Tuesday, March 27, 2012

Reopening the HAL Airport – Bengaluru.

I still remember the shrillness of the discussions about retaining the HAL Airport at Bengaluru when the new Bengaluru International Airport Limited (BIAL) was in the final stages of its preparation for launch. The argument then was that the closure of HAL Airport threw up a humanitarian problem that had been perhaps ignored by the Government when the Greenfield project was being negotiated, i.e. the issue of the accommodation of the KSTDC Taxi drivers who faced a bleak future and financial ruin. That problem however was solved, but many who were hoping for the retention of HAL Airport, particularly the IT Companies located in Bengaluru East were disappointed, as taking a flight from BIAL meant for them a two-hour commute through the heaviest of city traffic. The general public was however mollified by the promise of a modern, spanking and efficient airport.

Now that BIAL has been in operation for a couple of years and has been soundly criticized for being poorly conceived and under-provided for – in terms of its capacity, seemingly proved correct as it has been forced to go in for a doubling of the same several years before it had planned to. The airport, for some reason has only 8 Aerobridges which means that a vast majority of the flights have to use coaches for embarkation and dis-embarkation which in my view adds more than a wasteful half an hour to the process, while exposing passengers to the discomforts of the weather, needlessly contributing to atmospheric carbon and other inconvenience. Most modern airports aim to achieve close to 100% aerobridge arrivals and departures (except for servicing small turboprop aircraft one would guess), while BIAL has been left lagging far behind. The passenger traffic is expected to grow to 18 million in 2014, and judging from the current experience, this airport will definitely not be able to handle this explosion as the passenger facilities are too inadequate – the concourses, the food courts, the check in counters, the security counters and the emigration counters are all stretched, and doubling everything will still not be sufficient, and hence some radical solutions are necessary in my view.

I would like to list the following possible scenarios for discussion, and I hope that through this forum there will be some discussion and hopefully a couple of decision makers may agree with us and help in the resolution of some of the outstanding issues. One readily agrees that it is not practical to have two competing fully loaded airports, in the same city, as there would be untold confusion for travelers, as to which airport one needs to report to, in addition to the financial implications of reneging on the agreement with BIAL. However, with little effort, it is possible and desirable to reopen the HAL airport without hurting any party concerned for the following reasons:

§    India is going to see an explosion in Low Cost Carriers (LCC’s) in the near future, for both domestic and International routes. It would be quite unviable for such carriers to use a premium suburban airport as the cost of traveling to the city and vice versa by taxi would work out as much as the basic fare of some air tickets, making the home-to-home costs of the journey unattractive. Further, the landing fees, handling charges and parking bay charges etc. at a premium full-service airport would also work out quite expensive for an LCC, not to speak of the User Development fee and other levies the airport is forced to collect to garner revenue. Thus, if HAL airport can be used as an LCC terminal, there would be much value to be had. The infrastructure is practically ready-to-roll and major investments would not be required for this. It is an indicator that many emerging world cities have felt the need to do this and now, both Singapore and Kuala Lumpur have exclusive LCC terminals, separate from their main airports.

§    Another useful justification for reopening the HAL airport is get the advantage of Cargo and Courier operators flying from there. Here again, cost being the most sensitive determinant, users would be able to book smaller cargo consignments at a lower cost within the city and only the very large consignments may find it viable to transfer the goods to BIAL. This would also mean that there would be less pressure on BIAL allowing them to offer better service levels for passenger traffic.

§    One understands that the authorities have planned a City Check-in facility for BIAL, from where one can check in their bags and catch a High Speed train / Coach to BIAL. Is it not possible to make a portion of the reopened airport the City Check in facility, and extend the high speed train link to start from HAL Airport? One understands that the train will take some years to build, but until then, the BMTC Volvo service can operate from there, with passengers just asked to undergo security check again at BIAL. As their bags are already checked in and all other formalities completed, this may not be too much of an inconvenience.

If the authorities can consider the above suggestions, many of the logistical and humanitarian issues would be adequately addressed. To cover for the issue of competing airports, the possible loss of revenue to BIAL and the dis-honoring of the terms of agreement between the Government and BIAL, it may be prudent for the government to lease out the HAL airport also to BIAL, and enter into a clean tripartite agreement wherein any revenue earned can be shared in an appropriate ratio between the Government, HAL and BIAL. Thus, HAL Airport can be operated as the BIAL-LCC Terminal.

