Slanted Journalism !
The business of a journalist is to distort the truth, to lie outright, to pervert, to vilify , to fawn at the feet of mammon and sell his country and race for his daily bread of what is about the same – his/her salary. You know this, I know it, what tom foolery to be toasting an INDEPENDENT PRESS ! We are the fools and vassals of rich behind the scenes. We are jumping jacks. They pull the strings and we dance. Our time our talents our lives our possibilities are all the property of other men. We are intellectual prostitutes.” John Swinton editorial writer of the NYT during 1860s.
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Mr.T N Ninan’s outburst is understandable. He is a celebrity journalist who is clearly not favourably
disposed to the Modi government. In fact few Delhi celebrity journalists are.
Therefore, diatribes are not uncommon. But ideally such vitriolic
criticism needs to be backed by facts. Ninan’s essay
( https://theprint.in/opinion/why-modi-govts-rs-6-lakh-crore-monetisation-plan-is-a-walk-in-a-minefield/723564/ ) is bereft of research rigour and is riddled with information
deficits, bordering on outright misinformation.
1.
Ninan’s point is that this government has missed the disinvestment
target. Point taken . But isn’t disinvestment a form of asset
stripping ? So which government, corporate entity or individual
resorts to assets stripping? Isn’t it only cash strapped entities
that resort to asset stripping or in modern jargon – disinvestment ?
Can targets really be assigned to such sell offs? Targets are after all
an expression of value, whatever be the method of valuation, isn’t
it? Doesn't expressing a target imply attributing a constant value
for the assets? Sellers without exception are biased to a higher
value. So are accusations of targets shortfalls really tenable,
especially so when the author belongs "free markets" cult ?
However, Ninan’s point is fair, in the sense that the
Rs 6 trillion or Rs 6 lakh crore in monetising public assets is a
challenging target. But is it really? Seen from the telecom scam of
2008, when the public exchequer was duped of Rs 1.76 lakh crore in an airwaves auction or the spectrum auction, is it really a tall order?
Yet Disinvestment may be easier for governments. After all isn’t it
easier to sell land than cultivate it and make it yield? This en effete is disinvestment.
Monetisation on the other hand
would imply improving the return on assets. So it could essentially
mean that the freebie regime that has been in existence for a long
time goes. That includes free junkets, tax breaks , and toll
exceptions including an end to all forms of economic elitism ! It,
monetisation, is a regime of economic discipline. It implies that
every rupee invested in the economy pays for itself, which could
either be in the form of financial returns or economic
returns.
Monetisation though is not a new. It began
sometime ago, in case Mr.Ninan did not notice. If he is paying tolls,
isn’t that monetisation? (But the preferred mode is digital. For
far too long project operators that enjoyed political patronage or
cronyism refused to remit collections into the banks that had lent
money and imposed a charge on the revenues. Cash tolls allowed
siphoning away off funds. The result was burgeoning of non performing
assets. Digitisation of toll payments ensured collections are used to
first settle bank dues as opposed to bleeding public funds. What was
really outright pilferage of depositor from helpless PSU banks
was choked in one go. But digitisation also ensured that the benefits
of monetisation begin accruing as lenders recover their dues.
In the case of airports or ports sovereign assets were leased (BOT,
BOOT, BLT and many more gobble de gook jargon), default risks are
less. In ports and airports, governments collect a lease rental or a
share in revenues. Land ownership remains sovereign. So is Rs 6 lakh
crore a big target or is it really modest? One suspects it is the
latter ! But if Ninan wanted to pick holes, here is one : For a Rs
225 lakh crore economy, isn’t Rs 6 lakh crore monetisation a scandal?
2.Ideally
disinvestment option is beneficial only if there is value
realisation. But was there any value realisation, past disinvestment
when the monies were used to amortise current expenses? Governments
hand hold, curate and then exit from enterprises once value is added
to the nation. However when disinvestment was made even at less than
international peers then to investors that included foreign institutional investors, was it a garage sale or a fire sale ? Didn't
Editors like Ninan and his peers then hail the government effort as a
great privatisation effort ? Ninan refers to Air India : But is it really a failure or a
reluctance to sell at a low value?
Ninan needs to rejig his memory a
little on Kingfisher. In 2010, KingFisher(KF) had a bloated paid up
equity base of close Rs 4000 crore, without owning a sq foot of fixed
assets! All of KF fleet was leased barring Mallya’s own executive
aircraft .
