the POT cool through India's long festival? For it is not only the POT but the prices of milk and fruits and proteins that are rising and the fault needs a techno-commercial market based solution not outdated control economics like the Essential Commodities Act.

The key questions here are

a) Why are the prices of vegetables so different from farm to shelf in the retail markets?

b) Can the government control prices of vegetables artificially over a longer span of time?

c) If the Government starts to import will the POT potatoes, onions and tomatoes be the new addition to the current account deficit?

d)  Can improved food processing reduce consumption and streamline wastage to bring in more forex?

The main cost variable that affects the price of vegetables from farm to shelf is the price of moving the goods through the distance. It is not only the price of diesel or petrol but other variables that affect the pricing. Between Sahibabad sabji mandi on the east and Azadpur sabji mandi in West Delhi lies a dozen of police stations where a truck moving across the city has to pay hafta or bribe money for plying trucks in the city. Likewise a LCV moving vegetables from Azadpur Mandi to GK in South Delhi has to pay its weekly hafta. In UP the situation is worse as vegetables move through smaller vehicles like Vikrams and autos across the state, which by some strange logic are given permission to ply only within a 16 kilometer periphery. A auto cannot ply from one end of Noida or to the other or to Ghaziabad without being challaned.

These are strange restrictive state laws that break up the range of cargo movers in India and increase the complexity of movement and the cost of the supply chain. At each segment the licensing authorities and police officers extort money whatever the state. All these are added to the mounting price of diesel that makes goods and vegetable transport within the city prohibitively expensive. A Nashik onion trader and his Delhi counterpart at Azadpur Mandi and the vegetable vendor including the the Thelawala at Delhi always sets a premium price for the product, not only because the people can pay more but because the expenses including bribe money in Delhi for transportation is high. "Saron ke paas moti Kamai hai Dilli mein, to ham kyon chode " says aSardarji selling sabji in a posh south Delhi colony for last twenty years.

That apart there are lot of other reasons why price of vegetables are increasingly fluctuating. The mobile in the hand of the farmer has made the price discovery easy and he brings his produce to the market which offers a higher price that day. A tractor of Gobi from the Hapur Mandi would reach either the Ghazipur Mandi or the Sahibabad Mandi or be directly supplied to Noida depending on the price feedback received. Everybody is bearing the brunt of rising costs and using gadgets to bring in incremental earnings. With the paucity of rural hands at the farm, the cost of plantation and reaping the crop or the vegetable has gone up. The big farms are trying out mechanization at every level including the most difficult reaping of the rice crop. Wastage is still very high in Indian farms because most of the smaller farmers are still poor and their is no proper agricultural policy even after 66 years of independence.

The Modi Government has taken some steps to reduce taxes on food processing and packaging from 10% to 6% and allocate Rs 2000 crores for development of the industry but some overdue action is needed in easing the supply chain by working with the states to ease legislation and free the supply chain. The key is not to impose ESMA but to dismantle the control that FCI and APMC's wield over the farmers today. Politician control on the Mandi directly and through sarkari babus needs to be dismantled to free the supply chain. Restrictions must be lifted on transportation and logistics which is under state jurisdiction and the current multi permit system needs to be changed into a low cost single permit that is valid across the country.

If you pay taxes honestly about 50% of what you earn goes off in various taxes – income, service, securities transaction, etc.

Now take away another 28% in housing EMI, then another 7% in building maintenance etc.

It means your government, and your house have taken away 85% of what you earn.

So the 15% that you are left with has to go long enough for you to provide for your current needs, children’s needs, parents needs and your own retirement needs.

So every paisa that you spend (which is part of that 15%!) has to go towards your goal….so that extra samosa, or that soft drink, or that McDonalds trip which goes to the waist takes you that much further away from your goal.

So take care of every rupee (nay paisa) that you are spending. Much of that expenditure has nothing to do with your goals!

ONCE YOU DO THIS, THE BIG GOALS TAKE CARE OF THEMSELVES!

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Finance minister Arun Jaitley sought to lift the morale of his tax officers, saying the credibility of the department is its biggest asset. At a two day conference of senior tax officers today, Jaitley said the department will have to work with the highest standard of ethics to collect taxes to meet the government's spending needs. He is absolutely right. Tax collections have been budgeted to top Rs 7.36 lakh crore this fiscal, and Jaitely exuded confidence that collections could even surpass the target. A lot will depend on how the economy grows, but nonetheless taxmen will face the heat.

Lawyer turned politician Jaitley recognizes their pressures. “The job of the officers of the income tax department is very difficult in the sense that on the one hand they have to achieve the tax collection targets and on the other hand to play the role of tax facilitator for the assesse. Officers are duty bound to work in a non-adversarial, non-intrusive, transparent and fair manner, yet they have to deal firmly with those trying to evade taxes due from them to the department”, he said.

Tax officers have been at the receiving end, more so after the former finance minister Pranab Mukherjee changed law to tax past off-shore deals of foreign entities trading in Indian assets. The retrospective change in the tax rule hurt investor sentiment. But investors panicked even more after the UPA said it would introduce the so-called the general anti avoidance rule to curb sharp tax practices. They feared taxmen will get arbitrary powers, and such powers can be prone to misuse. The NDA used the phrase “tax terrorism” to describe the tax policy regime of the UPA.

A realistic assessment of the current state of affairs came from fiscal expert, Parthasarathi Shome, in his 550 odd page report on reforming India’s tax administration. Ironically, it was commissioned by the UPA. Shome concluded the country’s tax administration was functioning in a vaccum and had lost a sense of purpose. “It’s obsession to protect revenue without accountability for the quality of tax demands made is believed to have severely impacted investor sentiment.