HAL which is sitting on reasonably large passenger handling infrastructure will be able to put the same to use again and earn some revenue in the bargain. Though one speaks for BIAL, this arrangement would have many attractive benefits, not in the least the ability to plan the handling of LCC’s more cost effectively, an emergency landing facility, diversion of VIP flights, overwhelming ATC jurisdiction together with lower outlays for future capacity expansion at Devanahalli, amongst others. This way, HAL too would be provided with an opportunity to re-accrue some of its lost revenue and in the bargain, performing a big service to Bengaluru City.

The current capacity of BIAL plus the capacity that the reopened HAL Airport will offer and the addition of the capacity that is under construction at BIAL may all combine and suffice to serve the needs of Bengaluru for some 20 years comfortably. Something worth considering seriously, surely.

Wednesday, March 21, 2012

India’s new Highways are lawless Banana Republics!


The Highways of yore
The people of India complacently accepted and put up with substandard highways for about 50 years since independence. The highways then used to consist of single and double lane undivided carriageways that were poorly planned, even more poorly executed and was intended to go through every little human habitation along the way when traveling from one major city to another. This meant that road journeys were invariably the last option that any sensible person would consider as they usually turned out to be perilous, long-winded and usually undertaken only during daylight hours, if at all. Obviously, private car owners preferred to stay off them, and the only demographic that really used the highways of yore were the truckers, and they completely ruled the roost there! The larger the truck, the more the driver could dictate the terms on which other highway users were allowed to use them.  An accident or a breakdown in the middle of nowhere usually meant several hours if not days of misery, constantly worrying about becoming a victim of a dacoity or other such life altering experiences.
Considering the fact that India then offered just some 3 or 4 options for cars and 2 options for 2-wheelers, private vehicle ownership was very slim and of those, the numbers willing to risk the perils of a highway journey were few. However, despite the then overwhelming majority of the occupants being truckers and fewer numbers of somewhat slow moving personal vehicles, the driving etiquette on the highways had evolved into a fine art (and art literally in instructions on the rear of all trucks). ‘Use Dippar at Night’, ‘Sound O.K. Horn’, ‘Overtake from Right’ were the popular refrains seen on all trucks, while ‘Power Break’ and ‘Mark I’, ‘Mark II’ and ‘Mark IV’ was all the private car owners had to be satisfied with. Taxi’s loved saying ‘Show Hand Signals’, but that was it. Of course, while it is really not relevant to this discussion, it is difficult to not mention the other messages truckers peppered us with like ‘We Two Ours One’, ‘Small family Happy Family’, ‘God is One’ amongst others spreading the social message of small families or profound theology!
Thus, for the sheer need of ensuring the safety of human life, it was back then necessary to observe some very basic driving rules to avoid being involved in a head-on collision, like driving in a single file, overtaking only when the road curves to the right, the flashing of headlights while doing so, switching on the right turn indicator for a short spell to inform the vehicle behind that it was safe to overtake you, dipping your High Beam while passing oncoming traffic and honking for every conceivable other reason. These had all become the hallmarks of a good highway driver, and anyone who was not aware of these rules of interaction were immediately identified just from the way they drove and dismissed off as ‘City Lubbers’ (by the genteel of course, the truckers preferred ‘Sister Violator’ in Punjabi) and were avoided like the plague on the highways as they were expected to invariably cause disasters on the road due to their untrained driving skills.
Despite all the above, in many ways, driving on the highways in those days was a much more pleasurable experience than driving on our new highways today, due to the strict and wholly voluntary adherence to the above code, unlike now. The number of fatalities on Indian Highways is depressingly the highest in the world despite our not being the most populous country or the country with the largest number of vehicles plying.
The Golden Quadrilateral (GQ) and the NS / EW Corridors
The NDA Government for the first time since independence recognized the value of a good highway network infrastructure and undertook a massive exercise of converting a few of the highways linking the four Metros into modern roadways. The roads were all divided, 4 laned or 6 laned, and built to a very good specification right from the sub-grade development to the final black-topping. Instead of winding their way through every town and village along the way, highways were straightened off and wherever they had to travel through towns, they now took the Arial route via countless elevated roads and flyovers. This has immeasurably improved the quality of the journey as the average speed has close to doubled when compared to earlier and travel times cut down drastically. For instance, driving from Bangalore to Chennai on the old highway used to take close to 8 hours, while now the same journey on the GQ road takes just 5 hours. Of course, the time taken to travel from your home to the highway has gone up manifold, meaning that you still take 8 hours or more for completing ‘home to home’ journeys, but that’s a different story altogether, isn’t it?! Fodder for another article? Perhaps!
So they’re faster, but are they safer?
Absolutely not! Due to the highways being divided, the chances of a head-on collision have diminished no doubt, but the highway user has to contend with many new devils.
