Sucheta Dalal :Speed breaker (26 January 2003)
Sucheta Dalal

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Speed breaker (26 January 2003)  

The Finance Minister proposes but the Reserve Bank disposes. Although RBI and Sebi officials dutifully trooped to Delhi for the launch of retail gilt trading by the Finance Minister, true to its form, the central bank immediately managed to erect a speed breaker. The central bank’s circular to all banks asking them to obtain board approval before trading gilts on stock exchanges has delayed bank participation for at least a month. Since banks are the biggest gilt traders, the requirement has put a damper on the growth of retail trading. Bankers who are chafing at the RBI’s attitude say that its reluctance to permit a proper interface between the retail and wholesale markets is because it would involve closer coordination and cooperation with the capital market regulator.

Who is cell-ebrating?

The vast majority of telephone users will now have to prepare for another increase in their telephone bills. They will have to keep monthly phone bill within the rental limit and their STD facility locked up.

Hectic lobbying by the cellular industry cartel and flabby public sector monoliths (which Telecom Minister Pramod Mahajan has publicly sworn to protect) has worked with the TRAI and has hiked basic call rates.

An industry source says that with intense competition in the premium and long distance segments, only basic call rates offers any flexibility for a hike. But why should average consumers take the hit and keep warring telecom companies in the black? Because of the long standing myth that local call rates are subsidised by high long distance charges. However, telecom advocacy groups have repeatedly challenged the claim that local calls are subsidised—especially when better telecom equipment and technology is available at lower prices.

But companies do not part with cost data and in the five years of its existence, the TRAI has neither built a databank of costs nor made them available to analysts. Instead, the regulator refused to allow Reliance Infocomm to offer lower tariffs and has now raised basic call charges. That is how the level playing field works for ordinary consumers.

Confused signals

While Unit Trust of India-I is still to work out how to divest its stake in UTI Bank, the bank itself needs additional capital and needs it quick. Hence, instead of waiting to combine its capital raising efforts with UTI-I’s divestment, it is bringing in the Tatas and Commonwealth Development Corporation (CDC) as investors.

CDC, say sources, is also talking to UTI Bank about roping in a big investor, who may also bid for the 45 per cent holding of UTI-I and acquire management control. Wouldn’t the 10 per cent Tata holding only confuse the picture when UTI-I goes out to try and get the best price for its stake? UTI Bank’s top brass says no, but market sources say otherwise. In any case, the UTI Bank management says that the Tata investment has still to be cleared by its board. Maybe UTI-I should accelerate its divestment and ensure that it offsets the bailout provided by the exchequer as best as it can.

Out of gas?

The Mahanagar Gas is another company that is finding it hard to come to terms with changing market realities. This joint venture between the Gas Authority of India Ltd (GAIL) and British Gas of the UK is finding that there are fewer takers for its piped cooking gas in Mumbai, because consumers have to shell out a hefty Rs 5,000 to Rs 6,000 as installation charges, plus undergo the hassles of the messy breakage and refurbishment of their kitchens.

On the other hand, the same Bharat Petroleum and Hindustan Petroleum dealers who took anywhere between 15-20 days to replace gas cylinders have cut delivery time so much that they sometimes fulfil an order in 30 minutes flat. Also, new connections and second cylinders costing less than Rs 1,000 are available on the spot. Most importantly, the dealers have shed their legendary rudeness towards consumers.

Most consumers are so amazed at the transformation among their old gas companies that they are unwilling to shell out Rs 5,000 for the convenience of a piped gas. What a change from the days when people actually waited for Mahanagar Gas and tracked its gas pipelines. Mahanagar Gas, which is planning to raise Rs 100 to 150 crore through an IPO, had better find ways to cut installation costs if it wants to compete with the traditional providers of cooking gas.

-- Sucheta Dalal