Overall, the Indian tax administration is at its nadir, said Shome, pitching for fundamental reform to revive investment. Many are worth implementing.

A key reform is to separate the role of policy making and administration. Policy making in the US, for example, is done by the Treasury, while the Internal Revenue Service administers the law. So, the US tax administrator’s role is to apply the law as it stands, rather than make tax policy. India does not have a clear separation of the two roles. Tax administrators also dabble in policy making. That must change for tax rows to end.

India needs clear and simple tax rules, and lower tax rates. Jaitley should nudge states to adopt goods and services tax, that will create audit trails across the income and production chain. Meeting revenue targets not be a hassle then for India’s tax officers.

How and why does a person buy an asset?

Well he sees the cost of the funds being laid out for the investing, considers the risk, then considers the cash INFLOW that is likely to come from the asset. If the NPV > 0, or in other words IRR is attractive enough, he buys the asset. Our class on investments said this is the HOW of investing.

The WHY of investing is of course, the same – to get cash flow/ appreciation much higher than the money laid out to get the asset.

Sadly this is NOT TRUE FOR MOST OF THE INVESTMENT MADE. And we have amazing rationalisations available for why this is not so.

So when a boy from a small town goes to Mumbai / Delhi for a job, his small town friends, and family are STUNNED at the CTC at which he has joined. He proudly tells his mother ‘I have a CTC of Rs. 9 Lakhs’. For most of the people this is far, far beyond comprehension. Even his parents who are working as a school teacher or a government clerk this figure is stunning. So they think he gets Rs. 9L / 12 = Rs. 75,000 per month.

So they start thinking that he has a huge surplus on a MONTHLY basis and start seeing what they can do. As they have no knowledge of ANY financial product, they turn to land. Do they know IRR? No.

However they ‘KNOW SURELY’ that land prices ONLY GO UP at a rate faster than INFLATION. Their basis for knowing this? You got to be joking. They know it, that is all.

So they go and see some land for Rs. 3 Lakhs (that is just 4 months salary is it not?). So the first investment is made – sometimes with a bank loan, most times by paying in installments. Hope fully that land will double in 10 years. That is fantastic..because the story is ‘I bought it long back..now it has doubled’ Wow. IRR? 7% if it doubles in 10 years. It just might.

What about the Engineer who has got Rs. 10 lakhs from her dad’s Provident fund to buy a house in one of Mumbai’s extended suburbs? Well in 2007 she was looking around for a flat with a Rs. 10L down payment and a Rs. 25L Hdfc loan. Excellent, a small delay by the builder she got delivery in 2014 instead of 2012. Not too bad. Of course has been paying the EMI promptly. She said it is now DOUBLED. Her IRR is LESS THAN THE INTEREST COST THAT SHE PAID Hdfc.

But Subra Sir I am planning to give it ON RENT…She is looking for a tenant – expected rent Rs. 7k per month (quoted price). Assuming she gets a tenant for Rs. 6500 (society charges Rs. 2500 + Rs. 500 for renting it out) she will get NET rent of Rs. 3500*12 = Rs. 42,000 per annum. On the so called market price of Rs. 70,00,000 she is getting a partly 0.6% per annum.

Hey Subra you are playing with words. India is NOT A RENTAL YIELD market at all. It is an appreciation story. Sure.

If rents do not increase, but the price keeps increasing, in Economics that is called a BUBBLE. Think about it.

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Visits by Indian ministers to the US or the UK tend to be very boring affairs. Long speeches over lunch or dinner in glitzy New York or London hotels in the presence of numerous foreign investors extolling the virtues of investing in India or the wonders of the Indian economy tend to be as exciting as watching paint dry.

So it was difficult to suppress a yawn when one heard that finance minister Arun Jaitley would be in America on September 24/25 to attend an India Investment conference organised by the Institutional Investor Forum. One more talkfest, with the only difference being this would the BJP government’s first in the USA in 10 long years. Not that it is not important, but Indian ministers (irrespective of party affiliation) have this depressing tendency to launch into monologues that reveal very little and put off the audience, especially the Wall Street wolf packs.

So what should Mr Jaitley tell global investors in the conference? In the speech to Parliament on July 10, Jaitley outlined the government’s economic agenda which included promises to reform subsidies, increase FDI in insurance and defence and improve the investment outlook. Should he reiterate the same points in NYC? Or should he use the occasion to talk about more stirring things? A former colleague mentioned how, more than 10 years ago, then finance minister Mr Jaswant Singh, was putting an audience to sleep in the US by talking about India’s 5,000 years of glorious civilisation.

Mr Jaitley’s businesslike approach would not accommodate such frivolities but there is one thing the finance minister can and should talk about should he decide to make the trip.  And that is about his government’s determination to cut red tape, end corruption, and slash procedural hassles that doom many a business enterprise. Mr Jaitley should tell investors that his government’s promise of making things easy for businesses to set up factories, buy land and launch new projects is not an empty one. He should remind investors that India is not just the land of big business and conglomerates but that thousands and millions of small businessmen who feel completely helpless in the face of byzantine rules and procedures at various government levels.  He should reveal his government’s plans to cut the red-tape and talk about a how a beginning has been made by making environmental clearances and forest clearances online.

