Indian Economy: News and Discussion (Apr 1 2011)

[sugriva]

Fair disclosure : I own & also inherited some Reliance stock which my parents bought at par long long long ago, along with the shares they got when their debentures and others converted.

Ah, Reliance and its convertible issues and EGM for "conversion by force" of convertibles to shares. But then I digress

You dont pay the market price, you don't get supplies. Classic command economy problem of playing with price signals.

That is a very simplistic explanation. When there are other suppliers willing to supply long term gas at rates from 3.12 $ (2009 contracts) to > 5$ (more recent ones), Reliance is being Paki in balking at supplying gas at rates that were decided in an old contract. RIL very well has the right to demand more for new contracts that it signs but it underproducing now is classic Paki tactical brilliance.

But Baboons rather want the current gas to be used to produce subsidized fertilizers and power and LPG and whatever they decided is the "priority"

Babus are not the baboons that you make them out to be. If you read the news report that you referenced, it was about a RIL whine fest about being hurt because babus are giving RIL a GUBO session by making it divert its reduced gas production to "priority sectors" and not to RIL's petrochemical facilities. The intention seems to be to do GUBO to RIL.

you will also get shiny new polyester dhotis

Don't be so happy about that. They will be coming from your dividend payments and you may be left even without your langotis.

[somnath]

I do hope you had reported this. The admins would have had a good laugh at it!

This is pretty standard English I assure you . Just google for it.
Teaching Grandma to suck eggs
Teaching grandma to suck eggs
Grandma to suck eggs

A big apology to you on this - I didnt know, hence misconstrued...

Must say though, whichever school you went to, taught you well the fine art of covering ignorance in bluster! That doesnt take away from the fact that I didnt know the idiom at all, sorry...

h. But you were the one who asked who defined "long bonds". That is the market convention in Europe as well

Not at all, whether its called "long", medium" or "short" is irrespective..Your point was a cavil over whether a fixed rate contract is possible in the markets for 5 years tenor or more..If you want to call it "medium", be my guest...(if the longest maturity bond issued by the US treasury is the only tenor that is "long", then it is a pretty narrow definition, but its not relevant)..We were not talking about 30 year contracts in any case..

Net net, there are bonds, offshore, onshore, and millions of fixed price contracts with maturity >5 years and 10 years and more..

Point is such markets if it shows up just 200 securities is very thin indeed. Those long term fixed contracts are very rare.

So? "Thin" market = doesnt exist? By that logic, equity markets are "thin" (given how small they are compared to Fx markets)..So equity markets dont exist?!

Well, HOW Exactly will they do it is the question. In the absence of such markets for the long end risk management, those contracts are usually not entered into in India . That is why

First of all, they DO exist..there is data on that..As I said, just look at one category, sub debt, and you will understand they HAVE to be there (if you know what sub debt means)...Second, you are compeltely wrong in saying that there is no IRS market in INR - there i a well developed market on INR swaps, across maturities - ever heard of MIFOR/OIS? what isnt there is a FRA onshore, but that is executed through the USDINR NDF market offshore, which is very liquid..

But all this gyaan on onshore market is irrelevant, as all commodities are hedged offshore, where there are even more developed markets for these things...

Essentially, there is no question of whether long term fixed price contracts exist or not, they DO...

Err. Fixed for a few years! So they are not fixed to the perpetuity of the contract! Touche. Classic definition of a variable clause! Sometimes NatGas and other contracts are entered into for 30-40 years /for the life of the asset

If it is 30-40 years, then there are price ecalation clauses after 5 or 7 yers..However, many 3-15 year contracts are fixed price..Thats the nature of the market....

Now look at all the claims you have made:

1. The price was "set" by the govt..Fact: RIL et al "asked" the govt to come and clear up the mess..
2. There cannot be "fixed price" contracts for natgas...Fact: There are existing contracts that are fixed price, including the ones that RIL reneged on...
3. There are no >5 year financial market instruments that have fixed price contracts..Fact: they are ubiquitous..
4. The above arent there "in India"..Fact: Irrelevant to a commodities disucssion, but still, they are very much present..
5. There is no IRS market in Idnia...Fact: wrong, there is..
6. Arbitrators have to be "registered"..Fact: Well, I asked you if Gurumurthy is "registered" as anything..
7. RIL signed "myriad different" contracts with GOI, not NELP..Fact: not possible in a public auction..

At the end, besides slogans, there is nothing to the analysis, given so many rank incorrect assumptions...

The policy is a mess, not because of prioritisation (most gas producing countries have or have had such prioritisation norms), not because the govt wanted "cheap" gas (cheaper the gas, less the profit petroleum to the govt)..Not because of "price setting" either - NELP had defined price setting to be an "arms length" activity...But because ministers used the opportunity of new policymaking, and gas was new then, to try and play crony games, old style...So Mukesh versus Anil, Mukesh versus everyone else, and so on...In the process, they right royally screwed it up...

[somnath]

If you read the news report that you referenced, it was about a RIL whine fest about being hurt because babus are giving RIL a GUBO session by making it divert its reduced gas production to "priority sectors" and not to RIL's petrochemical facilities

Oh aboslutely..RIL couldnt care a fig if a priority sector company came along and paid it 8 dollars...And there are enough of them around (incl NTPC, which is "priority ssector")...The issue is they entered into 2 contracts that they reneged on, the court and Mukesh at that time asked GOI to step in - a price of 4.2 was fixed...Now as gas prices have gone up, RIL wants make more, hence playing footsie...Thats as simple as that..

Who's the culprit? Policy...I think going forward it is better defined, but with D6, there are so many contracts, agreements, court cases enmeshed that it has become messy and confusing..Allowing each party tp play these games...

[vina]

That is a very simplistic explanation. When there are other suppliers willing to supply long term gas at rates from 3.12 $ (2009 contracts) to > 5$ (more recent ones), Reliance is being Paki in balking at supplying gas at rates that were decided in an old contract. RIL very well has the right to demand more for new contracts that it signs but it underproducing now is classic Paki tactical brilliance.

See, the problem with that babu pricing is there is a shortage situation and what you do need to do is to allow price to rise and hence alternatives/substitutes to become thereby attractive and lowering demand. With the kind of subsidized inputs to the the "priority" sector, there is no incentive for them to do anything because they will get subsidized feedstock anyway! Let gas prices rise, then definitely Mukesh Bhai himself will be with his luxury yatch off the KG basin with dhoti rolled up an directing drilling of as many wells as possible to get gas out of the ground like there was no tomorrow to take advantage of high prices , rather than create shortages!

Ideally there should be a national gas network (the pipelines were being laid and work was being done), with free imports of LNG and the domestic gas competing. The market price will be somewhat closer to the import parity prices and any attempt to sell the domestic gas at far less than LNG landed price is crazy. If there is an excess of domestic gas or if capacity can meet demand fully and more, yeah, you can have discounted from tradeable gas price and the premium for that tradablility of LNG removed and the discount for islanded gas can kick in. Not in shortage scenarios.

