RRExit - The exit of Raghuram Rajan, Governor of Reserve Bank of India

The referendum on Britian's possible exit from the European Union taking center stage over the past few weeks and the term #Brexit becoming a trending topic on Social Media forms the background to this post. For, at about the same time, the story about Raghuram Rajan's impending exit broke, and thanks to the wit of India, we have the tongue-in-cheek term #RRexit being coined. 

As usual, the reactions have been on predictable political lines, with UPA and left leaning politicians heaping praise on Rajan and heaping scorn on NDA for not retaining a truly great RBI Governor, and NDA politicians happy to see his back. Like former Finance Minister P Chidambaram who was responsible for the appointment of Rajan, said that he was not 'surprised' by the development. "This government did not deserve Dr Rajan. Nevertheless, India is the loser," Nobel laureate economist Amartya Sen said, "It is unfortunate if Rajan's exit is because some government member is against him. His exit is a huge loss." I guess Politicians will be politicians (Sen included), and their vision is always blinkered by agenda or the next poll, but I was surprised and disappointed with the reactions of many of the Business Honchos like Infosys founder Narayana Murthy who said Rajan deserved more dignity than what he was treated with. "Believe we need the help of every smart Indian to remain on current growth path." HDFC chairman Deepak Parekh said, "It's a pity to lose him. I'm wondering what has precipitated this action by the governor. I am sure the government, at the right time, would have considered giving him another two years term as most governors have got." Even a visible supporter of the NDA like Mohandas Pai tweeted that it is a "very sad day for us great talent driven away by alcontents, cronies...deeply concerned."

In addition to Indians and Indian Politicians, we have the international press and some world leaders predicting that #RRexit coupled with the possible #Brexit would unsettle India, and lead to a fight of capital from here to other markets.

I firmly believe that all these reactions are a little unfair. There is no doubt about the credentials of Raghuram Rajan. My reading is that he is an amazingly well put-together and intelligent economist, but one has to admit that he is essentially, a left leaning one. He was a good professional addition to the UPA government and was perhaps it's only shining light, considering all the scams and economic downturns we had to face over the two terms of the UPA.

However, one must now acknowledge that India has overwhelmingly voted for a Right of Center dispensation and it is quite evident that their Economics and Rajan's Monetary Policies do not jell. So many times, the Government and the RBI has not seen eye to eye, especially on Inflation and Rate Cut policy. So one has to agree, that while he may be a great guy, but currently, he is obviously an unsuitable candidate, in the perception of the current dispensation. 

I'm not surprised that he was perhaps asked to go. I firmly believe that with every regime change, all appointees of the previous dispensation must offer to tender their resignation and await reappointment by the new Government. It would be the professional thing to do. Unfortunately, that is not a practice in India, and appointees seem to think that they are somehow required to hold on to their posts and push the earlier dispensations' agenda. This needs to change.

The NDA has an overwhelming mandate to rule India as they see fit and they have to prove that their approach, in terms of Fiscal Policy and Governance is better for the nation than the ones pursued by the earlier Government, and has to do so within 5 years. Hence, there is no argument that they need to have all their Tools, Tackles and Workmen exactly as they want them to be. It is only fair that it is so.

I further believe that Rajan was foisted on the nation in the last year of UPA rule for a 3 year term and that was not perhaps the ideal thing to do. They could very well have given him 2 or 3 terms when they were ruling but chose not to. It is patently unfair of them to expect the NDA to do so. However, having said all this, one fervently prays that the choice of person will be apt and worthy of the position that being the Governor of the Reserve Bank of India bestows on him / her. The next few weeks will be really interesting!

Fate of the Make in India program?

Recently, the Modi Government launched the ambitious ‘Make in India program’, where investors from the world over were requested to include India in their manufacturing plans and to invest extensively here. The aim is to convert India into a manufacturing hub for the world, very similar to China, as we offered the largest bunch of young, trained and motivated workforce's in the world. Intricately planned and amazingly thought through, details of Sectors that are desirable, the ‘Smart Cities’ that are being developed into such hubs and also the ‘Industrial Corridors’ that would work in unison have all been identified, but has any focus been put on one aspect – The Ease of doing business in India?