With the Indian economy being on the ascendency and incomes constantly going up, there has been an explosion of new cars on the highways. From the grand choice of 4 vehicles, I understand that an Indian customer has an array of over 400 models, each available in 3 or more variants ending up in a mind boggling surfeit of choice. This has contributed a large number of modern, fast and safe cars to the highways, and millions of these are making daily road journeys crisscrossing the country. Unfortunately, this market change seems to have completely eluded the truck buyers and we still overwhelmingly see the same two World War II relics ruling the road. They are seemingly desperately slow, sluggish in response, unbelievably uncomfortable for the drivers and hence unsafe by the oodles for both the drivers and the other road users. This shocking disparity in the type of vehicles now sharing highway space is perhaps the root of the problem.
Another very unique Indian oddity is the way that the villagers have decided that the highway running outside their homes is just an extension of their living rooms. In the past too, roads were used to dry the harvested crop, and used for the transport of everything using animal carts that dictated the speed on that section of the highway. These days, perhaps due to a drastic increase in population, people seem to consider the highway as good living space, with families lounging, walking around in slow abandon, children playing and animals herded on it, pedestrians crossing anywhere they feel like, or even private vehicles parked there. In sections of a highway passing through villages and towns where there is no provision of a service lane, such abuses can occupy one lane of the highway for the length of the village and effectively impede the movement of traffic for that distance.
Further, as mentioned earlier, the trucks that ply on our highways seem to continue to be built on outmoded technologies and evidently under-powered in most cases. Truck drivers apparently have to struggle when their vehicles are fully loaded to make them move smartly, as the act of acceleration and maintenance of a constant speed is quite a challenge. Thus, if they stick to the left lane as they are required to, they will end up constantly having to brake for all the illegal occupants of the road and then repeatedly struggle to again pick up speed and maintain a constant rate of travel, which could throw their entire logistics schedule out of gear making them miss deadlines and run into unhappy clients. Thus, to save themselves the trouble of trying to coax these unyielding machines, they end up avoiding the left lane altogether and illegally stick permanently to the overtaking lane on the extreme right. The truckers being what they are behave in a very obstinate manner and refuse to vacate the overtaking lane despite any amount of honking and flashing of headlights from vehicles behind intending to overtake them. Thus, most dangerously, all other vehicles are forced to overtake these monsters from the left, leading to high levels of anxiety and threat perception while driving and overtaking.
The new highways are unsafe due to several other aspects too. Consider this. If one is driving on a divided highway at a comfortable speed, one should never be surprised if the bumper to bumper distance between the truck in front and your vehicle rapidly reduces for no apparent reason – most often, the truck just wants to make a right turn and brakes to cut speed, but more often than not, as his tail / brake lamps do not function, this is not evident to the vehicle behind. Another shocker is maneuvering around a curve, and suddenly finding a truck or tractor coming on the wrong half of the road towards you. This is experienced by most highway users during almost every journey as truckers and villagers do not want to drive the long way around a divided highway, and think that it is perfectly normal to want to reach an intersection by driving the wrong way for a shorter distance. Thus, it is evident that our highways are quite absurd and fraught with danger unlike expressways due to the presence of ‘At Grade Intersections’, where multi-axle vehicles are permitted to make U-turns and other such inanities. The highway authorities must wake up to the safety problems and urgently remove all intersections and adopt the Exit Lane / Elevated Intersections to replace all ‘at grade’ intersections at the earliest.
Add to this the problem of poorly maintained trucks often breaking down on the highways, and the drivers just leaving them where they have broken down – their contribution to ensuring the safety of the other road users largely consisting of breaking off a tree branch and sticking it into the back of the truck and the placement of small boulders around the broken down vehicle. The boulders are sometimes just left behind when the truck resumes its journey or gets towed due to the utter callousness of the truckers. One reads in the news about fast moving cars just crashing into the backs of stationery trucks illegally stopped / parked on the highways, killing young and promising people with depressing regularity.
Thus, looking at all the problems one encounters on our highways it is easy to conclude that the rules and etiquette of highway driving of the last century have deteriorated and the rule of law all but disappeared. In short, our highways are quickly turning into lawless enclaves like some sort of narrow strip banana republics! Urgent and sustained action is required to abate and reverse this trend and ensure that our highways don’t just look world class, but are indeed so in every manner.
What is the need of the hour?
