All Newspaper editorials in one place – January 12, 2024



January 12, 2024

The Speaker’s court

The power to disqualify should be in independent hands


The Maharashtra Assembly Speaker Rahul Narwekar’s ruling on the disqualification petitions filed by rival factions of the Shiv Sena demonstrates why the adjudicatory function under the anti-defection law should not be in the hands of Presiding Officers in the legislature. In a matter that many thought would decide the survival of the Eknath Shinde regime, the Speaker has ruled that there was no case to disqualify members of the Eknath Shinde faction, or 14 members in the Uddhav B. Thackeray (UBT) group. The ruling is based mainly on the finding that loyalists of Eknath Shinde, the Chief Minister now, constituted the ‘real political party’ when rival Shiv Sena factions emerged on June 21, 2022. Mr. Narwekar’s verdict conveniently draws upon some aspects of the Supreme Court’s final verdict of May 11, 2023, in which a Constitution Bench ruled that the Governor was wrong in asking the then Chief Minister, Uddhav Thackeray, to undergo a floor test and that the Speaker was wrong in recognising the Shinde faction’s appointee as the party’s whip. In contrast to the Court ruling, the Speaker has declared that Sunil Prabhu, an appointee of the UBT faction, ‘ceased to be the duly authorised whip’ from June 21, 2022, and that Bharat Gogawale of the Shinde group was “validly appointed” as the whip. As a result, Mr. Narwekar found no reason to sustain the charge that the Shinde loyalists violated any whip. He also ruled that there was no proof that the UBT group violated the other side’s whip as no such whip was served on them.


The Uddhav Thackeray group may approach the Supreme Court again, possibly on the ground that the Speaker’s ruling contradicts key conclusions of the Bench. While acknowledging the split in the Shiv Sena Legislature Party, the Court had said: “… no faction or group can argue that they constitute the original political party as a defence against disqualification on the ground of defection”. The Speaker has also referred to the Shinde faction’s “overwhelming majority” (37 out of 55 MLAs of the original party). On the other hand, the Court had observed that the percentage of members in each faction is irrelevant to the determination whether a defence to disqualification is made out. However, the Court had conceded that the Speaker may have to decide on which faction is the real party when adjudicating a question of defection. It favoured reliance on a version of the party constitution and leadership structure submitted to the Election Commission before rival groups emerged. It is these observations that the Speaker has utilised to determine which group is the real party. As long as defection disputes are in the hands of Speakers, and not any independent authority, political considerations will undoubtedly cast a shadow on such rulings.





January 12, 2024

Show of fairness

Tableau rotational plan for States and Union Territories is an equitable one


The Defence Ministry has finalised a rotational plan which will ensure that all States and Union Territories get a chance to display their tableaux at the Republic Day parade within a three-year cycle. This is a welcome step that will potentially avoid controversy over the selection of tableaux that has become an unfortunate and frequent accompaniment of the parade. This year, tableaux of 16 States/Union Territories (UT) were selected for the January 26 parade following an established process but the Opposition-ruled Delhi, Punjab, Karnataka and West Bengal that were not qualified cried foul. Karnataka’s Congress Chief Minister Siddaramaiah has said that seven proposals sent by the State were rejected by the Centre. A political motive behind selection and exclusion has often been suggested, under the current BJP regime and the previous UPA regime. Only around 15 or 16 tableaux from States/UTs are selected each year, and, obviously, all cannot be accommodated. Those States that have not been selected for the parade this year were invited to showcase their tableaux at the Bharat Parv from January 23 to 31 at the Red Fort. The new plan, that has been agreed to by 28 States, is aimed at giving everyone an equitable chance at participation.


The Defence Ministry already has an elaborate screening mechanism for participants in the parade. A committee of distinguished persons drawn from various fields including Padma awardees was set up this year too that screened proposals from States and organisations. The Ministry of Culture had empanelled 30 agencies for design and fabrication of tableaux through an open selection process and States/UTs were advised to engage these agencies following appropriate procedure. The allegations by States of discrimination with respect to their proposals may or may not be unfounded, but the selection process has to be apolitical and conducted in a transparent manner while maintaining standards to avoid questions in the first place. While the marching contingents and military platforms at the parade showcase the nation’s military might, the tableaux and the performances hold a lens to the country’s cultural splendour and diversity. In the backdrop of controversies year after year, the new proposal of a rotational opportunity for each State/UT offers a fairer, more transparent mechanism. The assertion by officials that the Government, Minister or Secretary do not have any role in the selection process, is reassuring. It will go a long way in keeping the festivities free from bickering.