It is quite embarrassing that as a nation, we seem to unfailingly go after all our big FDI investors with a hunting crop! Tax notices have been served in the past on Vodafone, Nokia and BMW. Is this perhaps because our rules are so opaque, and our bureaucrats love to keep things shrouded in mystery and adhocism so that, suddenly, one fine day, they have the opportunity to use their Discretionary Powers to suddenly re-interpret the rules? Why is it not possible to publish a clear document recording all the Rules, Legal and Financial compliance's at the time of granting of the License? Will it not avoid this silly season of litigation and arbitration with Governments pulling in their ‘Sovereign’ punches – as Finland was forced to do some months ago?

Now, sadly, Nokia has announced that it will shut its Chennai facility on the 1^st of November, as it couldn't be transferred to the purchaser, Microsoft on account of pending Tax Claims by both the State and Central Governments. This move has put some 6,600 people out of work (directly) and adversely affected some 10,000 others indirectly. What will happen to Vodafone and BMW, next? With this kind of business climate and officialdom, the Make in India campaign is doomed to failure, unless the License-Permit Raj run by the bureaucracy is eliminated.

Just a couple of days after posting this article, I learn with dismay that the World Bank has demoted India a further 8 places to be 142 out of 189 (please see Economic Times link), for the period June 2013 to May 2014, which is the last year of the UPA Government. Thus, it is amply clear that all efforts of the UPA Government, if anything, did nothing to improve the business climate in India, leaving this unenviable task to the NDA Government that is now in power. The World Bank was thankfully quite candid in mentioning that this dismal performance cannot be a reflection on the performance of the new political dispensation which had been in power for a few days at the time of this evaluation.

I do hope that this will be a wakeup call to the NDA Government and they will configure all their policies in such a manner that India reaches to within the top 25 countries in year one, and higher as the years go by. For any foreign investor, who has 141 options better placed than India, it is not conceivable that he will overlook all 141 options and pick India to invest in. We have got to change the way we do business. 

Update as on 24th November 2014.

Since I wrote this article, I am thrilled to note that the Government of India in a surprising exhibition of alacrity, adopted the World Bank Report Ease of doing Business as a guidance tool, and has promised that they will configure the policies in such a manner as to be in full consonance with the requirements of Ease of doing Business and has even promised that they will try their best to ensure that India figures within the top 50 in a years' time.

Needless to say, this a sea change for an Indian Government and the openness, the speed of response and the appropriateness of the response is most heartening. 

The Make in India team have also since become quite active on Facebook and Twitter (@makeinindia) and have been collaring many followers, who, one would imagine, would encourage, motivate and guide the policy with their comments, including me.

More recently, a report titled Country Brands Index came out, something that I was personally not aware of, wherein they analyse a country's strengths in various criteria - economic, environmental and social and rate a country on how it is perceived by the rest of the world. Hence, a country that is high in the perception index, enjoys a high degree of reliability perception and hence people would be less hesitant to buy a product manufactured there. Thus, countries themselves become brands! 

I was amazed that just when India embarks on a Make in India program, a report, upon aligning with which, would ensure the success of the Make in India program, came to my notice, and I have introduced the same to the Make in India team. I do hope they will recognize the benefits and work toward a high CBI rating in 2015 and make us all proud. 

If India rates within 25 on the #EaseofdoingBusiness and within Top 20 on the #CBI2015, there will be nothing that can stop the flow of investment to us.

http://economictimes.indiatimes.com/news/economy/indicators/india-ranks-142-in-latest-ease-of-doing-business-report-world-bank/articleshow/44967304.cms

http://www.thehindu.com/business/Industry/nokia-to-shut-down-its-chennai-factory-from-nov-1/article6478317.ece

http://www.makeinindia.com/

Great outreach, Minister of Road Transport & Highways

The tragic loss of Cabinet Minister Shri. Gopinath Munde in an urban road accident, caused by something as silly as a jumped red light, and the fact that despite having one of the lowest vehicular densities, India holds the dubious distinction of suffering the highest road fatalities in the world, brought about a change in the attitude of the Government, and is taking pragmatic steps in attempting to curb this loss of life. 