Now that we have the Highways, we also have to ensure that people use them properly and safely. Of critical and urgent importance in the publishing of a Highway Driving Code, that will clearly spell out the rules that one will have to follow on the Highways, Safety Considerations, Good Highway Etiquette, Concern for the safety of other road users,  and the education of all concerned on the do’s and don’ts of driving on the highways. This needs to be made available extensively by permitting downloads from the net and printed booklets being distributed at every Toll Booth, Driving Schools, amongst others. Vehicles should also be classified depending on the permitted speed of travel into ‘Lane 1 only’, ‘Emergency Vehicle’ and ‘General’. Lane restriction stickers that publish this about the status of a vehicle needs to be introduced, and all vehicles restricted to lane 1 should compulsorily exhibit the sticker in a particular location. The rules have to be very strictly enforced, and any vehicles found to be in violation of any of the above needs to be fined heavily as a deterrent and more serious offenses / repeat offenses should entail the banning of such drivers from driving on the highways.
Safety and survival on the highways will improve drastically if the access to an accident spot by emergency vehicles is totally unrestricted, so that they can reach there within the so-called ‘Golden Hour’. All highways should have designated Emergency Lanes or Hard Shoulders that are never occupied by any other vehicle except those designated as eligible to do so. Other vehicles using and or blocking emergency lanes must be seized and the drivers made to face the full force of the law without fear or favor by the police.
It is being seen more often than not, that most of the highway drivers these days are not only lousy drivers, but also uncouth and cowardly to boot. We see a lot of rash and negligent driving and scant respect being shown to the other road users and courtesy an unexplored realm. In a majority of the cases when a vehicle is involved in an accident, the first impulse of an Indian driver would apparently be to abscond. I am sure that if drivers who cause these accidents stop and ensure that sufficient and speedy medical assistance is rendered, the number of highway related fatalities would drop drastically. Thus, all drivers must be educated on their responsibility towards accident victims by the issuance of a step by step procedure to be followed in case of being involved in an accident. In the event of non-compliance, extremely stringent action needs to be initiated for drivers involved in Hit & Run cases, to make running away from the scene of an accident a complete non-option. Will the registering a case of Attempted Murder be sufficient? I would think so. This is a non-bailable offense and should make every person think a hundred times before he or she absconds.
The ‘let us run’ philosophy perhaps is in vogue due to the perceived inconvenience that one believes that one would have to put up with by facing police investigations and the constant fear of having to bribe them for keeping one’s name and time in the clear. Evidently this impression is a hangover from colonial times and is probably accurate to a large extent, and hence the police will also need to be sensitized to appreciate and minimize inconvenience to persons who have stopped at an accident site and rendered assistance. Those drivers who are directly responsible for an accident, but who had taken all steps to conform to the rule book shall be incentivized by being asked to face a lesser charge, if possible. Third party drivers who render assistance should be complemented and receive a suitable reward or citation which can be recovered from the guilty hit-and-run driver. A strict and zero-tolerance implementation of the above rules should be insisted upon from the police, who also need to be well compensated to ensure that they are not readily susceptible to bribery.
Our highways require lots more Signage than existing, offering more guidance to the users. The highways shall also be laned as per international highway norms, and all guidelines strictly enforced. Our highways should ensure that all safety features like Truck Lay-bye docks, Emergency Parking Bays, Hard Shoulders, Exit Lanes and Merging Lanes are marked out and followed. The highways shall also be better monitored by the placement of more CCTV Cameras and Speed Measuring Devices to ensure that they are constantly under the supervision of the police who are not impeded by jurisdictional black-spots between two district police stations or other problems that currently obstruct them.
Perhaps the time is right for the introduction of a specialized Highway Police Force, which has complete and unrestricted jurisdictional hold over the highways and shall not be restricted by districts or sub-divisions and police stations. I suppose that jurisdiction shall have to be restricted to State borders as per the provisions of the Constitution, but as we are all part of the Indian Union, hot pursuit of drivers on the run should be permitted without any restrictions. Needless to say, this special police force, which is expected to perform the roles of both Traffic and Law & Order Police, would be part of the Armed Constabulary and hence the extensive training and sensitization of such a police force is crucial. Only the brightest and the best of cadets should be offered a place on the Highway Police force, and their hands need to be strengthened by the passing of any number of new laws and by-laws that permit the levy of steep and deterrent fines, license suspensions / cancellations, banning from highway driving, etc.
To conclude, I would like to reiterate that our Highways need to be made safe so that the unacceptably high accident rate is all but wiped out. Accidents, especially involving the death of young and contributing members of society is a huge loss to the nation, both in terms of the expense involved in the treatment, insurance payouts, investigation and prosecution, but also the perpetual loss of the dead persons’ contributions towards the exchequer in his or her lifetime. To improve the survival rate of accident victims, Emergency Assistance Call Points supported by Ambulance Stations and Police Outposts are of critical importance.
The Government should urgently justify the toll collected by making the highways places  of total and complete safety and of law abidance, and reverse the trend that is currently inexorably dragging us towards banana republic-ism.
Please also read:

Monday, March 12, 2012

Prevent Defacement of Namma Metro



Namma Metro,
Bengaluru.

Respected Sir,

At the outset, let me congratulate you and your team on the really excellent conceptualization and implementation of the Namma Metro. Please however permit me to also bring your attention to an issue that I have been very concerned about lately, and I'm sure my concern is shared by many like-minded denizens of Bengaluru.

It really angers and saddens me to see the Columns and other structures of Namma Metro being already defaced by Posters, just months after the inauguration. I shudder to think how the situation will be in a few years from now. This not only makes the pride of our city look shabby and unkempt, but is also a poor reflection of the pride we have in ourselves as Bengalurians. The persons who think it is okay to abuse the structures in this manner are showing a complete disrespect to each and every citizen by doing so. I am sure you will agree with me that it is not correct to allow some callous and unthinking louts to deface our pride, as this is an insult on every person who wants the Metro to look perfect and remain that way forever. I believe that urgent and strict measures need be taken to prevent the abuse of Namma Metro by the sticking of posters by a selfish few. The persons who have issued / commissioned these posters are easily identifiable as the posters themselves carry contact details or venue details.

I beg you to lobby with the Government on behalf of every right-thinking citizen, to promulgate a law that is a stringent deterrent to people who deface Namma Metro properties. The fines must be stiff and exemplary and should be payable for each poster applied. A fine of Rs. 1,000 per poster is not out of place in my opinion. In the event that such a law already exists, it needs to be applied uniformly without fear or favor and also made sufficiently stringent. I'm sure that people who issue the posters just do not take care to instruct their workers to avoid defacement of public structures, and the law needs to ensure that they shoulder the responsibility or face the consequences.

I have had the privilege of traveling to several countries all over the world, and I note with a lot of angst that such a defacement of a city's showpiece for cheap publicity happens only in our city. One has to agree that a problem with graffiti exists in the west, but that is more of an expression of anti-establishment symbolism by the youth, and not a means of getting free publicity at the cost of the public at large. I have to say that Namma Metro is really a world class product and we need to make every effort to keep it so. One suggestion is to provide approved designated Poster Sites like the London Underground has done, which the poster issuers can take permission and use to display their messages.

I hope and pray that you will be able to get a suitable law promulgated at the earliest, and curb the growing menace of the poster stickers. My best wishes are with you. As an indication of how Manna Metro could look in a couple of years can be gauged from the current condition of the once very beautiful Mysore Road Flyover. Please do not allow this to happen to Namma Metro too.

Thanks & Regards,

Hemanth Sharma

Just to put it on record that Namma Metro responded to the above.

From: Travel Help [travelhelp@bmrc.co.in]
Subject: FW: Prevent Defacement of Namma Metro
Dear Sir,

We thank you for your constructive suggestion on Namma Metro.

Also, we have notified the concerned department on your valuable suggestions. Shall keep you updated on the proceedings.

Thanks

Namma Metro Help Desk

Wednesday, March 7, 2012

Global Warming can be abated by Truck Hauling

Global Warming is a serious problem

It is currently one of the most serious issues that have been faced by man. Global Warming is indisputably building up to be one of the most serious killers and hence needs to be addressed on a war footing. Unfortunately, most Governments are not according the issue the serious consideration it deserves, and one hopes that they wake up and smell the coffee soon enough! Thankfully, The Koyoto Protocol has given the world a proverbial silver lining in the dark clouds (literally) by providing us a platform and an opportunity to monetize the carbon abatement efforts and consequently the Carbon Trading opportunities that have presented themselves are hugely exciting. These are opportunities that India needs to grab and it is heartening to note that many enlightened Indian business corporations are shouldering their social responsibility while also making sound business gains, as this is perhaps the only way investments (and sincere efforts) will be put in by industry to tackle this looming and calamitous problem.