January 12, 2024

RSVP Regrets

Congress doesn’t have a language on Hinduism. Staying away on January 22 follows its dismal pattern of me-too and boycott


The Congress’s refusal to attend the invitation to the consecration of the Ram temple checks token boxes but fails to make a case. It will not go to Ayodhya on January 22, it says, because religion is a “personal matter” and inauguration of an “incomplete” temple is a “political project” and “an RSS/BJP event” brought forward “for electoral gain”. There is criticism of the RSS and BJP — certainly, that box is ticked. But in this consequential moment, 32 years after the demolition of the Babri Masjid, and following the striking successes of Mandir politics over decades, there is nothing more than just that. India’s main Opposition party has nothing to say to those Hindus who see the temple as an embodiment of their faith, and whom it must also find ways of engaging, if it does not wish to speak only to its dwindling bastions. On the other side, there is no attempt either to invoke secular ideals or constitutional values, to strike a chord among those who share its views on the politicisation of the temple. Even voters who agree will be hard put to draw succour from a Congress statement that seems to be mainly nay-saying, lacking in a conviction that is firm or soaring. The belated and bare-bones RSVP to the Ayodhya invite underlines that Congress, as is its wont of late, is not taking a decision, but being forced to take a decision by the BJP.


As the parliamentary election draws closer, the fact is that Congress does not have a language on Hinduism with which it can go to the people. Over the years, the BJP’s project has visibly pushed it onto the backfoot and against the wall, putting it in a bind it has not managed to think a way out of. There have been far too many vacillations, and few moments of clarity — from 1989-1991 when a Congress government opened the locks and allowed the VHP to do shilanyas at the disputed site, to 2019, when the Congress in Opposition welcomed the Supreme Court ruling that paved the ground for the temple. Sonia Gandhi even said that its labelling by the BJP as a “Muslim party” cost the Congress electorally. And in the electoral fray, senior leaders like Kamal Nath most recently in MP have tried to wear on their sleeves their version of an in-your-face public religiosity. Overall, Congress responses to the BJP have spanned the unremarkable distance between a me-too stance and boycott politics. Its refusal to show up on January 22 confirms this dismal pattern.


Of course, picking up the BJP’s political gauntlet is fraught but another response, more imaginative, more political and bold, was possible. But for that, the Congress would need to think and act, not just react to agendas set by the BJP. It would need to frame an alternative idea and politics, and do the hard political labour of rallying the party behind it, as well as allies in the joint Opposition front. And then, it would need to communicate it to the people in a language that is persuasive, appealing and uplifting. That’s the challenge the Congress has boycotted, not just the upcoming Ayodhya ceremony. Running away isn’t nimble politics.



January 12, 2024

Costs of a levy

EU’s carbon tax will need to be contested. Industry concerns in effecting the green transition must be heeded


According to a report in this newspaper, Indian industry has expressed concerns about the European Union’s Carbon Adjustment Mechanism (CBAM). The regime came into effect on October 1 last year, but it won’t be before 2026 that tariffs will be imposed on imports to the 27-nation bloc. India Inc’s immediate worries are about a CBAM clause that requires exporters to submit nearly 1,000 data points about their production methods. Brussels contends that the requirement is meant to ascertain carbon footprint-related information but Indian exporters fear that they could lose critical competitive advantage in the process. Industry says that besides being a burdensome process, the data-sharing exercise could compromise sensitive trade secrets.


