The dialectics are becoming increasingly difficult to decipher. Classical Marxism postulates that when an idea (Karl Marx called it thesis) clashes with an opposing ideal (the anti-thesis), what emerges is not the victory of one over the other, but a synthesis, which combines the best of both the worldviews. This synthesis is the result of class struggles; but over time, this becomes the new thesis, clashes again with its anti-thesis to form another synthesis. The process carries on till a perfect society, the so-called Marxist Utopia, emerges. And India, we were told by knowledgeable Left-wing scholars, was still some way from this (supposedly) ideal state of existence; as a result, the class struggle against the bourgeoisie would have to carry on.

But now, it emerges that the vanguards of the Indian class struggle, the Communist Party of India (Marxist) or CPI(M) and its smaller co-traveller, the Communist Party of India (CPI), may not actually be the guardians of the Marxian anti-thesis after all. For even the two monolithic Red parties seem to have been inflicted by that most bourgeoisie of all vices-dissent. To be fair to them, disagreements between comrades have still not reached the epidemic proportions they have at other points of the political spectrum (except in Kerala, where senior apparatchiks jockey for position and pelf with as much gusto as Congressmen), but there's a clear clash of ideals between the liberals and the hardliners.

Sample this: senior CPI(M) leader and Marxist icon Jyoti Basu tells the media that Prime Minister Manmohan Singh's statement in Parliament on the Indo-us nuclear deal is "generally all right". The very next day, the party's new General Secretary Prakash Karat says his party has "some reservations" about it. CPI(M) Politburo member Brinda Karat vehemently denies that Basu had ever "given the deal a clean chit". "Our stand is very clear. Our mps have spoken against the deal in Parliament; our General Secretary has briefed the media on it," she says.

The party's stand on the privatisation of public sector undertakings (PSUs) is also full of contradictions, indicating a tussle to find a middle path between the pro-changers and the no-changers. The party (and, indeed, all the other constituents of the Left Front as well) used its clout with the UPA government to halt the sale of a 10 per cent stake in power equipment maker BHEL (Bharat Heavy Electricals Ltd), but thinks nothing about making repeated attempts to sell the Great Eastern Hotel in Kolkata and other state PSUs in West Bengal.

Shyamal Chakraborty, President of the West Bengal unit of the CITU (Centre for Indian Trade Unions), the CPI(M)'s trade union arm, and its national Vice President, sees no contradiction in these two seemingly irreconciliable stances. "We are against the sale of profitable or potentially profit-making PSUs. Social ownership of these must continue. But we don't oppose the privatisation of perennially loss-making units (which is what Great Eastern Hotel is)," he says. But the Central government, which had planned to divest 10 per cent in BHEL, would still own a 57 per cent stake in company after the proposed sale, thus, retaining its public sector character. How can this be termed "privatisation"? The fear, apparently, is that if the Left allows the government to sell 10 per cent today, it might sell another 10 per cent tomorrow. "It's nothing but creeping divestment," says Brinda Karat, explaining her party's opposition to the proposal.

In West Bengal, too, the CPI(M) seems to be pulling in two different directions. And here, too, the clash is between those who want to tailor its responses to the democratic aspirations of the people and those who want to retain its pristine class character. The flashpoint was the passage of the West Bengal Land Reforms (Amendment) Bill, 2005. The moving spirit behind the Bill, which would have diluted agricultural land ceiling in the state and made it easier to acquire farmland for industries, was Chief Minister Buddhadeb Bhattacharjee himself. Leading the opposition to it was state Land Reforms Minister Abdul Rezzak Mollah, whose job it was to pilot the Bill through the state Assembly. The upshot: the Bill's passage has been blocked, putting a question mark on Bhattacharjee's much touted efforts to attract foreign direct investment to the state. Despite efforts to muzzle him, Mollah told the media that he was unhappy with some of the provisions in the Bill. There are whispers that he would not have dared to take on the Chief Minister and other party bigwigs without the blessings of someone big in the party's central establishment.

The Marxists are clearly caught in a cleft between the political compulsions of moving with the times and the ideological imperatives of a dogmatic and doctrinaire faith. The dialectic, then, is veering around to finding a middle ground between these two positions. A senior party leader sums it up: "The pressure for change is coming from the states (read: West Bengal and Kerala) where people want development, not dogma. These units are run by leaders who have their hands on the pulse of the people. The resistance is mostly coming from the Central leadership, which has little touch with ground realities." The pro-changers are on the ascendant in Kerala; they are gaining ground in West Bengal. If dialectic materialism is indeed the science it is made out to be, then the next synthesis should take the Reds closer to a shade of pink. And that will be good news for everyone concerned.

-Arnab Mitra

ECONOMY
It Never Rains But...

