Financial liquidity-are we in the right direction

Stimulus packages and bailouts have become household words. Sovereign countries like Greece are in the midst of getting bailed out by European Central Bank. Countries are facing mounting debts and unease economy, and bailouts by other countries in the Continent are a forgone conclusion. Corporate which were in the Forbes lists are looking to Banks to bail them out? Fortune 500 Companies, most powerful American banks, thriving industrial houses, one after another, went bankrupt, even though partial resurrected by the Government bailouts India and its corporate sector is no better. Some banks were amalgamated with larger ones to save the smaller Banks from bankruptcy. Air India is in the deep red, and every year, the Government doles out tax payer’s money, yet it requires regular loans for survival. It is very near to bankruptcy. Kingfisher is moving ahead with financial woes and mounting liquidity problems. Government says that it is a private airlines problem, though they are keen to see Banks covertly extending support lest aviation sector become topsy turvy. The airline is in the brink of closure. There is another company that is on the threshold of bailout- which was hailed as a navaratna, today close to doldrums, Coal India Ltd. With zero debt, nearly Rs 4.5 bn of cash reserves and consistent cash flows, it is unthinkable that the company would ever become a bailout entrant. After all it is the world's largest producer of coal and the demand for coal is not going to be affected by Law of diminishing returns. It is one of the raw materials for producing power (electricity) in India. Is CIL heading the Air India route? There are reasons for this similarity. The biggest reason is none other than the government itself. Government sees no growth in growth areas. No pragmatic policy where required. Inaction when action should have been initiated, It has men of straw in their Policy and decision making ministries. Government is a big hindrance to the development of the Country. The company cannot increase its production. Production has in fact stagnated. It has no control over the price of its product. CIL already sells its coal at a highly discounted price because it is not allowed to sell at the import parity prices. But the employee strength is rising in Malthusian proportions. . The new mining policy desires that miners share 26% of their profits in the local communities- Corporate Responsibility. Air India or Indian suffered the same treatment. . It milked the company till it dried up into a barren land. Capping revenues while consistently formulating policies that lead to higher costs is what destroyed the company. But history was not a good enough teacher and the government is all set to repeat the same mistake. This time it seems to have chosen the mulching cow. Government is testing Utopian ideas in the fragile Indian economic sectors. Time is not distant when Coal will become a red Company. Coming to Kingfisher, Bank workers union are crying hoarse that no financial bailout should be provided to it. They claim that s 41 lakh Crores is locked up in the name of willful defaulters. SBI’s offer of Rs 1500 Cr to bail out the Company is one of the topics for the Bankers National wide strike on Feb 28, 2012. The same workers do not want smaller Banks to be merged with bigger Banks so as to reduce expenses. But even if the airline fails disrupting air traffic, throwing out many out of jobs, Bank unions feel that they can interfere in issues which are outside their pale of work! King Fisher could have been allowed to get foreign investment by allowing 24% foreign funds in Indian airlines. FCCBs are no longer cheaper because of the grave uncertainty in the forex rates. Government advisors have no clue to solve problems. Problems created by them for short term advantages. A complete rehaul of government departments is called for.