WHY DO REFORMS EQUATE WHAT CAPITAL MARKETS WANT?

The market is getting excited; the PM in FM’s role may be on reform path. Really, but what is reform? A steep power tariff hike, or may be a steep diesel price hike?, or may be FDI in aviation, retail, what else? May be double the prices of water being supplied at our home?

Why do we confuse reforms with what capital markets want? Why should you be happy that someone who is already fighting a 10% inflation, has to pay 24% extra for power tariff and that too without the guarantee that the power supply will be uninterrupted or the fact that he may be paying for double of his actual use because of power theft?

Why are the brokerages sulking over petrol prices being cut? Despite the fact that price cut is in no way in sync with the collapse in global crude prices (even in Rupee terms let me say before the usual defence of OMC is spoken up). And worse still why is everyone calling for a steep diesel price hike even after this collapse in crude?

The simple answer is these are relatively easy to predict, easy to call and have direct impact on stock prices. A head of research at a brokerage earns over one crore as salary. He doesn’t mind paying 100 bucks a litre for petrol – but he will be happy if BPCL or HPCL rally by 100 bucks – that would make him much happier.

But should it all be about stock markets? Or let me actually rephrase that – should stock markets only be happy if prices go up? Can we look at a situation where Indian companies make big profits at current prices or may be even lower prices? And that too with a much lower state subsidy burden?

Why is no one questioning the efficiency of the system? Can we improve the absolutely inefficient way some of these companies, especially PSUs are being run? Can we look at a situation where coupled with this improved efficiency, and a sheer economy of scale, some of these companies make much more profits at current prices than asking for a price hike all the time? 

Make no mistake – we are a poor country. The divide between rich and poor is only getting wider and at some point, this greed has to stop. We are making some necessities of life completely out of reach of a vast majority of our population.