In this connection, I was really impressed by an outreach program launched by the Ministry of Road Transport and Highways, who have drawn up a comprehensive road safety bill, and has put the same out in the public domain and quite creditably sought inputs and suggestions from the public. Everyone must salute this outreach of the ministry and extend all support. 

http://morth.nic.in

http://morth.nic.in/showfile.asp?lid=1424

http://morth.nic.in/index2.asp?slid=1479&sublinkid=933&lang=1

As I have written before on the topic of Highway Safety in this blog, and I was hoping to also cover the aspect of Urban Traffic Safety in another article, this opportunity was a Godsend. I reproduce the mails I sent and my suggestions:

“Suggestions for the Road Transport and Safety Bill” 

Dated 14th Sepetmber, 2014

"I congratulate you in taking steps to make our roads safer. I also applaud your outreach program in seeking public opinion and thank you for this opportunity to offer my suggestions.

I would like to bring to your notice that some automobile companies seem to treat India as an unregulated third world market and resort to shoddy adaptation of their international left-hand drive vehicles before releasing them in India. Thus, in some brands of cars, among other shortcuts, the trafficator switch remains on the left, making it very confusing for people who normally drive cars which follow the Indian standard of trafficator switch on the right. In a critical situation, this may lead to accidents. India must not permit this anymore.

Further, car manufacturers also follow purely commercial considerations while deciding on the inclusion of safety features which make Indian cars quite unsafe to use as even basic safety features such as Crumple Zones, Air Bags and ABS are treated as 'luxury' features.

I request you to clearly define what constitutes an acceptable Indian automobile, with some of the minimum safety standards being recorded in an advisory and enforced strictly. Provision of 2 Air Bags, Crumple Zones, 5 Seat Belts and Trafficator on the right should be made compulsory, is my submission.

Another area of grave concern for us, is the fact that our National Highways constitute under 10% of our road length but contribute over 30% of road fatalities. Thus, just making our highways 4-laned are not making them safe, as we do not enforce any regulation of the highways to make them into safe traffic ecosystems. It is of utmost importance to urgently introduce a Highway Code that restricts access of tolled highways to certain classes of vehicles that are manufactured highway worthy, and also define lane restrictions and speed restrictions for users.

Needless to say, this has to be implemented and administered very strictly without jurisdiction constraints. Perhaps a National Highway Patrol is the need of the hour. In this area, I would recommend the study of the Malaysian model of the Highway Code and it's adaption to our country".

Thanks & regards

Dated 17th September, 2014

I had written to you with a couple of suggestions on 14/09/2014, and I write again to bring to your attention another aspect that plagues our traffic systems and renders it quite dangerous. I hope you will consider bringing in suitable changes to address the following:

Unlike in most of the developed world, driving in India is viewed as a purely technical exercise, of getting from point A to point B without causing a collision. The License testing system that is in place also emphasizes this, and no credence or focus is laid on courtesy and discipline. India is known to have the “most civilized people with the least civil drivers”, and this has got to change.

• Never giving way to traffic on the right at an intersection,
• Ignoring traffic lights in the absence of a constable or during off peak hours,
• Not giving pedestrians the right-of-way even when they are using the Zebra Crossings,
• Not giving Emergency Vehicles the right-of-way,
• Overtaking from the left,
• Honking needlessly and aggressively,
• Driving on the wrong half of the road to beat a minor jam (and causing a major one),
• Blocking intersections when stuck in a jam or in slow moving traffic,
• Parking in a callous manner like hogging 2 parking slots or parking such as to inconvenience other road users,
• Arguing loudly and crudely or getting physically violent when involved in an accident,
• Ignoring lane discipline and
• The tendency to run away after witnessing or causing an accident, especially after causing someone to be injured,

Are all unacceptable in modern civilized societies, and India must aim to become the benchmark in courteous and civil driving.