One of the largest single consumers of Diesel in the world is the Indian Railways, and despite the low ‘per capita’ emission standards due to the massive number of passengers they move, the gross emissions would still be humongous, and any initiative in cutting down of carbon output that they put in place would make a huge dent in the emission levels, but I’m however a little disappointed to see the Indian Railways making only token gestures towards reducing emissions by adopting Light Weight coaches and solar powering their Signaling. Light weight coaches, to make any sizeable impact will need to be introduced on all trains, existing and future – and would come at an enormous capex as all the existing rolling stock needs to be replaced, and solar powered signals do not even begin to address a really serious issue. In my opinion, to achieve some very quick and high impact emission reductions, the Indian Railways should consider introducing Truck Hauling services on their proposed Freight corridors. This is the type of Inter-modal Transportation System that moves fully loaded trucks on trains and is also called Piggy-back Transportation.

Dedicated Freight Corridors

According to the plan published by The Dedicated Freight Corridor Corporation of India, which is a special purpose vehicle set up by the Ministry of Railways, Government of India, the country will see two main corridors being proposed, i.e. the Western and the Eastern Dedicated Freight Corridors or DFC’s. I’m not aware of the basis on which the above routes have been selected, but if they have been selected purely on the basis of current parcel / freight bookings, the planners will be missing the big picture. Instead of just looking to shift existing parcel vans to these corridors, the Railways would do well to look at the real movement of bulk freight in the country. An overwhelming majority of the movement happens by Trucking, and if we do not take a few thousand of these off the roads, we will be doing the Earth a great disservice.

Every day, literally thousands of trucks leave cities like Chennai to travel to Bangalore (and vice-versa) usually making the journey non-stop (no deliveries / pick up’s enroute) burning thousands of liters of Diesel, using up lubricants, and other consumables, causing crores of Rupees worth of wear and tear to parts and tires, incurring huge insurance costs, while increasing the occurrence of accidents, over crowding and wear and tear of highways, endangerment of other road users etc., while offering largely unreliable transport solutions to users. In addition to all the above, these trucks are seriously gassing up the world. I believe that the DFC’s should attempt to replace this movement to meet with both commercial as well as ‘green’ success. If the Railways can take even 500 of these trucks off each highway each day, by hauling them with their loads, from city to city, such that the trucks need to be driven only from the origin point to the loading yard and then from the unloading yard at destination to the consignee location, the benefits are manifold.

Truck hauling services can be made mandatory

Such a hauling service would dramatically cut COx emissions, while also reducing our country’s overall diesel consumption. It will improve our fuel security situation by cutting down on oil imports, stemming the foreign exchange outflow and prune the diesel subsidy bill. The resultant Carbon Credits that would accrue should also be a big ticket encashment. The direct revenue generation possibilities and future growth prospects are also enormous, as many businesses should prefer to route their logistics onto such a service, as the entire transport process would be more reliable (and possibly less expensive) than it is currently. Further, if the service is found to be viable and successful, the use of the service can be made mandatory by law as is being contemplated in many EU nations. Surely something worth evaluating seriously by the authorities concerned. Truck Hauling is already being offered in India by the Indian Railways, for instance on the Konkan Line, but the argument here is to apply the same compulsorily on the proposed DFC's, and also expanding the DFC network that can take a large number of trucks off the highways.

In the current situation, Indian trucking largely consists of Fixed Chassis 6 and 10 Tonne trucks. The sizes of the Trucks by the various manufacturers and the resultant diversity in the platforms to be provided for hauling them would be a little complicated currently, but needs to be persevered with. In the near future, it is inevitable that all trucking will become palletized and various container sizes that are uniquely standard to India will be visible. In such a scenario, the hauling needs to be only of locked containers and local deliveries will be made using small and large Trailers trucks. This will virtually remove a majority of the trucks from the highways, leaving behind these overloaded passageways to trucks that are travelling on non-trunk routes or on short haul routes. This will also make the highways safer for all the other vehicles using them, as for several reasons, the Indian Trucker is the worlds’ worst follower of Highway and Traffic rules. Thus, the less he is let loose on the roads the better it is for all of us. More about this in the future!

Sunday, March 4, 2012

Mall Rentals in India - A Mugs Game.

I wonder if any of you have attended any of the annual events where all the stake holders of the Retail fraternity come together to discuss and debate the issues concerning the industry, showcase the developments and honour their peers? If you have, and when there, if you have spent some time in the study of these various stake holders, it would have been impossible for you to have missed the following: With a few notable exceptions, you have one bunch of guys all in snazzy suits and walking with a swagger, dripping with luxury accessories and wearing constantly smug expressions of guys (and gals) who have met all their targets and are assured of great bonuses in a couple of months. You will find another bunch of men and women usually ‘dressed down’ (intentionally) and exuding the air of folks who know it all and despite never having done anything like putting their own money at stake, will never tire of telling you what you’ve been doing wrong all these years, a third group of very busy and professional looking folk who seem to exude an air of ‘what am I doing here? I could’ve been elsewhere spending my time more profitably’, and finally you have a ragged group of ‘all-sorts’, some in suits (minus of course, the luxury accessories) and some in humbler rags looking around with an air of the hunted about them, lost and seeming like they’ve been beaten senseless by the politics and the challenges of the industry. The first group are the Real Estate and Mall Developer Types, the second are the Consultants, the third are the Vendors and of course, the last sad bunch are the Retailers themselves.

