An Ode to Life

This Thursday, Kaun Banega Crorepati had two ‘special’ guests – Rukhsana Kausar (from Rajouri, Kashmir) and Stanzin Youtso (from Leh, Ladakh). There was something so heart-whelming about both these ladies that I was forced to think, and write, about them. Two individuals cannot be more dissimilar, as far as appearances are concerned – Rukhsana was sort of lost, shy, and not sure of the happenings around her; while Stanzin was pretty, suave and confident. But once one looks beneath the outer appearance, a strange, but basic, similarity emerges.

Rukhsana had been a news-maker two years ago, when she single-handedly killed one terrorist and wounded another after three terrorists attacked her house at Rajouri. On the other hand, Stanzin had lost all her family in the Leh cloudburst. It is their reaction to the calamity befallen on them which strikes one’s heart, and also rekindles hope about life and mankind.

What really impressed me about both these ladies was the character they have displayed after the incidents which changed their lives forever. In Rukhsana, one could clearly see the pain of a part of life lost in the shadows of terrorism, and also apprehension about future (there is an award of ` 6 lacs on her head announced by terrorists) – but there was no regret about her actions on that fateful night. That petite girl seemed lost in the glare and glamour of a television show, but the only thing about which she seemed sure was that her actions had been right, irrespective of the consequences, and she is going to re-build her life along with her family.

Stanzin presented a different picture. She, unlike Rukhsana, was awed neither by the glare of cameras nor by the presence of Mr Bachchan. She was confident, even playful, and discussed about her favourite songs and actors. But nowhere did it appear that she had forgotten the tragedy of Leh, in which she had lost her parents and siblings. Her eyes reflected the pain she had suffered (and is still suffering). But she was continuing with life – not by ignoring those painful memories, but to give all the due respect to them.

Those two have shown us that life can be difficult, but one has to take those difficulties in one’s stride and continue on. And that it does not take a hero to fight the vagaries of life; even the common man has the ability to do it. And that bad phases in life are neither to be wished away nor forgotten; one has to treat them as integral part of life, and try to build the future on the memories of such phases.

Both of them had reminded me of the true meaning of life. I salute both of you, as I salute life…

We the People

A couple of days ago, we have celebrated the 64^th anniversary of our independence – and today it seems that our nation is standing on a crucial juncture. The issue of ‘corruption, Anna and Jan Lokpal Bill’ has (or, more appropriately, can have) much wider ramifications. Like most of us, I also believe that Anna is a genuine patriot and is honestly trying to purge this country of corruption, without any ulterior or hidden motives. No right thinking Indian will think twice before supporting the objectives of Anna – however, it is also important that some of the implications of his strategy to attain those objectives are discussed.

The Constitution of India has very clearly and univocally put the onus of legislating for the nation on the Parliament. It is the duty, as well as right, of the Parliament to make rules which govern our nation. Now, in the form of Anna & Co, an extra-constitutional body is trying to force its own version of Jan Lokpal Bill down the throat of the nation. Anna might have best of the intentions, but if his demands are met by the government (and subsequently by the Parliament); flood-gates will open for self-help groups to blackmail the government into bringing legislations of their choice. We have seen scenes in recent past when groups have tried to brow-beat governments through similar strategies to gain favours (Gurjar’s rail-roko for reservation immediately comes to mind), but someone going to such an extent of insisting on his own version of the Bill is a first. If this strategy succeeds, then not only will such attempts increase manifold, but will also start claiming moral high-ground (aka Anna).

As I have said, making laws is the prerogative of the Parliament. And unfortunately, on several occasions the Parliament has failed in this. A glaring example is the Women Reservation Bill, which has failed to see the light of the day despite repeated assurances. But this is seen as a temporary failure of the Parliament, and the populace (at least a part of it) is still waiting for the Parliament to take action on it. But Anna’s case is entirely different. Here it is being claimed that the Parliament is incapable of making the law, and the version decided by a group of self-appointed do-gooders should be made law. If looked dispassionately, it is a strict no-confidence in the Constitution… I repeat, in the Constitution. Anna & Co are not forcing Parliament to make some law; they are holding Parliament incapable of forming the correct law, and are forcing it to accept the law made by them.

Let us, for a moment, assume that government accepts the Bill made by Anna & Co. What is the guarantee that another group, with the support of a couple of thousands, will not stand up tomorrow with its own version of the Bill? And how will we deny that group this right? And in that utter chaos, who will decide which the best version is? We can certainly see total breakdown of Parliamentary Democracy, as envisaged by our Constitution, here – which will lead the country to total anarchy.