I request you to consider the introduction of a set of rules that impose a very high expectation from a road user which are tested by the RTO’s during License issue / renewal, and ruthlessly failing anyone who does not observe these courtesy rules. Perhaps we need a booklet that lists all the expectations from a driver, 

• Including what he is expected to do when he is involved in or witnesses an accident, 
• Who gets the primacy of road use, 
• Incident scenarios with expected behavior mentioned thereof, 
• Honking on the road unless it is a dire emergency, should be eliminated totally, and 
• Every road user made to think about; and make all allowances for other users needs to be encouraged.

I do hope you will see value in this suggestion, as it will surely result in minimizing urban traffic accidents and fatalities thereof, and make driving on our roads a less dangerous and stressful exercise. I would like to mention here that changing driving behavior is a generational change, and if we bring in the rules now, we may see genuine change in 10-15 years. Let us waste no more time.

Thanks & regards,

Hemanth Sharma

www.sharmahemanth.blogspot.in

Selection Criteria for Retail Properties in India

I recently got an opportunity to consult with a small retail chain, thanks to a consortium I’m a part of and I was asked to write a small piece on the important points to be considered while selecting properties for retail. I promised to revert with “8 to 10 Bullet Points” in a few minutes and ultimately churned out this report that runs into six pages! As it is compressing some 22 years of experience gained by leasing and or project managing close to a million square feet of space, I thought it would be a good idea to share it with others who may find the information useful, or for students of retail who could understand the dynamic of site selection based totally on personal experience.

Opening Remarks

Please note that these points are generic points and hence are not placed according to any priority, but sometimes, depending on the Format, Size, and Target Audience, some of these points may attain a higher level of importance or even a criticality, which needs to be established subsequent to a detailed study.

Further, the criticality of Property selection is heightened when one is choosing a High-street location, as the costs are generally high and the foot traffic is not always assured. Thus, the following considerations would be most relevant for the selection of High-street locations.

Mall location considerations are entirely different and will depend on the success of the mall to attract the appropriate footfall in sufficient numbers, together with the design of the mall, the traffic flow and store design. Thus, mall locations will require a detailed and separate study.

Considerations

Property Identification can be clubbed into four main considerations:

A.      Format / Business Considerations

B.      Commercial Considerations

C.      Technical Considerations

D.     Hygiene Considerations

A.     FORMAT / BUSINESS CONSIDERATIONS

Depending on the merchandise being sold, location would be ideally located in certain markets in the city where similar merchandise is sold or is famous for. Thus, taking on the traditional or established players in the city and offering a differentiated experience or merchandise to be considered.

Audience Classification

•          Luxury
•          Premium
•          Budget

The network plan will need to be defined. Under each of the above classifications, one needs to clearly define whether one is targeting the following groups:

•          Impulse /
•          Daily Needs

Thus, an Impulse Luxury item will need to be located in the middle of a high income shopping district that hosts sufficient footfall of the audience who can afford the merchandise, on the other hand, Luxury Daily Needs products can be a little less exacting in choice of location as one hopes to promote premium and budget customers to try the merchandise. Similarly, Premium Impulse merchandise needs to be very aptly located on High Street / Malls / Luxury Destinations.

Work Place / Residence Locations of Audience

Studies have shown that a large percentage of customers prefer to stop by and shop for their requirements while driving on the way home from work. Thus, being located on a street that connects a popular work district to a high end residential district is always a good idea. However, it is critical to be located on the left side of the road (Indian driving characteristics).

High Street Considerations

When a High Street Location is being considered, one has to primarily determine whether the street is a One Way or not. If it is a one-way and does not funnel people from a work district to a residential district, it will not be an ideal choice.

Distance of Storefront from the Street

Most retail formats require vast amounts of visibility into the store to encourage passersby to promote themselves to visitors after being enticed by the displays in the store. Thus, if the storefront is too far setback from the pavement, the impact of the display is minimized.