Babus are not the baboons that you make them out to be. If you read the news report that you referenced, it was about a RIL whine fest about being hurt because babus are giving RIL a GUBO session by making it divert its reduced gas production to "priority sectors" and not to RIL's petrochemical facilities. The intention seems to be to do GUBO to RIL.

Always read between the lines, especially for corporate signalling in Strat-e-jee games. Just like you start whining about input costs and floating trial balloons , esp if you are largest market share/price setter in the market and float media articles about stuff like "Maruti mulling a price hike of 3 to 5% from Jan xx",and really a "legal" way of colluding on prices, this article is a "signalling" one to cover musharraf against future bad faith arguements in court! In fact,they would love to not have gas for their petrochem . This is a perfectly good way of signalling well before tearing up the contracts with the "non priority" /"govt allocated" contracts by invoking force majeure (which the govt will have to give it's assent to, if the gas production does not increase). The guys who are already GUBOed are the ones who are importing at spot prices at $14 or so. The force majure invoking will the shafting of the GUBOed ones.

In fact, the gas feedstock has substitutes (Naptha is the substitue I think) in all applications (ethylene for petrochem, fertilizer, power etc..)and I think Reliance ethylene and MEG crackers used naptha as feedstock before their integration into the natural gas chain! Many fertilizer and powerplants used Naptha as feedstock /fuel and can switch between the two.

The tussle is who is to GUBO and buy Naptha and run their ops, rather than the el cheapo gas that the babus price in. For reliance, running their petrochem on other feedstock is a very marginal margin hit (I am not well versed with Indian tax laws, maybe some See Pee Yea here can help, but I think that will be an internal consumption and not attract the myriad sales, excise etc and other taxes if it was traded.. Indian laws favor vertical integration and it is for a good reason that reliance integrated backwards and forwards) , while the other guys will be truly shafted.

Don't be so happy about that. They will be coming from your dividend payments and you may be left even without your langotis.

Throwing a few dhotis at you, if the gas can be pumped later at far higher prices will be really worth sitting around in langotis for a wee bit.. When the dhotis come back on over the langotis, it will be a dhoti with 100% tested Zari from top to bottom and literally worth it's weight in gold!

[Jaspreet]

Members,
Please don't put each other on ignore lists. There are some windbags here who talk like they are omniscient. The problem with that is that in the absence of contrary arguments they might end up persuading those who don't know better to their point of view. And that would be the last thing you want.

Please try ignoring the personal barbs and report the post if you can't but please do continue with counter arguments. They are appreciated.

[anupmisra]

Not sure if this has been posted earlier (apologies, if so). This is a two week old article in Forbes. India’s Accidental Economic Formula

What is holding India’s economy back? It’s the restrictions that have survived from the days of Nehru’s infatuation with Soviet-style planning, the “maddening complexities” enforced by New Delhi’s entrenched bureaucracy.

Many had hoped that Prime Minister Manmohan Singh, given his solid reformist credentials, would push liberalization hard. Yet he has presided over a weak government, stalling on promises of structural change in recent years.

Yet the economy is now in a “golden period.” Estimates put the increase in gross domestic product for the year ended March 31 at a robust 8.6%. Growth this year could be even better.

So why is the economy, in the absence of reform, doing so well? New Delhi’s excessive fiscal and monetary stimulus is part of the answer, of course.

And another reason lies in the feebleness of Singh’s government. The country’s constitution establishes a federalist system, so state governments can set their own course. As an April 29 editorial in the Wall Street Journal Asia points out, changes at lower levels of the political system are leading to a healthy competition for business and investment.

As the states try to outdo each other, India’s investment climate improves. A joint report, “Economic Freedom of the States of India: 2011,” highlights the differences among the 20 largest of the Indian states.

The rankings have substantially changed in recent years, indicating a vibrant rivalry. In the most recent report, Tamil Nadu, Gujarat, and Andhra Pradesh—in that order—were the top stars in economic freedom. In the previous 2005 report, the list looked a lot different. Only Tamil Nadu was in the top three then, with Madyha Pradesh and Himachal Pradesh as numbers two and three, respectively.

This now-intense rivalry could even end up moving New Delhi in the right direction. Abheek Bhattacharya of the Wall Street Journal’s Asian paper noted that the strongest Indian states may end up pushing reform at the national level. The states are essentially laboratories for nation-wide change, he observed in an interview on the John Batchelor Show last Wednesday. And laggard states are realizing the need to catch up. They are, he says, loosening restrictions and removing other impediments to growth.

The reform-from-below model, a direct result of India’s lively democracy, runs counter to accepted wisdom that authoritarianism is needed for economic development these days. For instance, just about everyone agrees that strong central guidance has been the most important factor responsible for the spectacular rise of the Chinese economy.

Of course, the global narrative has been absolutely correct since 2008 in China, when that country’s growth has been driven by massive state investment. In 2009, for instance, the country’s planners, either directly or indirectly through the state banks, poured about $1.1 trillion of stimulus into their then-$4.3 trillion economy. Nobody, however, thinks Beijing’s spendathon is sustainable, especially now that China has built all the “ghost cities” it can afford and now that the country’s banks are burdened by trillions of yuan of questionable loans.

But the accepted narrative was not true before the global downturn, when Chinese growth was more in spite of national planning than because of it. In reality, the country prospered primarily because of the creation and the development of the private sector, something that President Hu Jintao and predecessor Jiang Zemin were ambivalent about or hostile to.

Even Deng Xiaoping, the so-called architect of reform, succeeded because of defiance of his edicts by the Chinese people, both in the countryside and the city. If there was one dynamic that existed from the end of 1978—the beginning of the reform era—until the middle of 2008—the beginning of the Great Recession—it is that the planners of the Communist Party have been trying to catch up with Chinese farmers and entrepreneurs as they sought to create their own livelihoods, independent of the mighty state.

There is no doubt that central guidance can jumpstart economic growth, something that has happened in both democratic and authoritarian societies. Yet both India and China are beyond that stage.

And now, it looks like the Indians, mostly through good fortune, have ended up with a decentralized model of local competition that can continue growth over time, even if paralysis in New Delhi continues. The Chinese top-down management of the economy—especially with Hu Jintao’s emphasis on renationalization—is a distant second choice for national development.

The vitality of competition will soon become evident as growth stalls in China and soars in India.

