The Ecobizz Newsletter
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IBS HYDERABAD
THE TEAM
FROM THE EDITOR
Published by Club Ecobizz IBS Hyderabad
Editorial Head Mr. Abhishek Sharma E-mail: abhishek.sharma0404@gmail.com Designed and conceived by Mr. Siddharth Padhiary E-mail: sidpadhiary@gmail.com
Editor’s Message
Proof Read by Ms. Deepshikha Agarwal Mr. Vivek Parekh
Editorial team Mr.Abhishek Sharma Ms. Deepshikha Agarwal Mr. Vivek Parekh Contributions Team Ecobizz
Amidst the eventful schedules and vibrant happenings of IBS Hyderabad, Club Ecobizz is proud to come up with the August 2015 issue of its ever old, yet still young magazine, ‘THE FO-CUS’. Read on to find out the cover story on “Financial Inclusion” which gives the readers an insight on how every citizen of the nation is bought under the plethora of financial services available in the country. As always, we are open for feedback and suggestions. We also take the opportunity to thank our readers and cherish their continued association with ‘FOCUS’ . Here’s hoping that you have an augmented reading. Warm Regards The Editorial Team
Copyright Regulation This material has been reproduced and communicated to you by or on behalf of Club Ecobizz, IBS Hyderabad pursuant to part VA of the Copyrights Act 1968 (The Act). The material in this communication may be subject to copyright under the Act. Any further copying or communication of this material by you may be subject of copyright or performer’s protection under the Act.
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CONTENT
WHERE ECONOMY MEETS BUSINESS
04 E-Commerce Abhijeet Vishwakarma 12 Net Neutrality Tosif Nawaz 16 Russian Ruble Slide - T eam Khoj
COVER STORY 22 Financial Inclusion - Vivek Parekh
29 Vyapam Scam -Tousif Islam 35 Freemium -Samarth Khanna
38 Coal Gate Scam -Team Khoj
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“Thus, in the future, instead of buying bananas in a grocery store, you could go pick them off a tree in a virtual jungle.” - Yasuhiro Fukushima, Japanese business executive
August 2015
ONLINE RETAILING
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Logistics being major aspect that needs to be looked into for starting and operating an Ecommerce company.
You cant just open a website and expect people to flood in. If you really want to succeed, you have to create traffic. -Joel Anderson, Walmart CEO
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ONLINE RETAILING IN FORMATIO N, NE WS AN D S U P P OR T FLIPKART opening up their own logistics - distribution arm named 'eKART' whereas SNAPDEAL buying minority stake in GoJavas
E-COMMERCE Shopping Revolution What’s next? Forward or backward integration
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ith biggest ecommerce companies trying to grow business they have also started eyeing upon optimizing their business expenses. Most of the Ecommerce companies primarily work around market space concept and partnering up with a strategic logistic provider as the best way forward to manage their working capital and maintain liquidity. Logistics and delivery model of market space companies vary from company to company, but lately we have observed companies have started to look into their backyard for cost optimization. i.e. BACKWARD integration. FLIPKART opening up their own logistics distribution arm named ‘eKART’ whereas SNAPDEAL buying minority stake in GoJavas which it plans be their long term logistic partner. As customer services and logistics being the major parameter of success to any ecommerce organization, this is definitely helping them to capitalize on their logistics expenses. Whereas other similar market space ecommerce companies usually tying up with major courier companies like FedEx, BlueDart etc. The representatives
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of these companies pick up the product from the seller’s address [companies distribution centers] and deliver it to the end customer. Amazon is one marketplace which has its own fulfillment program named FBA program [Fullfilment By Amazon], where sellers can store the products at Amazon’s warehouses. In return, products are Packaged – Shipped - Delivered as and when an order is placed. It’s true that companies like Flipkart, Jabong, Infibeam etc. have their own in-house logistic services, but they don’t cater to all their orders via the in-house deliveries. Simply because it isn’t economical if the minimum threshold delivery isn’t attained. So they have their in-house delivery teams set up only in cities from where they receive a certain volume of daily orders and for the other parts of the country, they tie up with 3rd party logistic partners (typically courier companies) who make the deliveries (as well as collection of cash in case of COD orders) for them. These courier companies charge around Rs.30-50** for a product delivery of 500gm product, since they deliver more than a million merchandise on daily basis even if a product is of
Abhijeet Vishwakarma
Companies have started to look into their backyard for cost optimization. i.e. BACKWARD integration. ”
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Tap water is, on average 500 “Communications is at times cheaper than bottled the heart of e-commerce water. Boycott the bottle.
and community.”- Meg Whitman, President and CEO of Hewlett-Packard
a price range of Rs.200-400** they [Ecommerce companies] can easily achieve break-even in cash flow even without charging any delivery charges from customers. Apart from that, the courier companies handle many E-commerce companies’ logistics which help them to handle multi-products and which makes their delivery charges to minimum. Making it simple to understand the modus operandi, currently ecommerce companies handle their logistics in 3 basic ways: 1) In-house Delivery System: Companies like Flipkart, Amazon etc. are having in-house team. It helps them to save hell lot of money. Also it guarantees faster reach out. 2) Out Sourced Delivery System: Companies like YepMe, Shopclues etc. outsource the logistics to courier companies like BlueDart, Aramax etc. The cost to deliver the product will be on these companies only. And they have to bear it. 3) Vendor Delivery System:
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Companies like Ebay, Snapdeal, etc also ask their vendors to deliver the product to the customers. Vendors have to bear the cost of delivery. Future – Yet to Come [Way FORWARD]: Delivering the product to customers on time is a big challenge for these virtual stores. Though online stores are using courier companies for delivering their product to customers, there are specialist companies that handle logistics and product delivery for e-commerce only. Ecommerce companies have been using such specialist logistics provider’s to provide services like cash on delivery, etc, which is a preferred payment mode in India, as well as collect the product from customers in case of returns. Delhivery.com and Chhotu.in are two such providers of logistics services to e-commerce stores in India. DTDC Courier & Cargo has also launched DotZot.in, a service exclusively for e-retail.