Availability of Storefront Parking

Most formats that have some parking facilities in front, are seen to perform better than those on high-streets that do not have parking. Thus, properties that have some parking in front of the store, subject to the point about the distance of storefront from the street, will be desirable.

Store size

The size of the store shall be as per the requirements of the business, and shall be able to carry the entire assortment of merchandise correctly and efficiently. The added requirements of the space for the Stock Cycle and the Staff Cycle need to be provisioned for. If the space is too less, this will result in the assortment getting pruned, and if the space is too large, it will be inefficient and result in higher costs.

Width of Frontage

Based on the format under consideration, the site being selected shall offer a minimum credible width to achieve a defined Entrance, offer Good Visibility and ensure an Attractive display.

Site Aspect Ratio

This is the ratio of width to the depth of the site. Depending on the format, rectilinear spaces would be ideal, where the width is not too large and the depth consequently too shallow. On the other hand a narrow frontage with a very long throw for the depth is not desirable.

Signage Space

One of the most important aspects that need to be considered. Buildings that are intelligently built will have made specific and sufficient planned spaces provided for signage. The store will require adequate signage length to make a good impact and further, the width of the signage shall have a minimum such that a standard width of material can be used for the signage without wastage.

Visual Clutter

Storefronts that have clean signage and ensuring that the width and specification adopted by all the tenants of a building follow the same guidelines, the visual presentation will be orderly and impactful. If everyone follows their own standards, this will result in visual clutter and nobody’s signage will be effective. Thus, poorly designed buildings that have not specifically planned for sufficient signage needs to be avoided.

B.      COMMERCIAL CONSIDERATIONS

Cost of Rent

The monthly cost of rent outflow shall be based on the profitability analysis for that neighborhood. The potential of the location to support its rental shall ideally be judged on the basis of the expected turnover at that location. Based on analysis, rent outflow shall be pegged at an Allowable Percentage of the Expected Turnover, say 10%. Thus, if the required turnover level cannot be achieved within the time frame agreed, the site would be under severe strain.

Rent Escalation

All landlords will expect the rent to escalate at a particular rate each year, and would typically expect an escalation rate that covers for inflation. This can be bunched together and charged once in 3 years to ensure that the store gets a chance to stabilize before suffering a higher rental.

Cost of CAM (Common Area Maintenance) or Utilities

In some cities, Commercial properties are required to pay higher costs towards Water and Power Utilities. Thus it is important to understand the cost of utilities fully before committing to a property. In managed properties like malls, this is a shared expense and depending on the professionalism and efficiency of the mall, the costs can vary between 20% to 50% of rent outflow. Thus, it is as important as the rent, and similar to rent suffers from some escalation too.

Cost of Signage

Municipalities of several cities charge a license fee for the signage f a store, beyond a particular size or area. This could be of sizable value and hence it is important to peg the cost of this license as part of the input Operating Costs.

C.      TECHNICAL CONSIDERATIONS

Availability of Power

It is important to correctly determine and establish the amount of Connected Load that one will require. Typically, all buildings would have been designed on some assumptions and the power connection available would be a finite defined limit. If the formats requirements exceed the permitted load / available connection, the enhancement costs are quite prohibitive and due to the shortage of power in most Indian states, quite long in lead time.

Use of Generator

Generators are used when the connection is of lower capacity or is not available to the store at the time of launch. However, captive power generated using fossil fuels typically costs about 2.5 times public utility power, and hence quite unaffordable in most instances. Even when the connected load of sufficient capacity is available, generators are used when there are power failures and due to the cost consideration mentioned before, the absence of mains power for extended periods of time could have serious financial impact on the store. It will not be out of place to mention here that power generated by use of fossil fuels is highly polluting in nature and it will be necessary to minimize the use of such devices.

