Tag: bangalore

Penny wise pound foolish at PSUs

A couple of months back, an uncle who works for a PSU in a reasonably senior engineering role, had to go to Calcutta on work. Thanks to his late arrival from Calcutta, we had to postpone a party that had been planned for a weekend. When I asked about his late arrival, I was told that his train had been delayed. It was then that it struck me – that a lot of PSU officers still do business trips by train!

The logic completely defies me. An airconditioned train ticket (at my uncle’s grade, I don’t think they would send him by cattle class) from Bangalore to Calcutta costs around Rs. 2000, and it takes about thirty six hours. A flight, on the other hand, costs not more than Rs. 7000 (assuming you’re not booking at the last minute), and takes about three hours. What amazes me is that the PSU that employs my uncle values his time at less than (7000-2000)/(36-3)  ~= Rs. 150 per hour! Ok even if you assume that the train journey had two nights when he would have been unproductive (and assuming that he’s a superman and so doesn’t need to rest and recover from a long journey), his employer values his one full day of work at Rs. 5000!

While this valuation might be consistent with my uncle’s salary (I’m only guessing given his experience and position; I haven’t asked), I think it’s still a stupid choice to make on behalf of the PSU. I was reading an op-ed by Mihir S Sharma in this morning’s Business Standard, where he talks about our warped sense of “austerity”, and was wondering if this decision to send my uncle to Calcutta by train was a measure in a similar direction!

Austerity means cutting down or limiting wasteful expenditure. It does NOT mean cutting down tangible expenditure in favour of the intangible (my uncle’s lost working time is an intangible, since he gets paid monthly; so is his reduced efficiency on the day immediately after his journey). Unfortunately some of the PSUs have not recognized this and still stick to some age-old “policies” regarding travel and expenditures.

My wife, who works for Toyota, informs me that a certain number of cars produced every day are “specially made for the government”. When I ask her what is so special about a sarkari car (apart from that rhino-horn like thing on the bonnet) she tells me that they are not supposed to have air conditioning! Given that air conditioning is a default in most cars nowadays, this “no air conditioning” is a special request that the government has to make to the manufacturers, so I don’t think it makes any tangible difference in the cost of the car. From my experience with my Zen, driving with and without air conditioning (I live in Bangalore, so I don’t need it at all times), I know that air conditioning hardly makes much of a difference to the mileage of the car. So overall in terms of cost, there is little the government saves by not having air conditioning in the car.

Now think of the babu in Delhi, where summer temperatures go well into the forties, and which is so dusty at all times of the year. Think of the possible increase in his efficiency if he were to travel in an air conditioned car. That is an intangible and the government will have none of it. It is all about austerity, you know. Penny wise, pound foolish.

PS: The recent focus on corruption has done more harm than good. Afraid of “being pulled up” by the CAG or any similar authority, a number of PSUs have gone into policy paralysis, and are simply not taking decisions, lest they are accused of being corrupt. The economic loss (again intangible) is humongous compared to the amounts these people might have possible swindled had they made the decisions! We never learn.

Sadananda Gowda’s Set-up in South Bangalore

Ever since D V Sadananda Gowda became chief minister of Karnataka not so long ago, we residents of KR Road have been subjected to the holdup of the KR Road-SouthEnd Road signal several times a day. The convoy for which traffic is held up is huge, leading us to believe that it can’t belong to anyone but the chief minister. However, the chief minister’s house is in Milk Colony near Malleswaram, so what is he doing in South Bangalore? We wonder if a chinna veetu exists!

The problem with private provisioning of public goods

… is that private players who are providing those goods have an incentive in blocking attempts by the public sector to provide those goods. For the purpose of analysis, let us take the example of Gurgaon, both because I’m reasonably familiar with it and because it has been in the news in the international media thanks to a recent profile of the city by the New York Times.

Now, Gurgaon has a major problem with power supply. It is said that (I don’t have first hand info for reasons you’ll soon understand) the “city” faces about four to six hours of regular power cuts every day. I don’t know the exact reasons for it (surprisingly, Haryana sells power to other states so it appears there is no power deficit per se in the state), but it could be a pricing issue, with free power for farmers and all that. Anyway, the reason for the power cuts doesn’t matter so much.

