Over the years what I learned that not all the businesses make money.Let me say it differently,over the years what I learned and realized that some type of businesses will definitely not make money.
The soldiers in the economy
Some businesses are like soldiers in the economy of a country ,which are the basic requirements of the country.These are the businesses over which other businesses in the country will flourish.So these soldier businesses are highly regulated and pricing power will never be granted to them.Because these are the basic requirements of the country and if pricing power is granted to these businesses ,then it will affect all the other businesses in the country.Some of the examples are
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Public Sector Undertakings (PSUs)
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Power Generation / Transmission / Distribution Companies
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Mining companies
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Railways
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Oil Marketing Companies etc.
Example
Power generating companies have entry barrier and not anybody can come and start generating power immediately.
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Energy is highly essential.
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Not everybody can produce it.
Then why the companies like NTPC,PGCIL etc do not make money for shareholders. Because even if they make highly essential products/services and no body else can make them,still they don’t have the right to fix the prices for their products / services that they provide.
If the producer of the product do not have the right to fix the price for its products,then it will not make money.No matter even if it makes fighter aircrafts having alien technology, it will definitely make money. These are like socialist businesses which are not allowed to make make money so that others can make money.
If pricing power is granted to the power generation companies ,then they can increase tariff and cost of production of for FMCG,Automobile companies etc.will rise. So power tariff will be kept lower deliberately.
Example
Oil marketing companies like Indian Oil,BPCL etc are selling petrol and diesel in losses and Reliance and Essar petrol pumps are avoiding selling or selling less petrol and diesel so that that they can make less loss.
Every country which is democratic in nature and do not have sufficient natural resources (like Land,Oil,Energy,food,minerals etc. ) to support its population is definitely a socialist country because it has a gap between need and availability of resources and the country need to distribute the resources as per the need of the people and not as per the wish of the people, which is a classic definition of socialist country. and if such country now allows you to make profits i.e. if it supports capitalism now ,then there must be a set of businesses in that country which operate in the socialist rule and they are not allowed to make huge profits, so that other business can make profits and enjoy capitalism.
What I learned that ,category-A type of businesses are not allowed to make money so that category-B type of businesses can make money and I need to stay out of such category-A type of business…
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