A more serious challenge for industry will be to navigate CBAM’s definitive phase when tariffs start getting imposed. In 2022, more than a fourth of India’s exports of iron, steel and aluminium were to the EU. According to industry estimates, the EU tariffs could raise the costs of Indian exports by 20 to 35 per cent. A multi-pronged effort will be required. For one, India will have to contest CBAM’s protectionist underpinning. The government has already questioned the mechanism at the WTO. It will also need to join hands with other affected countries to contest CBAM at climate fora. The measure is being imposed in an already unequal context, due to the failure of rich countries to honour commitments to make clean technologies accessible to developing countries. One suggestion by experts is, therefore, to impose the tariff but channel the fund to developing countries — instead of the proceeds going to the EU’s corpus. Given the already contentious nature of climate financing, implementing this recommendation will require tough talking. The government is reportedly contemplating a levy similar to CBAM to nudge industry to reduce its carbon footprint — the revenue would then be used to fund the domestic green transition. There are, however, imponderables, including whether the EU will play ball and withdraw its tariff.


There are apprehensions that other developed economies could follow in the EU’s footsteps — the US, for instance, opposes CBAM, but conversations have already started in America about imposing a similar levy. Big companies like Tata Steel and JSW seem to be bracing for this challenge — they have ambitious decarbonisation targets. However, abating emissions from the steel sector is tough. Technological interventions — carbon capture and storage, for example — could be costly for small companies. They will require handholding by governments, regulators and financial institutions.





January 12, 2024

Doctor’s orders

Orissa HC directive will find resonance with millions who have struggled to decipher doctors’ handwriting


An old joke goes like this: A young lover is unable to read a letter from his beloved because her handwriting is illegible. He takes the spider-trail-like scrawl to the local chemist, who promptly hands him medicine. After all, an ineligible cursive is the hallmark of prescriptions, not love letters. Now, thanks to a judgment by the Orissa High Court, there may be hope for the hapless millions who have struggled to make sense of their prescriptions.


The Court has directed Odisha’s health department to ensure that doctors write all prescriptions, post-mortem reports and other documentation in capital letters. Or at least in legible handwriting. Both the common man and the judiciary cannot comprehend the “zig-zag” of the doctors’ penmanship. There has been speculation about the reason for the scrawl. It has been attributed to the fact that doctors are often in a hurry, in overburdened public healthcare systems. Medical jargon is complicated and the possibility of errors when writing by hand — without spellcheck — is compounded. A cynical view is that poor handwriting is a strategy to keep medical knowledge out of reach in the age of Google.


Beyond the punchlines, though, poor penmanship can have tragic consequences. The deaths and injuries caused by it led the Medical Council of India to issue multiple directives on ensuring prescriptions that do not require a graphology degree to decipher. Hopefully, the Orissa HC’s directive will have some effect. Increasing digitisation too can help avoid errors when it comes to prescriptions and reports — it is far easier to have a printout or even a cloud-based medical history with all prescriptions and reports than trying to make sense of the crisscrossed lines on a piece of paper. And it’s easier than trying to write in all caps, all the time. The only loss, of course, will be of jokes at doctors’ expense.





January 12, 2024

We Love Mumbai

The political theatre is enthralling. But how long can it carry on without casting a shadow on the city’s economics?


Is Mumbai still Maximum City? This phrase is now popularly associated with being the most ‘extra’. Sort of the XXXL of achievement and ambition. Of the different metrics that can be used to measure these, it is in the political realm that Maharashtra’s capital has been at the most notable disadvantage. Delhi is the national capital. But as we have seen for the nth time this week, politics in Mumbai makes up in drama what it may lack in national heft. The twists and turns of government formation here have got all fiction beat. Betrayals, conspiracies, old horses getting bloodied, young bloods making merry, the action is non-stop. Narwekar is overnight a top Google search.


In finance and films, the city has maintained its peerless stature – despite Bollywood’s demise becoming the main water cooler speculation every now and then. The 1995 blockbuster DDLJis still playing at Maratha Mandir cinema. Everyday its iconic dialogue, “Go, Simran, go…live your life,” is the sentiment with which some bestie somewhere is sending her dear one to this city of dreams.


Mumbai’s cultural flex is hardly limited to cinema. The first official Dior show in the country took place last year against an enthralling backdrop of Gateway of India and Arabian Sea. It underlined Mumbai’s global fashiontainment properties. On the cricket front, the recent World Cup gave further evidence of how knowledgeable and pukka Mumbai fans are. They have been known to chant foreign names during India matches. Bosses, especially in other metros, rave about the city’s work ethic too. Surveys often find Mumbaikars working the maximum hours in the world. Not that this gets them down. There is still tons of partying. And PDAs.