However, using private courier and logistics companies has one major limitation-reach. Most of these would be unable to deliver products to small cities and villages, for which companies have started to use our country’s postal service like AMAZON. If you are familiar with mail-order businesses that operated much before e-commerce picked up [Value Payable Post (VPP)], the cash-on-delivery equivalent service offered by India Post. As mentioned earlier by me, Logistics being major aspect that needs to be looked into for starting and operating an Ecommerce company. Lately, we have also observed, Ecommerce companies moving backwards to optimize upon cost. But, the other side of coin i.e. if the logistic companies plan to provide best of such customer services like Offering a Virtual platform where-in retailers could trade their products that would a major turnaround for this industry. As Logistic Companies
August 2015
ONLINE RETAILING could plan to look into FORWARD integration and diversifying their business risk at the same time widen their income basket. This would definitely be a debatable point as different people would have different views on this. But believes me or not, as Logistic companies like blue dart, Delhivery, Vichare Couriers, Palande Courier etc start to plan their diversification strategies helping them to de-risk their
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businesses, Forward integration into Ecommerce market space would be a key to de-risk. We could see major acquisitions or new startups coming in next couple of years, which could be next level competition to current Ecom Biggies like AMAZON, FLIPKART, SNAPDEAL, etc.
We could see major acquisitions or new startups coming in next couple of years, which could be next level competition to current Ecom Biggies like AMAZON, FLIPKART, SNAPDEAL, etc.�
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INTERNET FREEDOM
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Net neutrality is the principle that internet service providers and government should treat all data on the internet equally . The Ecobizz Newsletter 11
IBS HYDERABAD IN F ORMAT I ON , N E WS A N D S UPPOR T
DIGITAL REVOLUTION NET NEUTRALITY Freedom of information
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o not dwell in the past; do not dream of the future, concentrate the mind on the present moment. The whistle-blower rises to spread the fight for noble cause.Net neutrality (also called net equality or internet neutrality) is the Principle that Internet service provider and government. should treat all data on the internet equally, not discriminating or charging differentially user, content, site, platform, application, type of attached equipment, or mode of communication. The so famous topic of 2015 spread like fad in Bollywood is derived by Columbia university media law professor Tim Wu in 2003, as an extension of the longstanding concept of a common career.
Gandhiji Said “People will forget their duties but will never forget their rights”. The internet’s success is fostering innovation, access to knowledge and freedom of speech is in large part due to the principle of net neutrality. But due to intense lobbying by telecom operators like Airtel and Vodafone, the TRAI (Telecom Regulatory Authority of India) is planning to allow them to blockapps and websites to extort more money from consumers and business and extreme violation of net neutrality.TRAI has released a consultation paper with 20 questions spread across 118 complicated pages and wants us to send responses by 24th of April
August 2015
You are determining the future you every day. Will the decisions you make today lead you closer to the person you want to be tomorrow?
2015. The Information Technology Act 2000 also does not prohibit companies from throttling their service in accordance with their business interests. There are no laws enforcing net neutrality in India. Although TRAI guidelines for the Unified access service license promotes Net Neutrality, it does not enforce it.In India, telecom operators and ISP offering VOIP services have to pay off their revenues to the govt. Further examples also includes Aircel’s Wikipedia Zero along with Aircel’s free access to Facebook and Whatsapp. Now biggest question arises how as an individual, company, or society we are required to work so that they can be put on their toes. Apart from sending responses to TRAI, we can actually do quite a lot with just a little effort. We can write open letter to MPs and other state representatives. We can even use social media to have conversation with family, friends, acquaintances and much more using resources like memes, printing banners, profile pictures; screenshots even website banners and keep track
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of current happenings and awareness for national cause. This thought might must be instil in our mind that if we are fighting for something, it is obvious that first they ignore us, then they laugh at us, then they fight with us, then ultimately we will surely win. So just “Save the Internet” and Vote for Net Neutrality.
The internet’s success is fostering innovation,access to knowledge and freedom of speechin in large part.”
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IBS HYDERABAD The growth and development of people is the highest calling of leadership. -Harvery S Firestone
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August 2015
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TUMBLING RUBLE
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IBS HYDERABAD Given the trend of its economy and its currency, it seems the days of the Russia Superpower seem to be a thing in the past.