[Theo_Fidel]

Someone needs to round these rascals up and export them to say Siberia. They can then 'eliminate' poverty in Siberia.

http://www.livemint.com/2011/05/2522172 ... e.html?h=B

The latest stunt by some members of the influential National Advisory Council (NAC) headed by Sonia Gandhi is silly. Jean Drèze, Aruna Roy and Harsh Mander—the Gang of Three —led noisy demonstrations outside the offices of the Planning Commission, whose estimate about how much it would cost an average Indian to stay out of poverty these worthies find too low. This is perhaps a sign of where policy debates have sunk to in a regime torn between a hapless Prime Minister and a domineering party leader.

Why? The most potent weapon against mass deprivation is economic growth. In the late 1980s, Amartya Sen had compared “growth-mediated security” with “support-led security”. His two favourite examples of the latter were China and Kerala. Two decades later, China has pulled hundreds of millions off poverty because of double-digit growth while more dynamic states have closed the human-development gap with Kerala. NAC and Sonia Gandhi do not seem to understand this.

[RamaY]

Yawn..
Reliance Asks Oil Ministry To Review Priority of KG-D6 Gas supply

Vinaji

I think it is more of Reliance's doing. They first filled media with news of large finds, which increased their stock prices and so on. They went along with large contracts; starting from AP to Guj and every state along the way.

Now they are retracting on most of the finds and their sizes. Since the finds are lower than previously announced, they want to retract on some of their previous commitments.

The catch is GoI wants to define the priority list where as Reliance wants to have that discretion.

Everything is maya onlee..

[sugriva]

This is a perfectly good way of signalling well before tearing up the contracts with the "non priority" /"govt allocated" contracts by invoking force majeure (which the govt will have to give it's assent to, if the gas production does not increase).

Not so fast. Force majeure can cut both ways. In this situation even govt can invoke force majeure and cancel D6 contract to RIL. Would RIL want that?

Let Gas prices rise

Wonderfool. Then what is the sanctity of a contract. As far as I can tell, RIL, of sound mind and sound body, signed contract to supply gas at 2.4$. With some pakiness, the price is today 4.2$. Now it wants to do some more pakiness and jack up prices some more and people are supposed to GUBO before them.

[Theo_Fidel]

I think it is more of Reliance's doing. They first filled media with news of large finds, which increased their stock prices and so on. They went along with large contracts; starting from AP to Guj and every state along the way.

RamaY, remember they are a publicly listed company and are required to report what they believe per listing rules. Were they excite, sure they were. No more than GSPC and its 20TCF down to 3.4TCF. Reliance has done some very questionable things. Esp. the Anil Ambani group of companies. I personally dislike them and will never own their stock. But, they have created more wealth for India than just about all the dinosaur PSU's combined. And they have done this on a shoe string. It is a travesty that we are discussing their production of KG gas and not questioning the PSU's for sitting on all the lease area they squat on. Even the 3-4 TCF PSU finds are just sitting there under the ground generating no wealth for the nation.

GOI has no credibility in this regard. If they had any shame they would disband the PSU's immediately for being humiliated by Reliance. In an open market they would have gone bankrupt by now.

In terms of pricing lets keep in mind the numbers involved. Even a 5 TCF find is a heck of a lot of money in the open market. Averaging out at say $10 per Thousand Cubic feet. It works out to about $10 Billion per TCF. So that in turn gives one about $50 Billion for a 5 TCF find. The eventual production will be much higher than this 5 TCF as more wells are drilled, gas/water injection is deployed, etc.

Any company will be excited about finding $50 Billion. Its another matter that the Babu's only want to charge $20 Billion for it. Essentially give away our natural wealth for a loss to their pet projects.

[somnath]

A lot of people have just a dogmatic view of outcomes, without having an appreciation of the complexities of execution of reforms...Especially true for complicated sectors like natgas, where various segments of the same industry are of diffeerent "types" - oligopolies (exploration), natural monopolies (pipelines) and monopolistic competitions (selling)..There are issues of "right of way" - how do "price discover" in a pipeline, which is a monopoly? Or is it desirable for an importer/producer to sell to a potential customer who is not linked up to a pipeline? these are regulatory issues that need intervention..

In India, historically, like with all other hydrocarbons, gas too was under an APM regime..That still exists - but relevant only for "certain" gas produced by ONGC/OIL/GAIL..Now, why cant this be dismantled overnight? Simple...there are downstream projects that have been set up (power, fertiliser) with certain contracts with the producer around the APM regime...Just moving to a market-based, non-APM pricing would not just render these guys' business models defunct (and not all of them are public sector), it would invariably lead to litigation..Os these can possibly only be "phased out" over time, as the gas from these properties run out..

the second pricing algo is for imports - which is fully arms length, done by entities like Petronet with foreign producers..There, long term contracts are entered into, and both parties typically honour them - Rasgas has been supploying 7.5 Mio @ 3.12 dollars under a 5 year contract enetered in to in 2009 (they have many other contracts they have)...This is the simplest, contracts enetreed under English law, and little margin for disputes, unless the producer plays funny, like Iran did..

the third also was the "pre-NELP" pricing of some smallish roperties, like Ravva...these were a mix of APM and"arms length price discovery", tending towadrs the latter...Ironically, these contracts have held, by and large!

The fourth, and this was supposed to the the big bang reform, is NELP pricing...Under which D6 was the biggest property..Under this, price discovery was supposed to be "arms length"...Unfortunately, the first blow to the philosophy itself came when RIL and RNRL entered into a contract on a bileteral basis on a price that was arrived at by NTPC through an open auction...that was clearly not arms length (unless one consides the length of Mukesh and Anil's cumulative arms!)...And then the whole Mukesh-Anil spat started, oil prices started going up, and the whole thing got embroiled in a mess...

While I am not a commodities expert, I spend considerable time on the asset class as a part of my job..For reasons mentioned right in the begining, natgas is a nototiously difficult market to "liberalise"..Because there is no "one big bang" approach that will work - each segment of the industry needs a different set of regs...there are outstanding legacy arragnements that need to be grandfathered...Sanctity of contracts maintained, well, largely...Add to it typical politician proclivity to currey rent seeking activities with assorted entities..

An interesting comparison of India's regs would be Indonesia...Why? Because a) it is also liberalising its natgas market and b) unlike India, it is a natgas sufficient economy, it has all the natga it needs, and hene has greater flex in allowing "freer" market forces more quickly than India does, as "all money stays within"!
http://www.iclg.co.uk/khadmin/Publications/pdf/4151.pdf

For those really interested, do a full read - and go through the regs that define price controls, allocation et al...Even after "liberalisation", it is very very tightly controlled...And the first principle, ie, the state owns all natural gas (and oil) rights is laid down clearly...India's NELP guidelines, in comparison, are actually much "looser"...

Instead of getting lost in non sequitor (long term fixed price contracts dont exist, or India doesnt have an IRS market sort of stuff), it is more value adding to study the process and outcomes..

