| India to sign FTA with Asean |
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| NEW DELHI: India is set to sign an FTA with Asean either in August or October this year, opening the $1.1-trillion South-East Asian market for Indian exporters who find it hard to sell their merchandise in the recession-hit west. |
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| Full duty refund to exporters |
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| NEW DELHI: The government decided to extend full rate of duty refunds, including excise, to merchant exporters, who purchased goods from the local markets for overseas shipments. The central board of excise and customs (CBEC) said in a circular that the exporters seeking full duty drawback will have to submit the proof with the customs authorities that they have procured goods from the local markets. The decision has been taken on the basis of the recommendations of the Drawback Committee. Exporters see the decision as a facilitating measure at a time when they face erosion in demand for Indian products abroad. |
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| IFC to invest Rs 5k cr in India |
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| NEW DELHI: International Finance Corporation (IFC), the World Bank’s lending arm, on Tuesday said it plans to invest close to $1 billion (Rs 5,000 crore approximately) in India in the next fiscal (July 2009-June 2010). The firm is set to make these investments in infrastructure, agriculture and rural development areas. |
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| Handicraft exports may turn positive in 2 months |
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| NEW DELHI: With fresh enquiries beginning to pour in from the US and EU, Indian handicraft exports, one of the worst sufferers of the economic meltdown, is likely to enter the positive terrain in the next two months, giving hope to artisans who had lost their jobs. After contracting by an alarming 48% in 2008-09, exports of handmade items have shown an improvement in the first month of this fiscal. |
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| Apparel export up 4% in ’08-09 |
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| COIMBATORE: Despite the global meltdown, apparel exports from the country registered over 4% growth in 2008-09 fiscal. In value terms, exports clocked $10.13 billion in 2008-09 as against the $9.68 billion in 2007-08, Apparel Exports Promotion Council (AEPC) Chairman Rakesh Vaid told reporters at nearby hosiery town of Tirupur. Vaid attributed the reason for the growth to the robust performance witnessed in the first two months—April and May in 2008, after that there was a slowdown during the last six months of the fiscal. |
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| India, Poland to sign 3 pacts |
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| NEW DELHI: President Pratibha Patil on Thursday arrived in Poland on a three-day state visit during which three bilateral agreements are expected to be inked. Meanwhile, industry body CII said that India and Poland should aim at increasing their bilateral trade to $5 billion in the next five years by collaborating in sectors such as environment and renewable energy. India's exports to Poland in the first six months of 2008-09 fiscal was $289 million while the import bill was $139 million. The two-way trade in 2007-08 fiscal was $636 million. |
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| Egypt withdraws import fee |
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| NEW DELHI: Egypt has withdrawn the 'precautionary fee' of 25% on imports of cotton yarn, fabric and sugar from India after New Delhi protested the move by the African country on the ground that it violated WTO rules. In January, Egypt had imposed a temporary precautionary fee of 25% for one year, adding that the minimum fee was half a dollar on every kilogram of cotton textile and one dollar for every kilogram of sugar. |
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| Economy to see 8-9% growth by Sept: PM |
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| GUWAHATI: Prime Minister Manmohan Singh said the world economy will recover “partially” by September and India would then go back to the growth rate of 8-9%. “I expect the world economy to partially recover by September and if that happens we expect to go back to the growth rate of 8-9%, which has been the growth rate of India for the last five years,” the prime minister said while addressing a press conference at Amin Gaon in Guwahati. To a question on the reasons for the current global economic crisis, Manmohan Singh said: “This is a crisis because of the mishandling of the financial system by the major developed countries.” |
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| Veg oil imports may rise 20% |
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| NEW DELHI: Vegetable oil imports may rise by 20% to touch 7.5 million tonne in 2008-09 season ending October this year on the back of zero import duty on cooking oil, according to industry estimates. Imports of vegetable oils, have increased by 59% to nearly 36 lakh tonne during November 2008 to March 2009 of the current oil year (November-October), but industry official expect imports to slow down in the remaining seven months. “We expect the vegetable oils import at 7.2-7.5 million tonne in 2008-09 oil year,” said Mumbai-based Solvent Extractors Association of India executive director BV Mehta. |
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| India back on FDI radar |
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| NEW DELHI: At a time when the world economy is facing the worst credit freeze in several decades, India attracted $2.7-billion FDI in January, up 58.8% from a year ago, and remained a favourite destination for cross-border investments. “January numbers are very good… it is an indication of the confidence that the rest of the world has in India,” department of industrial policy & promotion secretary Ajay Shankar said. |
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| HSIIDC to set up complex in Faridabad |
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| HARYANA State Industrial and Infrastructure Development Corporation (HSIIDC) is setting up three-floored complex to provide ready to move in space for factories at sector 59 in Faridabad. The first of the kind three-floored complex being set up by HSIIDC would offer 926 sq feet covered area to each unit at a tentative cost of Rs 28.5 lakh.
