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Competition at the doorstep

Why Indigo, the largest player in the domestic aviation space, cannot afford to ignore new entrant Vistara


here is a battle raging between
the incumbent, old airlines and
the new carriers in India on the
5/20 rule; but there is another battle that
IndiGo, the largest private player in the
domestic aviation space, may not have
seen coming.
Rave reviews of the Tata-Singapore
Airlines offering Vistara in terms of
service and especially, food have
begun coming in from all over in the
last few months. Many frequent fliers

are now taking Vistara (even if it costs

them a few hundred rupees more) by
choice if the timings on the sector are
available. I spoke to several frequent
fliers CEOs and consultants and
they have a host of different reasons to
opt for Vistara.
Vistara operates from the better terminals T3 in Delhi and the new terminal in Mumbai offering far easier
and more comfortable check-in and
pre-boarding service. There are shorter
queues to contend with. At some airports, Vistara has an exclusive security
check-in. During rush hour, for fliers
pressed for time this can make all
the difference.
Flights are, in general, on time.
Cabins are clean and the staff is courteous. On-board service is a trifle indulgent and many passengers feel a bit
pampered or special. Many regular
but less budget-conscious fliers see value in the premium economy class. But
even in economy class, theres more
legroom than in those of other airlines.

Last but not the least, its a wellknown fact that the way to the Indian
heart is through the stomach. More than
one flier raves about the food (which, of
course, is free to boot) offered by the
airline; many describe it as a restaurant
at 35,000 feet!
Vistaras strong product offering
comes at a time when passengers are a
bit tired and disenchanted with
IndiGos, despite the airlines efficiency
and unerring consistency. The list of
cribs and those cribbing is growing.
To quote a frequent flier: Indigo is
becoming cheap (as opposed to lowfare); it used to be smart. It leaves you
with the feeling that it will do anything
to make an extra buck be it the fastforward service or the way it charges for
every extra kilo of baggage.
Some of IndiGos latest offerings
have partly failed to fly. Take for
instance, the new fast-forward service,
wherein by paying a bit extra you are
entitled to a separate check-in space and
your luggage arrives first at your desti-

nation. The problem arises when it

doesnt. Run-ins of this sort I have
witnessed a few myself at some airports
leave a bitter taste, as the airlines
employees are not empowered to refund
the extra amount paid by some passengers. Inflexibility and adherence to rules
to a tee by the staff dont go down too
well with an angry customer.
With a credible competitor, comparisons become inevitable (fares on both
IndiGo and Vistara are largely comparable) and stuff that passengers overlooked in the past, they find quite irksome now. At check-in counters, IndiGo
has, of late, reduced the number of loaders and you find the person behind the
counter trying to check people in and
attempting to load luggage on to the
belt especially when there are elderly fliers and women who need assistance. Even for fliers, who have checked
in and have boarding passes in hand,
the queues can be quite long. Minor
stuff, but irritants nonetheless.
As one flier told me: Vistara greets

you with courtesy and IndiGo with efficiency and hard rules. If you fly regularly, the IndiGo experience is quite
tough: long lines, average food, no leg
space, an efficient but soulless staff.
This is not to belittle what the largest
domestic private airline in the country
has achieved. Its large, loyal fan following remains almost intact. Its network
and punctuality hold it in good stead.
The product is mature, one that has
delivered under severe passenger scrutiny and remains consistent.
But in my view therein lies the danger. In the airline business, if nothing
changes, you may in fact stand to lose.
Passengers are a pretty fickle lot and
before you know it you find your loyal
base has eroded and flocked to the rival
as Jet Airways experienced first-hand
when Kingfisher Airlines first took to
the skies and the former whiffed its first
scent of real competition. The new kid
on the block has an unfair advantage
just on account of its newness. Its challenge will be offering what it does while
keeping a check on costs.
So whether they like it or not or
acknowledge it or not, rats are beginning to nibble at IndiGos doors. My
unsolicited advice: keep as keen an eye
on this battle as on the other one.