[somnath]

On the various intricacies of infrastructure "reforms",if anything trumps the natgas scenario, it has to be telecom...There, perhap more than natgas, the balance between "free market", ensuring common access, higher revenue for a "national resource" et al is incredibly difficult to achieve...And prone to Raja-like dusruptions as well..

Brodband is the next big objective for India's telco sector...How to achieve penetration there, while balancing multiple issues, is a tricky question...Here is an interesting perspective..

http://www.business-standard.com/india/ ... nd/437456/

Shyam Ponnappa is one of the better commentators on telecom, and he ends with the million dollar question..

A common network is, therefore, a logical and environmentally sound choice. The question is: How best to own and operate it?

[somnath]

There is quite a bit of NAC-bashing in the pink media (reflected pretty well in BR as well!)..So its interesting to note an opposite view coming in..

Vinayak Chatterjee on NAC's proposals on the new land acquisition bill...

http://www.business-standard.com/india/ ... ty/437457/

If anyone knows infra in India well, its VC (and maybe some of the "brahmins" in IDFC)!

[svinayak]

Not sure if this has been posted earlier (apologies, if so). This is a two week old article in Forbes. India’s Accidental Economic Formula

And now, it looks like the Indians, mostly through good fortune, have ended up with a decentralized model of local competition that can continue growth over time, even if paralysis in New Delhi continues. The Chinese top-down management of the economy—especially with Hu Jintao’s emphasis on renationalization—is a distant second choice for national development.

The vitality of competition will soon become evident as growth stalls in China and soars in India.

Lot of fake debate and arguments. India being its history and geo graphy has this kind of decentralized economy for hundreds of years. Indian economy accommodated this during heavy rains and drought for millenia.

Modern state and economy based on local growth is showing the same pattern and with outside investment this shows multiplier effect
India is like a hundered jellys together working together. One jellys falling behind does not matter to the whole

[Theo_Fidel]

Jaspreet,

What! U just call me a 'blow hard'. Just kidding...

Nice sentiment. But it takes two to clap.

Acharya,

You just gave me the weirdest mind image. India as a bunch of wriggling Jellies... ..what the..

[vina]

A big apology to you on this - I didnt know, hence misconstrued...

Wow! Finally you "didn't know" something.

We were not talking about 30 year contracts in any case..

Eh? Surely you dont mean to say that KG-D6 Reliance kind of contracts are for 5 years!

Net net, there are bonds, offshore, onshore, and millions of fixed price contracts with maturity >5 years and 10 years and more..

Oh.. Quit going on and on like a broken LP record. Such fixed price contracts dont exist in COMMODITY markets. And even in financial markets they exist, they are far less in volume when compared to floating/indexed products and in INDIA specifically, I would be very very surprised indeed if they did in large measure because the ecosystem to manage those kind of products don't exist (I will come to your point on ..oh, but they do exist in a bit) thanks to RBI baboogiri.

In fact, I would say the bulk of the external deals India Inc did were indexed to Libor and I have seen little pure fixed external deals (longer than 5 years) and if you find a pure fixed one, do post , I would like to study it.

Second, you are compeltely wrong in saying that there is no IRS market in INR - there i a well developed market on INR swaps, across maturities - ever heard of MIFOR/OIS? what isnt there is a FRA onshore, but that is executed through the USDINR NDF market offshore, which is very liquid..

This has to be a joke on the lines of "Pakistan's indigenous car, the Habib Sitara!".

Just because you have a notional interest rate derivative market it really doesn't mean that it is functional or is indeed useful!

For eg, consider the Retail Debt Market and find out how much was the volume yesterday at the NSE (drumrolls.. a grand zero!). So does the NSE have a RDM or not?

Or consider the F&O volumes in BSE (NOT NSE) and find out how used it is. Does the BSE have an F&O segment or not?

In fact the entire debt market in India is a sort of joke. You dont have a functioning term market, You are not allowed to short govt bonds, you cant "buy" if you cant show the need to "cover" (aka.. speculate/take naked positions), there cant be options on it , in fact, the entire Yield Curve is a massive joke and is just so much model make believe as the "equator" around a model globe! There is such little market validation of the prices of the securities traded for the maturities, the entire thing looks hokey and the folks I know in NY who spend considerable amount of time fitting beta splines and pondering and agonizing over the shape and movements of the yield curve would be shocked out of their be-jeezus if they saw it.

Look at the stats from yesterday's close in the Clearing Corp of India Ltd (which runs the NDS-OM, the dealer network of the RBI for . The total volume was a piddly 15,000 crores (approx $3.5b) . For upto 3 years,the volume was 60 crores , 3 to 7 years Rs 1626.52cr , 7 to 10 years was 10481 crores and above 10 years 3632 cores. In fact , the 7 year security saw the bulk of the volumes @10481 croes and 1400 contracts. The rest of the bonds saw little volumes (5K crores put together!) . In fact,much of the longer dated securities saw volumes like 1 to 3 contracts at most .. simply beggars belief!

If someone is going to bootstrap this and give it as a Yield curve, it boggles the imagination. It really was a one security market (at least yesterday , the 7 year sec) ! BTW, the that is one heck of a funny kink in the 1 to 3 year maturity in the Yield curve. Is that an arbitrage opp , or is that an economic signal of something, you cant know unless you have a liquid market .

Good luck if you want to do any risk and interest out of this make believe.

No wonder the market participants in India dont do really long term stuff. You can get an edu loan in US for 30 years (i got one at around 5.49 APR for 30 years fixed), 30 year mortgages are as common as bread, corporates raise long term debt and funding and you have long term contracts.

Here go and ask for business loan with a 10 year maturity, you should see the look face of the bank manager , if you are a 25 year old IT/Vity and have a working life of 35 years ahead of you and go ask for a home loan, you get at max 15, while every logic screams 30! There are sound structural reasons for that. Even for corporates, unless they go overseas, the debt markets are very very limited indeed (cost and tenor wise) and no wonder they go ECB almost exclusively (whoever can that is) with a vengeance and no wonder you have really atrophied debt market!

As for the proposed CDS market that the RBI has got position papers on, it sounds like as much a joke as the other parts of the bond market and it has all the trappings of being still born.
If there is a crying need in the Indian financial system it is in the moribund bond markets. But that runs up straight against the govts agenda of control and babugiri and so wont happen.

You of course are welcome to believe that we have a "interest rate swap" and other fixed income markets domestically . I have nothing to say to that.

[RamaT]

Standard Chartered says India will sustain a 9.3% growth rate and be a $9.6 trillion economy by 2020.



http://www.standardchartered.com/media- ... -Cycle.pdf

[somnath]

Eh? Surely you dont mean to say that KG-D6 Reliance kind of contracts are for 5 years

Well, that too, though I didnt say that..RIL entered into various contracts with different people subsequently, but the first bone of contention was a 17 year contract with NTPC - fixed price @ 2.4 - widely refernced if you care to read..A similar contract with RNRL as well..The 5 year contract I spoke of was the Rasgas-Petronet, 2009, @ 3.12, under which they are still supplying 7.5 mmbtu - again widely referenced...