HSIIDC has invited proposals for 40 units from entrepreneurs willing to set up industries involving stream specific lightweight machinery. The use of ground floor, first floor and second floor was restricted for categorised industry. The industries at ground floor would be light engineering units like turning machine, milling, electrical discharge machine, wire cut, LT transformers and coil manufacturing and CNC except power presses forging (hot & cold), die casting, chemicals, electroplating, welding, shearing, alloys, casting, power extensive units involving 50 KW and above, textile dying and printing, water based unit and printing and packaging. The industries at first and second floor would be electrical and electronics except printed circuit board manufacturing, painting and powder coating, software industry, readymade garments, gem and jewelry units, testing centres and calibration units.
As per the official spokesman, the number of units might be increased or decreased at the discretion of the corporation. The allotment would be made keeping in view the technical feasibility, economic viability, background of the applicant and the marketing details of the project of the entrepreneur.
The corporation has also expedited to acquire additional land at industrial estate Rohtak, Nirwana and IMT Rohtak phase-I. |
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| Delhi, Mumbai corner half of FY08 FDI inflow |
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| WHILE FDI inflows into the country increased eight times over the last four years, the major beneficiaries of the accelerated flow have been only two cities — Delhi and Mumbai. In 2007-08, the two cities attracted around 50% of the total FDI booty of $24.5 billion. Other major cities such as Kolkata, Bangalore, Chennai and Ahmedabad together attracted just 17% of the total FDI inflow. Interestingly, between Delhi and Mumbai, the latter has emerged the clear winner in 2007-08 by attracting FDI of $7.6 billion in the first eleven months. Delhi attracted FDI worth $3 billion during the period.
Other cities including Bangalore, Chennai, Hyderabad, Ahmedabad and Kolkata recorded small inflows of $1.5 billion, $0.47 billion, $1 billion, $2 billion and $0.38 billion, respectively, during the April-February 2007-08 period. In 2006-07, total FDI inflows were at $15 billion with Mumbai attracting $3.5 billion and Delhi $2.5 billion.
Among sectors, the biggest beneficiary in 2007-08 (till February) was services which recorded an FDI inflow of $5.4 billion. This is the first time the sector has topped the chart. In 2006-07 and 2005-06, electrical equipment sector ruled the roost. In 2007-08, electrical equipment slid to the seventh position, attracting just $2 billion of foreign investment. Telecommunication, on the other hand, moved up from the third to the second slot. It received $4.8 billion of FDI in 2007-08.
Real estate proved to be one of the most attractive sectors for foreign investors in 2007-08. FDI in real estate witnessed an inflow of $7.1 billion as compared to just $2.2 billion between 2000-2006.
In 2007-08, the country received FDI of $24.5 billion as against $15.7 billion in 2006-07, showing a growth of 56%. In 2005-06, the growth was even sharper at 184%, up from $5.5 billion in 2004-05.