While reserving my comments on the Consultants and the Vendors for another article, I would like to dwell in some detail on the other two protagonists in this real life stage – the Developers and the Retailers. While most Retailers, particularly those in the field of the vending of FMCG merchandise, are yet to record a clean profit at Enterprise level, despite a constant struggle for the past almost 20 years of organized retail in India, the Developers have been garnering huge profits from the retail industry by controlling the supply and the purvey of the so called ‘quality retail spaces’ being offered at prices that are sometimes downright obnoxious to say the least. Mall Developers in the main Urban Centres of the country have been asking for astronomical rentals, without any assurance of traffic or footfall, which has been putting most retailers’ business models into a severe tailspin when probed for profitability. Even the most hardworking FMCG Retailer struggles to achieve a 20% Gross Margin, and are expected to show profit at enterprise level when they are hardly left with a Nett Margin of 1.5~2% after costs. While the rest of the input costs like Manpower, Technology, Asset Creation and Merchandise, are pretty competitive and driven largely by market forces, the only one cost that seems to be a mugs’ game in retail is that of Rentals. Only large space consumers like Hypermarkets seem to have any chance of getting concessional rentals by bagging sweet Anchor Tenancy deals. While the rest are literally thrown to the wolves.

Why are we encountering such high realty prices? Perhaps the whole problem is one of structure – of the entire Realty market itself, which is ruled by extreme short supply, high demand, poor quality workmanship and un-professionalism as it is largely geared to cater to the middle income housing segment. While that is true, it is also true that some of the parcels of land that have recently been released into the market, especially by way of Governmental auctions have been acquired by developers at absurd prices of upwards of Rs. 11,000 Per SFt. Thus, based on such inputs costs and the forever rising cost of quality construction, the developers of some premium mall properties have priced their rentals at simply unaffordable levels of Rs. 250 to Rs. 350 Per SFt. bracket. While I am willing to concede that Developers too face their own set of problems like archaic Zoning Laws, corruption in the Government Departments and Local Bodies and a very low FSI allowance - considering their investment. It is also true that in some zones, the Building Height restrictions add to the pressure on a projects’ viability.  But, this is only one side of the coin.

The other aspect that makes the asking rentals even more unaffordable are the methods adopted by the developers for fixing the Rental Area, and the worst offender amongst these is the so called ‘Plinth’ to ‘Super Built’ or Rental Area conversion. Retailers face problems in even accurately establishing the so-called Plinth area, as it is based on the whims and fancies of every individual developer and variously includes or excludes external wall thicknesses, half of internal wall thicknesses, peripheral columns, internal columns with unlimited confusion on the inclusion of staircases, lift shafts and other such grey areas, etc. This is unbelievably non-standard, and procedures for arriving at the Plinth Area vary from developer to developer and is often a point of negotiation! Thus, we see that once the Plinth Area is negotiated on and established, it can be close to 10% higher than the actual useful Carpet Area. The conversion of this Plinth Area to Super Built or Rental Area is again by multiplying the Plinth Area by an unexplained factor, which may range from 35% to 50%!

So why does the developer need to apply such a high conversion? Typically, in a Mall when all the Tenantable Areas are added up, they do not equal the total Construction Area, for which the builder needs to spend for construction. This includes areas that are required for common use like corridors, aisles, stairs, lobbies, ramps and engineering or service areas – all of which should not exceed 20% in a well designed building. The difference usually comes from poor architectural design that creates negative spaces, excessive common areas and poor utilization of space due to some very fanciful designs being adopted for Malls. In effect, it seems like the poor design standards and pre-occupation with Form by most Architects, which normally result in such inefficiencies in space utilization, has to be borne by the hapless retailer in the form of inflated rentals. I sincerely believe that retail space design needs to be approached purely on a very scientific basis and with an end use approach of providing very affordable high quality retail spaces. It is a myth that people will flock to Malls designed to look like Palaces, Space Research Centres from Star Wars, or gaudy Hallucinations in Glass and Light. Customers will come to clean and orderly designed spaces that offer ease of shopping in a comfortable and safe environment that houses happy and contented retailers!