Reforms in India have always been made out to be about big things, increasing or allowing FDI or private participation in various sectors. Stellar work has happened since 1991 to increase the choice available to investors and provide competition to moribund companies. Innovation has grown in leaps and bounds, but at the same time the encroachment of government in various levels of corporate or entrepreneurial activity has become rampant. A businessman has nightmares when he contemplates buying land in India; he wants to shift his plant to another country when he hears about the labyrinthine bureaucracy that he has to deal with at state level and about opposition from environmental groups.

Mr Jaitley should talk about how his government is going to remove these hurdles so that it becomes easier to do business in India. Allowing 100% FDI in defence is relatively easy but it does not look like major reform when Lockheed Martin spends three years entangled in government bureaucracy and unable to buy land. Mr Jaitley should invite investors to India not just because of its potential but also because it is easy to set up a business and operate in the country.

Indian culture does not need a brand ambassador but in the hands of Narendra Modi and Arun Jaitley, it can certainly be made to look more exciting and happening. And that should be Mr Jaitley’s purpose and message.

The Cuban Missile Crisis in 1963 was supposed to have brought the world to the brink of Armageddon. With Soviet ships steaming towards Cuba and American warships barring their way, the superpowers came very close to a shooting war than any other time during the Cold War. This was widely attributed to some deft diplomacy, wise statesmanship from John F Kennedy, who didn’t react when provoked and quiet backroom maneuvering between Kennedy and Premier Khrushchev.

More than 60 years later, the superpowers (it would be a stretch to call Russia that now, but let us continue) are once again on the brink of a major crisis. The naval armadas haven’t been launched and we are not yet into Defcon 3, but the crisis is probably the sharpest break yet in US-Russia relations since a Boris Yeltsin-inspired mass hysteria swept the communists out of power and the Soviet Union into the dustbin of history in 1991.

On one side is Vladimir Putin, who thinks it is his job to recreate as much as possible the 1980s map when the Soviet Union held sway and was equal to the United States in military prowess and economic strength. On the other is Barack Obama, who seems to have belatedly realised Putin’s game plan after initially treating him as a friend who has been roughly treated by the George W Bush administration. The West thinks Putin is a danger to democracy and views Russia’s pressure tactics on Ukraine and Georgia with distaste and alarm. For Putin, this is Russia’s Near Abroad and there is no way he is going to allow the West gain a foothold in any of the Slav republics that abut the Russian border.

I think the West is making its second big mistake with regard to Russia. The first was made by Obama, who glibly assumed that Russia’s breach with the West was due to Bush’s cowboy approach. The reset was a sign of professionals taking back control of American foreign policy from cowboy amateurs.The second mistake is being made now. The belligerence from the Obama administration to the Ukraine events is misplaced. Angry attacks against Russia, equating Putin with cold-blooded dictators of the past is not going to resolve the issue. Agreed, the Obama administration is not making these charges but it is not helping matters either by slapping sanctions, many of which are likely to be ineffective anyway. Sure, anger over the deaths of nearly 300 innocent people is justified and so will any international action to bring culprits to justice. But treating Russia as a villain is always counter-productive.

I think the West is also not trying to fully understand Russia’s main concerns here. When Kennedy moved against the Soviets, he did so secure in the knowledge and belief that he was acting on decades of presidential precedents when it came to foreign interference in North and South America. The Monroe Doctrine is not an empty statement of intent. Many US presidents since 1823 have viewed any attempt at violating its principles as an unfriendly and aggressive act.

The question now is this. Why can't Russia have an equivalent of a Monroe Doctrine of its own? Is it not unreasonable to expect Russia to back down and allow its arch-enemy unfettered access in the region it considers its own sphere of influence? The last thing Russia wants is NATO troops on its border with Ukraine, which is what will happen if American influence in that part of the world is left unchecked.

This is where the Kennedy example comes in. The crisis was not just provoked by Russian intransigence and aggression but also by American expansion of its missile programme deep into south and south-eastern Europe. American Jupiter IRBMs were introduced into Italy and Turkey in 1961 and could have incensed the Soviets who would have then been forced to escalate the crisis. The 35th president faced a much graver threat than Obama but handled it calmly, ensuring the victory of US objectives. Even when a U2 spy plane was shot down over Cuban waters in one of the dramatic episodes of the crisis, Kennedy did not get provoked. On October 28, 1962, the crisis ended with the Soviets agreeing to withdraw their bombers and missiles from Cuba. But the public declaration remained quiet on American actions. In fact, Kennedy had agreed to withdraw his missiles from Turkey and Italy but refused to publicise it.

Obama should take a leaf out of Kennedy’s book. He should move immediately to accommodate Russian concerns on Ukraine, Belorussia. He should tell Putin that Washington and the west have no intention of interfering in or influencing policy actions of Ukraine and Belorussia or other Slavic states which have deep cultural and historical linkages with Russia. NATO will not expand eastward and come close to the Russian border. In return, Obama should extract from Putin promise of good Russian behaviour in south and eastern Europe and till far north, encompassing all the Baltic republics. To ensure good behaviour, Obama can promise favourable trade terms and readmission into the G8. Europe’s politicians should also play their part in relieving Russian concerns. .

Historian AJP Taylor notes in his book the Struggle for Mastery in Europe, 1848-1918 that British politicians after the Crimean war looked upon Russia as a semi-Asiatic state with not little or no clout on the continent. There is little doubt that the world and Europe has changed much since then. It is time for Obama to be a Kennedy.

The drama over Narendra Modi’s return flight path has naturally overshadowed events that happened in Brazil. One assumes Mr Putin was also flying back home around then, though one doesn’t know what route he took.