Mauritius and Singapore are the two biggest investors in the country. The inflows from Singapore have more than doubled to $1.67 billion in 2007-08 as against $ 578 million in the previous year. FDI from Mauritius and Singapore were recorded at $9.4 billion and $6.4 billion respectively in 2007-08.
Investments from Japan have grown the fastest — from $55 million in 2006-07 to $761 million in 2007-08. Besides Mauritius and Singapore, the US and UK are the largest source for FDI. In the first 11 months of 07-08, UK invested $1.12 billion and US invested $1.02 billion, respectively. |
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| Inflation shows signs of peaking, hits another 3½-year high at 7.61% |
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| There Are Chances That In 2 Weeks, Positive Base Impact May Play Role In Bringing Inflation Down: Experts
THE annual inflation rate rose yet again, to a fresh three-and-a-half-year high of 7.61% for the week ended April 26, government data showed on Friday. Inflation measured as a change in the wholesale price index (WPI) from its level in the corresponding week a year ago, was a tad lower at 7.57% in the previous week.
For the moment, it looks like the worst in yearon-year terms. The price index has moved up for all items by 7.61%, including primary articles (8.8%), manufactured goods (7.42%) and the fuel, power, light and lubricants group (6.9%).
However, what’s heartening is the week-onweek rise that has definitely cooled down. From the week ended April 19 to the week ended April 26, prices have risen much slowly by 0.08%, compared to the 0.8% week-on-week rise in early March. In the second week of March, week-on-week increase in the price index had fallen to 0.5%. In April, it had come down to 0.3% and 0.26%. However, last week, when experts were expecting it to come down to 0.1%, it went up again to 0.3%.
A worried government came out with another slew of measures, including banning futures trade in potato, rubber, soya oil and chana, and persuaded steel companies to take a price cut.
Experts feel there are chances that in the coming two weeks, positive base impact may play some role in bringing inflation down. In May 2007, inflation had gone up significantly in the first week by 0.4 points to 212 from 211.6.
“The inflation figure of 7.61% could be reaching a peak in year-on-year terms because there will be a high base effect in the next week. Hopefully, if we stick with the 0.1% week-on-week increase in price index, we should be at 7.25%, and may be 7%, before May is out,” Deutsche Bank south Asia regional head Sanjeev Sanyal said.
Reacting to inflation numbers, finance minister P Chidambaram said inflation will stay at the current level for some time before it shows a downward trend, and the current levels indicate that inflation is stable. He stated the government is in the process of asking cement companies to cut prices and may take further administrative steps if necessary. Some experts, however expressed doubts whether the trend of moderation in weekon-week price movement will continue, in the wake of rising inflationary expectations.
The pace of inflation on a week-on-week basis has been moderating. The whole point is whether it will remain volatile. There are expectations that the base effect could help in next two weeks, however it will remain short-lived since lower base effect will come into picture again. It will push the inflation to a higher level,” Crisil Principal economist D K Joshi said.
Besides there are inflationary expectations looming over the economy due to the falling rupee and spiralling crude oil prices. This would raise cost of imports, said Mr Joshi.
The possibility of further rise in CRR in the wake of rising liquidity due to falling currency is not ruled out.
Kotak Mahindra Bank chief economist Indranil Pan said, “With inflation consistently above the 7% level, it is safe to assume that the central bank will actively take liquidity tightening measures.
In its annual monetary policy announced on April 29, the central bank raised the Cash Reserve Ratio (proportion of deposits that banks must set aside) by a quarter point to a seven-year high of 8.25%, effective May 24.
The commerce ministry on Friday revised the inflation rate for the week ended March 1 to 6.21% from 5.11%. The government revises the rate from two months ago after receiving additional price data. |
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| Govt may take more steps to check prices |
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| The government is aiming to bring down inflation by more than a percentage point in the next few weeks by taking fresh measures to curb price rise. Minister of state for industry Ashwani Kumar said on Thursday that while the full impact of these measures would be reflected in six-eight weeks, the positive effect of the measures already taken has started showing. He said the steep rise in prices of many commodities have not only ceased, but prices of some items have also started showing a downward trend.