The importance of water management


Catching the pulse of the audience

Trust Prime Minister Narendra Modi
(pictured) to catch the pulse of his
audience. On Monday, he laid the
foundation stone for a national memorial
in New Delhi to Dalit icon and the architect
of the Constitution B R Ambedkar. Modi
also delivered the Ambedkar Memorial
Lecture. As he walked to the lectern to
deliver his speech, many in the audience
shouted slogans of Modi zindabad (long
live Modi) and Bharat Mata ki Jai (victory
to Mother India). But the PM began his
speech by raising the slogan, Jai Bhim
thrice and asked the gathering to do the
same. Jai Bhim, or victory to the vision
of Ambedkar, is a slogan to acknowledge
his contribution to the cause of the Dalits.

Growth and development in India will be governed by the way water is used and managed. On World Water Day, Romit Sen
and Kamal Vatta analyse how a proper framework can ensure the safety and sustainability of this resource
ater has been at the centre
stage of the development and
political debate. Growing
scarcity; increasing pollution; enhanced
competition, conflicts and trans-boundary water sharing issues have dominated the national discourse in current
times. Recent policies and programmes
of the central government indicate an
increased impetus on addressing some
of the major concerns facing the sector.
Given the complexities associated with
the management and governance of
water resources, an effective framework
on how we can better manage and use
our water resources appears challenging. However, certain fundamental
aspects need to be addressed if we are to
ensure the safety and sustainability of
this precious resource.
The first among these is a comprehensive assessment of water resources
in India. The last time a comprehensive
assessment of water resources for the
entire country was done was in
1999-2000. The planning of water
resources needs to be based on updated
data and it is time that a complete
assessment on water availability, use
and future demand is carried out.
A large share of our water needs is
met by groundwater. Groundwater
depletion has become a serious problem, with aquifers across the country
moving into the over-exploited zone.
There is a Budget allocation of
~6,000 crore for undertaking a major
programme for sustainable management of groundwater resources in 2016.
However, one must address the fundamental problem of limiting groundwater extraction. There are no exact estimates on the number of groundwater
extraction units in the country and the

number of observation wells is far too

less. There is an urgent need to increase
the number of observation wells across
different regions to get an accurate estimate of groundwater levels.
Deteriorating groundwater quality
has also been an area of concern. This
makes a large section of our population,
depending on groundwater as their
major source of drinking water, vulnerable. The Central Ground Water Board
in its assessment has indicated that
India faces the problem of arsenic, fluoride, nitrate and heavy metal contamination. While the cause of groundwater
pollution is both natural and anthropogenic, the management options have
to look at a complete profiling of
aquifers, conjunctive use of surface and
groundwater and programmes for rainwater harvesting and aquifer recharge.
Improving water-use efficiency is the
need of the hour and is crucial for reducing the dependence on freshwater
sources. Agriculture accounts for 85 per
cent of the total water use and therefore, resource optimisation in this sector
is vital. Water-use efficiency in agriculture can be brought about by the adoption of low-cost technologies. It is also
important that measures for bringing
efficiency in the urban and industrial
sector are implemented through better
demand management and effective
recycling and reuse.
The initiative of setting up a Bureau
of Water Use Efficiency is an innovative
step. The Ministry of Water Resources
has been working for the past four years
to set up a National Bureau of Water Use
Efficiency. The National Water Mission
had a target of improving water-use efficiency by 20 per cent by March 2017.
However, little headway appears to have

Fair and square

CRYSTAL CLEAR A large share of our water needs is met by groundwater. Groundwater depletion has become a serious
problem, with aquifers across India moving into the over-exploited zone. The fundamental problem of limiting
groundwater extraction can be addressed by setting up more observation wells
been made in these areas and it is time
that efforts are undertaken to revive
these initiatives.
Water has an economic value in all its
uses and thus should be recognised as an
economic good. Therefore, suitable pricing mechanisms need to be developed.
Pricing of water has always been a politically sensitive issue but it is high time
we recognised the need to bring financial
stability in our water utilities. An important prerequisite would be to set standards for water pricing according to the
ability to pay. Pricing should be looked
upon as a critical input for activities such
as agriculture, industrial and domestic
use and as a means to increase the financial stability of water projects, which do
not exclude the provision of water to the
poor and the marginalised.
One of the arguments cited for the
current state of affairs in the water sector

relates to the governance of water spanning across different departments and

ministries, both at the central and state
levels. A few years back, the central government proposed the idea of having a
National Water Framework Law. This
was opposed by the state governments
because they saw it as an infringement of
Constitutional provisions that mention
water to be a state subject, giving rights
to the state to frame legislations on water.
In December 2015, a committee was constituted to examine the provisions of the
draft National Water Framework Law
and suggest changes/modifications
therein, taking into account inter-alia
the emerging challenges in the water
sector, reuse of wastewater, the likely
impact of climate change on water
resources and the importance of river
restoration/rejuvenation among others.
Given the enormity of the challenges