The eventual geo-political impact of the crash on Vladimir Putin’s position is impossible to gauge – western commentators are crowing about putting him on the back foot, and the EU joining up with the US in hardening sanctions against Moscow. Experience suggests that as soon as the horror of the tragedy fades, domestic trade and economic lobbies will again begin to raise objections to further isolating Russia. Even the US second round of sanctions has been carefully structured to take care of domestic business interests. Nobody even talks about Crimea any more.

Against this backdrop, the BRIC summit, with its decision to set up what will effectively be an emerging markets development bank, becomes even more crucial. The global reaction to the setting up of a BRIC development bank has been, well, interesting. It clearly shows up what in the old days would be called the north-south divide.

Most emerging market opinion, in Africa, in Russia, in the Middle East and China, hail the move as critically shifting the poles of financial power and overthrowing the “repressive” regime of the US-dominated World Bank and IMF. Most developed country opinion is divided between how divided the BRICS actually are, and about stressing about China’s rising global power, and how its global ambitions might blow the project out of the water before it’s even afloat.

So what actually will it be? The beginning of the end of western control over global financial systems, or an idea that will collapse as its members start to fight amongst themselves? I’m biased, of course. Like the Chinese ambassador to India, and Raghuram Rajan, I believe that developed countries still owe a debt to emerging nations for the aftermath of the 2008 financial crisis, which they’ve refused to pay.

I can still be objective though. Years of living on the east-west, north-south divide has taught me to look at situations from all sides. The hole in the western media argument is simply this – nothing, other than an accidental bundling by Jim O’Neill, binds the BRICS. Except their antipathy to institutions like the IMF and World Bank, and simmering discontent for being treated like second-class citizens at global forums.

Mr Putin, for one, is always known to go his own way. Yet he’s cooperating on this project. With a common enemy, you don’t need to be friends. So yes, despite all the clunky structure, I think the BRICS bank will take shape.

How stable will it be? That’s the zillion dollar question. About as stable as the current G7 (now they’ve kicked out Russia) alignment and US-EU cooperation over Russian sanctions. Of course, it’s not going to be at stable, it will take decades before Shanghai, or Mumbai, or Johannesburg can compete with a New York or London as financial centres controlling the flow of global capital. It’s just a sign, and an important one, that the BRIC countries agreed to a common project at their second summit.

There’s a sense of urgency here, unlike what we’ve seen in innumerable G7, G8, NATO and EU summits. The one curious thing that nobody has yet commented on – this spells the end of G20, which was born with a bang in London after the 2008 financial crisis.

Obviously, if emerging nations are going to forge their own way in the world, never mind who they ally with, they’re not about to cooperate with the Merkel crowd any longer. Hallelujah.

The assets that are easy to understand are those in which you know how much returns you are getting. So you keep a fixed deposit in a bank, the bank tells you that the FD is for 5 years and you will get 9.25% as return.

Ditto for PPF, Kvp, nsc…

However when it comes to Real Estate or Equities, the returns are not so simple to calculate. Recently met a middle aged couple who were very proud / happy with their RE investment in a distant Mumbai Suburb called Kharghar. I AM NOT COMMENTING about the quality of choice of location or investment decision, this is just an explanation of innumeracy.

So I asked them how much are the returns that they had got in that investment. The wife looked towards the husband and he said – ‘clearly about 20% p.a.’. I said during the period 2007 to 2014 I do not think that the return was 20% p.a., but let us take a look.

He had bought the house in 2007 for Rs. 35 lakhs – out of which about Rs. 15 lakhs was borrowed (and he is still paying the EMI, of course). He had paid the builder almost all the money and he got it registered in his last week.

The Math is as follows:

He had paid about 35,60,000 in 2007 to the builder and he was paying an EMI of Rs. 15000 to the lender. He paid about 3.5L in 2014 to get it registered, and now the flat is available for occupation. The RE broker has told him that at best he can expect Rs. 7k as rent (this to me is a stunningly low rent yield on current market prices estimated to be between Rs. 65L and Rs. 70L).

So how much is the return, once more Mr. S? Well your mind tells you it is 20%, but if your money has LESS THAN DOUBLED in 7 years – it is a yield of about 10%p.a.

This at a time when he has been paying EMI on a loan which is currently costing him about 11% p.a.

Rebuttals please?

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Life is not easy for a young married couple if they have no clue about each other’s financial personalities.

Many of the girls have a reasonable inkling of the CTC of the guy – say Rs. 10L and then they look at their own ctc of Rs. 8L and feel – ha that is fine. However the take home, and ‘keep with themselves’ salary is a big black box…so well I get a story read on:

How do you react to the following?

Key: H is Husband, W is Wife, F-i-L and M-i-L : Father and Mother in law.

First before I tell you the incidents put yourself in the following positions and reply from all the angles:

1. Marriage over, honeymoon over, slowly girl (she has a job with a Cost to Company Rs. 14L) tells the boy ‘I have a Personal Loan of Rs. 7L taken to pay off my dad’s GAMBLING losses’. Boy is shocked, but can do nothing now, right?

2. H and W go for an EXPENSIVE honeymoon (real expensive 6 months CTC for the 2 of them!!), and when the bill comes at the end of the month, EXPECTS THE GIRL to pick up the tab.

3. G works in compliance in a bank, and H constantly uses his company’s credit card ARGUING that he will pay before due date. While giving the credit card, the company has GIVEN A LETTER saying ‘this card has to be used only for the company’s expenses’.

