Taxing Airfare

A month back while returning from Bangalore (my first visit after the new international airport was constructed), I encountered a most vexing announcement- ‘All domestic departing passengers are requested to pay Rs. 260 as User Development Charges at the terminal entrance’ Now as a rule I am not against levying of taxes and it is not a question of money either but after the huge amount of taxes which airline companies already charge from the passengers (as everybody knows normally fare charges constitute only 5-10% of your total ticket amount; the rest are pure taxes), paying any sort of tax again was something of an anathema to my typical CA brain (Ahem!). When I went & asked the airport authorities I was told that the private developers of the airport were levying taxes for ‘building and maintaining’ the airport. Sic. Then I realized that about 4% of these charges goes in the Govt’s kitty. In short, we are being charged for making use of something which should have been our right, since most of us pay our taxes regularly which in ordinary parlance is anyways supposed to be used for infrastructure development issues, right???. This is a blatant example of 'double taxation'. I had no option but to shell out the money, grumbling and mumbling that inspite of being a frequent flier out of Mumbai and Delhi airport for the last so many years, had never heard of such ad-hoc charges being levied! Later on, I learnt from my cousin, that such charges are also being levied at the new Hyderabad airport.

Little did I know that the Bangalore/Hyderabad model would find favour with all airport maintenance authorities in the country. Today news has come in that Govt has allowed the GMR-led consortium Delhi International Airport Ltd (DIAL) that is operating and upgrading Delhi airport, to impose airport development fees (ADF) on passengers upto Rs 200 on domestic traveling and 1300 on international traveling. And news has come in that not to be left behind, Mumbai Airport has also applied to the Govt to allow it to levy ADF.

In short, your air journey is going to become more taxing, literally!!

Love Futures & the US marriage market

First things first, a disclaimer- Guys, plz take this article with a strong dollop of humour. No offenses intended!

Thats what everybody in my group is talking about these days- 1. Markets & 2. Marriage. Well, the first topic is an occupational hazard...u just cant stop talking about it, especially in the current times. The second, well every single female (and some guys too) in my batch has been facing some heat at the home-front about their marriage-plans. So almost everybody is exchanging their tales of woe- one way or the other. But guess, we guys are so used to make money out of everything, even marriage as an area of possibly minting some money doesn't seem far-fetched :-) (P.S. The marriage mall idea i had mentioned in an earlier blog arose from one such merger of the two...)

Take another example of my conversation with AM the other day. Like me, AM is a Chartered & a banker. She is a sweetheart, a true-blue friend & about to get engaged. With the virtue of her having worked in NSE earlier, we were discussing the recently launched currency-futures. The conversation went something like this...

Me: So what do u think, will these futures.....

AM (shrieking): Yeoooouuuuiieeeee!!!!!!!!!!!!!!!!!!
(Almost sounding like a cross between Celine Dion singing & Tarzan yelling)

Me(panicking): A, what the hell happened? Are u alright?

AM(excitedly): Hey Veekay, guess what, I have a great idea!

Me(non-plussed): Huh??????

AM: Hey, we have so many futures- stock futures, commodity futures, currency futures? U know why- bcoz people think that their movements are a gamble nd they wanna hedge their losses, right!! But u know which is the biggest gamble on earth?

Me: Kya?

AM (more excited than before): Marriage, stupid! What if there were 'Love-futures'? I mean what if somebody could buy or sell assets that pay in proportion to the number of years the love will last in a marriage, say up to some maximum of fifty years.

Me (getting into the scheme of things): And what, if u get married to a person nd then u realise u dont love him?

AM: If the love never starts, you get your money back. Simple!

Great idea...dont u guys think so? :-)

******************************************************************

Another fallout of the ever-deepening mortgage crisis. My another friend PK has decided (wisely, i think!) that all the potential grooms working in the US are not to be considered. To quote her, "these guys are reallly risky assets...U cannot even think about leaving ur jobs here nd moving there bcoz ,
a. frankly u yourself will not find a job,
b. the guy can loose his job anytime too &
c. if he looses his job, both of u will be stuck with a piece of real-estate trash for which u wont be able to afford ur mortgage payments nd plus cant realise money out of disposing the property too. Better stick to the guys in India. Atleast, they will have liquidity'

Superb piece of credit analysis. Wish the mortgage houses & the IB firms had such practical sense too while identifying assets for investment :) :) Hehe, Jus kidding!

Carnage!!

Here it comes...

…my second blog, Finomanics. A blog which purports to touch the tip of the iceberg of the financial & business world. So people actually interested in some amateur finance gyan spawn by Yours Truly & Yogesh, can view it on http://www.finomanics.blogspot.com

Readers having more gyan are also invited to collaborate on articles. Happy Reading!

Going back to the grassroots!