Space for Air Conditioners – ODU’s

The building shall have sufficient setbacks and locations that can take the mounting of the required number of air conditioning units. As these generate considerable heat and also a fair amount of noise, they may be objected to by neighbors; hence it is critical to locate them appropriately. Conversely the length of the piping permitted between the ODU and the IDU is finite and has to be taken into consideration while deciding if it is feasible to have cost-effective air conditioning in the site.

Ceiling Height

Most retail formats have some standard fixtures that they need to display and stock their merchandise, and hence the services need to be placed above that height. Thus the ceiling height or more accurately, the clear height below the lowest beam of the site shall be sufficient to house the fixtures and also have remaining height in which false ceilings, lighting, ducting and other services can be comfortably run and efficiently maintained.

Columns

While columns are an integral part of any building, it must be noted that modern and well designed buildings have a minimal number of columns, ensuring that the space utilization is of a higher efficiency. Multiple and closely spaced columns result in the racking not being laid out in the most useful manner resulting in low efficiency.

D.     HYGIENE CONSIDERATIONS

Handicapped / Wheelchair Access

Some municipalities insist that certain types of public buildings provide for free and unrestricted handicapped access. This needs to be evaluated, and checked if the building under consideration requires the same, and whether it meets the criteria.

Toilets

Availability of clean and safe toilets for staff and customers.

Safety and Security

The site that typically has staff working till late hours, stores high value merchandise or stores cash collections overnight shall have sufficient evaluation of the safety and security aspect for all the three store cycles, i.e. The Stock, Staff and Customer Cycles.

Presence of Pavement, absence of Electrical Infrastructure

Other aspects that need to be looked into are whether the pavement / footpath in front of the store is sufficiently wide and safe for customers to use, and whether there are any obstructions from Transformers, Telephone Junction Boxes, etc that can adversely affect the visibility of the store and also render the pavement unsafe for pedestrians. Particularly, the presence of un-cleared garbage and badly broken down pavements and roads in front of the stores needs to be avoided.

Traffic Conditions

To permit customers to cross the road with ease and safety, the traffic shall be sufficiently light and well regulated, or if the traffic is very dense, safe Zebra Crossings and or Subways / Skywalks shall be available at a reasonable distance.

Legal Documentation and Ownership

Properties need to be leased from people who are the rightful owners and sufficiently rigorous due diligence needs to be carried out by an expert law firm to establish the same. The Lease Document shall be drafted in a scientific and totally legal manner that can stand to scrutiny by any public office. Finally, properties that are taken on lease for commercial activities shall be declared Commercial and documented as such. Residential premises shall not be leased for commercial activities as this is a contravention of the law.

Concluding Remarks

While the above list is a comprehensive list of Look-Out-For items for a person entrusted with property search, each format will have its own specific and specialized requirements that need to be studied in detail and locations appropriate for the business identified. In the event that a more specific study is required to define the requirements of a specific store format, the same can be provided subsequent to a detailed study of the format, the assortment, the profitability and the catchment analysis.

Ideally, for a chain store a detailed Net Work Plan shall be drawn up in consultation with Operations and Marketing, reflecting the market potential of the city and the desirable locations that one would like to be present in, and based on the same the site search should be initiated. Please do contact the undersigned for more detailed support.

Thank you.

Why the people of Karnataka rejected the BJP

In the background of the decimation the BJP and the KJP faced in the Karnataka elections the other day, we hear a lot of people conducting Post Mortems attributing it to various reasons like infighting, the Yeddiurappa Factor and others. I believe that none of these are relevant. The people of Karnataka have voted out the BJP as it has failed them, just like every other political party since the last 10 years or so.

I remember the days when the last Congress Government was surprisingly ousted and JDS wrested power, I had felt a distinct sense of foreboding when they claimed that Congress lost power due to their urban centric policies and undue concentration on Bangalore, and vowed to ignore Bangalore and concentrate on Farmer issues when in power. While this may have given the JDS good political dividend for a few years, this policy shift killed the Goose that laid the proverbial Golden Egg by stifling investment in Bangalore, and consequently, the revenue generation for the rural focus works started dwindling. This was also the start of the downfall of Bangalore and since then, it has become an increasingly unlivable city.