In reaction to this, apartment societies have taken it upon themselves to provide “power backup” to the residents (for a fee of course). Even in that, there are three grades. I used to live in a DLF complex that had “one hundred per cent power backup”, which meant that I was assured of 24/7 power supply. Every time there was a power cut, the generators would start in a matter of a few seconds, and with “one hundred percent backup”, I could run just about any device on the “backup” power supply. In return, I would pay the apartment association six rupees per unit (as opposed to 3 rupees I pay here for sarkari power in Bangalore).

Then, there as “eighty percent backup”, in which you could use the generator-power supply to run all appliances except air-conditioners and geysers (both extremely important in Gurgaon given the weather). Then, there was another level with fifty percent backup, though I didn’t particularly understand it. The individual houses in the city, though, had no backup, and people living there had to make do with inverters.

Now, suppose that magically Haryana were to become a power surplus state, would the state government be able to provide uninterrupted three phase power supply to Gurgaon? I would think not, for there are several “private players” in that city whose source of profits and wealth is derived from the fact that they provide backup power supply. Think of all those people who invested in DLF flats because they had “one hundred percent power backup”. Now, with power backup not being a distinguishing factor, these flats will lose in value since they cannot command the same kind of premium as they used to (rather, the supply of “apartments with assured power supply” goes up, thus reducing demand for the only ones that offered this luxury earlier). Then, there are scores of generator and inverter dealers in Gurgaon, who again depend on the power shortage for their livelihood. And so forth.

It doesn’t appear as if Haryana has power shortage any more (recently, Karnataka bought power from that state to tide over its power crisis). However, there are enough powerful lobbies in Gurgaon who depend on power cuts (!! ) for their income and wealth, and it appears they have managed to lobby the government there (officially or unofficially) to block the provision of assured power supply. The moral of this story is that once “public goods” start being provided by private players, it is hard to displace them, and this results in a lifetime of inefficiency.

Library sourcing

It’s been close to two years since I took up membership at the British Council Library in Bangalore and of late I’ve been thinking that I won’t extend my membership after it expires this December. The library hasn’t been very active in updating its book stocks, and seeing the same books in the same places again and again (my interests mean I’m limited to a handful of shelves in the library) gets monotonous, and there have been times when I’ve borrowed books just for the heck of it.

Yesterday, I was meeitng Kodhi after which I wanted to go to the library (since books were due for return), and he offered me to come along with me. And for the first time in a very long time, I had too many books from which I had to decide which ones to take home. There had been books which I’d been seeing at their regular places time and again, and had never felt the need to read until Kodhi told me about them and convinced me to borrow them. Overall, it was a very pleasant visit to the library.

Going forward, I think I’ll extend this strategy. Every time I go to the library, I’ll take along a different person – hopefully someone who understands well my interests and reading habits, and see if I make better use of the library. Since there are two months left before my membership expires, I hope to have got more data on this (how “successful” visits to the library are when I go with a friend) and can make a better decision about giving up the membership (it costs around Rs. 2000 per year).

The Pasta Darshini

A long time back I’d cribbed that in places like Bangalore where not too many people are willing to experiment with food, non-standard cuisines end up being insanely expensive. This was perhaps during my first trip to New York last year, when I’d been amazed to find extremely high quality food at nondescript places for very reasonable rates, and was cursing my own city for making me pay up exorbitant amounts every time I wanted to have something “special”.

Given that background, the new Veekes and Thomas outlet in Jayanagar 4th block (I believe they have outlets elsewhere in the city also) comes as a pleasant surprise. It’s a small place, situated across the road from the more famous Maiya’s. The whole establishment is less than 100 sq ft, with a large part of it taken by a massive machine to make sugarcane juice. The two times I’ve visited, there have been two guys there, one to make sugarcane juice and the other to make pasta. The seating area is limited, and you’re served in disposable (areca bark) plates and glass glasses.

They mostly make pastas and some other european dishes (their subtitle is “fine European cuisine” though I’m not sure how “fine” they are), and represent really awesome value for money. The average pasta there costs Rs. 60, and a soup I had on my last visit (wasn’t too great) was Rs. 15. And perhaps to go with the fact that they’re situated in the heavily-vegetarian Jayanagar, they don’t serve meat.

The wife says that it’s among the best pasta she’s eaten in Bangalore. While I disagree with that, I do think the food is really good given the price point. Also, given that they have only one cook, the waiting time can get a little long. The other thing with Pasta is that it is a slow-cooking dish, which is why it doesn’t lend itself too well to the darshini format – which is more suited for made-to-order or assemble-to-order dishes.