Farm growth: A washout on the cards

What you win on the swings, you lose on the roundabouts. The Indian Meteorological Department announced on August 3, 2005, that none of the country's 36 sub-divisions had recorded scanty rainfall. The total precipitation between June 1 and August 3, 2005: 506.4 mm, compared to the average of 484.4 mm. The rider: excess rains have wreaked havoc in parts of Maharashtra, Gujarat and Madhya Pradesh, and could spread to other states such as Jharkhand, Orissa and Karnataka. The result: the kharif crop could be affected. Rice and cash crops such as sugarcane, oilseeds and cotton are likely to be impacted. But all is not lost. A 2.2 per cent rise in cropping area will offset some of the losses. And, since the cropping season is still not over, there's hope that losses can be minimised. Says Chetan Ahaya, Chief Economist at brokerage firm J.M. Morgan Stanley: "Flat agricultural growth will retard the overall economic growth rate by 0.75 per cent; negative farm growth will bring it down by a full percentage point.'' The Reserve Bank of India has predicted a 7 per cent growth for 2005-06. Let's hope the farmers do their bit.

-Ashish Gupta

SECOND
Oil On The Boil-Again
Bloodied bottom lines, supply worries and a market in the grip of speculators make another round of hike in oil prices inevitable.

Crude crisis: Pull out some more of that

On August 2, 2005, a day after the announcement of the death of Saudi king Fahd bin Abdel Aziz, the West Texas Intermediate-the benchmark for crude prices in the world-touched $ 61.6 (Rs 2,710) a barrel, the highest in the last 25 years. But the bigger worry for most countries was the fear of crude prices shooting up even further as more and more western countries start stocking up for the long winter ahead. Adding to the problem is growing instability in the oil producing regions-all the way from the Persian Gulf to Nigeria to Venezuela.

That the era of cheap oil-$20 to $30 (Rs 880 to Rs 1,320) a barrel-is over is something most analysts agree on. "It has much to do with the increase in the cost structure of exploration and production (E&P) companies," contends Subhomoy Mukherjee, Head (Oil & Gas) Research, ICRA. Reason: easy onshore oil is no longer available. Still, he believes that $60 (Rs 2,640) a barrel is a little too much.

Such high crude prices are bad news for an import-dependent country like India. The oil import bill, which was around Rs 59,427 crore in 2001-02 almost doubled to Rs 1,17,032 crore in 2004-05, and is expected to touch Rs 1,80,000 crore this year. As long as the government continues to hold down the prices of petroleum and petroleum products, the country is saved from the impact of high inflationary pressures. But some easing of pressure could have a cascading effect in most sectors of the economy. The government, however, is holding prices down by asking the oil companies to absorb the increasing prices and not pass them on to consumers. The consequence is predictable: bottom lines of most refining and marketing companies have been bloodied. In the first quarter of this financial year, the four public sector refining and marketing companies-Indian Oil Corporation, Bharat Petroleum, Hindustan Petroleum and IBP-racked up cumulative losses of around Rs 9,600 crore.

"Frontline refining and marketing companies are likely to lose Rs 40,000 crore because of under recoveries by the end of this financial year," Petroleum Minister Mani Shankar Aiyar told Parliament on August 2, making a plea for a hike in fuel prices. The last hike in domestic prices on June 21, 2005, hasn't helped the cause of these companies much either. It was just enough to cover 50 per cent of the total cost of production, when crude prices were ranging between $50 and $55 (Rs 2,200 and Rs 2,420) a barrel.

What'll happen to the oil companies if prices of kerosene, LPG, diesel and petrol are not allowed to be raised? "Apart from the pressure on their operating profits, oil companies are going to face the brunt of higher working capital requirements because of increased crude prices," cautions Mukherjee of ICRA. Besides, the major investment plans of these companies may have to be put on the back burner for the time being. And that's not a happy decision either for the company or the country so desperately searching for energy security. With the Left refusing to budge on the petroleum pricing issue (it will only allow a nominal hike) and a cash-strapped government unwilling to take on the subsidy burden, it seems that the hapless oil companies will continue to haemorrhage.

-Ashish Gupta

It's Not Cricket, DD
Prasar Bharati wants free money from cricket.

Sports coverage: Prasar Bharati googly stumps private broadcasters

If cricket is a religion in this country, then it's getting too communal. The government's move to bring about a legislation that will make the telecast of sport events of "national importance" on Doordarshan (DD) mandatory, has raised the hackles of private broadcasters. Their argument: Not only is the decision against the basic laws of free and fair trade, it will also make their battle for survival difficult. What sports broadcasters have at stake is over Rs 500 crore of annual ad revenue and Rs 600 crore of subscription revenue. No chump change, considering India contributes more than 60 per cent of ESPN Star Sports' ad revenues from the entire Asia-Pacific region. And of this 90 per cent comes in by selling Indian cricket, "exclusivity of which is important, as all channels are competing for the same set of eyeballs and advertisers", says R.C. Venkateish, Managing Director, Ten Sports.