When most of the contemporary malls are studied closely and their design efficiencies mapped out, we see quite a depressing picture. Especially when the final design efficiency is reckoned based on the actual True Carpet Area (actual area of Carpet you will order for that space), which is the measure of a property’s true physical potential or the Useable Area efficiency, that one actually ‘trades’ out of, can be as low as 40 – 45% of the Rental Area, or area for which rent is paid. This just not tenable. Thus, a small Health & Beauty Retailer who needs 1000 SFt. Carpet Area, ends up having to take about 1100 SFt. Plinth Area and 2200 SFt. of Rental Area. Further, as they are most often treated as small consumers of mall space, they will get almost no preferential treatment and may end up forking out Rs. 250 Per Sft. on Rent, Plus Service Tax and Rs. 50 Per Sft. on Amenities or CAM (Common Area Maintenance). Even after ignoring the Taxes component, the Occupancy Cost works out to Rs. 6,60,000 Per Month or Rs. 660 Per Sft. on Carpet Area. You name one FMCG Retailer that can make a profitable business venture while bearing such rentals. I cannot think of any.

One must also note that despite adding the Lobbies and the Concourses as ‘Common Area’ and asking tenants to pay support rent for them, these areas are used as Revenue Models by letting out the space for Temporary Promotions and Brand Building, maximizing the profits for the Mall Managements. In the ideal world, any common floor area that can be used to generate revenue must be excluded from the Common Area rental calculations. In addition to the above rent quantum, as explained earlier, most Mall Managements levy unjustifiably high charges for CAM. Compounded with these high costs, are poor Mall design criteria, resulting in odd shaped lots, lots with poor connectivity / visibility, large central columns, deep beams, low ceiling height etc., all impediments that make adoption of standardized modern retail store formats a nightmare in the Indian context.

The final nail in the coffin of many a struggling retailer would be the very long gestation period that most new Malls face in the country. For a Mall to attract and retain sufficient footfalls, many things will need to be just right, not the least being absence of competing Malls, location, accessibility, catchment, tenant mix, scale and parking facilities. Due to one or several of these factors not having been addressed properly, the mall can be simply doomed to failure, or at best, be relegated to an ‘also ran’. It is also sometimes observed that in a hurry to fill the Mall, even the Managements’ mandated tenancy mix is given the go-by and many small ‘me-too’ retailers take the spaces and offer little synergy to the other tenants. This is particularly true in ‘Sold’ Malls, where the developer has no control over who the tenant of the investor would be. We must also be sobered by the fact that Indian Mall environments are yet quite of recent vintage, and it will be a few more years of hit-and-miss research before a suitable Tenant Mix model can be reliably developed and consistently applied.

Thus, in conclusion, it is quite evident that Malls need to be built on reasonably priced land parcels, which are large enough to provide sufficient scales of operation. The Mall Managements also need to change their ‘profit-at-all-costs’ approach and prescribe their asking rentals based on more justifiable methods and formulae. I would love to someday see a Mall advertise that they will be charging only 20% over Measured Carpet Area, and then put the onus on the Architects to deliver Design Efficiencies that would make that viable. I would also love to see the day when the internal Marketing teams of Malls are given targets to recover the ‘notional rent possibilities’ of Common Areas by leasing for events, and not burdening the tenants with rentals for the same.

India will take some time yet, to achieve the standards that good Malls in similar environments like Southeast Asia offer. The property conditions are quite comparable in the two regions, but asking rentals in very successful malls in South East Asia are about half of those in India, without all the attendant opaque area measurement parameters, while on the other hand, the market potential offered by those markets is at the very least, twice that in India. Let me also hasten to add that the above story is true only at the few professionally managed malls, and the picture in the majority of the smaller developments and ‘sold’ Malls is even scarier to contemplate.

I do hope that Mall Developers in India study in greater depth the business, management and design models of Malls at similar market countries such as Malaysia or even Indonesia, and soon move in the right direction - To a saner and hopefully brighter future. A high tenant turnover due to failed retail business models helps no one - not the Mall, not the other tenants and definitely not the displaced tenant. Thus, it is absolutely no surprise, that currently, all the strutting around at the retail seminars and meetings is done by developers, and the retailers, particularly the small and medium sized ones look like a hunted lot… they are truly lambs to the slaughter.   Malls need to be built simply and efficiently and rentals charged on justifiable basis for retail to survive in India. Until that happens, we can continue to expect to see a lot of broken-hearted retailers, rueing their trust in the ‘so called’ Indian Retail revolution.