Nevertheless this is a good start. It’s hopefully a harbinger (sorry for using such a lofty word here; nothing simpler came to mind) for cheap “non-standard cuisine” in Bangalore. The next logical setup, I guess, would be a falafel-hummus stall. The advantages there are that the dishes are either quick-cooking or can be made to stock , ingredients to make them are easily available here, not much is lost by having a vegetarian-only place (I think there are easier to set up in terms of licensing than places that serve meat; and easier to cook as well) and the taste isn’t very different from Indian (yesterday I was describing the falafel as “AmboDe made out of chickpeas”).

Again, I can help someone set this up, though I’m not particularly interested in running the business since I think it involves a lot of hassles.

 

Yet another startup idea

This time it’s an i-phone/android app. The motivation for this is the heavy advertising in the last few days for Mapmyindia GPS, on hoardings all over Bangalore. Again, I don’t know if this has been implemented before.

So this will be built on top of Mapmyindia or any other similar GPS. When you hunt for the shortest route between point A and point B, you can give two possible choices – shortest by distance and shortest by time. The former is the default choice that all GPSs currently use. This one is an app to provide the latter.

Now, each city will be mapped out as a network of intersections. And then, for each “edge” on this graph, we use data that we’ve gathered from other users of the app in order to predict the amount of time taken to travel. Of course, the prediction model is not going to be simple, and I’m willing to partner you (via my forthcoming quant consultancy firm) in developing it. It’s going to be a fairly complex model based on time-of-day, recency of data, outlier detection (what if someone stops off for lunch in the middle of an “edge”?) and all such.

So, now you have the city mapped out (for a particular instant) both in terms of distance and in terms of time, and in cases of any traffic jams or such, my system will help you find the quickest route to your destination. Should be useful, right?

Of course, the success of this app (like a lot of other apps, I guess) depends heavily on “network effect”. The more the users of this app, the better the model I’ll have in predicting time between intersections, and save you the headache of mentally trying to optimize the route to your destination each time you set out (like I do).

I’m pretty serious about this. If you think this hasn’t been done before, we can work together to get this up!

The deal with plays

I live near Basavanagudi in South Bangalore, hardly 6 km from the city’s best theatre Ranga Shankara. In the other direction, a (relatively) new auditorium which plays host to several promising plays (KH Kala Soudha) is even closer. There are times when we consider going for a play at one of these locations. To date, however, I’ve been to a performance (can’t call it a play) at KH Kala Soudha once. The only time I’ve been to Ranga Shankara was five years ago, back when i was in college.

I think one of the reasons for this is that I can never muster the necessary incentive to go watch a play. A large number of plays, as I understand, hold nothing much of promise in the stories that they tell. I’m not much of an actor, and don’t have an eye for fine acting which I want to discover. Yes, sometimes the way some stories are told is fantastic, and this is even more so when the play in question is telling a known story (the one play I’ve watched in Ranga Shankara was a Harivansh Rai Bachchan interpretation of Hamlet; where they use Yakshagana dancers for the play-within-a-play, and that was a fantastic way of telling the story).

Still, the thought of having to sit there in one place, without doing anything that might distract the performers, focusing all my energies on the performance, for the “option value” that there might be something really insightful in what the performers are trying to convey is daunting. With widespread sponsorship from governments and corporates, most plays are very reasonably priced, but the attention they demand can put me off.

And then I wonder if the reason I don’t like plays so much is because they’re rehearsed, that everything goes according to a particular script, that every move of the actor has been choreographed! The way plays are structured essentially requires discipline on part of all the actors, and the play could sometimes be seen as just an exhibition of discipline! I must mention here that I have even less patience for other more obvious exhibitions of discipline such as parades.

I read that the Rangashankara  festival is coming up soon, and I do hope I can get myself to at least check out a few plays (especially since I’m now fairly rich in terms of time). However, I must say it will take a lot of convincing on your part to make me come watch your play. If you say “we’re performing Shakespeare’s Romeo and juliet” I’ll say “why should I come watch you when I can read the play?”. But if you tell me that there’s a story that you want to say, which you’re going to say in a particularly unique way, then I might be interested.