Such fixed price contracts dont exist in COMMODITY markets

Says who? You? In the face of data? Strange...Refer to the above..Most natgas is traded under bilateral contracts, not on the exchange, but even the limited data shows that there are tons of such fixed price contracts...

And even in financial markets they exist, they are far less in volume when compared to floating/indexed products and in INDIA specifically, I would be very very surprised indeed if they did in large measure because the ecosystem to manage those kind of products don't exist

Again, thin volume = doesnt exist? FYI, it is the animal of "floating rate" instruments came later in the public bond markets in India...Regardless, there are tons of both publicly traded bonds as well as many more bilteral loans that are long tenor and fixed price...

In fact, I would say the bulk of the external deals India Inc did were indexed to Libor and I have seen little pure fixed external deals (longer than 5 years) and if you find a pure fixed one, do post , I would like to study it

Again, why go on to the "offshore" market, just check on the generic category of sub debt onshore - you will get yhour answer..There are hundreds of >10 years INR bonds outstanding in the market...

Just because you have a notional interest rate derivative market it really doesn't mean that it is functional or is indeed useful

And this needs to be the biggest joke...I guess the entire desks of IRS traders in banks across the country are wasting their time then! MIFOR/OIS, in case you know what it is, is an extremely liquid market, with transactions running into thousands of crores every day...Just because you dont know of it, doesnt mean it doesnt exist...For longer dated swaps, if MIFOR/OIS isnt sufficient, there is the offshore NDF market...whatever you cant hedge onshore you can hedge offshore and run split books...Split books by themselves run into many billions of dollars for India...

Even further, for insurance companies and pension funds, they dont even need any derivative markets necessarily to invest in long term papers...at its very basic, they simply do portfolio immunisation - match their liability durations with asset durations...

And yes, bond lending doesnt exist? What is repo/reverse repo?

What you saw in the CCI data was trading on Gsecs - by AEXJ standards, 3.5 billion dollars is a very good volume in govies...The highest volume is in the 10 year, because traditionally the 10 year govie is the benchmark - and therefore most liquid...In fact most trading would be on the 10 year segment..Not sure why the 7 year security saw a spike, unless its a benchmark issue that is "slipping out" of benchmark and hence people are crystallising profits/losses, or some such...And yes, these numbers are pretty good enough to get a yield curve on - Indian yield curves are pretty well defined and I have never heard any trader complaining about liquidity..

Even for corporates, unless they go overseas, the debt markets are very very limited indeed (cost and tenor wise) and no wonder they go ECB almost exclusively (whoever can that is) with a vengeance and no wonder you have really atrophied debt market

On the contrary, most ECBs are short tenor, actually 5 year is the standard tenor...Most long term funding by corporates happen onshore, through bilat loans, and some bonds...

As I said before, some risks on INR can be covered onshore, while some other need to be covered offshore..Some cannot be covered at all...All markets have their own limitations...Doesnt mean that those markets dont exist, and cant price a long tenor (5 year or more) fixed rate contract...Commodities, o the other hand, dont need to be hedged onshroe at all, they are all hedged offshore....

Now the reasons why the Indian debt market is not as well developed are many - and we can have that discussion (BTW, babu-giri is hardly a reason, the same babus setup Asia's finest equity markets)...But irrelevant to the limited point on whether long term fixed rate fiancial contracts are possible in India, in the fiancial markets, or indeed in the commodity markets - there is enough and more data if you want to see it...Superficial newspaper knowlege doesnt help..

[vina]

What you saw in the CCI data was trading on Gsecs - by AEXJ standards, 3.5 billion dollars is a very good volume in govies..

Surely this has to be the joke of the century. You can sell a couple of billion dollars without batting an eyelid in NY / London markets and for an economy of India's size, this is pitiable. Why the impact cost of a couple of 100 crores worth of order in any will be security will be massive and will have everyone cowering and shivering in their dhotis.

Maybe they can borrow some of Sugriva's shiny Reliance dhotis as well for good effect.

And yes, these numbers are pretty good enough to get a yield curve on - Indian yield curves are pretty well defined and I have never heard any trader complaining about liquidity..

.. It is different from mathematically defining a yield curve vs actual testing of it (call it reality check), if not you are living in a make believe mark to model world (not mark to market world) like the CDS and other structured products folks were living in before the crash. One of the prime lessons was to move those over the counter products to exchanges and clearinghouses to enable price discovery and to create a real market. That shift is well under way now.

As for traders complaining or otherwise about liquidity, well, it is an accepted fact in India, even in the equities side, other than the top 40 to 50 odd stocks, the liquidity barely exists for anything without steep impact costs.

Anyway. Good luck on a sane and functioning debt market in India. With the current market structure, it cant happen. Reeks too much of atrophy and decay and the musty smell of the graveyard.

[somnath]

Some more declarations based on superficial newspaper knowledge..

You can sell a couple of billion dollars without batting an eyelid in NY / London markets and for an economy of India's size, this is pitiable. Why the impact cost of a couple of 100 crores worth of order in any will be security will be massive and will have everyone cowering and shivering in their dhotis

So the Indian bond market is small compared to the international markets...So? As I asked youa afew times, small = does nto exist?

And do you even think of a sense of proportion? The govie market of an economy running a trillion dollar deficit every year (or clsoe to that) will be comparable to one that runs 50-60 billion dollar deficit! Never mind the fact that NY/London/HK/SG are global financial centres, India isnt..

Have you ever executed any order of any size in the Indian bond markets? I regularly do transactions running into hundreds of milions of dollars in a day in Indian bonds - never faced a problem...A market trading 3-4 billion a day isnt moved by 20-30 million dollars, or even 200 million..

It is different from mathematically defining a yield curve vs actual testing of it

Mark to model! Do you even know which securities are eligible for mark to model? If you did, you wouldnt say this...

make believe mark to model world (not mark to market world) like the CDS

CDS mark to model! Outside the Fx market, CDS is the LARGEST volume traded market in the world...Larger than equity markets, any other markets...There is a big difference between CDS and CDOs, in case you are confusing..

Good luck on a sane and functioning debt market in India

there are various views on it, and I personally think it is the most underdeveloped segment of the Indian capital markets...But that doesnt mean that long tenor (5 years and more) contracts cannot be priced off that market - they are regularly done, in billions of dollars terms..

And none of the above detracts from the basic fact that RIL reneged on a 17 year fixed rate contract with NTPC on natgas (yes, both NTPC and RIL would have hedged it, or at least part of it, not onshore, but offshore)...The litigation on which is one of the reasons why the current imbroglio has happened...

