Perception v/s Reality

Rahat Talreja – Vice President – CSS India

You must have been accused of being a Robber (as in: You robbed me) or Lootera (as in: you looted me) or Fleecer (as in: You fleeced me) or Thieves / Thugs (as in : they thugged us or in Hindi: chor hai yeh log)

More so if you are in the business of airline, malls, multiplex, logistics, high end restaurant, airport shops and cafe’s etc. Let me elaborate.

Airlines

Perception:
Every peak season like Diwali, Christmas etc., you see articles in newspapers on how airlines are “looting” passengers with exorbitant sky high fares. Bombay to Delhi ticket at 25000 which normally is 2500.
Then same night, you put on the TV and the TV as always is broken into 6 frames – 5 guests/panellists and 1 host journalist – all arguing on : Are airlines right in looting innocent passengers with sky high fares?
What is the regulator doing? DGCA? Airlines Ministry on this loot? NGO view, political party view, customers view all are unanimous: They are looting.
Just 1 person would be representing the airlines who would also 75% agree to it that they are looting.
This is perception.

Reality:
Open the balance sheet, profit and loss account, sales / purchase registers, cost matrix of the airline.
95% of the time, every year, they fly passengers: Below cost.
Reason: no pricing power and uncontrolled competition.
95% time they lose money on every ticket.
5% time – they have some opportunity to cover up due to demand supply matrix
Yet, they guzzle the capital invested, have poor balance sheets, and have losses on operations.
In India, all airline promoters are billionaires starting from Govt of India run Air India to Tata’s Vistara to Naresh Goyal’s Jet airways to the 5 star ex. airline Kingfishers billionaire promoter Vijay Mallya to the Wadia’s Go air
Because to become a millionaire, you start as a billionaire. After the so called “loot”
This is reality.

Multiplex and Malls

Perception:
How can they ask 400 bucks for a popcorn,
200 bucks for corn and 600 bucks to see this useless movie which is like semi porn (remember I am a poet at heart)
150 bucks for the parking? 100 bucks for a bottle of water?
On TV, the argument goes again: where is the regulator? Why allow them to fleece customers?
Hushed comments: these guys make HUGE money

Reality:
Most malls shut down eventually. Most multiplex chains get sold or shut down. In India, it’s almost a monopoly with PVR. Space for none but one. But are they making that kind of money you think? The answer is: read their finances, that’s the truth and you will realise how the real estate and municipal taxes are what you pay for and not the popcorn, water, wafers etc.
And we are not even bringing in parameters like return on investment which are prime to businesses.

Logistics

Perception:
Your rates are very high
Your THC is high
No one is charging VGM
Your destination charges are high
Then, it gets more personal
You guys are looting
You are like thugs
Don’t take advantage
You guys are making huge money from us

Reality:
(applicable to most except the few top companies in the listed space)
No logistics company promoter lives on the expensive Mumbai Island City / South Mumbai, all live in the suburbs and farther than that. That itself is a sign of the high charges and loot.
None is in the millionaire list
Most are highly leveraged
Most started from scratch and are still scratching something to remain in business
Negative freight & Rebate are words and concepts holier than God himself for them
Most are poor enough to see travelling to a foreign country and sometimes by business class as a sign of “I have arrived“
A lot many “buy THAT car or THAT phone” and think they have arrived and many such poor think tales.
So the real money always eludes the glamorous businesses.

The Improvements In Salvage Law: Is The 1989 Salvage Convention Environmentally Dynamic?

The preamble of the 1989 salvage convention begins by elucidating recognition of increased concern for protecting the environment and the need to create a regime to incentivize salvage operations that incorporate environmental considerations. The convention enumerates duties and responsibilities owed by the salvage parties to the environment, but it is principally in two provisions, Article 13 and Article 14 that the regime to incentivize the undertaking of salvage operations for environmental protection purposes is found.

Article 13 provides that the salvage award shall be fixed with a view to encouraging salvage operations, taking into account the following criteria “without regard to the order in which they are presented below…” (b) the skill and efforts of the salvors in preventing or minimizing damage to the environment;

Article 14 provides for a form of special compensation for salvage efforts where there is a threat of damage to the environment in order to address the irreconcilability of the principle of no cure, no pay with incentivizing environmentally motivated salvage operations.

Though these articles were enacted to provide a responsive regime to incentivize environmentally motivated salvage operations, the force of the provisions is weak. A salvage reward under Article 13(b) is will always be qualified by provision 13(3) of the Convention, “The rewards, exclusive of any interest and recoverable legal costs that may be payable thereon, shall not exceed the salved value of the vessel and other property.” Environmental threats can have devastating consequences to a region. A large oil spill for example has the potential to significantly damage marine habitats, biodiversity, and local livelihoods. By limiting a salvage reward in this manner, no matter how devastating the environmental impact of a damaged ship may be, the salvage crew must engage in a balancing exercise to determine if it is profitable. Notably, this limitation was recognized by the International Salvage Union at the 2011 Comité Maritime International (CMI) colloquium; “…all too often the tribunal is unable to give full effect to this provision because of the low value of the salved property.”



Article 14 allows for special compensation claims as an exception to the general no cure no pay principle of salvage law. One of the most significant issues with Article 14 is that the ambiguous wording has created legal uncertainty for when the provision applies as there must be a ‘threat of damage to the environment’. The meaning of the phrase ‘threat of damage to the environment’ is unclear and requires significant interpretation. To give effect to the phrase, a decision maker must consider what constitutes a threat, whether the threat must be real or may be a reasonably perceived threat, what is the meaning of coastal waters found in the definition of damage to the environment, how is the word substantial as found in the definition to be defined, and how substantial must the threat be.

Joy Thattil

Maritime Lawyer & Partner @ Callidus Corporate & Maritime Consulting ( CCMC) Dubai & India

joy@calliduscmc.com