RUSSIAN RUBLE SLIDE Ruble in trouble??? Introduction ussia is known for being a superpower and a permanent member of the UN Security Council. But given the trend of its economy and its currency, it seems the days of the Russia Superpower seem to be a thing in the past. The Central Bank of Russia has understood that the country is in a time of economic strife and desperate times call for desperate measures. On 18th September 2014, Russian markets hoped to overcome the free falling ruble problem and move towards normalcy. It seemed to be working but only for the first twenty minutes. After that the Ruble fell by almost 50% due to a fall in Brent Crude Oil by 45%. The Russian Ruble tumble has been greatly affected by the fall in the oil prices. Adding to this, is the fear of investors in investing further in the country and hence the lack of foreign capital flowing into the country due to the sanctions and geopolitical instability. Banking System of Russia The Bank of Russia is the central bank
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of Russian Federation. It is the main regulator of the Russian banking industry, responsible for banking licenses, rules of banking operations and accounting standards, serving as a lender of last resort for credit organizations. The bank is independent of federal and local government and is the institution which issues the Russian currency - the ruble - in Russia and is responsible for the stability and circulation of the currency. The central bank is also responsible for defining and implementing nation monetary policy. It controls the money supply through the key rate which is an important tool to influence interbank interest rates and with that the level of inflation. The CBR is also responsible for the rules and guidelines in the area of banking. CBR became lenders of last resort because of several sanctions imposed on Russia so the access to foreign capital has also become limited and hence hard for the domestic businesses to survive. So to prevent them from shutting down, CBR has liquidated the market and offered
August 2015
loans at cheap interest rate. When the businesses use this capital, not only will it avoid any shutdowns but also give them opportunity to save Russian citizens from unemployment and avoid social chaos. Central bank of Russia is helped state owned companies Gazprom(gas and oil), EkoNiva (agricultural), RosNeft(oil giant). Russian agribusiness group EkoNiva recently got a 2 billion ruble ($43.6 million) loan from CBR to expand its dairy operations in the Black Earth region of Voronezh. It also helped state oil giant Rosneft raise money to pay $US26 billion in foreign currency debt. CBR prepared to spend 60% of sovereign wealth fund ($100 billion) to help the finance in industrial and agricultural projects. Monetary Polices The Bank of Russia employs the system of monetary policy instruments to steer overnight interest rates at which banks carry out operations with each other in the money market. The Bank of Russia seeks to maintain money market rates within the borders of the interest rate corridor and to keep them close to the key rate which indicates monetary policy stance. The bank of Russia uses various short term and long term instrument to control money supply. The main short term instruments are Main auction-based operation, Overnight standing facilities and Finetuning facilities. The Bank of Russia main instrument for steering money market interest rates is auction-based one-week operations. The Bank of Russia conducts these operations once a week as auctions to provide liquidity (REPO auctions) or auctions to absorb liquidity (deposit auctions). The Bank of Russia determines the direction of the main operations and the maximum volume of liquidity provision (absorption) based on the analysis and forecast of banking sector liquidity. As structural liquidity deficit is currently observed, the Bank of Russia provides liquidity to the banking sector using REPO
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auctions as the main instrument. Overnight standing facilities are used to restrict fluctuations in money market rates. Deposit operations are the standing facility instrument to absorb liquidity while a set of instruments varying by operation form (secured loans, REPO, swaps) and types of collateral (bonds, shares, foreign currency, credit claims on non-financial organisations, guarantees, gold) is used to provide liquidity. Operations under standing facilities are initiated by commercial banks and can be used by them on the daily basis. The volume of liquidity provided (absorbed) through these operations is restricted only by the limits connected with Bank of Russia risk management. Fine-tuning operations helps in preventing excessive fluctuations of money market rates within the interest rate corridor. On certain days, when banking sector liquidity demand deviates significantly from its supply, the Bank of Russia can conduct 1to 6-day auction-based fine-tuning operations. Every morning, the Bank of Russia updates banking sector liquidity estimates and when necessary takes a decision and makes an announcement on holding a fine-tuning auction as well as on its term and maximum volume of liquidity provision (absorption). Besides short-term operations, the Bank of Russia system of monetary policy instruments also includes long-term refinancing operations which enable banks to borrow against securities, non-marketable assets (claims under loan agreements with non-financial organisations), guarantees and gold. The use of these instruments is aimed at improving conditions for main Bank of Russia refinancing operations. The main long term instruments are Regular auction-based operations, Occasional auction-based operation and Standing facilities. To attract investor interest into the economy, The CBR and the Russian government came to the consensus of increasing the interest rate from 10.55 to 17%. As of August 2015, the
interest rate sits at 11%. According to multiple news sources, The CBR is merely working to easing the losses in transition to recession rather than working on stabilizing the economy to avoid economic calamity altogether. Fall of the Russian Ruble The ruble has lost its value by more than 25% since 2014 against the Dollar. The reasons for such a decline are varied with some of them being the usual suspects. The US Federal Reserve decided upon increasing the interest rates which led to many of the foreign investors moving towards the US Dollar. The increased Demand for the USD led to an appreciation in value of the currency against economy. The US Dollar has not only grown aggressively against the ruble but also the Euro, the Yen and the pound. In the year 2000, Russia produced 6000 crude oil barrels/day and as of 2014 their production has less than doubled to 10500 crude oil barrels/ day. This clearly suggests that the Russian government has decided to rely upon oil exports for the benefit of the country’s foreign exchange rate. A one-dollar decline in oil prices results in a 70-billion-ruble reduction of revenue for the Russian budget. While a oneruble fall in the exchange rate leads to a growth of 180-200 billion rubles. There is however a positive side to the depreciating value of the ruble. The oil exports of Russia are made in exchange for US Dollar and Euro which means that the value of the revenue is higher in terms of ruble. This however remains an ideal situation for Russia as the depreciating currency results economic pricing of exports to other countries. The sanctions imposed by the USA and EU against the Russian Government and various Large Russian Companies have crippled the country’s progress in the Foreign Exchange Market. It has already been established that a falling ruble is overall bad for the Russia Economy. As of July 2015, the external debt of Russia is $556.2 billion. By the end of FY 15-16, Russia is required to