On the finance front, every time Sensex hits a new high the revels are spread across the country. More so now that more households are investing in equities. Celebrations are especially intense when these market highs go against global headwinds. But it is also true that in recent decades cities like Gurgaon and Hyderabad have felt racier than Mumbai. Will all the political drama affect Mumbai’s economic profile? Infra struggles have been pretty taxing. Right now several grand projects are simultaneously underway – making Mumbai beat Delhi in pollution. Both poor migrants and rich CEOs need these projects completed good and fast. For now, they wait, Apna time aayega.





January 12, 2024

Think, Then Build

Infrastructure projects cost a lot more because planners keep repeating simple mistakes


India can never have enough infrastructure development as it tries to upgrade the quality of life and catch up with more advanced economies. Advanced or not, no country is blessed with unlimited resources. It makes getting more bang for the buck essential if we are to compress our catch-up timelines. What we see is anything but that. Let’s take a look at three common goof ups.


In attention to detail | Bengaluru-Mysuru expressway is one of GOI’s showpiece projects. Less than a year after it was formally opened, planners are back at the drawing board. Almost 10% of the original project cost will be incurred to streamline multiple entry and exit points on the expressway. Since the towns along the road have long existed, the initial carelessness is cutting into scarce resources.


Ignoring relevant factors | Chardham highway project represents an improvement of five existing national highways. The upgrade was too clever by half. As GOI told Parliament, it broke down the project into 53 “independent” sections. It helped bypass environmental scrutiny, but the Himalayas are not made up of autonomous ecosystems. Consequently, accidents recur and costs keep rising.


In the same league are urban infrastructure projects that are designed as if extreme rainfall events are unheard of. Central Delhi’s makeover got a reality check last year when an underpass had to remain closed for a few days after a bout of flooding.


Not my problem | Another feature common to urban infrastructure projects is to consider them as standalone issues. For example, Chennai’s elevated railway line is almost three decades old. It’s a largely wasted effort as planners simply overlooked the need for last-mile connectivity. It was somebody else’s problem.


Set right these flaws and see the difference.




January 12, 2024

Sticking to Rules is Name of the Game

Negotiations allow gaming firms to keep gaming


The gaming ecosystem in the country benefits from efforts like that by Krafton, creator of Battlegrounds Mobile India (BGMI), to address GoI’s concerns to have a ban on the popular game lifted. These concerns are broadly over data localisation and public order, apart from drawing more capital into online gaming, which is a key driver of digital engagement globally. The ban was imposed when India had neither data localisation nor gaming rules. As these shape up, the online gaming industry will have greater policy clarity on developing titles for a key market like India. It will also be able to reach deeper into the country’s programming talent pool, a vastly under-tapped goldmine.


The emerging regulatory structure is designed to prevent psychological harm to users, particularly children, through age-rating and time limits. It seeks to curb addiction and financial loss in real money games. And the games being offered in India should not suborn ‘national interest’. These are fairly consistent with content rules in other media formats and the safeguard mechanism is, in keeping with tradition, self-regulatory. In Krafton’s case, the desired local ownership, self-regulation and data localisation levels were achieved through negotiation, which sends out the right signals for both government and industry. Since then, fresh regulatory clarity has emerged. The online gaming industry should have a free run — as long as it stays within these guard rails.


GoI’s concerns are not excessive, given the size of its young population and the dominance of online gaming by Chinese companies. The rules provide protection to consumers and producers. GoI had to build an elaborate consensus among stakeholders to be able to offer the industry a growth runway. Krafton saw the writing on the wall when it moved its operations into India, agreed to address issues of addiction and juvenile mental health, and committed capital to local gaming startups. As anyone adept with a console knows, that’s how you move ahead.