the water sector faces; given the fact

that water is a resource that has a strong
inter-relationship between natural and
anthropogenic activities and given the
urgency that our interventions on managing water needs to be synchronised
across users, departments, states and
government, a framework law with
basic principles for alignment of legislations sounds rational.
The objective of celebrating World
Water Day on March 22 every year with a
pledge to conserve water will be successful only if we remember the fundamental: water cycle and life cycle are one. Our
existence, growth and development will
be governed by the way we use and manage water in the times to come.
Romit Sen is deputy director and Kamal
Vatta is director at Centers for International
Projects Trust

Look no further than Doordarshans Kisan

channel to disabuse yourself of the
opinion that state-run media, by the very
nature of its control being in the hands of
the government, projects only the views
of its masters. Launched last year, the
news channel and its Twitter handle not
only report the views of the government
and its policies and programmes for the
farm sector but also those of Opposition
leaders such as Congress Vice-President
Rahul Gandhi and Bihar Chief Minister
Nitish Kumar. The channel was one of the
first to report on the crop damage caused
by the recent rains in northern parts of
India; its Twitter handle even put up
photographs of the damage.

Prepared for all situations

At a conference held in Mumbai on crop
insurance and the progress made by it, a
senior reinsurance executive remarked
that while the government would be
paying the subsidy for the scheme, one still
had to be prepared to make some claim
payments. Quoting British military and
political leader Oliver Cromwell, the
executive said, Put your trust in God, but
keep your powder dry.


Regarding Henri
AXA stalwart would be
partial fix for HSBC
HSBC already said it plans to pick an
outsider to replace current chair
Douglas Flint when it makes its
choice next year. Now there is a suitable one on the market. Henri de
Castries, who recently joined HSBC
as a board member, on March 21
announced he was retiring as boss of
French insurer AXA. He could fit the
bill for the UK bank, at a push.
The Anglo-Hong Kong banks traditional way of appointing a new
chairman was simple: it just picked
the incumbent chief executive. John

Five-year slam
Chinas debt mountain
will get even bigger
Chinas debt burden is only going to
get bigger. Total borrowing has
grown rapidly to reach about 250
per cent of gross domestic product
(GDP) last year, raising concerns
about runaway credit. But pressure
to meet unrealistic economic growth
targets will delay any sustained
effort to bring debt back down.
The governments latest five-year
plan highlights the dilemma. Prime
Minister Li Keqiang pledged that the
worlds second-largest economy will
expand by at least 6.5 per cent a year,
in real terms, until 2020. Meanwhile,
planners expect total social financing a broad measure of private
sector credit to grow by 13 per cent
in 2016 alone. So even if inflation
reaches the optimistic target of three

Bond and Stephen Green both ance sector, and a 38 per cent negative
became chairmen, and while Flint total return for German rival Allianz.
wasnt previously chief executive, he Just over a fifth of AXAs life and savwas finance director. Even before ings business is in Asia, and premiHSBC was last year criticised
ums earned there have doufor enabling historic Swiss
bled since 2010.
tax evasion, this arrangeThe Frenchman wouldnt
ment meant its leaders
be a perfect fit. He has been
perceived ability to knock
in situ at AXA for over 15 years,
heads together was undera bit too long for comfort. He
mined by having been at
also has spent the last six years
as chairman and chief execuscrew-ups happened.
tive, which is even less ideal if
De Castries, who has been
HSBC seriously wants to iron
at AXA since 1989, would
out the wrinkles in its own
solve this at a stroke. His
governance. That said, theres
tenure has been a qualified success: much to be said for a global bank rootsince he took the helm in May 2000, ed in the UK and Asia hiring a contiAXA shares have recorded a total nental European outsider. De Castries
return of six per cent, against a seven isnt exactly a fresh face, but AXAs
per cent fall in the European insur- loss could be HSBCs gain.