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IBS HYDERABAD pay off a debt of more the $180 billion. Russia can exercise the option of extending the Debt Maturity period. The reason for such a decision is that, the CBR has only tried to delay the impending recession rather minimise its impact. Russia can also attempt to call peace with the World in General by pulling out its troops of Ukraine and stop any attempts of war. This would probably help in lifting of economic sanctions which would pave way for an improved ruble. Also an improved ruble would help the Russian economy to escape possible debt trap. But most importantly, the prices of crude oil should reach a price of more than $100/barrel in order for the Russian Economy to stabilise. The devaluation of currency is good in the short run due to increased liquidity in the economy but it also comes at the cost of decreased purchasing power of the citizens, the falling ruble impacts the tourism industry of various countries such as Turkey and Spain where tourism ranks high as a GDP Contributor. Trade Relations between India and Russia: Bilateral trade between India and Russia amounted to USD 9.51 billion in the year 2014. Indian exports were USD 3.14 billion and Russian exports were USD 6.34 billion. Indian investment in Russia is about USD 7 billion and Russian Investment in India was about USD 3 billion. With the introduction of multiple sanctions and the falling ruble both the economies have an uncertain future. But India has the advantage of being a developing economy. India does not share a trade relationship of a very high magnitude unlike China but due to heavy involvement, The following sectors might be affectedPharmaceutical companies: Companies such as Dr.Reddy’s Laboratories Ltd, Cadila Pharmaceuticals Ltd; Pharmasyntez; Unique Pharmaceutical Laboratories; J B chemicals, Torrent Pharmaceuticals and Sun Pharmaceuticals have a
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major stake in Russian Market. Indian pharmaceutical companies share prices affected drastically because of tumble in Russian Ruble. Dr.Reddy’s Laboratories 15 percent of sales depends on Russian Market, J B chemicals earned 88 crore through export to Russia in the finical year 2013-14. Banking: Russian banks like Sberbank (largest bank in Russia and Third largest bank in Europe as of 2012), VTB, Vnesheconombank, Promsvazbank and Gazprombank opened their branches/offices in India.Similarly State bank of India and Canara bank are providing banking service in Russia. European Union and U.S planted economic sanction over these Russian banks. Hydrocarbons: In 2012, Gazprom marketing and trading Singapore and GAIL signed 20years LNG supply Contract. Gazprom market capitalization reached $367 billion in August 2008 as per the survey compiled by Financial Times and expected to turn 1 trillion within a decade but due to sanction the Gazproms’ market capitalization was around $51 billion the net income fallen by an astonishing 86percent , which lost more than $300 billion which also show an impact to GAIL. ONGC and Rosneft signed a MoU in May 2014 for bilateral cooperation in subsurface surveys, exploration, appraisal and hydrocarbons production in the offshore Arctic Region of Russia.
The devaluation of currency is good in short run due increase in liquidity in the economy but it also comes at a cost of decreased purchasing power of the ctizens.”
August 2015
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FINANCIAL INCLUSION 21
IBS HYDERABAD Financial Inclusion is one of the levers with greatest potential for economicansocial progress in the 21st century.
FINANCIAL INCLUSION
Inclusive Growth: A mere slogan or a fundamental drive?
E VivekParekh Batch of 2017
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ven after 69 years of independence,a large section of Indian population still remains unbanked. This situation has led to financial instability among the low income groups who do not have any access to financial products and services, which so far has been vulnerably dependent on informal channels of credit like family, friends and moneylenders. The challenges ahead to ensure banking services to nation’s 1.2 billion population will be a huge task but our present government is taking a correct steps in its
quest to provide access to a wide range of financial services to all its citizens. Last year public sector banks took the story further after opening a large number of bank accounts under the Prime minister’s Jan Dhan Yojana to tap the population of India who has no access to banking services . Recently few months back, Reserve bank of India accepted applications for small finance banks and payment banks which gave financial intermediaries the first opportunity to get involved in offering a complete range of financial August 2015
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services that a bank can offer. The other important development initiative taken by government was launch and relaunch of insurance schemes and pension scheme as part of financial inclusion push. These are the Pradhan Mantri Surakhsha Bima Yojana,Pradhan Mantri Jeevan Jyoti Bima Yojana and Atal Pension Yojana. The two insurance schemes offer a cover of Rs 2 lakh each,while the pension scheme will guarantee a pension of Rs 1,000 month. However are these schemes reaching those whom they are meant for ??? Asking among people who are the potential beneficiaries, I found the reality that there were many who had no idea about the schemes and there was a lack of comprehension about what it really meant and what the benefits of enrolling in the schemes would be . I feel we The Ecobizz Newsletter
all can take an initiative to make people understand how meaningful these insurance schemes would be and ensure everyone you know enrolls for the scheme. This step can make a genuine difference to a very significant number of people.. Digital banking and financial literacy is also going to play a major role in financial inclusion but for that we need united efforts by all the banks.Financial literacy is very important and all the banks must discuss how to improve it .First and foremost the ease of banking is still not provided .If you look at e-commerce platforms, I can just create an account and shop .But in online banking, we still have natural hurdles such as KYC issues and the compulsory need to have an account.Recently RBI is working towards ease of banking and they have already removed two step
authentication for transactions below Rs2000 which was a commendable initiative taken by them If you look at other developments in digital banking such as Aadhar and Direct bank transfer,they are certainly going to help.Recently percentage of customers using internet banking with public sector banks and private sector bank accounts has increased.But if you look at mobile banking usage it is showing improvement at a very slow pace. The second important development expected this year is in September when Bandhan Financial Services, a non-banking finance company (micro finance institution) will be able to start operating as a bank .This model will showcase how an MFI is able to make a transition as a bank .But it is very imperative that MFI man-
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Financial inclusion is just a basic step because what needs to follow along financial inclusion is financial education
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INF ORMAT I ON , N E WS A N D S U P POR T
FEATURES
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Y Venugopal Reddy was the first to use the term Financial inclusion in April 2005 as Governor of the Reserve bank of India.
