Sucheta Dalal :Dealing with competition (6 April 2003)
Sucheta Dalal

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Dealing with competition (6 April 2003)  

Is Mahanagar Telephone Nigam Ltd (MTNL) cutting costs to deal with fierce competition in its markets? Reader Koushik Shekhar sends us these details.

In the FY1996, MTNL’s turnover was Rs 3,448 crore and its wage bill Rs 312 crore or nine per cent of turnover. In FY2002 turnover increased to Rs 6,143 crore but the wage bill more than doubled to Rs 1,400 crore—or 22.8 per cent of turnover. In the nine months ended December 2002, the wage bill as a percentage of turnover was further up to 24.7 per cent (Rs 1,094 crore of a turnover of Rs 4,424 crore). This means that instead of cutting costs, MTNL passes on all benefits of increased business to its employees.

And, if TRAI had its way, this entire inflated cost would be passed on to the consumer. Private operators would not complain either, because the high tariffs increase their profits and let them woo consumers through better and more value added services. Now look at another statistic. MTNL employs 30,000 people in Mumbai whose total population is 1.25 crore. So one out of every 400 Mumbaites is a MTNL employee, with no commensurate contribution to the city.

Staffing Sebi

Soon Sebi will hardly have any senior staff left, which is bound to deal a severe blow to its decision-making processes. Interestingly, the shortage begins right at the top. The Sebi board today comprises just four members representing the finance ministry, the RBI, the DCA and the chairman himself.

Innumerable board meetings have been postponed because Sebi cannot even get a quorum of three to make decisions. The Sebi Act now provides for three full time members on the board, but no appointments have materialised although a couple of names of retired executives from the IDBI and SBI are making the rounds.

Next, we come to executive directors. After two disastrous selections had to be cancelled (following our revelations about their background), the regulator is fighting shy of starting the process all over again. In the meanwhile, Dharmista Raval, who handles Sebi’s law portfolio resigned in February and will relinquish office in early May.

Curiously, no effort has been made to find a replacement for this key post. We predict that Sebi will deal with the dangerous shortage of senior executives by simply resorting to the deputation system with a vengeance to avoid new selections.

Monarch or Manager

Sec chairman William Donaldson, who took home $18.7 million as chairman of health insurance firm, Aetna Inc three years ago, has now attacked executive salaries. In a recent speech, he worried about the steady increase ‘in power and influence’ of corporate CEOs and said that ‘in some cases, the CEO has become more of a monarch than a manager’.

With corporate scandals having exacerbated the $7 trillion collapse in the aggregate market value of American corporations, Donaldson felt that investor anger was aggravated by ‘the perception, and unfortunately, the reality that those at the top have not shared their losses’ and ‘continued to enjoy massive salaries, bonuses and perks unrelated to performance’. Recent compensation cutbacks, he said, were ‘rather underwhelming’. In India, corporate monarchy is not even questioned. So when industrialists leading loss making companies charter flights and zip off to watch various world sporting events along with friends, or throw lavishly wasteful parties, they are feted in the society sections of the media while disgusted investors simply keep away from the capital market.

Skybus ahead

The war with Iraq has suspended Konkan Railway Corporation’s plans to build railway projects worth over Rs 10,000 crore but CMD B.Rajaram’s dream project is finally beginning to take shape at Goa.

A prototype of the Skybus built by Bharat Earth Movers Ltd (BEML) in collaboration with Konkan Railway will be unveiled in Goa this month. Although it will initially be deployed for the Goan Metro project, the light-weight coach sets the corporation on the path of setting up India’s first Skybus system providing inexpensive and air-conditioned mass transport without the hassle of land acquisition.

The irony is that despite Konkan Railway’s proven excellence in design and implementation and the patents it holds for the Skybus project, not to mention an approving nod from the President of India, the Skybus has remained in limbo because nobody would give the concept a chance.

-- Sucheta Dalal