“The government’s strategy is to attack each factor that results in inflation,” Mr Kumar said at a press conference. The minister pointed out that despite rising inflation, for the first time food prices in India are ruling lower than anywhere else in the world. As per government estimates, in the last two months there has been a substantial decline in prices of food grains from peak levels. For instance, price of rice has come down by 1.64% during the two-month period, while price of wheat has witnessed a decline of 9.10%. Prices of pulses and edible oils have also come down by 7.69% and 18.93%, respectively. The government believes there will be further reduction in prices as the monsoon this year is expected to be favourable and measures to curb inflation would continue.
The government is also in talks with cement manufacturers to see how cement prices can be brought down. It expects further reduction in prices of cement as representatives from the manufacturers association have responded positively to suggestions and proposals made by the government to bring down prices, Mr Kumar said. However, prices of steel and iron remain high.
The government is willing to consider all possible measures and take more administrative steps to contain prices, the minister said. “We need to ensure growth, employment and sustainability,” he added. He urged the industry to shun short-term profits in favour of longerterm strategies. |
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| Textile exports in FY11 may cross $40b: Vaghela |
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| MUMBAI: India’s textile exports may cross $40 billion in 2010-11, short of the government’s stated target of $50 billion, weighed down by the rise in rupee over the past year, Union textiles minister ShankerSinh Vaghela said. The government is targeting textile exports of around $25 billion for 2008-09, Vaghela said on Wednesday. India missed its 2007-08 target by 18% due to the rupee appreciation. “I understand that our $50 billion target is facing some challenges, but we are still confident of achieving more than $40 billion,” Vaghela said. “A strengthening currency is good for any country. However, our exports were hurt as exporters did not get the desired returns,” he added. The worst is behind and exports would benefit now that the rupee has started falling again, he said. |
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| Auto industry puts expats in drivers seat |
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| New Delhi: Indian auto industry is going for some ‘videshi’ touch. Companies are increasingly opting for foreign hands to run the show in the country and make a stronger presence abroad.
Be it one of the oldest homegrown company like Bajaj Auto or the most visible car brand Maruti Suzuki, more and more companies are increasingly opting for expats to manage operations. Maruti last year brought in S Nakanishi, a Japanese, at the helm following the retirement of experienced Indian hand Jagdish Khattar.
Bajaj Auto recently appointed Tomotaka Ishikawa, one of the poster boys of Japanese two-wheeler major Yamaha, as full-time advisor from April this year. “Given Bajaj Auto’s strategy to be distinctly ahead, by developing itself as a lifestyle brand in global markets, availability of Ishikawa’s long, varied, and proven experience in the global auto industry is well timed and would be most valuable,” the company said.
US car companies like General Motors and Ford are also taking a similar route in India. These two companies opted for leadership changes just as they embarked on fresh big investments. GM last year appointed Karl Slym as the Indian subsidiary’s president and MD in place of Rajeev Chaba, who was shifted to Egypt. “India is one of GM’s most significant growth markets and Rajeev has led the GM team at an important time. We are delighted to have Karl to bring his extensive experience to maintain that growth,” GM Asia-Pacific head Nick Reilly said.
Ford India has made Michael Boneham president and MD of its Indian operations in place of Arvind Mathew, who re-locates to Dearborn, US. Again, the change comes after the company deciding to pump in $500 million investment in India and plans to roll out a small car.
Mathew does not agree to the argument that an expat would not be as successful as a local. “It is the team that is more important for success. And in any case, India is such a diverse country that a north Indian is more or less an alien in
South as he cannot understand the local language there and vice-versa. So I do not think that being a local makes much of a difference,” said Mathew, who prefers to send his employees on foreign postings to get “valuable experience” that can later be useful in the home market.