Yet, when the KF carrier sought debt
restructuring, it was done at Rs 64 a share although the airline had
then already wiped its paid up equity clean, SBI had then opposed the terms of restructuring, but
wasn't it Chidambaram ( Ninan’s and N Ram’s friend) and some in
PMO who supported that valuation ? In a nut shell aren't they
technically complicit in the Mallya heist of PSU bank depositor
funds?
Given that kind of history of airline funding,
should AIr India be subjected to that spurious method of "free
market price discovery?" Air India after all already had an
operating fleet of 123 aircraft less than 10 years old and a paid up
equity half of what KF had in 2009. So should govt go ahead with
garage or distress AI sale and say “ Eureka “simply to proclaim
disinvestment a success in the media?
Isn't understanding
the reason for losses more important than putting up taxpayer PSUs
for sale? Where one agrees with a PSU divestment is that governments
need to stay out of micromanaging or operating businesses unless they
are natural monopolies. Across the world isn't that the
norm?
3.Ninan’s point on railway privatisation is
interesting. Are there instances of railway infrastructure
privatisation? The mistake most often quoted is British Rail. In the
British rail privatisation, only the rolling stock, Trains were
allowed to be owned/operated by the private sector. Some fixed assets
were monetised for maximising rental collections. In BR privatisation
model, The permanent ways or backbone remained firmly in government
hands. Amtrack or French Railways remain firmly in public sector,
with every small private equity components. Yet despite the so called
private sector operational efficiencies, if Ninan had bothered to
look at global railway systems with positive operating (OR), IR ranks
among the few still with positive ORs.
In Konkan Railways,
disinvestment is an option. If those who commented had even bothered
to go through the website they, would know that IR holds only 51 per
cent equity. The remaining equity is shared between Maharastra, Karnataka, Goa and Kerala. All these states have the rights
to sell their respective stakes if they choose to do so. They haven’t
done it because, KRC is a cash cow with huge hidden reserves. Besides
any sell off of a portion of the equity will land up only with IRCON
or IRFC, both cash rich organisations. Unlikely that foreign
investors will ever be solicited. But is that what is worrying the so
called private sector apologists or the reformists battalions?
As
for the Depreciation Reserve Fund, isn’t it an above the line
charge on IR revenues? So shortfalls in DRF are supplemented with
fiscal funds, (that shows up as capital at charge increases in the IR
finances) for creation of a public assets. For asset renewals and
creation of new asset, IR were consistently asked to seek private
sector intervention or through IRFC/IRCON (internal and extra
budgetary resources) ! However allocation of tax payer funds are
resisted for new infrastructure investments new rail networks citing
fiscal concerns. Allocations for current expenditure ( pay commission
hikes, absentee legislator salary hikes) though are cleared without
so much as a squeak and no editor even sees any breach of fiscal discipline. It is called fiscal fundamentalism by left wingers, when
it was nothing short of grand larceny!
Well a shift to the DRF charge from a historical cost basis to a replacement cost was suggested. This suggestion itself is about 50 years old. Yet that shift is fraught with risks. How does on assess the value of a future asset, perhaps a new generation locomotive that is still conceptual ? Besides what about the economic and financial fallout of a shift to replacement cost depreciation charge? There is a risk of negative Operating ratios. But if passed through directly could translate to freight or passenger fares hikes with an inflationary impact. Not to mention editorials on managing or mismanagement of inflation. The alternative would be an escalation in fiscal charge by way of transport subsidies!
Accusations of malfeasance make nice headlines, but how come none of
these were mentioned before 2014? Ignorance or Collusion?
5.
The reference to Vizhinjam port in Sothern tip of Kerala is
interesting and in fact very amusing. Ports are in the concurrent
list in the Constitution of India. The centre’s jurisdiction
therefore applies only to the 12 major ports. Vizhinjam comes in the definition of minor ports and therefore within the jurisdiction of the
Kerala state government. That makes Kerala the lessor , doesn’t it
? Isn’t it the lessor who is responsible for the lease terms
then?
But then tendentious stories and half truths are
hallmarks of India’s English language journalism, both general, and economic.
Hollywood star Denzil Washington and one of the few actors endowed
with a very sharp intellect once answering question said, “If you
don’t read the newspaper you are uninformed, if you do read it, you
are misinformed !” That in essence captures Indian journalism !
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Reference :
Ministry of Railways, Explanatory Memorandum
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The writer is a former journalist who washed his hands
off the profession a while ago and shifted to the mountains. He now
prefers to watch and enjoy the media circus!