4. H takes a personal loan for a ‘friend’ who is now refusing to pay back. He is paying the EMI in the case of a bank loan and the friend is absconding. Amount is Rs. 200,000.

5. H has taken a lot of bank loans, W refuses to bail him out. He is now blacklisted, so borrows from a shark. Interest rate? 3% per month, monthly compounding. W feels rotten because her money is in a bank earning 8.4% p.a. W has no clue what to do, but knows she should not bail him out – the past experience was not so good.

6. H is a joker tells everybody ‘My salary is Rs. 9 lakhs’ – actually it is the ctc and his take home pay is Rs. 29,500 per month. His siblings and parents think it is Rs. 75,000 per month.

7. W understands delayed consumption and knows wealth is in paper and demat statement. H comes from a family which judges everybody on how many houses, how well furnished, how many cars….huge conflict even while talking

the list goes on and on….AND THERE IS NOTHING that I can do about it.

Enjoy.

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Replying to the Lok Sabha on July 18, 2014, Finance Minister, Arun Jaitley, justified the sudden imposition of Minimum Alternate Tax (MAT) on units operating in Special Economic Zones (SEZs) and on SEZ developers.

But first, Zenobia Aunty would like to narrate this fairy tale. Once upon a time, not so very long ago, businessmen operating out of SEZ units were a happy lot. After all, if they set up operations before March 31, 2014, they were entitled to a graded tax holiday for 15 years (100% of eligible profits would be tax exempt for the first five years of operations, 50% would be tax exempt for the next five and the balance for the next five years – if certain reinvestment norms were met).

Mind you, buying an operating unit within an SEZ zone was expensive, as was creating a SEZ located campus. The saving in the tax cost however led many to jump on the SEZ gravy train. These tax savings were also factored in for chalking out the future business strategies.

So, Company ABC went ahead and explored markets in countries it had not set foot on before, it also hired as many as a thousand new employees. Company XYZ chalked out extensive R&D plans, its new product line would help it win huge export orders.

Yet, fairy tales set in tax-land, do not go quite as planned. One fine day, on enactment of the budget proposals of 2011, both units operating in SEZs and also SEZ developers were brought within the ambit of Minimum Alternate Tax (MAT). The only saving grace, it was not with retrospective effect but applied from the financial year 2011-12 onwards. The current rate of MAT is 20.96% and it is computed against book profits.

Understandably many companies were up in arms. A bunch of Bangalore based companies lost the battle before the Karnataka High Court, which ruled: It is a settled position of law that every tax exemption should have a sunset clause. As the MAT exemption for SEZs did not have a sunset clause, the flaw was removed by an amendment made by the Finance Act, 2011. Second, these exemptions created an inequality between SEZ companies and other companies, which was removed by the amendment. 

In short, the High Court held that the legislature can never be precluded from exercising its legislative power by resorting to the Doctrine of Promissory Estoppel.

Zenobia Aunty smirks: “The government sure doesn’t know how to be a true business partner.”

One always heard about how the Commerce Ministry is battling for the rights of the SEZ developers and units in SEZ. For instance, when the Budget 2014, did not contain the much desired abolition of MAT or at least MAT for SEZs, we once again heard that the Commerce Ministry will make a fresh pitch and tax sops would be part of an entire SEZ package.

“Ho-Hum,”  Zenobia Aunty had said on hearing this bit of news. She was so right to make these dismissive sounds.

Now in a written reply to the Lok Sabha, our  Finance Minister, Arun Jaitley has said:

“Minimum Alternate Tax (MAT) has been levied on developers of Special Economic Zones (SEZs) and units operating in SEZs with effect from April, 1, 2012 (Assessment year starting April 1, 2012) vide Finance Act, 2011. Representations have been received from the business community and others regarding restoration of exemption from payment of MAT to SEZ units and developers.”

“The Ministry of Commerce amended the Income-tax Act through Special Economic Zones Act, 2005. Sub-section (6) as inserted by SEZ Act, 2005 and section 115JB of the Income-tax Act provided that MAT shall not apply to the income accruing or arising on or after 01.04.2005 from any business carried on or services rendered by an entrepreneur or a developer, in a unit or a Special Economic Zone. There was no sunset date for this exemption. MAT is levied on the principle that everyone participating in the economy must contribute to the exchequer.”

“It was noticed that the companies were making huge profits and distributing dividend to their shareholders but were not paying any income tax due to the large number of exemptions/deductions available under the Income-tax Act. Accordingly, MAT was levied on all companies to address inequity in taxation of corporate taxpayers.”

“The removal of MAT from SEZ developers and units had no justification vis-à-vis other sectors of economy which were liable to pay MAT. Further, MAT paid by the company can be carried forward for set-off against regular tax payable during the subsequent year(s), upto ten assessment years when the regular tax payable under the normal provisions of the Income-tax Act is more than the computation provided under MAT.”

Zenobia Aunty asked around – is the carry forward and set-off period adequate? It seemed the period of ten assessment years would not suffice for all.

Has the Finance Minister sounded the death knell for any hope that SEZs had? One hopes not, but it does appear so.