[vina]

And do you even think of a sense of proportion? The govie market of an economy running a trillion dollar deficit every year (or clsoe to that) will be comparable to one that runs 50-60 billion dollar deficit! Never mind the fact that NY/London/HK/SG are global financial centres, India isnt..

Well, a govt that same govt that ran a surplus in the late 90s had a bond market that was 200 to 300 times larger back then compared to what we have today.

Have you ever executed any order of any size in the Indian bond markets? I regularly do transactions running into hundreds of milions of dollars in a day in Indian bonds - never faced a problem...A market trading 3-4 billion a day isnt moved by 20-30 million dollars, or even 200 million..

Yeah indeed. If you had traded a couple of hundred million in those bonds that had 2 or 3 contracts traded in total and tripped on those slippages and impact costs, I am sure your bottom that would have been spanked so hard that you would have trouble sitting through your Sunday Church sermon.

CDS mark to model! Outside the Fx market, CDS is the LARGEST volume traded market in the world...Larger than equity markets, any other markets...There is a big difference between CDS and CDOs, in case you are confusing..

Back to the same old are we of shooting off mouth without knowing how to even price a CDS including the math involved in calculating the default probability and the option payoffs, which in many cases are based on hokey data from the same discredited rating agencies.. All sound very elegant on paper , nice model prices get thrown up, thin markets on particular names, traded over the counter, all that is nice and dandy, but ugly departures from model (like all models, you are talking social studies here remember (i can never call them social sciences, there is no scientific rigor and math models alone don't science make) happen with surprising regularity whenever dhoti shivering happens. That is true of all models including as the LTCM case shows of on the run bonds going "special " and stat arb relations breaking down with off the run bonds.

And indeed. Thank you. I know my CDO including PO, IO and the tranche levels. Like I said, go teach your grandma how to suck eggs.

[somnath]

I have never seen so many bloomers delivered with so much abrasive confidence in such short a time/space-frame..

Well, a govt that same govt that ran a surplus in the late 90s had a bond market that was 200 to 300 times larger back then compared to what we have today

the US govie/bond market had daily volumes of 900-1000 billion in the '90s!!!???

Of course, the biggest bloomer is to compare a closed (and smaller) market like India to the world's premier economy and financial market - but then thats an issue of sense of proportion, not basic data..

If you had traded a couple of hundred million in those bonds that had 2 or 3 contracts traded in total and tripped on those slippages and impact costs

Have you ever traded 200 million dollars in the Indian market? Even theoretically, someone says that 200 mill is a market moving volume in a market of 3 billion, well...

which in many cases are based on hokey data from the same discredited rating agencies

CDS contracts are priced off data from "rating agencies"?! Where did you read that? Mumbai Mirror? Have you ever seen a CDS pricing calculator? Have you ever seen default probability assumptions of underlyigns and equivalent numbers from ratings agencies?!

All sound very elegant on paper , nice model prices get thrown up, thin markets on particular names

Thin markets? The CDS market is THE LARGEST asset market in the world, outside Fx...

That is true of all models including as the LTCM case

LTCM was a case of CDS models?! Read up on the LTCM story..And arbitrage models are the same as CDS pricing models!

Of course, once more..

nice model prices get thrown up

CDS contracts are priced on "model prices"? Where? In Timbuctoo? Certainly not in the usual markets, incl your favourite NY/London..

I know my CDO including PO, IO and the tranche levels

Certainly looks like, in the same manner in which you "know" that long tenor assets cannot be fixed priced in global and Indian markets! Or for that matter Indian IRs markets are "notional"..

[vina]

Have you ever seen a CDS pricing calculator? Have you ever seen default probability assumptions of underlyigns and equivalent numbers from ratings agencies?!

Yeah. You punch buttons on the CDS calculator and it shows up a value and you think you know the underlying of how it works . Have you actually BUILT a CDS calculator (just even a spreadsheet one?) . I have.

And yes, I used the default probabilities database from the specialist that Fitch ( I think) acquired around 2002 or so , don't remember the name after all these years.

Nice try. Like I tell you, go teach your grandma how to suck eggs.

BTW, I know it is going to be lost to someone who knows just to punch caluclator buttons on trading terminals, but do you know what Implied Volatility at all means in an option quote and what is it's relation to the underlying model?

In fact all the VaR calculations on which you put up margins on your positions are model based ! So yeah at some level you are marking to model only whether you realize it or not.

Why just this morning today, many in the Indian markets if they held SunTV positions would have got a shocker! They would have got additional margin calls any moment now , after the stock tanked 30% ! And if someone was extra heavy on Sun TV, well, his VaR estimates 5% and 10% loss @ 95% confidence just got flushed down the toilet.

And yeah, even if you get extra smart today and model the volatility tomorrow by Garch or anything, it is highly probable that the loss models are going to be inaccurate going forward (I think an overestimate from this point for a short duration) .

Anyway, enough with you. Goodbye.

[somnath]

Coal India looking to buy Indonesian mines..
http://thebusinessofmining.com/2011/05/ ... ian-mines/

Its been happening for soem time now - CIL is scouting for assets in Australia as well..

In absence of forward movement in the Land Acquisition Act, India is just going to get ever more dependent on imports...Add to that CIL's monopoly - no other mineral resource has the sort of monopoly that CIL has, with all its attendant efficiency issues...

[Raghavendra]

India among top four wealth creators http://www.business-standard.com/india/ ... /137313/on

[Suraj]

NOTE
somnath and vina: It's remarkable to wake up and find an entire series of posts by the two of you reported, either by each other or someone else. I think it's an unprecedented achievement in the history of BRF. I don't suppose the irony of first slapping each other verbally, then reporting posts with 'I don't usually report posts but...' strikes you ? There are no prizes for being the more courteous troll.

The entire series of posts will be cleaned up this weekend. I strongly recommend both of you to voluntarily take a break from this thread for a week. If you both restart the argument, you'll both earn a summary 1-month ban from the forum for trolling and thread disruption. Thanks.

[Hari Seldon]

The injustice of our anti-poor schemes

Well, Surjit Bhalla takes on the poverty policy ayatollahs. Again. INterestingly, makes a good point that had come up in one of this dhaga's debates....

Why is the discussion on the politically charged, and politically correct, subject of poverty almost always one-sided? The ayatollahs of poverty policy believe they cannot possibly do anything wrong because, after all, they are designing policies for the poor. When large leakages in poverty programmes are documented (ironically, first asserted by Rajiv Gandhi in 1985), the refrain is: why are you so worried about leakage to the poor when there are leakages to major corporations — and scams against the poor?

If the telecom ministry can be corrupt, why not the ministry of rural development? Why do we cringe at the mere discussion that the ministry of consumer affairs (in charge of food distribution to the poor), may harbour corrupt practices?