January 12, 2024

Employ Our Disabled, Boost Our Workforce


A country should be judged by how they treat their disabled, aged and non-human citizens. For persons with disabilities (PwD), life in India is like running on an unending obstacle course. What is more unfortunate is that even if a few among them manage to cross those hurdles — discrimination, lack of accessible infrastructure and facilities, and educational and skilling support, to name a few — most falter on yet another track: employment. But things are changing. Several private companies like IndiGo, Lemon Tree and KFC are hiring PwDs — not for out-of-sight backend jobs but demanding customer-facing roles. These firms are identifying newer roles for PwDs, investing in accessible facilities and sensitising employees to the needs of their differently-abled colleagues.


There are 30 million disabled Indians. According to UnearthInsight’s 2021 study, 13 million of them are employable. But only 34 lakh have jobs across the organised and unorganised sectors, via government-led schemes and self-employment. Tech and retail are leading the way in skilling and creating job opportunities for PwDs. This means much more than just getting employed. More social and economic visibility also means the state being pushed to invest much more in disabled-friendly infrastructure and PwD-focused educational and skilling opportunities.


More PwDs in public spaces will sensitise the ‘general’ public towards legitimate needs of their fellow citizens. India passed its landmark disability Act in 1995. In 2007, it ratified the Convention on the Rights of Persons with Disabilities. In 2015, it signed the SDGs charter. A common thread — ensuring financial independence of PwDs — runs through them. India Inc and India must join hands to fulfil that promise.




January 12, 2024

Troubled waters

Skirmishes on Red Sea a major headache for India


India is staring at another round of supply disruptions, after the Covid-induced chaos in container movement in 2020 and 2021, if the Iran-backed Houthi militia in Yemen continues targeting cargo ships that ply the Red Sea and Suez Canal — to and from North Africa, Europe, West Asia (including Israel) and beyond. At least two commercial vessels bearing Indian cargo, including oil, have been attacked.


Clearly, India has been scarred by this spillover of the Israel-Hamas conflict into the Israel’s southern neighbourhood. The Centre should take stock of the situation and consider steps for exporters and import-dependent industries and sectors. These could be fiscal concessions or incentives to exporters to defray a part of their higher shipping and insurance costs. To assess the impact in value or volume terms alone could be misleading. Sectors such as machinery, electronics and auto, which rely on crucial equipment that could seem insignificant in value or volume terms, can be badly hit. GVC-driven production, depending on diversified global supplies, such as auto and phones, are part of this category. Production and inventory management can take a beating, as during the height of the semi-conductor crisis; for instance, it would be quite useless to stock inputs from suppliers in East Asia, if inputs from Europe have been held up at sea.


Back-of-the-envelope calculations are quite disconcerting. About half of India’s crude oil imports in FY2023, worth $105 billion, from countries like Russia, Congo, Nigeria and the Americas is likely to have passed through the Suez Canal. In 2023 (January-October), India sourced about a third of its oil from Russia, or about 1.7 million barrels per day. Its other key suppliers, Iraq (20 per cent of all supplies), Saudi Arabia (17 per cent) and UAE (6 per cent) are not reliant on the Red Sea, but Nigeria (2 per cent) certainly is. It remains to be seen whether India sources more of its oil through the Persian Gulf. India’s petroleum product exports to Europe could lose out, while the bill for exports and imports will rise on account of higher freight and insurance cost, even as crude prices are likely to rule firm for sometime. As for exports, high volume and low margin items such as bulk chemicals could be rendered uncompetitive with the re-routing of vessels around Africa.


Broadly speaking, according to the Global Trade Research Initiative, 25 per of India’s merchandise trade is routed through the Red Sea, which amounts to roughly $25 billion every month. This could be regarded as the value of the consignment that will see an escalation in freight and insurance costs for as long as the crisis persists. The conflict, according to estimates, could lead to a 40-60 per cent increase in shipping costs as well as 15-20 per cent higher insurance premiums, as vessels traverse an extra 3,000-4,000 nautical miles to Europe. The Export Credit Guarantee Corporation should cover for this insurance spike, to begin with. In the medium-term, ways to reduce vulnerability of shipping lines to global shocks should be considered.