“The focus of any tax administration is to broaden the base. Our policy thrust is to adopt non-intrusive methods to achieve this objective.” This is from paragraph 210 of the budget speech, from the section on direct taxes. Before that, there are paragraphs 10 to 15. Read through those paragraphs and you will find retrospective legislation, advance ruling for resident tax-payers (provided income tax liability is above a threshold), transfer pricing. All that’s fine, but who is this for? Direct taxes can be personal or corporate. For personal income taxes, the number of assessees is 34 million. If one excludes rural income (which also means non-agricultural income of farmers) and accepts that 50% of urban households will be below the threshold, 34 million isn’t a low figure. At best it can be another 2 million more. It’s a different matter that because of tax exemptions, there is tax avoidance, often confused with tax evasion. In 2014-15 budget, nothing much can be done on tax exemptions, DTC requires discussion. What does it then mean to say the focus will be on broadening the base? You won’t be able to increase that 34 million number, more so because there have been revenue losses on direct taxes. So you will go after that same 34 million.

We go back to paragraph 4 of the budget speech. “Tax demand for more than Rs 4 lakh crore is under dispute and litigation before various Courts and Appellate authorities. This is one of the serious concerns of all taxpayers in the country.” Read that sentence again. It doesn’t say high-end taxpayers. It doesn’t say corporate taxpayers. And ask yourself the following question. On tax administration, what does the budget say on reducing compliance costs for all taxpayers, specifically with that personal income tax focus? “Hearing in all tax cases by personal presence should be avoided, and data can be sought through an e-system. The taxpayer can upload the data on the e-system. Personal hearing should be sought only in complex cases.” I will tell you in a minute where this is from. It is from “scrutiny”. My returns are often picked up for scrutiny and I have no quarrels with that. But the language makes me see red and often the letter for personal appearance turns up after the intimated date is over. My CA sees red because he wastes a day (he is used to the language). That sentence I have just quoted comes from a 550 page report on reforming tax administration, the 1st report submitted by the Tax Administration Reform Commission (TARC).

It was submitted to the Finance Minister (the present one) on 30th May 2014. 550 pages is too long to read, but there is a 40 page executive summary too. Leave aside the big things – exemptions, DTC, or the ones which involve significant changes. What was the problem in implementing the smaller changes (described in the TARC report as internal processes) on registration, tax payments, filing returns, scrutiny, TDS, refunds? Read the report yourself (it is on Finance Ministry’s website) and wonder whether 45 days was too little to implement any of these. I don’t buy that argument. A charitable view is that it wasn’t considered important. An uncharitable view is that 4.1% fiscal deficit/GDP and tax revenue growth of almost 20% won’t happen without tax terrorism. That’s the reason the sentence about broadening the base worries me. You can “broaden” it this year by postponing refunds till next year.

M.S. Dhoni is faced with a selection dilemma as he leads his team into the second Test at Lords against England. The five bowler strategy failed at Trent Bridge because the pitch did not assist Stuart Binny’s medium pace while Jadeja failed to produce wickets. Thankfully for India, Binny justified his existence by playing a match-saving knock in the second innings of the first Test. Now the question facing Dhoni and his think tank is whether they should dump the five bowler strategy or simply stick to it for another Test before taking a call. They could swap Jadeja for Ashwin and still have the five bowler strategy. Alternately, they could drop both Jadeja and Binny and bring in Ashwin and Rohit Sharma as some experts seem to advise. 

If you go back to the recent New Zealand series, India did something very similar. Rohit Sharma played in both Tests along with Jadeja while Ashwin warmed the benches because he was out of form and the team could accomodate only one spinner. In the prior series we had both Ashwin and Jadeja playing in the eleven. The point is that under Dhoni’s Test captaincy, India has been simply swapping these handful of players hoping for the best. Dhoni, who is widely admired in T20 and ODIs for his instinctive captaincy that often produces brilliant results, seems to be so reluctant to experiment in Tests. As a result, the team is floundering between complete defeats or insignificant victories. 

Dhoni could do himself and scores of cricket-crazy Indians around the globe a favor by bringing his innovation and instinctive decision making to the Test arena. India’s Achilles Heel in Tests has been its inability to take 20 wickets in a Test. Since Kumble retired, we don’t have a bowler who can wrap up the tail. Ishant Sharma is a perennial fixture in the team despite his poor test record. Simply swapping the same “blokes” around boils down to doing the same things and expecting different results. At a minimum, Dhoni must make sure he gives the newbie fast bowlers warming the benches a shot in Test cricket this series. They can’t do any worse than Ishant has over the years. 

Next, Dhoni could experiment with more all-rounders in the side. Binny’s performance in the first Test, Bhuvaneshwar Kumar’s batting in both innings and Ashwin’s impressive batting performances over the years is a sign that when it comes to Tests and given India’s desperate need to pick 20 wickets to win a Test, it is important to be unconventional and think outside the box, so to speak. Perhaps, Dhoni could consider opening the innings with say Ashwin or Rahane instead of the struggling Dhawan. This gives him, Jadeja and Ashwin as spinners, and should the conditions help seam bowling, Binny can have a bowl too. Nay sayers might counter this by saying that it’s important to have specialist batsmen in the Test. The fact is we have been playing with seven batsmen for a number of series under Dhoni, and the results are there in front of us.  

The best captains win by maximizing the resources available to them. Dhoni badly needs to drop his conservative Test hat and wear his T20, ODI thinking cap and lead a change in course. It’s time the think tank looked beyond the “same old, same old” and brought some fresh thinking to the table or else it is time for the selectors to rethinking the Test leadership.

Talking of fresh, new leadership, the people of India did precisely that in the recent elections when it summarily dumped the floundering UPA after two terms and handed the keys to the kingdom essentially to one man by giving the BJP a virtual free hand. The belief was this “one-man” army backed by a majority in parliament will rein in the changes and set the country on a new course. 