Recently I happened to meet the head of credit of a PSU Bank at a social function in Mumbai. And fortunately for me, got the oppurtunity to speak at length to this extremely learned person about the banking industry. Our discussion invariably turned to the impact of the farm-loan waiver and the difficulties the banks are experiencing in collecting dues from farmers after the announcement of the ambitious scheme. He noted that the banks are facing too much resistance over the loan-repayments from other allied agricultural activities as well as rural-based agro industries' loans , which are feeling left-out from the loan-waiver, as they too are as much (if not more) in red over the agricultural-slow down. The NPAs of the banks are mounting hugely over the cascading effect of the waiver. (Recently,news came that the SBI has decided to put on hold financing of new tractor and farm mechanisation activities.The bank’s NPAs during 2007-8 jumped by Rs 2,800 crore, of which Rs 1,000 crore was on account of farm loans that went bad during the fourth quarter)


I was not at all surprised by the news.The policy makers, instead of finding a long-term solution to the farmer suicides & the supply-chain problem largely ailing the sector, chose a temporary public gimmick to increase the political mileage. Also, another problem ailing the SMEs operating in this sector is the inability of these industries to garner funds from the private funding too...by & far, the main beneficiaries of the SME funding in the country have been the IT & ITES sector. [Like some time ago, Google.org, the Soros Economic Development Fund, and the Omidyar Network announced that they are setting up a firm in India that will invest upto $ 17 million only in small-to-medium businesses.]. However, Angel funds have chosen to remain afar from this industry fearing increased NPAs & losses; contributing to the sectoral disparity among the industry itself over the funding.


The need of the hour is micro-financing. On one-hand we have the huge NPAs faced by the banks & on the other we have got the example of the Vikram Akula led-SKS Microfinace, which has shown us that sustainable & judicious use of funds in this sector can yield excellent results to the investors in this sector.In the last year alone, SKS Microfinance has achieved nearly 170 % growth(Huh!), with 99% on-time repayment rate.And that too with a mandate of $579 million (Rs 2313 crores) and loans outstanding of $263 million. [courtesy:http://www.sksindia.com/background.htm]. I can hardly think of any other sector delivering such excellent results to their investors. Proves that going back to the grassroots pays too, literally!

Budgeting Blues

When I had started writing in this blog, I had promised certain non-finance field related friends, that I would not include any article 'jo unke sar ke upar se jaata hai' to quote their words. Just for once, Shipra & Vikrant, 'Entschuldigen Sie.' (excuse me)

So Chidubond (a term coined by my friend Viren) has toed the line,has come out with a populist budget as widely expected. Yes, he has come out with some very good initiatives in the process...Rationalisation of DDT for one & ofcourse, easing of the tax slabs. And also came up with a good way of cleaning Banks' B/S by taking over their NPAs. Also a gud boost to the realty, pharma & power sectors. All things said & done, can't help pondering on the following points:

1. Agreed the FM has bought all the off-shore registered companies' M & A deals retrospectively into the tax net, but on a related note also wondering why the FM did not take any steps to address the Participatory Notes controversy, when the honourable PM has himself expressed his concerns about the issue in a recent paper to the IMF (I seriously doubt whether altogether banning P-notes is viable; but atleast some steps should be taken to address the recognisibility of funds flowing in the capital markets)

2. The sub-prime crisis & the US recession. The FM said that the impact of these two cannot be ascertained as yet & hence not accounted for in the budget. Fair enough. Just thinking how the rosy pictures & nos. depicted would have been impacted even if a fair amount of estimation could have been made of the looming crisis.

3. And ofcourse, the off-budget accounting of the write off of the farmers' loan. By keeping the write-off below the line, the FM has ensured that he complies with the FRBM requirements (meeting the fiscal deficit target). Can't help wondering how the FM would adjust the funds over the next 3 yrs, to buy off the PSU banks' NPAs ( 65000 crores is at stake here), without accounting for it? Also, on a related note wondering whether the FM has not indirectly punished the farmers who despite hardships have managed to fulfill their loan obligations... uphelding altruism yet again, Mr. FM??

Taxing Matters....

Sometime back, my cousin posted a wonderful post on his blog Jidnyase in which he touched upon a topic which has fascinated me the most for a very long time now- The right of a common man to dictate the end use spending of his hard-earned money taken away from him in the form of taxes. Embarking upon a related topic now- the topic of private ownership v/s public spending. In short the age old debate of capitalism v/s socialism.

Time & again this conflict has raised its ugly head in the context of mankind. Take the recent example of Nandigram, an issue which to my opinion, has been sadly blown completely out of context due to political interference, resulting into disastrous consequences. But the moot-point here remains the mid-point of “to what extent can the rich go on to continue to build on their riches trampling on the fundamental needs of the poor” & “ to what extent can we begrudge the rich their wealth borne out of their entrepreneur skills”. In other words, there should be properly threshold by which neither party is felt threatened, neither the common man for earning his livelihood & neither the entrepreneur for earning his riches by use of his skills. But the problem lies in the definition & the sustainability of this threshold.

Was discussing the same situation vis-à-vis the capitalism v/s socialism angle with a colleague the other day in office. Now my friend, with a family business background, is an unabashed capitalist. “Modern world is a jungle”, he intoned during our discussion “and the rule of the jungle is survival of the fittest”. Hearing his speech, my mind easily slipped away from the present to the pages of Ayn Rand. It was as if I could practically visualize the protagonist of Atlas Shrugged Hank Reardon defending his philosophy before a court: "I refuse to apologize for my ability – I refuse to apologize for my success – I refuse to apologize for my money."

Fair enough…many of us will object to my colleague’s views (at least he had the gumption to display such controversial views openly!!),keep aside land acquisitions, but aren’t their many of us who go to huge lengths to plan our taxes… Fact remains that much as we sympathize with the plight of the poor, when the time comes to shell out our hard-earned money from our own pockets for the welfare of the poor, we feel the pinch. But the moot question here for all of us to answer is how comfortable we are with the fact that we are comfortable and well fed while all around us people are starving. And that is a call every person has to take individually….