per cent, debt will outstrip nominal take on a greater burden: official
GDP. Extend those trends, and bor- borrowing was about 44 per cent of
rowing will hit about 290 per cent of GDP last year, according to
annual output by 2020.
Breakingviews calculations based
Central bank Governor Zhou on data from the Bank for
Xiaochuan has expressed concerns International Settlements. Thats
about rising corporate debt levels well below the level in developed
but theres little sign that China is countries. However, this excludes
reining in credit. Banks extended borrowing by state-owned entities
new loans worth 3.5 trillion
and local governments.
yuan ($540 billion) in the
Moodys puts these continfirst two months of 2016, a
gent liabilities at between 50
third more than in the same
and 70 per cent of GDP.
That leaves consumers,
Meanwhile, Chinese comwhose borrowings are just 39
panies are using domestic
per cent of GDP. So housedebt to help finance an BY PETER
holds have plenty of scope to
overseas M&A binge which THAL LARSEN
load up on mortgages and
totals nearly $100 billion
credit cards. A consumer
this year, according to
credit boom might help
ThomsonOne. Though a
deliver growth targets while
healthier stock market would allow also shifting the economy towards
corporations to deleverage by issu- greater consumption. Whoever does
ing more equity, the collapse of last the borrowing, however, debt levels
years bubble has made investors will keep rising. As in the rest of the
understandably skittish.
world, deleveraging will have
The government could perhaps to wait.

The authors are Reuters Breakingviews columnists. The opinions expressed are their own. For further commentary see www.breakingviews.com

Wait for the after-effects

With reference to the editorial, Cut in
savings rates is a sound decision (March
21), the finance ministrys move aimed at
boosting economic activity could not
have come at a better time. However, it
would be naive to conclude that the poor
and the middle class will gain more from
the lower interest rate regime.
Incidentally, while there has always
been pressure on the Reserve Bank of
India (RBI) to slash interest rates, no one
not even the government questions
the indifferent attitude of the banks,
which take their customers for a ride.
The editorial rightly points out that
an immediate consequence of the rate
cut might be that the government would
need to borrow more from the market.
But then, how can the government have
its cake and eat it too?
The suggestion of the editorial to consider merging the Public Provident Fund
with the National Pension System is not
a wise one at this juncture. Let us tread
the path of economic growth cautiously.
Any hasty or imprudent move may bring
more peril instead of laurel for the Indian
economy. Let us see what after-effects
follow the rate cut. The move seeks to
address the main grievance of public sector banks that they do not enjoy a level
playing field vis--vis the deposit rates
of government-sponsored small savings
schemes. Actually, public sector banks
should now properly reduce their lending
rates to facilitate effective transmission
of any rate cut-oriented future monetary
policy of the RBI.
S Kumar New Delhi

Blow for senior citizens

With reference to the editorial, Cut in
savings rate is a sound decision, interest
is the only source of regular income for
many senior citizens. A sharp interest rate
cut in savings schemes for senior citizens
and term deposits is a blow to them. The
value of their interest income keeps dip-

ping while the cost of living keeps rising.

Medical bills go up in advanced age.
Getting proper treatment in government
hospitals is quite difficult and treatment
in private hospitals is unaffordable.
The governments argument for cutting rates is that it will pave the way for the
Reserve Bank of India to trim lending
rates of banks. But hardly any senior citizen will apply for a bank loan to buy a car,
house, etc.
One view is that the rate cut is the result
of pressure from foreign mutual funds and
insurance companies, which contend that
if people continue putting their money in
secured deposit schemes, where would
they get their customers from.
M C Joshi Lucknow

Recovery of dues
With reference to Devangshu Dattas column, Rate cuts are not a panacea for all
ills (March 21), one of the root causes of all


economic peril is persisting loan delinquencies, which obstruct the smooth flow
of credit in the economy thereby
hampering investment, consumption
and demand.
In such a situation, any cut in policy
rates is worthless due to the inability of
banks to transmit the effects in time. Until
and unless a reversal occurs in the diminishing returns of banks, they wont be able
to transmit the effects of policy rate cuts
without a downward revision in the interest rates of deposits. In case banks take
this path, it would be at the cost of depositors; it would also adversely affect the
resource mobilisation of banks.
The current rate of interest on deposits
of various tenures is not justifiable when
compared to the cost of sustenance. It
will negatively impact the segments
dependent on interest earnings for
their livelihood.
The need of the hour is to focus on the
recovery of defaulted dues. For this a wellorchestrated collaboration between government, banking regulator, market regulator, legal system and banks is of
paramount importance.
V S K Pillai Changanacherry

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