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Reserve bank of India accepted applications for small finance banks and payment banks .
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Financial literacy is very important and all banks must discuss how to improve it.
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Digital banking and Financial literacy is going to play a major role.
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Percentage of customers using internet banking with Public sector banks and private sector banks accounts has increased .
ages to make lending viable .They need to understand and address the customer’s changing requirements in everyday life and need to innovate and give the multiple options in products to stay relevant over a lifetime. As a bank they have to build the trust of poor borrowers to park their funds with the bank .How Bandhan handles the transition will be a test case for others.In a way it will also be a pointer to the pace of financial inclusion in India . Financial inclusion is just a basic step because what needs to follow along financial inclusion is financial education. Because , when you have financial education at an individual level,you have financial responsibility, and that will lead to financial progress.Some of the important initiatives taken by government and banks together could pave the way forward for financial inclusion in India in the coming years.
In September when Bandhan Financial Services, a nonbanking finance company (micro finance institution) will be able to start operating as a bank .This model will showcase how an MFI is able to make a transition as a bank.�
Financial literacy is very important and all the banks must discuss how to improve it
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When you have financial education at an individual level,you have financial responsibility, and tht will lead to financial progress.
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Banks have to build the trust of poor borrowers to park their funds with the bank.
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Vyapam Scam is multi billion home grown illicit Your time is limited, so don’t waste it living someone else’s life. Dont be trapped bywith dogma- which is living with the results of business,engineered other people’s thinking. full state patronage August 2015 26
ANONYMOUS TRUTH The Ecobizz Newsletter
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There’s a saying, when poor people steal, it is called theft and when rich, powerful people steal, it is called a scam.
August 2015
IN F ORMATIO N, NE WS AN D S U P P OR T
VYAPAM SCAM
A dent on Government Service Selections
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cams have become part and parcel of this country. There’s a saying, when poor people steal, it is called theft and when rich, powerful people steal, it is called a scam. Governments come and go but the governance remains the same. In 2014 general elections the country was moved by a man named Modi with his promises like “Na khaunga,na khane dunga”(neither I will cheat nor will I let anyone cheat). One year and few months down the line, a scam of the worst kind is staring at the faces of the people and the Prime minister as well. The breaking of the Vyapam Scam has shocked each and everyone and has left the entire country extremely outraged and anxious. The sheer size and scale of the scam in the state of Madhya Pradesh is mind boggling. Vyapam or (Vyabsahik Pariksha Mandal) or Madhya Pradesh Professional Examination Board (MPPEB) is a self-financed and autonomous body incorporated by the State government for conducting entrance tests for recruitment in government jobs and admissions in educational institutes in the state. Irregularities in the entrance tests had been reported since 1995 but the first FIR was filed in 2000. The Ecobizz Newsletter
Till 2009, the government was in denial and refused to even think that these cases could be interlinked or part of an organized wing. The sheer scale of the scam came to light in 2013,for the first time when 20 people were arrested under charges of impersonation in PMT,2009. Interrogations of these people lead to the arrest of Jagdish Sagar, the mastermind. This blew the scam open and the government was apparently forced to set up a Special Task Force (STF) and handed over the probe. By 2015, more than 2000 people had been arrested in connection with the scam, including the ex-education minister and BJP leader Laxmikant Sharma and several other politicians. The modus operandi of the scam involved a nexus of exam candidates, government officials, middlemen and politicians. The functioning of the examinations was manipulated in several ways. Starting from impersonation of candidates, photos on admit cards were manipulated. Sitting arrangement was rigged so that the bribing candidates would benefit. Answer sheets were manipulated and filled in by the exam officials themselves after the exam was conducted to benefit
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Vyapam or (Vyabsahik Pariksha Mandal) or Madhya Pradesh Professional Examination Board (MPPEB) is a self-financed and autonomous body incorporated by the State government for conducting entrance tests for recruitment in government jobs and admissions in educational institutes in the state.
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Irregularities in the entrance tests had been reported since 1995 but the first FIR was filed in 2000.
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The sheer scale of the scam came to light in 2013,for the first time when 20 people were arrested under charges of impersonation in PMT,2009.
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The functioning of the examinations was manipulated in several ways.