The curse of geography on Air India

International flights are regulated by a strange agreement, in which at least one end of the flight should be in the country that is the “home” of the airline. For example, Jet Airways runs flights along the Mumbai-Brussels-New York route, but is forbidden from carrying passengers solely from Brussels to New York (that market is a monopoly for airlines based in EU or USA). However, if Jet has flights from Mumbai to say Brussels and Singapore, it can carry passengers from Brussels to Singapore, since they’ll be touching the ground at Jet’s home country.

Secondly, airline ticketing is usually done on a “source-destination” basis, and not based on each leg. For example, the price of  a Brussels-Singapore ticket on Jet Airways has nothing to do with the price of Brussels-Mumbai and Mumbai-Singapore tickets. As far as the airline is concerned, all these are independent “markets”, and the price for Brussels-Singapore is set partly based on what other airlines charge for Brussels-Singapore (taking into account flying time, layover time and all that).

These two together give an undue advantage to airlines that are situated in countries that are “in the middle”. The best example for this is Emirates, which flies, on the one hand, to several destinations in Asia, and on the other to several destinations in Africa, Europe and the Americas. This allows Emirates to effectively aggregate demand from all these destinations and connect them up in the form of a hub.

For example, there may not be too many people who want to fly Bangalore-Venice. However, if you aggregate all destinations Emirates serves to the West of Dubai (in Europe, Africa, US, Middle East, etc.) there will be a lot of people who will want to fly from Bangalore to all these places put together. Similarly, if you aggregate all destinations in Asia, there will be enough people from Venice to fly to all these places put together and thus Emirates, by providing a hub, creates an effective market. This is what I mentioned earlier as the advantage of geography, of being situated “in the middle”.

Now, if Air India were to be profitable in the international sector, one way of doing so would be to create a “hub” in India, where Air India connects up passengers to the east to those in the West. While that sounds simple enough, what we need to see is if any place in India is situated conveniently enough to function as a hub. Now, look at the map of India, and see what is around.

To the north-east lies China. There is a lot of nothingness between India and the parts of China that generates high airline traffic (the coast). To the northwest, you have Pakistan, Afghanistan and barren republics of Central Asia. The “business parts” of Russia, again, are quite far away. To the South of India you have vast oceans, the south-east and west already have thriving hubs (Singapore, KL, Bangkok, Dubai, Doha, etc.) and India is again not well placed to compete effectively with any of them. I know this isn’t a rigorous analysis, but look in any direction, and you’ll find it hard to believe that there is reason enough for people living there to fly internationally using India as a hub.

This is the curse of geography that India suffers from, and there is nothing we can do about it, and this is something we need to accept. Given this scenario, the best airlines from India can do is to connect various places in India to places abroad where there exists a “direct market” (for example, Kochi-Dubai by itself is liquid enough so you can have Indian carriers operating that route). Thus, airlines from India can never aspire to achieve the scale and connectivity of an Emirates or a Malaysian. The sooner the airlines accept it, the better.

The moral of the story for Air India is that it should recognize this curse of geography and give up on its dreams of connecting the world. It should stick to connecting destinations within India, and “direct markets” from India  to destinations abroad.

Government finances versus public interest

In an op-ed in Business Standard (I think) yesterday, Praveen Chakravarti (he’s with Anand Rathi now, used to be with UIDAI when I met him at the Takshashila Conclave last year) argues that fixed price allocation of telecom spectrum wasn’t such a bad thing since it kept prices for customers low and reasonable. As part of his argument, he mentions that due to the auction of 3G spectrum and licenses, prices of 3G services have been really high, way over the reach of the common man. Similarly, after the auction of the 4th telecom license in 2001, mobile telephony prices remained high, and came down only after the backdoor entry of Reliance and Tata Teleservices a couple of years later.

One of the points that the CAG mentioned in his report on Air India a few days back was about the granting of “sixth freedom” rights to international carriers flying from India. For example, twice this year I flew west (once to the US, once to Europe) from Bangalore, stopping over at Dubai. For both trips, Emirates sold me a single ticket (i.e. I purchased a Bangalore-New York ticket, not separate tickets for Bangalore-Dubai and Dubai-New York). The granting of this sixth freedom to carriers such as Emirates, points out the CAG, has resulted in substantial loss to Air India since no one flies Air India for international flights anymore. I didn’t believe it when I read it but one of the recommendations for the CAG was to cancel sixth freedom licenses to carriers such as Emirates. Another report around the same time recommended that “interior markets” (Bangalore, Hyderabad, Ahmedabad, etc.) be made Air India monopolies in order to protect its finances.