Why doesn't Prasar Bharati bid for the telecast rights, instead of trying to wrangle them from competitors? "It doesn't make sense for us," says its Director General, Naveen Kumar. "We would be wasting our funds if, for example, we bought an entire English cricket season in which India was playing, say, only twice." Good economics, but a bit too self-seeking. The past two fiscal years, DD raised Rs 150 crore and Rs 130 crore from sports events, but spent only Rs 63 crore and Rs 67 crore, respectively, on them. The ball is in the government's court, but outsiders have a more equitable solution to the problem. "If sharing the content with (DD) is made mandatory, then it should not be allowed to raise any commercial revenue from it," says Jamie Stewart, ICC's global sponsorships manager. Game, DD?

-Archna Shukla

MANUFACTURING
The India Advantage

Made in India: Better than China in skills

India may not be at severe disadvantage in manufacturing when compared to China, says a recent KPMG report on manufacturing in India. A growing population, skilled workforce, relatively high managerial competency and low wages make India a good manufacturing location, despite its infrastructure issues. Compared to China, the report states, the quality of many institutions that influence business environment is high. For example, from among 102 countries, India comes in at #43 on property rights protection compared to China's 64th rank. Citing a CII study, the report also notes that the average return on investment in India is over 19 per cent, compared to just 14 per cent in China. "If you are looking at high volume and relatively low technology manufacturing, China tends to be more competitive. But in lower-volume manufacturing where technology is more intensive, India is better," says the report, quoting a Honeywell executive in India. Can India also grow as a manufacturing exporter? Many companies think so, says the report. "India is well placed by geography, language and historical association to service customers in advanced economies," the report notes. Some well-known industry concerns surface in the report. For example, poor availability and high cost of power is cited as a negative, as are excessive bureaucracy and indirect taxation. "We have been in India for 25 years, and 17 years in China," says an Emerson India executive quoted in the report. "Every dollar we have put into India has earned a very good return. Every dollar invested in China promises a terrific return, but it is still only a promise."

BUSINESS TODAY-ERNST & YOUNG
Deal Watch

DEALTRACKER JULY'S TOP DEAL Essar Tele's acquisition of 67% stake in the wireless business of BPL Communications

Beginning last issue, Business Today began publishing a monthly listing of the biggest deals in India Inc. Our partner in the effort: Global professional services firm Ernst & Young. Here's the second Deal Watch.

Deal Particulars: Essar Teleholdings, a joint venture partner of Hutch, acquired BPL's wireless businesses at a valuation pegged between Rs 4,400 crore and Rs 5,200 crore. Hutchison Essar, along with BPL, now has 11 million subscribers, equalling Reliance and close on the heels of market leader AirTel (Bharti Tele-Ventures) with 12 million. Essar already had a 9.9 per cent stake in BPL Mobile, a service provider in the Mumbai circle, and has now acquired 67 per cent in the holding company (BPL Communications) that also operates in Kerala, Maharashtra and Tamil Nadu. The buzz is that Essar will retain the BPL Mobile brand for some time.

Impact Analysis: Given regulatory constraints, it is evident that the business will eventually be merged with the Hutch-Essar operations and create India's third largest cellular company. The merged entity will have a market share to rival India's top two mobile service providers, Bharti and Reliance Infocomm. The deal enables Hutchison Essar to expand its footprint to three other circles and consolidate its position in Mumbai. Hutchison Essar is now likely to accelerate efforts to bundle its various India units into a single entity ahead of a planned initial public offering.

The BT 50 Index
Barring the occasional correction, the markets are expected to sustain their upward movement.

The rally continues (despite a sharp correction) in the markets on the back of FII inflows and healthy corporate numbers. The monsoon, which to date has been normal to heavy, has also played its part in improving market sentiment. It would appear that the rally is still not over and barring the occasional correction, we could just see another period of sustained trading and indices hitting newer highs.

Our flagship free float methodology-based index-BT 50-has completed two years now. The free float methodology has several advantages: first, it considers only the value of stocks freely available in the market (after excluding the part held by promoters and other strategic investors) and the weightage assigned to individual shares is more representative than the market capitalisation-based methodology; second, it takes care of the perpetual selection dilemma regarding closely-held companies. For instance, the inclusion of these companies may distort the index based on total market capitalisation methodology, but dropping them altogether may reduce its representative character. The free float methodology facilitates inclusion of large closely-held companies but assigns them a lesser weightage. After the success of our broad market free float index (that the Sensex subsequently decided to adopt this is testimony to the efficacy of the free float method), we decided to launch sector indices using the same method. While the general index captures the overall movements (covering several sectors), sector indices capture the movements in individual sectors. All these indices have a common base period (January 1, 2002). The weightages are reassigned every quarter after companies declare their ownership details. The base value of all BT indices is 100.

-Krishna Gopalan