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Another appalling aspect of the case is that mysterious deaths of people allegedly linked to the scam have been reported since 2010,one after another
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Whistleblowers have been an intrinsic source of revelation in this case. Anand Rai, one of the whistleblowers filed a PIL which led to the investigation of the scam
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As they say only 5 percent of the total scam has been revealed, the rest is yet to be revealed. Whatever is the outcome of this scam, the losers are the “aam admi” ,the 75 lakhs aspiring hard working students who have been affected in this scam
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Tousif Islam Batch of 2017
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certain candidates. Even records were manipulated to allot higher percentage to certain candidates. Any sane person would see through this that without a powerful hand behind this, a hoax of such audacity would not have been possible. Another appalling aspect of the case is that mysterious deaths of people allegedly linked to the scam have been reported since 2010,one after another. Earlier the government claimed that the deaths were natural and they had no links to the scam. But the death toll has risen to a staggering 49 and the circumstances of deaths of most cases prove to be extremely suspicious Most of the people who were either accused or witnesses in the cover-up have all of a sudden mysteriously succumbed to alcohol related illnesses, suicides or accidents. Records show that not only candidates but also dummy aspirants and those probing the scam have died. Recent death of an Aaj Tak journalist interrogating the father of an accused candidate has created ruckus in the media. Death of Namrata Damor,who was found dead at the rail tracks in Ujain village shook the entire state. The aaj tak reporter died interviewing Namrata’s father. Some of the other eminent names that have been found dead are the governor’s son Shailesh Yadav, who was accused in contractual teacher’s appointment. Dean of Jabalpur medical college, D K Sakalle, who shockingly
reported to have burnt himself to death. The families of the deceased have refused to accept the government’s explanation and demanded CBI probe in all the cases. Whistleblowers have been an intrinsic source of revelation in this case. Anand Rai, one of the whistleblowers filed a PIL which led to the investigation of the scam has alleged that he is being harassed by the state government. He had been receiving threat calls and the court granted him security cover. He reported that government provided him security only for 8 hours and he was left to the mercy of killers for the rest 16 hours. He was transferred suddenly in july,2015 from Indore to Dhar district. He lodged a complaint with CBI against union minister and BJP leader Vikram Verma. Whistleblowers like Prashant Pandey,a former IT consultant hired by the STF has alleged that the government agency was trying to tamper with the evidence in order to shield the chief minister. An excel sheet recovered from the hard disk of an accused Nitin Mohindra’s computer, implicating the chief minister,claimed to be tampered with, where chief minister’s name was changed to someone else’s name. Another whistleblower Ashish Chaturvedi has alleged to expose the family members of Shivraj Singh Chauhan,who have allegedly benefited from the scam. Ashish suffered three attacks on his life and he has alleged that the police was deliberately August 2015
not providing him with adequate security. Who is to be blamed for this? Where on one side the government is passing whistleblowers bill in the parliament for the sake of safety and protection of whistleblowers and the same are being left to the dogs in the state just because they threaten to expose some of the protagonists in the establishment. Is this a war between the establishment and the common man who refuse to accept the narrative of the establishment anymore? The state Governor Ram Naresh Yadav has been named the 10th accused by the High court, regarding rigging the MPPEB forest guard recruitment examination. His son has died who was an accused. High court stayed the arrest because he has been granted immunity by the Constitution as long as he holds his office. Central government is unexplainably adamant not to remove him as governor where they have wasted no time in removing all the governors of the states when they came to power, neither the governor is ready to resign. Some say that the government fear that, if the governor is removed, he will spill the beans and it will be doom for the government. The Ecobizz Newsletter
Initially chief minister Shivraj Singh Chauhan resisted a CBI probe into the matter saying that the STF was doing a commendable job, even when ex vice-president of BJP Uma Bharti demanded a CBI probe in 2013. Only on July 9th,2015 the Supreme court had to order the Central Bureau of Investigation (CBI) to take over the case under Supreme court monitoring. As they say only 5 percent of the total scam has been revealed, the rest is yet to be revealed. Whatever is the outcome of this scam, the losers are the “aam admi� ,the 75 lakhs aspiring hard working students who have been affected in this scam. Their dreams have been shattered. One whole generation of young aspirants has been crushed through this scam just because some politicians want to feel cozy in power, in this country. Developmental politics, politics for people, is still a farfetched dream in this country, where every moment we have politicians and the very establishment itself making a mockery of the constitution of this country.
Is this a war between the establishment and the common man who refuse to accept the narrative of the establishment anymore?�
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FREE MOBILE APPS The Ecobizz Newsletter
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IN FORMATIO N, NE WS AN D S U P P OR T
FREEMIUM
Play Apps giving you an idealistic world to live in. I used to play Clash of Clans on a daily basis. For the hardcore players, I was at Town Hall Level 7, my highest class of warriors were the Level 2 dragons and I was saving my gems for the fifth builder. But the problem was that I was not really getting ahead. For the past two months, my upgrades had trickled to a halt. A friend said that he had bought ingame currency for Rs. 180/-. I was startled at first. I still belong to the school of thought which believes that why should anyone pay for a mobile app. And then I saw an episode of South Park (STU-Z people, if you are reading then please upload the entire series). Now in the 17th season there was an episode which explained the whole phenomenon of supposedly free-2-play apps of the mobile platform. The whole situation made sense now. I had been toiling away for the past 4 months to get where I am. And then there were friends who had paid for the game with real money to get fake currency and they were getting ahead of me in a matter of mere 15-20 days. The running joke became that these people were buying in-game steroids. Now the term freemium revealed itself like a classic movie villain who seemed like a nice and harmless supporting act but turns out to be The Ecobizz Newsletter
the evil within. I learnt that freemium is not all that free. The rapper 50 cent wrote in his book ‘The 50th Law’ that in his days to get people hooked on to drugs he used to give out free samples and then stepped up the buying price after every purchase. Similarly, these free to play apps give you an idealistic world to live in. Game are supposed to be an escape from the real world to the imaginary where you the player is supreme. Video Games for all their notoriety of violence and mental disorders are meant to make you feel good. But the Freemium games exploit this mindset. Set in a massive multiplayer universe the odds of being the supreme god of the game are very low. Here everyone is equal. But paying for fake currency is the only way to make yourself feel better. Supercell the developer of the game Clash of Clans raked in a revenue of $1.7 billion last year. There is a very intricate economic system that goes inside the games. And every freemium game is making huge amounts of money. Candy Crush and Subway Surfer have their own way of earning money. Freemium is the new thing in the mobile gaming market and is here to stay.