In my previous article, I had documented examples of lies on poverty masquerading as informed analysis. I want to add to that list. In a document entitled “The right to food in India”, Biraj Patnaik, principal advisor to the Supreme Court Commissioners on the Right to Food Act, presents some carefully selected data. A graph (slide 20) entitled “Net availability of foodgrains per capita per day in gms” presents data which ends in 2001; this graph shows a low level of foodgrains consumption in that year — 416 grams per person per day. The report was written in 2007 and almost all the data presented in the report ends in 2006. The author could have noted, but did not, that in 2002 foodgrain consumption shot back to a close-to-historical high of 494 grams, and that average consumption during the five years 2002-2006 of 453 grams was close to the historical average since 1951!

Sure, Bhalla's proclivities are well-known. But his arguments are more than mere polemic or empty rhetoric. read and judge for yourselves, as always.

[sugriva]

^^^^
Some questionable assumptions
1. NSSO data is off by 100% (NSSO predicts about 40% of consumption, per Surjit Bhalla it should be around 80%)
2. Even if we, for argument's sake, agree with SB's assessment of survey data being off by 100%, some basic maths tells us that the number of poor will not be halved. (Normal distribution and all that)
3. The 130,000 crore food + NREGS programme is actually the amount that is being spent to sustain consumption at poverty levels, not alleviate it. Per SB's own calculations about 195,000 crores are required to simply sustain consumption at poverty levels (39,000 crores X 4.5)

[vina]

^^^^
Some questionable assumptions
1. NSSO data is off by 100% (NSSO predicts about 40% of consumption, per Surjit Bhalla it should be around 80%)
2. Even if we, for argument's sake, agree with SB's assessment of survey data being off by 100%, some basic maths tells us that the number of poor will not be halved. (Normal distribution and all that)

How so ? This is the basic problem I have with much of e-Con-O-Mix! By every evidence , even anecdotal data, the income/poverty levels in India is in NO WAY a normal curve or even close to it. It is a massive fat tail with a massive bulge from just above extreme poverty /barely sustenance levels to slightly above poverty , with a growing middle class and a very thin elite. This is very different from a "developed" country kind of thing with the middle class making up the massive bulge in the middle of the normal distro and the poor and the rich and ultra rich making the normal tails at the left and right! Unless you have an imagined normal distro of that kind in India as well, this is flawed!

In a very skewed distro like in India, in fact, if SB is anywhere close to accurate in terms of survey data being off , the number of poor in fact might be indeed be halved, nay more than halved , you cant dismiss it off hand without doing the numbers!

3. The 130,000 crore food + NREGS programme is actually the amount that is being spent to sustain consumption at poverty levels, not alleviate it. Per SB's own calculations about 195,000 crores are required to simply sustain consumption at poverty levels (39,000 crores X 4.5)

The Rs 130,000 + NREGA + whatever is in itself a massive underestimate. Consider the "Indian model" post reforms. The publicly listed companies (the entire oil sector, fertilizer , power etc) are made to carry the burden of the "subsidy" cross, with direct impact on the bottomline. So a lot of the subsidy burden is "off balance sheet" for the govt! If you include the loss in value (I mean enterprise value) and lost profits and dividends to the shareholders, this would be a mind boggling figure indeed, as indeed you should becuase that is the direct measurable opportunity cost of that lost value and profits. That just gives you an idea of the scale of inefficiencies and basic baboonism built into the system.

Now fundamentally, why should the shareholders of the listed enterprises bear the burden of this "welfare dole"/ whatever. If the govt wants to subsidize the consumers, fine, let it do so directly. Why should the enterprises be made to do it. You talked about the sanctity of contracts wrt Reliance. I replied that Reliance and GOI are made for each other. What about the massive number of shareholders of all the PSU listed enterprises that the GOI shafts (recently ONGC folks got shafted when GOI increased the "subsidy burden" by 5% or so), where is the sanctity of contracts here? All this is fine if the enterprises are "mai baap" fully owned by GOI and operate in a market economy and do as they wish. But that is not the case.. indeed failed miserably as a case and when you take in minority shareholders, what about fair and equitable treatment of them ?

[g.sarkar]

http://www.economist.com/blogs/schumpet ... n-it-firms
Indian IT firms Another-giant leap
"EVEN two decades after the Indian technology miracle began it is hard not to be impressed by the scale of the achievement. Particularly considering the obstacles. The roads in Bangalore, the city at the heart of the revolution, still suck. Power cuts still periodically kill the lights and air conditioning on the campuses of the big IT firms, until back-up generators come to the rescue. This is a world-class industry built from nothing, that won most of its business abroad, while overcoming India’s lousy infrastructure and inept, and sometimes venal, state.
Indian IT has made shareholders and employees rich and now boosts the country’s balance of payments by $59 billion a year. Yet its impact goes far beyond the numbers. The big firms were among the first to win blue-chip American and European clients and to adopt blue-chip governance and accounting norms themselves. This won acclaim from foreign investors. The industry “changed perceptions of India as a third world country,” says S. Gopalakrishnan, the chief executive of Infosys who heads upstairs to become co-chairman in August. On the other side of town, Suresh Senapaty, the chief financial officer of Wipro, says the industry “created a global brand for India” that helped firms in other sectors to compete abroad......"
Gautam

[svinayak]

The industry “changed perceptions of India as a third world country,” says S. Gopalakrishnan, the chief executive of Infosys who heads upstairs to become co-chairman in August. On the other side of town, Suresh Senapaty, the chief financial officer of Wipro, says the industry “created a global brand for India” that helped firms in other sectors to compete abroad......"

The west controlled the brand of India and made sure it was bad for 50 years. This is not many Indians understand.
Then they controlled the entry of India as a brand once they had finished the cold war and other geo political events
They want to control the brand of India in the future and IT is one way of doing it

[vina]

Hmm. Interesting. In today's Al-Hundi, there was a news report of how the farm sector is getting mechanized, starting off by saying about labor shortage due to MNREGA and the labor intensity of rice transplanting (I rememeber rows of women bent down, transplanting by hand from the old days). With harvesting and threshing already mechanized largely, transplanting is probably the only back breaking manual labor left I guess.

Per that article, it seems that TN and AP have gone nearly all mechanized in rice planting, cutting down labor required from 25 to 30 per acre to 2 people and the amount of water required by 40% and seeds reqd by 20%! KA is now giving 50% subsidy to farmers to buy transplanters!

Googled around and found a YouTube video of the transplanter . Pretty good if the MNREGA actually does the transition of the farm labor to industrial labor. This will be a monumental social change and will liberate the dalits finally and fully for the first time ever from being landless laborers , the low productivity of that kind of farm labor and the oppression and lack of social and economic mobility that entails and the terrible caste and economic structures that it engenders.