Unfortunately, the BJP government under the all powerful Modi appears to suffer from a conservative approach (which seems to plague Dhoni!) when what was needed was bold and fearless measures. There were several in the media who openly backed this shift away from the UPA to the hilt. Soon after the first budget, one Modi backer tweeted, “Bumped into a famous (pro-reform) economist at breakfast in Delhi. To say he was disappointed by the budget would be an understatement.”

“Has Modi forgotten that it was a promise of change that swept him to power from Gujarat to Delhi?” wrote another outright Modi bhakt. “Modi's Bad Reform Start - His new finance minister offers a timid agenda.” lamented the WSJ. 

For every P.J Kurien case in the UPA, there is Nihalchand case in the BJP. The black money probe does not seem likely to produce any results either. Anti-corruption measures seem to be completely forgotten. The promise of "ache din" is fading fast. There is already a long list of complaints, though it has just been little over a month for the new government. To top it off, the BJP is actively involved in cobbling together a majority in the Delhi assembly using the same old “politics as we know it” instead of seeking a fresh mandate.  

“Out of the box” thinking might be a clichéd term, but it seems to be the need of the hour for both our cricket and our politics. 

You can follow Pran's tweets at http://twitter.com/pkurup

Normally you think there is risk (income risk) only when you are in business, right?

What can be the risk if you are an employee? risk of losing your job (you can find another one), risk of your company closing down (another company will give you a job)….so really a person in service does not see much risk.

So your boss inflates expenses, inflates assets, shows excessive sundry debtors, pays less tax, falsifies tax and excise records – AND AS A CA you turn a blind eye. You tell yourself if I do not work for A, I will have to work for B. If A is dishonest, so will the others – B or otherwise! So you rationalize and turn a blind eye to the fraud transactions.

One day your boss decides to come clean (forget why that is a long story) and your boss is in Jail. He says he falsified books and you the CFO helped him. So the CFO is in jail. The Internal Audit head who is supposed to know all this, also goes to jail….

See the people who have been rotting in jail and sentenced to pay a fine:

Vadalamani Srinivas (CFO) has to pay Rs. 29.5 crores,

G Ramakrishna (VP Finance) has to pay Rs. 11.5 crores

Prabhakar Gupta (Internal Audit) has to pay Rs. 1.5 crores

This is so much like the Ratnakar – Valmiki story. For those who do not know that story:

There was a dacoit (Ratnakar) – and he met a Learned Man (Narada) and threatened to kill him. Narada asked him ‘What are you doing?’ So the dacoit said ‘I am a dacoit, I kill people, and loot them so that I can earn a living for my family’.

Narada told Ratnakar – by doing all this you are accumulating a lot of sins go and ask your family whether they will share the sins with you. So R went home and asked his family. His family said ‘It is your duty to provide, HOW YOU PROVIDE IS YOUR CONCERN’.

Ratnakar was shocked and he came running to Narada and narrated what happened. On that day Ratnakar was converted to Valmiki the Rishi.

Now you take today’s context. The learned, qualified man takes it upon himself to provide for the family. For doing this the man of the house takes on doing illegal things (everybody is doing it, if I do not do it here, I will have to do it elsewhere…etc), gets blood pressure (at age 30), diabetes (bad food habits is a big contributor), gets sleep deprived, travels at unearthly hours….

Who is going to share it with You?

Search me. And who is going to pay these fines? I have no clue, but if these guys earned ONLY a salary from Satyam, they are unlikely to have even a fraction of this amount. Also there is no incentive for Raju to pay these fines.

Employees, enjoy. The day you are caught, weep alone.

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There’s something many 35+ year old entrepreneurs seem to NOT get.

35+ and 35%.

We aren’t talking about any malfunction or a missing cool factor.

We aren’t talking about the battle against beer bellies.

Well, we are talking about.

Mobile.

Mobile First.

Mobile Only.

Mobile.

From a general observation we have had over the last few months, we believe that 35+ aged entrepreneurs don’t really get mobile. There, we said it.

And the reason is very simple. They think in terms of the desktop web laptop web!

- They are still used to laptops.

- Still used to *laptop web* and the audience which lives online.

- Still can’t put all eggs in mobile-only basket.

Take a look around – some of the startups we have profiled over the last few months are actually much better off in a mobile/app-only avataar. For instance, Tinder (which again is app-only) is disrupting dating. A similar launch in India is only about desktop web. You run into “We will soon be launching an Android and iOS version of our service” every now and then.

India’s internet story is largely a mobile one. We saw a primarily internet-only audience a couple of years ago, and since then the user base has been growing, and mobile data usage has just exploded – easily over half the number of internet users are mobile only, and many more access it way more often on the phone than over a desktop or laptop.

The Phone is Everything. To Everyone. Everywhere

Be it task management, sales, CRM, ecommerce, music, information, entertainment, banking, and obviously communication – all of it is consumed on phones. Despite the challenges of payments on the mobile, e-commerce has grown rapidly on the mobile phone (thanks to C.O.D.?)

When Idea made that ad about the mobile representing an individual and everything in their life, they were closer to the truth than they probably realized. WhatsApp did, and that’s what made it so valuable to Facebook.

The mobile phone is also truly ubiquitous. Everyone, across geographies, languages and economic lines has one, and more and more are finding a reason to have a data connection live on their phone.