January 12, 2024

CBAM as an opportunity

Indian exporters could proactively adjust to it


Ever since the European Union’s (EU’s) Carbon Border Adjustment Mechanism (CBAM) was announced in mid-2023, Indian industry has openly expressed its reservations about this framework, which places an emission tariff on imports. A recent survey on tax transparency in ESG (environmental, social, and corporate governance) by consultancy firm PriceWaterhouseCoopers (PwC) showed that 67 per cent of respondents said CBAM was likely to impact their supply chains. These fears are not misplaced. A study by the Delhi-based Centre for Energy, Environment and Water has estimated that the tax would impact 43 per cent of India’s exports to the EU, the country’s second-largest overseas market, by raising costs and eroding competitiveness. In steel, for instance, Indian mills’ carbon footprint is significantly higher than that of competing producers, so its prices could rise 56 per cent, according to some calculations, under the CBAM regime.


The carbon border tax will be effective from January 2026 as part of the EU’s programme to meet its emission-reduction target of 55 per cent by 2030 (with 1990 as the baseline). But Indian exporters already have had an idea of the complex compliance challenges involved since October 2023 with the start of a mandated trial requiring companies of seven carbon-intensive sectors to share emission data with the EU. Most Indian corporations see CBAM, not unreasonably, as a protectionist non-tariff barrier. The Indian government is considering an appeal against the mechanism at multilateral forums on the basis of the “common but differentiated responsibility” principle. Equally, commentators have suggested that Indian companies diversify their export markets to destinations with less stringent emission requirements, such as Latin America or Africa.


These are valid and necessary responses but are likely to take time. But given the direction of global climate change commitments and the urgency of the exercise (with 2023 being a standout year for high temperatures), Indian producers would do better to proactively examine ways to meet the CBAM challenge. Indeed, one of the objectives of CBAM is not only to ensure a transition in the EU but also globally. The PwC study shows that most companies understand the risk-mitigation opportunities in early transitions. It said half the companies surveyed had made the point that they had net-zero commitments and were actively exploring ways to meet those targets. Almost half these companies have set themselves challenging net-zero targets by 2030. This impulse can already be seen in the steady shift towards renewable energy by carbon-intensive industries such as steel, cement, and fertiliser, partly to address the structural deficiencies in state-owned grid power supplies and partly to access lower-cost ESG funds.


Others are proactively examining ways to explore green-hydrogen technologies for similar reasons. The immediate fallout of this transition may well be cost-intensive and painful, as all technological evolutions are. But, in the long run, Indian industry has the opportunity to emerge as a more robust competitor. Recent Indian industrial history shows that companies have gained from rising to such challenges. In the 1990s, the organised carpet-weaving industry in UP, for example, internalised this lesson quickly after Germany banned imports of carpets made by child labour and using carcinogenic dyes. Today, neither problem exists in this belt; in fact, India bans imported textiles that use Azo dyes. CBAM could be a similar opportunity to make a great leap forward with a lighter carbon footprint.





January 12, 2024

Social media conundrum

Moderating content will affect revenue


After facing pressure from regulatory authorities and civil society around the world, Meta has said it will start hiding harmful content from teenagers using Instagram and Facebook. The move comes after the social-media company was accused of making the platforms addictive and harmful to teenagers’ mental health by more than 33 states in the United States, citing evidence from internal studies released by whistle-blowers. The European Commission had asked Meta for information on how it plans to protect children from harmful content online. The social-media giant says it intends to remove posts that centre on suicide, or self-harm, or eating disorders from the feeds of teenagers. It will rigorously excise such content from their feeds even if the users follow adults who post on such topics. This move is obviously prompted by apprehension that regulators could lay down restrictive rules that prevent Meta from signing up or engaging with teenagers.


However, it will be difficult to enforce or oversee this initiative from multiple angles. These platforms rely largely on self-certifications for age verification, although underage users are in theory supposed to be protected. Facebook and Instagram ask for sign-ups to be at least 13 years old and it requires parental consent for minors to open an account. They are supposed to be shielded from “crude indecent language, frequent coarse language, explicit sexual dialogue and/or activity, or graphic violence and/or shocking images”. In practice, it is fairly easy to bypass the age-verification restrictions. Tech-savvy youngsters do so and sign up as adults quite often, even though it’s a violation of terms of service and can get accounts shut down. Instagram has further restrictions in that users under 19 cannot be privately messaged by anybody who is not followed by them. In addition, their content cannot be tagged, mentioned, or used in remixes, etc by anybody whom they don’t follow. There are also sensitive content controls for minors and minor accounts are not cited as “accounts suggested for you (to follow)”.