Vipul Prakash, partner with Executive search firm Elixir, said, there are two major reasons why Indian companies were opting for expats to run operations. “Salaries in India have become globally competitive and India is not paying less compared to other big destinations. Thus we can afford them.”
“Secondly, there is a shortage of people in India when it comes to handling large scale or deal sizes. However, there are people in abundance if you recruit globally and this also leads to more hiring of expats,” he said.
Prakash said his firm gets as many as 500-600 applications every month from top executives in European and other western countries who want to work in India. “They want a work experience in India as it adds weight to their CVs,” he pointed out.
An expat, recently sent on
a posting
to India for a
multinational
car leasing company, said India is seen as a great opportunity to work. “However, language and other local problems, like erratic weather and poor infrastructure, are major problems,” he said.
The issue of who heads the operations has always been a thorny one. Among the notable spats was the power struggle in Hyundai’s Indian subsidiary. It is believed that Korean MDs appointed to India were not very happy with then president BVR Subbu. Ending his decade long association with the company, Subbu suddenly quit Hyundai India in March 2006, days before his contract was to come up for renewal. The company has now appointed former finance secretary Ashok Jha in his place. |
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| Steel export levy may be lifted partially |
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| EXPORTERS OF SOME ITEMS COULD BE EXEMPTED IF THEY IMPORT SEMI-FINISHED STEEL
THIS may come as a big relief to steel makers exporting value-added products. The government is considering to exempt cold rolled coils (CRC), galvanised products and tubes & pipes from the levy of 10% export duty if such products are exported against import of semi-finished steel (hot rolled coils or HRC). Tata Steel, SAIL, Bhushan Steel, Uttam Galva and a host of secondary steel producers would be among the major beneficiaries.
The measure is to improve supply of steel in the market and prevent consumption of domestic semifinished steel for the purpose of exports. If implemented, this would be the first roll back by the government in its initiative to tame rising steel prices.
A proposal in this regard is being considered by the finance ministry for inclusion in the notification on recently announced export duty on steel, an official source said.
Over two million tonne (mt) of domestically produced HRC is used for making high-end steel products meant for exports. Relief from export duty would enable more companies to source HRC from overseas. This could release an additional two mt of steel in the domestic market, thereby preventing any price rise accruing from shortages.
The nodal steel ministry has also given a proposal to the finance ministry to make necessary changes in the notification (on measures for the steel sector to contain inflation) exempting steel exports using imported inputs from any further levy of duty.
“Since taxes on export of various steel items have been announced, it would be necessary to exempt from such taxation the export of CRC, galvanised products and pipes and tubes which are exported against import of HRC under advance licensing scheme (ALS). In the absence of such exemption, it may not be economical for the manufacture of highend products to import HRC under ALS, add value and export value-added products after paying the proposed taxes,” steel ministry has written in its memorandum to the finance ministry.
Responding to the discussion on the Finance Bill 2008-09, finance minister P Chidambaram last week had announced imposition of 15% export duty on hot rolled steel products, 10% on cold rolled steel products and 5% on galvanised sheets to disincentivise exports and contain the domestic demand-supply gap. It is, however, felt that the move would be counter productive to steel ministry’s initiative recently where it got an agreement from steel makers to source their entire requirement of HRC from overseas for producing high-end products for exports.
The country exports about 4.5 mt of steel. Around 3 mt of this is HRC, which is the prime raw material for various industries. While direct export of HRC has now been disincentivised through a 15% export duty, value-added products would also use imported steel. |
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| India, Canada to discuss FTA during Kamal Nath’s visit |
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| OTTAWA: India will hold discussion on a free trade agreement (FTA) with Canada during Union commerce minister Kamal Nath’s visit to that country next month. Indian high commissioner to Canada R L Narayan said that “this would be first high level discussion on this issue.” He said both countries had already concluded a bilateral investment protection and promotion agreement last summer. An expert committee of Canadian council of CEOs and CII, set up last year to evolve strategies to strengthen bilateral relations including an FTA, would soon finalise its report, he said. |
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| MARKET SHOOTS UP 313 POINTS TO 17,600 |
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| IT MAY appear that above a certain point, inflation is actually a good thing for the stock market. Even as wholesale price index-based (WPI) inflation climbed to a three-and-a-half year high of 7.57%, equity indices rose over 1% on Friday, and are now up 3% in the week.