I am, not for a moment, implying that the Constitution is sacrosanct. If a section of our society is thinking that the Parliament is failing in the duties assigned to it by the Constitution, then the remedy lies elsewhere. We need to change the Constitution. The process of framing laws in the country needs over-hauling. But what are the alternatives? Should we hold a country-wide referendum for each law to be implemented? It will be a logistical nightmare, but why not. If we no longer trust the Parliament to make rules for us, then we have to think of alternatives, so that each Indian can have equal say in the process – not just a few self-appointed torch-bearers. But it will require changes in the Constitution (which nobody is talking of), and, as long as the present Constitution is in place, no extra-constitutional body (read Civil Society) has a right to hijack the law making process.

Another issue to consider is the real worth of Jan Lokpal. In the past also we have seen the formation of so many agencies, with the promises of ending corruption – CVC at the Centre, Lokayuktas in states; but we all are witness that they have failed. And there is nothing to assure me that Jan Lokpal will not meet the same fate. Then there is the question of ‘guarding the guards’. One PJ Thomas was caught in time – but a number of PJ Thomases have managed to sneak through. When we are unable to elect/appoint/post honest incumbents at any public office, how can we be sure that we will be able to appoint an honest Jan Lokpal? Do remember the adage – ‘power corrupts, and absolute power corrupts absolutely.’ And we are planning to give absolute powers to this proposed Jan Lokpal.

Let us return to from where I started – India is at a juncture. But what is India? India is a hypothetical entity, totally unreal. Only we are real; we, the people of India. And the day we decide not to tolerate and condone corruption, it will end. And as long as we are accepting corruption as a way of life, it will continue – with Jan Lokpal, or without it. I read a small tale as a child which is very apt for this situation: ‘A sage asked all the residents of a village to put one glass of milk each in a tank, in the dark of the night. The objective was that by morning, the tank would be filled with milk. But in the morning the tank was filled with water. Each villager had put a glass of water in the tank, thinking that one glass of water put by him will not matter in a tank full of milk.’ We all are like those villagers – thinking that one glass of corruption tolerated/condoned/promoted by us will not matter. But it does matter – as it all adds up to a billion glasses of corruption. It is for us to fill our glasses with honesty instead of corruption, only then the tank will be filled with honesty. Until then, no Jan Lokpal, or Super Lokpal, or Mega Lokpal can remove corruption from this nation.

Economy of Oil

The prices of petroleum products in India present a fascinating study. The prices of petrol/diesel in India are among the highest in the world, and yet the government keeps on claiming that a huge subsidy is being provided, and that all oil companies are in the red. So it is high time we try to find out the real cost of these petroleum products, and also the truth behind government’s claims.

The basic principal of business is that if, for a firm, the cost of taking its products to the consumer is less than what the consumer pays for that product, the firm will make profit – otherwise it will make loss. So we just need to calculate how much oil companies spend (or need to spend) for getting their products to the filling station, and what the consumers are paying for these products. (For simplicity, we will use approximate averages – which will not have any noticeable impact on the conclusions.)

For oil companies, the input is crude oil – which is refined to yield different products. These products are, in turn, distributed through different channels to reach the consumers. Thus, the costs for oil companies include the cost of crude oil, the cost of refining, and the cost of marketing and distribution. For one barrel of crude oil, the costs incurred by a typical oil company are as following:

     Cost of Crude Oil                 = $100    (actually it is $85)

     Cost of Refining                    = $15      (estimate taken from US data)

     Marketing and Distribution    = $10      (…on the higher side; to be sure)

                      TOTAL              = $125        = Rs50 ×125       = Rs6,250

The next step will be calculating what consumers pay for the refined equivalent of each barrel of crude oil. Through the refining process crude oil is converted into a host of products, including petrol and diesel. Though the actual output of refining process depends on the quality of crude as well as on the refining process, average figures will well serve our purpose. So, the final products and the resultant revenues for 160 liters (one barrel) of crude oil are as following:

      Petrol                   ->       75 liters         (@ Rs68 per liter)         = Rs5,100

      Diesel                   ->       35 liters         (@ Rs43 per liter)         = Rs1,505

      Jet Fuel                ->       20 liters         (@ Rs60 per liter)         = Rs1,200

      Naphtha               ->       15 liters         (@ $1,000 per ton)       = Rs750

      ‘Heavy’ Products  ->      15 liters         (ignored)

                                                                                 TOTAL        = Rs8,555

(Yes, it was a revelation to find that Jet Fuel is cheaper than Petrol in India.) ‘Heavy’ products are petro-chemicals such as lubricants and waxes, which – though not worthless – are ignored in our calculations.

These simple calculations clearly show that the oil companies need to spend only Rs6,250 for delivering their final products to the customers, while the customers are paying Rs8,555 for those products. Under normal circumstances, this difference of Rs2,305 (i.e. almost 37% of costs) would have been the ‘Profit before Tax’ of the company for each barrel of crude oil processed. ‘A mighty profitable business’, I would say; especially when we include the revues from ‘heavy’ products – motor oils, lubricants, grease, aromatic petrochemicals, among others.