“Responsive” doesn’t cut it

It’s not merely about being available on the phone. It’s about thinking mobile-first. For starters – in terms of user behaviour on the device – the desktop or even the laptop was never this personal a tool for most individuals, and you never had the level of attention that a phone commands from practically all users.

Even in terms of functionality and integrating with the user’s life the mobile affords you a lot more functionality that gets you involved a lot more deeply – in what they can do, when they can, and who with. The mobile, in fact, is a trigger for decisions that the desktop never could become.

That one change in itself is extremely important to recognize when you create a service or tool for the mobile first audience.

Think whether you need to build for the desktop at all!

Yes – for many a service and many an audience, you can get away with a totally mobile focused approach to product or service design and UX. Think whether you’re better off as an app that the user will need to “invest” into to download – the decision is a barrier given the couple of steps it takes, and the premium users place on both storage as well as real estate on their screens – or as a lightweight mobile aware site.

There are numerous instances of pure play mobile focused services having worked where equivalent desktop versions never found any traction – Newshunt comes to mind as a great example vis-a-vis earlier desktop based local language news services.

It’s a tough transition to make. And to some of us who grew up with the early days of the internet, especially in India, it does not come naturally at all to think mobile first. But it’s where the users already are, and the future of digital services is certainly headed.

Train yourself to think right on this. It’s not an option any more.

[With Inputs from Ashish Sinha. Image credit : shutterstock]

» If you are somebody who falls under this definition, definitely make it to bigMobilityConf.

The post These 35+ Aged Entrepreneurs Don’t Get this! appeared first on NextBigWhat.

In Fortaleza, Brazil, Prime Minister Narendra Modi met his peers Vladimir Putin, Xi Jinping, Dilma Roussef and Jacob Zuma, and everybody decided that it would be a good idea to set up a Brics bank, to offset the global power of the World Bank and the IMF. Financing and other details have been cleared up, the bank will be based in Shanghai and headed by an Indian for the next five years.

India's only worry is that China's gigantic foreign exchange reserves, its large population and precise economic targeting could eventually turn this into a Beijing-powered financial institution, though China is not scheduled to head it for another 20 years. But beyond the handshakes and smiles, there are other things that India needs to think about.

In late May, Russia and China signed what could be the deal of the century. After haggling for 15 years, eight of these in serious negotiations, China agreed to buy gas from Russia for 30 years at an estimated total cost $400 billion. That is a staggering number.

No Price for Guessing

China will only invest in building pipes on its own soil, Russia will build the infrastructure to pump out gas and take it to China's border. The pipeline will run from Irkutsk to Harbin, and all the way down to Beijing.

This deal is only about Gazprom, Russia's energy giant supplying gas to China through one pipeline, called the eastern line. There are talks of another pipeline, called the western line, also being opened up. If that is done, the volumes will double.

What will this gas cost users in China? Frankly, nobody knows, because pricing has not been announced. That has not deterred analysts in Europe and America from guessing: estimates range between $2.5 and $3 per million cu m, the unit used in India. But why speculate?

More Gas for the Buck

The only conclusion that everyone agrees on is this: this deal will knock down the gas prices that Japan, a perennial importer of energy, pays for buying liquefied natural gas (LNG) by several notches. That will be good news for India, which is also a large importer of energy.

The deal seems like a simple commercial transaction: after all, China needs lots of cheap energy to power its growth and where else should it look at, other than resource-rich Russia? The truth is more complex. Russia's eastern flank is rich in every natural resource, ranging from timber to minerals and energy.

But there are too few people to exploit this, and not many are willing to brave the extreme cold and tough geological conditions that prevail in the region. Compared to India's 380 people per sq km or China's 142, Russia has a meagre eight people living in the same area. And eastern Russia is even more sparsely populated than the rest of the country.

The financial risks of a project like this, as any sensible banker will tell you, are also immense. Only governments can take such risks and China and Russia have decided that this is a deal worth doing. Why?

Among all the people Modi met in Brazil, nobody is as reviled in the West as Putin. Ever since Russia annexed Crimea, effectively cutting Ukraine into two nations, America has been unrelenting in its criticism. Europe, which needs Russia's resources, especially heating gas to survive, has been content to carp and then turn a blind eye.

So, it is natural for Russia to go looking for allies elsewhere. And China is a great fit: it is teeming with people and its companies are flush with cash. Already, Chinese companies that deal in timber, metals and other natural resources cross the Amur river in China's northeast to source material and do business in southeastern Russia.

Partners are Forever

Moscow sometimes makes things tough for them, by closing border check posts or making the paperwork tiresome, or by insisting that Chinese companies hire locals rather than importing workers. The Chinese retort that Russian workers are lazy or drunk, or both. Nobody said that it's a perfect relationship, but it seems to be working reasonably well.

Over the last 15 years or so, India and Russia have been talking about greater cooperation in the energy sector. Apart from a few investments by ONGC's overseas arm in eastern Russia, little has come of these talks. Apart from finances, sceptics point to geography. Between China and Russia, there are no giant obstacles. Between India and China, there are the Himalayas, to thwart pipelines and movement.

But in May, Russia and China, at loggerheads since the days of the Cold War, showed that nothing is impossible. Their deal left sceptics scratching their heads, energy pundits in a state of shock and Western diplomats trying to make sense of a world order where these two giant countries begin to do business and cooperate in earnest.

Most Indians missed this deal, and its real import. That is unsurprising, because it took place just after the Lok Sabha results were announced. Now that a new government is in place, it's time for India to think out of the box and see how it, too, can benefit from this Russia-China love-fest.