Samarth Khanna Batch of 2017
Dev Chandan Batch of 2016
The rapper 50 cent wrote in his book ‘The 50th Law’ that in his days to get people hooked on to drugs he used to give out free samples and then stepped up the buying price after every purchase.”
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SCAM SHAM The Ecobizz Newsletter
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COAL GATE SCAM
A window to the dark industrialisation INTRODUCTION Coal mining has been around in India for more than 200 years. India boasts of one of the largest reserves of coal mines in the world at 301.56 billion tonnes of coal. Odisha and Jharkhand account for 51.65% of the national reserve. With the introduction of steam locomotives the demand for coal increased exponentially and India under the British raj increased its production manifold. By 1900, the production figures stood at 6.75 million short tonnes and more than tripled to 20 million short tonnes by 1920. After 1947, the government of India settled to produce 33 million short tonnes per year as a part of the 1st Five Year Plan. Even during the First Five Year Plan, the need for production of coal was being felt. The National Coal Development Corporation (NCDC) was founded in 1956 as a Government of India undertaking with most of collieries belonging to the Indian Railways. Coal Production had certainly evolved, not just in terms of numbers but also in the number of ways it was being done.
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The coal industry was not aware of the processes of mining and maintenance of such a commodity. Coal mining companies were not aware of the process of stowing which is a way of packaging the mined coal reserves. Stowing was not a widespread practice due to which large reserves of coal were left in pillars which resulted into fires following spontaneous combustion. Coal and Oil both being fossil fuels were in a way substitutes to each other. The 1960’s was a period when oil was cheaper than coal. The world had now learnt how to use oil, and were exploiting the oil reserves. The deficit in supply led to the price of oil skyrocketing in the 1970’s resulting in hike in coal demand. The central government then decided to bring the coal mines under government control. Since production of coal under private ownership accounted for 75% of the total nation production, the industry was highly disorganised and loopholes were exploited for personal benefit. The takeover process started in 1971 and the Government of India took over all the coalmines of the country August 2015
by 30th January 1973. This led to Coal Mines nationalisation act in 1973 which gave the central government or any entity acting on behalf of the central government but restricted to Government owned companies and corporations as the sole authority to mine coal within the country. In 1975, Coal India Limited (CIL) was brought into existence, its sole purpose being as a holding company to integrate and streamline the structural set up and bring both coking and non-coking coalmines in one controlling unit. In July 1992, the Ministry of Coal issued the instructions of constitution of a Screening Committee to for screening proposals received for captive mining by private power generation companies. A number of 143 Coal Blocks were identified by Coal India Limited and associates.
The screening committee has representatives from State government, concerned ministers from Central government and coal companies. Since 1993 this board is responsible for allotment of coal blocks. The committee allocates the blocks after evaluating the applicant. The parameters and the guidelines for allocation followed by the committee, while evaluating the applications, were duly published on the website of the Ministry of Coal before inviting the applications. • Comprehensive details about the applicant, the group The Ecobizz Newsletter
• Performance of the group • Financial strength • Readiness of the end-use plant etc. • Techno-economic feasibility of the end use project • Status of preparedness to set up the end use project • Past track record in execution of projects • Financial and technical capabilities of the applicant companies • Recommendations of the state governments the Administrative Ministry concerned. In regards to the Coal Allocation Scam, the first charge that CAG made on the ministry of coal was that it completely bypassed the usage of the Screening Committee and went on to allocate the coal blocks at its own accord. A loss of approximately Rs. 1.86 Lakh Crore was reported by the CAG and the scam became the media’s hot topic as massive numbers was involved. THE SCAM What is the scam all about? Coal allocation scam or coal gate scam is a major political scandal concerning the Indian government’s arbitrary and non-transparent allocation of coal to public and private sector companies. Post liberalization in 1991, the National Mineral Policy (NMP) was enunciated in 1993 to welcome the participation of private sector companies in developing the Indian economy. Each company has to go through the stringent procedures and highly competitive bidding process set by the screening
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IBS HYDERABAD committee to be eligible to own and mine one or several of the coal block(s). However, the final decision is in the hands of Coal Minister of India, but coal blocks, in large numbers were allocated to companies almost free of cost. A small bank guarantee was taken from the candidates, who were required to pay royalty only when the coal mine would become operational. Coal blocks can also be given to private companies for “captive purpose”. Captive purpose means, the companies can operate these mines only if the end product is steel, power, cement or any other, specified by the Indian government. None of these procedures were followed and the coal blocks were distributed arbitrarily to those who were close to UPA. These blocks possess 1700 crore tonnes of coal worth over INR 50 Lakh Crore. What does the UPA government say? According to the UPA, Coal India Limited, with an average growth of 2.3% per year from 2004 to 2012, was incapable of meeting the country’s increasing demand for power. The coal blocks were hence given away to the private companies at low/negligible rates so that they in turn don’t impose high charges to Indian population and even the lower class of people could afford it. This led to the rise in share price and financial worth of the companies at a fast rate and also led to windfall gains. The government’s zero-loss theory The zero loss theory suggests a situation in which one’s gain is equivalent to another’s