Jai Ho. Probably the only thing worthwhile out of the NREGA I can find. Now if only, they NREGA can actually make it's participents develop real life vocational and marketable skills, rather than filling and digging holes, I could applaud it.

[youtube]OmAXM_c3mK4&feature=related[/youtube]

[Singha]

mechnical plough machines which was like long bikes with the person walking behind holding a bike type handle is also common, even in the poorer states like assam.

I think Govt gives some subsidy or grant to buy such kit. there is plenty of corruption in this discretionary granting ofcourse.

the ones I see look like this http://www.gladhander.cn/up_files/wf/po ... ractor.jpg

[vina]

mechnical plough machines which was like long bikes with the person walking behind holding a bike type handle is also common, even in the poorer states like assam.

I think Govt gives some subsidy or grant to buy such kit. there is plenty of corruption in this discretionary granting ofcourse.

the ones I see look like this http://www.gladhander.cn/up_files/wf/po ... ractor.jpg

Yes. The power tiller has been around for a long time in India (the most common ones being Mitsubishi & Kubota licensed manufactured tillers) along with tractors.

Some 10 /15 years ago, threshers started getting common in TN, and after R2I , lines of lines of them which I had never seen before in TN (maybe in Punjab they were ubiquitous), I saw lot of combine harvesters and I think the transplanting is the final backbreaking part that is getting mechanized.

The business model for much of this is like an IT/Vity "Shared Service" . You usually hire these things as needed and each farmer actually doesn't need to own one. The small farm sizes in India usually makes that uneconomic unlike the humongous farms in Massa/Australia/Kaneda/Brazil/Argentina etc.

Yeah, basically , a couple of hundred of these machines per district can take care of the entire transplanting business.

[nandakumar]

mechnical plough machines which was like long bikes with the person walking behind holding a bike type handle is also common, even in the poorer states like assam.

I think Govt gives some subsidy or grant to buy such kit. there is plenty of corruption in this discretionary granting ofcourse.

the ones I see look like this http://www.gladhander.cn/up_files/wf/po ... ractor.jpg

Yes. The power tiller has been around for a long time in India (the most common ones being Mitsubishi & Kubota licensed manufactured tillers) along with tractors.

Some 10 /15 years ago, threshers started getting common in TN, and after R2I , lines of lines of them which I had never seen before in TN (maybe in Punjab they were ubiquitous), I saw lot of combine harvesters and I think the transplanting is the final backbreaking part that is getting mechanized.

The business model for much of this is like an IT/Vity "Shared Service" . You usually hire these things as needed and each farmer actually doesn't need to own one. The small farm sizes in India usually makes that uneconomic unlike the humongous farms in Massa/Australia/Kaneda/Brazil/Argentina etc.

Yeah, basically , a couple of hundred of these machines per district can take care of the entire transplanting business.

I wonder how the economics of these things works out. In the case of IT shared services there is work all the year around. But a mechanised seed planter would have work for may a week or fortnight in a crop season. Everybody would need these devices practically at the same time, linked as they are, to the rainfall pattern in that district. If these implements are crop specific then that is about all the utilisation they would get in a year. Is it then going to be any more cost effective than manual labour?

[JE Menon]

Damn, I never knew these transplanters existed!!! Never thought I'd see the day when this task would be done mechanically!!!

[Pragadeesh]

Damn, I never knew these transplanters existed!!! Never thought I'd see the day when this task would be done mechanically!!!

Check out this post ji: http://www.skyscrapercity.com/showpost. ... stcount=29 some more information available.

[Theo_Fidel]

I wonder how the economics of these things works out. In the case of IT shared services there is work all the year around. But a mechanised seed planter would have work for may a week or fortnight in a crop season. Everybody would need these devices practically at the same time, linked as they are, to the rainfall pattern in that district. If these implements are crop specific then that is about all the utilisation they would get in a year. Is it then going to be any more cost effective than manual labour?

Right now it is still more expensive than manual labor. The machines cost about Rs 8,000 to rent per day with the skilled crew. Do not try to operate this on your own. The crew is very expensive and about 3-4 workers are needed to keep it running smoothly. Make sure one is walking in front so soft spots, twigs, leaves, etc are not a problem. I also strongly recommend the 4 row machine for smaller irregular plots. The 8 row one proved a little hard to turn and get into tight spots. Also don't rent one more than 2 years old. I started late and the only one available was 4 years old. It kept breaking down and spares had to come from Tirunelveli. It spread an oil slick on some parts of the field.

The other problem I had was sourcing the seedling mats. For best performance (no missed hills) the seedling mats must be grown in custom plastic grid mats that are particular to each manufacturer. The field grown mats caused a mortality rate of about 20% w/ Ponni rice and my yield was not what it could have been. Though this could also have been because I planted at SRI spacing which is higher. In manual planting a certain amount of mortality is expected and hence is planted densely. Apparently certain varieties of rice work better, esp. modern dwarf varieties. The traditional Red Samba rice 'Rajamundhi' variety grown here is apparently particularly unsuited due to a weaker early root system. It slumps into the wet puddle quickly.

Forgot to mention petrol is extra. I used about 3-4 liters per acre but the crew said that they have done it for less. Mechanization is very petrol/deisel intensive. It will dramatically increase our oil import bill.

[Bade]

Damn, I never knew these transplanters existed!!! Never thought I'd see the day when this task would be done mechanically!!!

You should have read my nukkad posts from last year. It is happening in SRK's most red-flagged district of Palaghat, Vadakanchery to be specific and you would know. All peace and progress only. And, it was not even the mechanical contraption that vina posted. That is too old a technology apparently, this one was all booted and panama hat wearing Thozilalis driving the device across the field with the mats of rice plants being fed in the rear of the machine by a two-woman crew sitting pretty above all the mud and soil. Very TFTA and clean process. All indigenous technology from the looks of it on the DD channel program, not imported maal.

[vina]

I wonder how the economics of these things works out. In the case of IT shared services there is work all the year around. But a mechanised seed planter would have work for may a week or fortnight in a crop season. Everybody would need these devices practically at the same time, linked as they are, to the rainfall pattern in that district. If these implements are crop specific then that is about all the utilisation they would get in a year. Is it then going to be any more cost effective than manual labour?

True. These things will have seasonal demand only. But that is okay. You have to make the money back in those demand periods. The demand is lumpy and so is the cash flow for the operator.

That said, in good well irrigated areas in TN (esp the Kaveri belt and the Periyar/Vaigai irrigated ones near Madurai, parts of Tirunelveli,) Coastal AP (Krishna/Godavari) and other places with heavy rain (Kerala) and good water availability , Mandya in KA (dont know about Bengal and Assam, maybe there too), paddy traditionally was 3 crops a year, so you have usage for around 3 fortnights a year for that specific transplanting machine.