Without going into the sympathy factor for the BJP when it replaced the JDS as the next Government, BJP had been given a mandate to rule the state on the claim that they were a ‘party with a difference’ and that they would usher in an era of development and growth. However, they frittered away that mandate by indulging in excessive corrupt practices wherein virtually every Government Department was covered in the muck of making a fast buck. Governance as a result suffered and the State started going rapidly downhill. For over 50 years, Karnataka had boasted of higher than National Average growth rates and also seen excellent performance on most social indicators. Sadly, today we have amongst the worst infant & young mother mortality and malnutrition rates in the country. We have fared badly even in terms of female literacy, gender ratio and safety of women and many other social indicators, leading to a drastic fall in the quality of life and outlook for the poorer sections of the state. People may forgive a Government for any ills, save for the absence of Governance. That is perhaps why the BJP and KJP have both been voted out.

I hope they will introspect on this.

A new role for the Highways Authority of India

When the National Highway Authority of India (NHAI) was formed, India was still reeling from the ravages of colonial rule that had impoverished her, and left her with scarce resources and scant infrastructure. Thus, the then role of the NHAI was to deploy a portion India’s revenue collected by the Central Government to create roads for ushering in prosperity, connectivity and development. At a time when no individual possessed the wherewithal to invest in the infrastructure needs of the nation, the NHAI did what it could to meet its mandate.

The NHAI first created single lane highways, that very slowly evolved into double lane ones and right up until even the late Nineties, India hardly boasted of a decent highway, even by SAARC standards. The roads were created to connect every village and town, and as was the thinking back then, actually meandered around and passed through virtually each and every habitation before reaching its destination. Journeys were long, uncomfortable and perilous.

Fast forward to today. India has several corporate entities that can invest the humongous sums of money that is required for the development of the Highway infrastructure, and many of them have invested and built thousands of kilometers of four and six lane highways of very high quality, that run in the shortest distance between the main destinations, and towns along the way are served by connecting roads, rather than the highway itself meandering out of alignment. (In another article I had commented on the lawlessness that exists in these highways, but that is different story altogether). Thus, what one increasing sees nowadays, is that the NHAI need not be required to spend scarce national resources in the creation of highways, as private enterprise is more than willing and also well able to do this, and have delivered infrastructure of higher quality than what the NHAI was able to do for over 50 years. Perhaps, it is time for the NHAI to morph itself into a different kind of entity playing a slightly different kind of role.

The NHAI can concentrate on the creation of Highways in regions of the country where private enterprise is unwilling or unable to do so, like politically sensitive and security challenged areas. The rest of the Highway building should be entrusted to private enterprise, and the NHAI should play the role of an Administrator of the Highways, rather than the creator of them. My understanding of the role is elaborated below:

Consider this. I recently drove from Bangalore to Chennai, a journey of about 340 kilometers. During this very short journey, I had to stop, get into somewhat long queues of vehicles, and pay small sums of money at no less than 7 toll collection booths, each transaction consuming close to 5-8 minutes to complete. This added a needless 40 to 50 minutes to my journey time, and also contributed to unnecessary irritation and tension, as the toll collectors were generally uncaring about the contemporary requirement of journeys having to be safe, fast and tension free experiences. I do understand also that each stretch of the highway was built by a different investor and thus, each of them was legitimately entitled to revenues generated from the road users. What I am against however - is permitting each of them to repeatedly impede my progress by collecting small sums in payment, delaying me by insisting on exact change and other such inanities.

