Yell SCAM at 115 decibels

Something as obscure as fixing the price of natural gas for drillers can become a hot and loaded debate in India - proof that doing anything, anything at all,  in this country has become so difficult . This is a slightly old story, but draws some important lessons.

Firstly the story itself. In March the government raised ( or tried to raise) the price of natural gas it pays to domestic drillers from $ 4.20 per BTU (British Thermal Unit - what a curious measure) to $ 8. India imports gas currently at some $12 , so on the face of this this does not seem too controversial. Yet a huge hullabaloo erupted with big charges of corruption and how the government was selling out to the Ambanis. The then Delhi Chief Minister, Arvind Kejriwal even filed a , constitutionally questionable, police complaint of fraud. The word "scam"; so fondly used by Indians was merrily bandied about. Consequently the policy has been put on hold  - another favourite Indian trait. We love to get stay orders - never mind that the stay can go on indefinitely and can cause more harm that the act attempted.

The purpose of this post is not to argue whether a fraud was committed or not - The Economist, which is as neutral as you can get in such matters has written an article saying that it is unlikely that any major wrong has been committed.  Instead , this muse is about some lessons that this affair shows

Firstly, political leaders have become completely irresponsible and can basically say anything and charge anybody with anything, without fear of censure. It is one thing to debate a policy matter and have a different view. It is yet another thing to fling wild allegations, file a FIR with the police, accuse anybody of anything and get lots of high decibel airtime in India's breathlessly loud TV channels.

The second lesson is that India has come to such a sorry state that shout scam and everybody will believe it  no matter what the facts are. In fact, who cares about the facts, if you will pardon the pun. The more outrageous the scam allegation is, the more believable it is. Corruption has become so entrenched in public life that nobody believes that there is no scam in anything !  In reality, this is not true. "Scams" are still the exception. Much of government actually functions reasonably well. We exaggerate corruption wildly. Sure there is a lot of it and some of it is quite outrageous. But , it has been my pet theory, that we are all individually far more corrupt than the government collectively is.

Thirdly, governments should simply stay away from price fixation or valuation of any sort. Whether they are straightforward or corrupt is immaterial ; they will only be seen as dirty. At best they will be incompetent. At worst, they will be stinkingly corrupt. It would be a master stroke for the new incoming leader of India to simply abolish price fixation with the stroke of a pen. Where there are large markets, preferably international (like the price of natural gas), simply let the market decide. Where there are no reference prices, run an auction.

But the most important lesson of all is for Reliance. This was a case probably where Reliance didn't do much wrong and has actually suffered significantly (read the Economist article). And yet it would be a difficult task to find a single Indian who believes Reliance is clean. What an image to build for a company, and for a family. This image has been built over time for the following reasons

- The father built the company by taking every advantage of the license raj and manipulating government policies in the past. There is little doubt the he took business-politics nexus to great heights

- The company is secretive, aggressive and has a reputation of dirty tricks. Nobody, be it customer, supplier, and probably even employee, likes the company.

- The Chairman builds a 27 floor most expensive house in the world right in the middle of Mumbai when the majority of the population in the city  lives in appalling housing or none at all

- Making money is the sole obsession of the company and the family - they do very little else for the community unlike other entrenched business families like the Tatas and the Birlas

Little wonder that when somebody shouts scam at Reliance it is instantly believed, whatever may be the facts. In the long run, with a reputation like this, the company will not survive. The elder and the younger Ambani may wish to ponder over this fact - they have made enough money and one more rupee , or one trillion more rupees will not make the slightest difference. Instead they may like to spend the rest of their lives rebuilding their, and their company's, tattered reputation.  When you are dead and gone, your greatest legacy is not your wealth, but your reputation.

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Pip pip, toodle-oo; its just not cricket

If ever there was a misleading title to a post, this must be it. This is not about cricket at all. Neither is it about Bertie Wooster. Instead it’s a most ungentlemanly rant.

Readers may recall that I had railed about the behaviour of US Congressmen towards Akio Toyoda here. Something similar has now happened with British MPs and Kraft. This growing trend of activism by politicians towards business is dangerous.

What happened yesterday was this. Kraft was “summoned” to appear before the House of Commons’ business, innovation and skills committee (let us lightly pass over the delicious irony of the words skills and innovation being featured in the same sentence as MPs !) Unlike the brave Toyoda-san, Irene Rosenfeld, Chairman of Kraft ducked this one and sent Marc Firestone Kraft’s head of corporate and legal affairs. Marc Firestone, as far as I know, is a US national. He is not a subject of Her Majesty and British MPs have absolutely no right to behave as they did with him. You can read an account of the select committee hearing here. I happened to listen to snippets of the hearing on BBC Radio yesterday. Marc Firestone was virtually in tears and the bullying by the MPs was downright scandalous.

The problem relates to Cadbury’s Somerdale plant near Bristol. Well before the affair with Kraft, Cadbury had planned to close this factory. During the very public wooing of Cadbury, Kraft unwisely announced that it would not close the factory in a dumb move to get public support. After the deal had been done, Kraft announced that it would close the factory after all, saying that it had not known previously how far advanced the Cadbury closure plans were. Kraft clearly did a mistake, and was blatantly at fault. But the crux of the matter is this – it has done nothing wrong legally.

It is irrelevant to this argument whether Kraft was right or wrong. The British Parliament has no right to demand anything of Kraft US. Sure – it can proceed against Kraft UK. It can certainly action against British nationals, if they have done anything illegal. But other than that, it has no business calling foreign nationals and bullying them.

Unlike Toyoda san, Irene Rosenfeld chose to duck this, but for the wrong reasons. If she had upfront stated that British MPs had no right to demand anything of her, I would have applauded. Of course, saying such a thing would be a PR suicide. Instead she chickened out quietly. That would equally haunt her as a PR disaster worse than if she had come. Some readers of this blog know of an alternate person she could have sent, who I believe would have acquitted himself a little more credibly. On second thoughts, he would never have come; knowing which battles he could win and which he couldn’t. Would love to see some comments on this from those who know him.

This growing political interference with businesses needs to be condemned. I could mouth some obscenities. But then , although the sun has set on the British empire (maybe the MPs haven’t noticed it as yet), some of the glories of British culture are alive and well in the Commonwealth. The British MPs behaved like boors with Marc Firestone. I will express disapproval in a more British way. Pip pip, toodle-oo ; its just not cricket old chap.

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