loss, so the net change in their wealth is zero. P. C. Chidambaram, at a press conference in New Delhi, said CAG’s concept of presumptive loss was “flawed” and there was no loss because no mining has taken place in the coal blocks as yet. “If coal is not mined, if it remains buried in mother earth, where is the loss? The loss can arise only once the coal is taken out, mined and sold at unacceptable price or value. But if the coal is not mined, where is the loss” was the defending statement of the then finance minister. For almost eight years, the action on this was being postponed and the bidding system delayed. Comptroller Auditor General (CAG) The role of CAG has been a very vital one in bringing the dirt out. In a report following the performance audit, CAG accused UPA government of the following two points: • The coal blocks were supposed to be auctioned through a competitive bidding system, but the government failed to do so. • This has allowed the private and public companies to obtain windfall gains of INR 10.6 Lakh Crore. This figure was later changed to an absolute loss of INR 1.86 Lakh Crore to the Indian Government. This figure was based on the following assumptions:
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• Only those blocks given to private companies were taken into account. • Only open cast mines were taken into account – No underground mines. Because of these assumptions, the figure of INR 1.86 Lakh Crore, although the final one, may not be exact. CAG’s itself claims the figure to be a conservative one. Whistle blower: BJP MP Hansraj Gangaram Ahir was the one who exposed the coal block allocation scam. Ahir had meticulously collected information on the irregularities in coal block allocations. He tried to contact the Prime Minister’s Office for assistance but was instead stonewalled. Ahir then turned to fellow BJP MP Prakash Javedekar, who petitioned the Central Vigilance Commission (CVC) for an inquiry. Subsequently, The CVC ordered the CBI to look into the coal allotment procedure and the ramifications of it, hit the errant entities hard. SC’s verdict On 25th August, 2014 judgment was delivered in these cases and it was held, inter alia, that the allotment of coal blocks made by the Screening Committee of the Government of India and also the allotments made through the Government dispensation route are arbitrary and illegal. The Supreme Court has de-allocated 214 coal blocks out of the 218 coal blocks allocated since 1993. The 4 coal blocks which are exempt from the verdict are run by the Central government with no joint venture with the private sector. Two of them are with National Thermal Power Corporation (NPTC) and Steel Authority of India Limited (SAIL), and the other two have been allocated for ultra mega power projects by Reliance Power and NPTC under competitive bidding. It has asked coal blocks which are already operational will get 6 months to wrap up their operations. After 6 months, the blocks will be handed over to Coal India. But the power producers dependent on these coal blocks will not suffer as even after Coal India takes them over, it will continue to provide coal to the power producers. The Court has also said that coal from captive mines can be used only to generate power and cannot be used for any competitive bidding. The Supreme Court said that it saw no reason to save the blocks as the allocations were arbitrary. All the companies have also be fined at Rs 295 per mega tonnne for the loss suffered by the country, and in this case, the Court has accepted CAG’s estimation of the loss. Repercussions: The Supreme Court’s verdict had a strong repercussion on Indian Economy and power and coal related sector. Metal stocks fell sharply after the Supreme Court verdict. Sensex also fell over 200 points but recovered later. Cancellation of the blocks have hit investors’ confidence, caused acute distress in some industries, affect 28,000 MW of power capacity, and caused an estimated loss of Rs. 4.4 lakh crore in terms of royalty, cess, direct and indirect taxes, besides
August 2015
raising the cost of coal imports and setting back the process of extraction and effective utilisation of coal by eight years. Jindal Steel and Power lost 11% immediately after the verdict. Currently 40 out of the 218 coal blocks that were allocated produce coal. The Supreme Court has cancelled all these allocations except one mine belonging to SAIL and two mines which feed coal into Sasan Power, which is an ultra mega power project. Data from the ministry of coal suggests that these mines are likely to produce around 52.9 million tonnes of coal during this financial year (April 1, 2014 to March 31, 2015). So what happens from 1 April, 2015? As the judgement points out “The Central Government is confident, as submitted by the learned Attorney General, that the CIL (Coal India Ltd) can fill the void and take things forward.� Hence, Coal India is likely to operate these mines after the cancellation comes into effect. Following the cancellation of the coal blocks, concerns were raised about further shortage in the supply of coal, resulting in more power supply disruptions. The 2015 Coal allocation Bill primarily seeks to allocate the coal mines that were declared illegal by the Supreme Court. It provides details for the auction process, compensation for the prior allottees, the process for transfer of mines and details of authorities that would conduct the auction. In December 2014, the ministry notified the Coal Mines (Special Provisions) Rules, 2014. The Rules provide further guidelines in relation to the eligibility and compensation for prior allottees. The bill creates three categories of mines, Schedule I, II and III. Schedule I consists of all the 204 mines that were cancelled by the Supreme Court. Of these mines, Schedule II consists of all the 42 mines that are under production and Schedule III consists of 32 mines that have a specified end-use such as power, iron and steel, cement and coal washing.
The Ecobizz Newsletter
Team Khoj - 2017 EcoBizz
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Dear Readers, We believe you appreciate the transformation of ‘The Focus’. Your praise and encouragement has always been a source of motivation for us. Therefore, in case you have any comments or suggestions for improvement please leave them in the COMMENTS section our website www. ecobizz.weebly.com. We at EcoBizz will be more than happy to incorporate your suggestions. For keeping in pace with latest developments, discussion forums and online events follow us on Facebook at https://www.facebook.com/eb.focus. Regards, Team Ecobizz
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