There are loopholes within those restrictions, quite apart from the fact that it’s easy enough for a youngster to sign up as an adult. In addition to any content that may be created by an adult, minors can also create disturbing content. Instagram, in particular, has a poor reputation for issues related to self-image, and bullying of minors by their peers. Moderating content to ensure it is “vanilla” is a titanic task. It is entirely possible for a disturbing post to remain viral for a substantial period before it is flagged. An army of moderators with a much improved reporting system would be required to make this credible. That has costs. The biggest issue for a social-media platform is perhaps the conflict between engagement and content moderation. Internal studies cited by whistle-blowers made it clear that the company would push for higher user engagement even though it was aware that minors spending inordinate amounts of time on Facebook and Instagram had suffered harm. It will be tough for social media to rebuild the business model to reduce access to harmful content without reducing engagement. If engagement is reduced, there will be a negative financial impact. It’s hard to see how the platforms can resolve this conundrum without being driven to do so by the threat of strict regulatory oversight.





January 12, 2024

Under a cloud

The Boeing-Alaska Air episode shows loose regulation needs fixing as urgently as loose bolts on a plane door


Boeing chief executive officer (CEO) Dave Calhoun got emotional on Wednesday while talking about the hole blown into the side of one of his company’s planes. Though many would say that Calhoun should instead spend his time in fixing the planes, the misty eyes of the CEO made sense from Boeing’s perspective. Failing to look genuinely sorry could have been a disaster when faith in its products is deservedly low. Few should, however, actually sympathise with him as Boeing has only itself to blame for the mess it finds itself in. Calhoun had tried to assure the world last October about “adding rigour around our quality processes.” But the Alaska Air blowout 16,000 ft above the ground last week has shown how ill-founded the CEO’s confidence was. Many industry experts had pointed at Boeing’s preoccupation with financials and returns at the cost of engineering superiority and quality when the 2018 (Lion Air) and 2019 (Air Ethiopia) Max disasters happened. Calhoun, who took charge in 2020, has clearly not been able to provide much of a remedy.


Not only have Alaska Air and United Airlines reported loose bolts in Max 9 jets after the US Federal Aviation Administration (FAA) ordered grounding of 171 such planes, India’s Directorate General of Civil Aviation has too, in a Max series jet. Last April, Boeing had disclosed that its key fuselage-supplier—and former subsidiary—Spirit AeroSystems had installed two fittings in certain 737 Max models improperly, which delayed deliveries.


In August, Spirit again received flak for incorrectly drilling holes in the fuselages. And in December, Boeing asked inspectors to look for loose bolts in the rudder control system. At the same time, the company had requested the FAA to exempt its latest 737 iteration from specific safety norms on anti-icing systems until May 2026 so that it could begin delivery even as it worked on fixing the issue. The series of events certainly doesn’t inspire confidence in Boeing’s manufacturing and quality assurances. The bottom line is clear: The Max series planes are facing intense scrutiny across jurisdictions, and the company must amply demonstrate its planes are safe.


Boeing’s failures create a further imbalance in the Boeing-Airbus duopoly. To be sure, Airbus too has its own share of troubles, with the issues detected in Pratt & Whitney manufactured engines forcing the grounding of its A320 Neo in many jurisdictions. Even so, the delays and the buyer uncertainty that are likely to hobble Boeing in the Alaska-Air aftermath can still be to Airbus’s benefit. Here, too, Boeing would have lost because of the shortcomings of its vision.


While the company must shoulder the bulk of the blame, the fault also lies with the inability of jurisdictions to hold multinational corporations accountable. Boeing was made to fire its then-CEO after the 2018 and 2019 crashes—but only a good year and a half after the first incident. While the Trump administration levied a $2.5 billion fine on the company, bear in mind that the company spent around $44 billion on share repurchases between 2013 and 2019. Also, there was no criminal liability for failing to inform the FAA of the software changes that contributed to the crashes. The short point is loose regulation needs to be fixed as rigorously as loose bolts on a plane door plug. The delivery delays that will inevitably result from the incident will cause a fair bit of pain to airlines across the world, but safety must be made the paramount concern.