Now, there is a fine balance that needs to be achieved between government revenues through grant of licenses, and the economic impact on the general public because of the grant of such licenses. For example, the government (through Air India) may have lost significant amounts of money thanks to the grant of sixth freedom licenses to carriers such as Emirates. That has been counterbalanced with lower fares and easier flying options for travelers from hitherto less connected sources like Bangalore or Hyderabad. The government may have lost significant revenue by granting backdoor entry to Reliance and Tata Teleservices, but that was compensated by sudden drop in charges for mobile telephony, and the subsequent growth of the sector.

Given Air India’s history and performance, the government could have never invested enough to make Bangalore and Hyderabad as well connected with the rest of the world as, say, Bombay or Delhi. In that sense, granting of sixth freedom rights to Emirates was a cheap way for the government to provide international connectivity to these cities. Similarly, it would have been hard for the government to invest in MTNL or BSNL in order to take mobile telephony to the masses. Backdoor entry to two operators was a “cheaper option” to achieve this objective.

So what was the problem with what Raja did, you ask. The problem there was the creation of a playing field that was not level. He blatantly favoured certain players against others, and made hefty kickbacks from the process. That is the real tragedy of a non-auction process – in that there is “consumer surplus” left over with some of the companies after they’ve paid the fixed price for the resource, and some of this consumer surplus can be channeled in the form of kickbacks to government officials. I don’t know the parallel for this in the aviation space so I’m not able to comment on that.

Tailors

In a little street called Narayana Pillai Street, off Commercial Street in the Shivajinagar area of Bangalore there stands a building called “Ganesh complex” which can be called a tailoring hub. There are some ten to twelve shops (forgive my arithmetic if I’ve counted too low) all of which are occupied by tailors who stitch women’s clothes, primarily salwar kameez and its derivatives. I don’t know if there’s much to choose between the stores, and I think it’s a question of “tailor loyalty” the way it’s practiced among beach shacks at Baga beach in North Goa.

The wife is friends with a tailor called Ahmed, who runs a shop called HKGN tailors in this complex. Till recently (when he took two weeks with a consignment) his USP was “one hour tailoring”, where upon receiving cloth and measurements, he would stitch your dress in about an hour. I hear that there are a large number of tailors in the vicinity (though not sure if they’re in Ganesh complex) who offer the same terms. In fact, I know a lot of women who travel to that area to get their clothes stitched both for the quick delivery and also for the network of tailors that is present there.

While waiting for Ahmed to deliver the wife’s latest consignment yesterday (the one he took two weeks with), I was watching tailors in neighbouring shops working. The thing that struck me was that there isn’t much economies of scale in bespoke tailoring. Each piece  of cloth needs to be cut separately, in its own size, and there’s nothing that can be “batch processed” across different samples. Of course, there is tremendous scope for specialization and division of labour, so you see “masters” who measure, mark out and cut cloth, and “stitchers” who stitch up the stuff together.

However, across the city, except for the handful of tailors in the Shivajinagar area, the standard turnaround time for stitching seems to be about two weeks. And given the wife’s experiences (I usually buy readymade garments so not much insight there) it is a fairly disorganized industry and requires several rounds of follow-ups and waiting at the tailor’s shop in order to get the goods.

The economics of the industry (that there are no economies of scale) makes me wonder why the two-week-turnaround time has become standard in this industry. Isn’t the turnaround time solely because of inventory piled up at the tailor’s? Can the tailor not manage his inventory better (like say going a few days without fresh orders or hiring a few extra hands temporarily or working a weekend) and thus lead to much shorter turnaround time? Given the individual nature of the job, what prevents tailors from offering instant turn-around like the handful of people in Shivajinagar do? Or is it that bulk orders (one person coming with a bunch of clothes to stitch) mess up any “quick turnaround model” the tailors could offer?

There is only one explanation I can think of. “Sales” and “production”, for the tailors happens at the same spot (their storefronts). For “sales” purposes they need to be there all the time, though they don’t need to be actively doing anything. Hence, it suits them if production is also a continuous full-time process, so that the time they spend at the storefront isn’t all “wasted”. By piling up an inventory of orders, tailors are always assured of having something to do even if no fresh customers are forthcoming.

So as the wife’s experience with Ahmed has shown, the “quick turnaround” hasn’t been sustainable at all.