But here lies the catch, and also the double-speak of the government. Huge amount of taxes (more than Rs2,305 per barrel) are imposed on petrochemical products, so that the landed cost for oil companies increases beyond Rs8,555. If we assume that the total tax imposed on each barrel of crude oil is, say, α – the final landed cost becomes Rs6205+α, which is more than Rs8,255. Now, the government is FORCED to provide HUGE subsidy to make these products affordable. If this subsidy is, say, β per barrel of crude oil; then                                     6250 + α = 8555 + β

                            or            α – β = 8555 – 6250 = 2305

Hence the taxes [α] are more than the subsidy [β] by an amount equal to Rs2,305 per barrel of crude (equal to the possible Profit before Tax estimated above). Under competitive market conditions, this amount of Rs2,305 should have been shared by the oil companies (as profits), the consumers (as reduced prices), and the government (as taxes). But a distortion is introduced in this scenario by the government through excessive taxation. Now the oil companies make no profit, consumers pay more, and the government make huge money through taxes (while shouting over rooftops about subsidies – which are factually much less than taxes). In fact, for each barrel crude oil imported/produced in India, the government earns Rs2,305 as taxes after deducting the subsidies.

Since India imports approximately 2.5 million barrels of crude oil per day, and produces another 0.8 million barrels at home; for these 3.3 million barrels of crude oil, the government earns more than Rs2,305 × 3.3 million = Rs7.6 billion. We must also remember that since the landed cost of domestically produced crude is much less than that of the imported crude – the profit earned by government is even more. So, even after accounting for all the so called subsidies, the government is making a clean Rs2.7 trillion from taxes on petroleum products each year.

This takes us to another interesting aspect of the story. In US, the price of gasoline (petrol) is approximately $3.0 per gallon – which translates into Rs40 per liter. Thus the fuel for ‘common man and farmers’ in socialist India – Diesel, @ Rs43 per liter – is costlier than petrol in capitalist US.

Long-live our socialism…

(The calculations done above are just of the ‘back of the envelope’ type using approximate values, and the final figures obtained are not cent-percent accurate. But the trends which emerge are correct, and point in the right direction.)

The Inverted Management

The task of managing large organization is not simple. It requires complex, multi-tiered management structures – with well defined roles and responsibilities for each arm. Conventional wisdom as well as common sense dictates that the top management should focus on long-term strategic issues concerning the organization, while dealing with day-to-day tactical issues should be left to the lower (field) management.

However, as usual, this common sense is uncommon – and it is not rare to find organizations where these roles are just reversed. The top managers not only manage (or try to manage) the micro-issues on daily basis, but also feel proud for doing so. And the long-term planning on which the future of the organization depends is delegated to the hapless field manager, partly because the top managers are left with no time for it.

The reasons for this inversion demand a deep analysis of the psyche of the organization. A typical example will have the following characteristics:

• There is only single entry level for managers – which means that there is no lateral hiring of managers at senior levels
• The top positions in the organization are awarded not on the basis of competencies or capabilities, but solely on the basis of time spent in the organization
• The performance review mechanism is such that non-performance (and shirking) is seldom punished, though there may be heavy penalty for making errors

Under these circumstances, the managers get divided in two categories at the time of entry itself – the first category of those who can potentially reach the top positions, and the second category of those who cannot. Now, the first category of managers has no incentive for taking risks – as a single judgmental error can mar their future career prospects, while avoiding risks will guarantee a bright future. Simultaneously, the second category of managers has nothing to gain as well as nothing to lose. It can be well imagined that systemically there is no motivation for them to work hard.

Consequently, the majority of managers who do attain top positions in the organization are those who have not taken any real risk in their career – which directly means that they have not taken any worthwhile decision for the organization. Once at the top, they are utterly incapable of taking strategic decisions for obvious reasons. As a result, they divert all their energies to tactical issues which should have remained with the field managers. (The general perception on this issue is that top managers fail to tackle strategic issue because all their energies are diverted to tactical issues. However, as per my understanding, they turn towards tactical issues to hide their incompetence to handle strategic issues.)

But strategic decisions have to be taken, even if the top management is incapable to take them. So, this responsibility is delegated to the field managers – to complete the inversion of management. For every decision, the top management waits for a proper proposal, or report, or feedback from the field – conveniently oblivious of the fact that no field manager can have a long-term, organization wide vision; not for the want of capability, but for the want of information and exposure. A field manager observes only a miniscule part of the organization, and that too for a limited time horizon. The decision taken by such a manger, even when taken with best of the intentions and efforts, seldom fits perfectly with the similar decisions being taken by innumerable other field managers. In the long turn, this friction between field-level strategic decisions totally destroys the strategic perspective of the organization and renders it dysfunctional.