January 12, 2024

Relx played the long game on performance well


RELX PLC ISN’T a household name in the same way as bigger FTSE100 members like Shell Plc, HSBC Holdings Plc or Unilever Plc. Public recognition is also impeded by a name that comes from the brow-furrowing school of corporate rebrands, alongside Abrdn Plc and the short-lived Tronc Inc For people of a certain age, Relx looks like a misprinted nod to 1980s pop band Frankie Goes to Hollywood (biggest hit: Relax). Make no mistake, though: It’s the poster child for digital transformation.


In the 14 years since Erik Engstrom became chief executive officer in November 2009, the company has transformed itself from an unremarkable publisher of trade and academic journals into a data and analytics powerhouse. Having traded sideways in the decade before Engstrom’s appointment, the stock has gone onto produce a 10-fold return since then, including reinvested dividends. A changing-of-the-guard moment came late last year when Relx overtook British American Tobacco Plc to enter the FTSE 100’s top 10 by market cap. Relx also edged out BAT as the strongest performer among the benchmark’s original constituents when the FT SE marked its 40th anniversary this month. There’s no doubt which represents the future. BAT trades at a multiple of six times estimated earnings, reflecting the mature, low-growth cash cow it is. Relx, which changed its name from Reed Elsevier in 2015, commands a multiple of 28 — more like Wall Street tech titans such as Apple Inc. and Meta Platforms Inc. The FTSE 100 trades on an average price-earnings ratio of 10.


A catalyst for the company’s reinvention came in 2000 with a collapse in advertising revenue at its Computer Weekly magazine as job ads migrated online. That convinced executives to accelerate a switch to subscription revenue and digital content. Almost a quarter-century later, Relx employs about 10,000technologists and spends $ 1.6 billion a year developing information-based analytics and decision tools. Its fastest-growing business is risk, which uses AI to help banks, insurers and airlines tackle issues such as fraud, cybercrime and corruption.


Engstrom, a Swede who began his career as a consultant at McKinsey & Co., has brought a culture of continuous improvement, avoided large-scale acquisitions and increased discipline over costs, which are managed to grow more slowly than revenue. For a company with a $ 75 billion market cap, Relx lives parsimoniously: There are no corporate jets or company cars, and its London headquarters has fewer than 100 staff. The result has been a notably smooth expansion in earnings and profitability: Relx’s Ebitda margin has narrowed only once since Engstrom became CEO — in 2020, the first year of the pandemic.


How much of Relx’s rise is luck? Data became the new oil, and companies with large proprietary datasets found themselves sitting on valuable real estate. The company’s LexisNexis legal and news database contains 144 billion documents and records, and its Elsevier unit publishes more than 2,800 journals, including The Lancet, and 600,000 academic articles a year. Compare Relx to its peers and the performance doesn’t look so outstanding. Amsterdam-listed Wolters Kluwer NV has done even better, producing a more than 12 -fold total return in the past 15 years.


The AI boom sparked by OpenAI’s ChatGPT looks like another case of fortuitous positioning. Relx has been using extractive AI for about a decade, and is moving into generative AI — the type that can create new content out of the data it’s been trained on. Last year, Bank of America Corp. named Relx as one of the top 20 global companies likely to benefit from generative AI. Relx faces threats—the move toward open-access publishing could erode margins, for example, according to Bloomberg Intelligence analyst John Davies—but the company looks to have a wide moat, in the term popularized by Warren Buffett for an entrenched competitive advantage. As a service exporter that draws 60% of its revenue from North America, the company is also relatively immune to the disruptions of Brexit and the UK’s faltering economy.


If there’s a strategic takeaway from Relx’s success, it’s: Confront the brutal facts. That’s among the key concepts listed in Good to Great, former consultant Jim Collins’ study of what enables some companies to make the leap into outperformance. Relx’s success owes much to tough decisions made decades ago. Others could learn from the example.



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