This is where a new role of the NHAI can be considered. The primary mandate of the NHAI shall remain as the creation and maintenance of Indian Highways, but, instead of directly getting out there and constructing them; I sincerely believe they should rather concentrate on the following:

•       Contracting out the creation of Highways to the private sector wherever possible, and directly involve itself in the creation of only very critical or financially non-remunerative highways which are required in the national interest.
•       Defining a contemporary Highway Driving Code and the setting up of a Highway Patrol to very strictly implement the same. This will include clearly defining which vehicles are permitted to use the Highway (banning those very slow moving 3-wheelers, and mini transport vehicles for a start), and for those that are permitted, which lane they are eligible to use, etc. Code of Conduct during an accident, etc.
•       And finally, the main focus of this article - Collecting the Toll from the road users on behalf of the investors, and depending on how many vehicles use a particular stretch of road, set up a mechanism for making a payment to the concerned investor. Permit me to briefly explain the concept below.

I am not discussing about the existing Smart TAG or On Board Transponder Units. These are used by daily users of the Highways, and is an excellent solution for such users. While the investment in the infrastructure required is really quite high for the TAG system, I’m sure they have been found to be justified over some usage parameters, considering their popularity all over the world. My discussion is centered on improving the road usage experience of occasional Highway users, who have to today, stop and pay cash. My suggestion is that the whole process be made cashless at the Toll Booths. What if all occasional Highway users can buy a NHAI Pre-charged card, for a particular sum, let’s say Rs. 500.00, which can be made available at every store or shop that sells Mobile Telephony Recharge cards. Highway users should then be able to just insert the card into a slot and retrieve it after a few seconds of processing time, and then drive away, saving many precious minutes. Each time that the card is inserted, the following transactions can occur – deduction of the current Toll amount, updating of the Balance in the Card, capture of any other data from the card and also the display of Currency Balance information on the LED screens. In my reckoning, most of the required infrastructure already exists at every Toll Booth, and minimal additional equipment will be required to accept the payment made with the proposed NHAI Cards. If on occasion, the charge in the card is insufficient, the road user should have the option to revert to cash payment mode. If this method of payment is implemented, I’m certain that a large majority of the road users, particularly those who are not technology challenged will gladly adopt this.

The benefits of such a system of pre-collection are manifold. The road users will have a faster, more efficient and less stressful journey, while the NHAI will be the main beneficiary as it would be able to collect a very large sum of money upfront, and will be required to consolidate a weekly or monthly payment settlement to the investors based on the actual usage which will always be lesser than the face value collected for the card. Since the revenue collected is always larger than the payout, the NHAI will also develop a large and attractive financial float, which can be used for funding its highway expansion, technology upgrades, etc. Even the investors will stand to gain much by adopting this system of toll collection as their highway usage efficiency will dramatically increase, the safety of the road users will be hightened and they will also see the reduction of security concerns involved on the collection and handling of large sums of cash at remote locations. They will also be able to minimize the quantum of manpower required to man a toll plaza while increasing the efficiency of the transaction which will drastically increase their Nett Earnings per vehicle. The main benefit to all will be the minimization of leakage, which could occur due to underreporting of traffic by the Booth Collectors, collection of incorrect toll, and other such issues.

Some user friendly features in the Online Interactive Portal that will be necessary to manage customers will be very helpful, like perhaps getting a downloadable Statement of Account on a particular date, which will be useful for people who need to claim reimbursement of expenses. Also, one should be able to recharge the card using the portal by linking up with payment gateways of Credit Cards or Internet Banking. Unused currency in a card should also be refundable by direct Credit into ones’ Bank Account, etc. Needless to say, a portal such as this, which has the ability to garner literally millions of eyeballs, should also lend itself to lucrative advertisement opportunities. The possibilities are endless and very exciting! Soon, we may see one such card being used for many other transactions like Metro Rides, Bus Rides, Purchase of Fuel, and Payment of Fines for infractions caught by the Highway Patrol, etc., as the only issue would be to track the usage of the card and ensure that the correct entity receives the required amount as payment.

I wish and pray that the Management of NHAI will agree that my bullish enthusiasm for such as Card Based Payment system is well-placed and will start thinking along these lines and usher in a very early implementation. I will look forward to the day this happens.

Additional Reading:

http://sharmahemanth.blogspot.in/2012/03/indias-new-highways-are-like-lawless.html

Multiple Toll Collection receipts for a short 340 Km journey.

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.