The view on the Street remains divided, but bulls are convinced the market could ride the present momentum for a few more days.
There is near unanimity in the view that largecap stocks stand a better chance of doing well, compared to mid and smallcap shares.
The 30-share BSE Sensex advanced 312.81 points, or 1.8%, to close at 17,600.12 while the broader 50-share S&P CNX Nifty rose 62.30 points, or 1.2%, to end the week at 5,228.20.
“With a feeling that the dollar may have bottomed out and commodities may be heading for a correction, the short-term outlook on equities is bright,” says Standard Chartered STCI Capital head of equities Milind Pradhan. “There is strong buying from funds and insurance companies in select large cap heavyweights, and thanks to the low volumes, it’s showing up as sharp movement in the indices,” he added.
Mr Pradhan’s comments should be seen in context of global equities rallying consistently over the past few sessions. Even on Friday, stocks rose in Europe and Asia, pushing the MSCI World Index to a threemonth high, as investors are betting that the turmoil in financial markets may be fast subsiding. In sectorwise trends, bank stocks were among best performers, with the BSE Bankex gaining close to 4%. The belief is that with interest rates unlikely to rise near term, demand for credit may not be affected. Auto shares too posted handsome gains, as players are hoping that demand will automobiles will pick up as interest rates stabilise. Metal, healthcare and fast moving consumer goods shares were among the key laggards.
Elsewhere in the US, employers cut fewer jobs than economists had forecast in April, boosting optimism that the labour market will weather an economic slowdown. The jobless rate fell to 5% from 5.1% in March. The Federal Reserve also expanded its cash- loan auctions for banks by 50% to $75bn each thus lowering borrowing costs, further enhancing the bullish sentiment. |
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| MARKET SHOOTS UP 313 POINTS TO 17,600 |
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| IT MAY appear that above a certain point, inflation is actually a good thing for the stock market. Even as wholesale price index-based (WPI) inflation climbed to a three-and-a-half year high of 7.57%, equity indices rose over 1% on Friday, and are now up 3% in the week.
The view on the Street remains divided, but bulls are convinced the market could ride the present momentum for a few more days.
There is near unanimity in the view that largecap stocks stand a better chance of doing well, compared to mid and smallcap shares.
The 30-share BSE Sensex advanced 312.81 points, or 1.8%, to close at 17,600.12 while the broader 50-share S&P CNX Nifty rose 62.30 points, or 1.2%, to end the week at 5,228.20.
“With a feeling that the dollar may have bottomed out and commodities may be heading for a correction, the short-term outlook on equities is bright,” says Standard Chartered STCI Capital head of equities Milind Pradhan. “There is strong buying from funds and insurance companies in select large cap heavyweights, and thanks to the low volumes, it’s showing up as sharp movement in the indices,” he added.
Mr Pradhan’s comments should be seen in context of global equities rallying consistently over the past few sessions. Even on Friday, stocks rose in Europe and Asia, pushing the MSCI World Index to a threemonth high, as investors are betting that the turmoil in financial markets may be fast subsiding. In sectorwise trends, bank stocks were among best performers, with the BSE Bankex gaining close to 4%. The belief is that with interest rates unlikely to rise near term, demand for credit may not be affected. Auto shares too posted handsome gains, as players are hoping that demand will automobiles will pick up as interest rates stabilise. Metal, healthcare and fast moving consumer goods shares were among the key laggards.
Elsewhere in the US, employers cut fewer jobs than economists had forecast in April, boosting optimism that the labour market will weather an economic slowdown. The jobless rate fell to 5% from 5.1% in March. The Federal Reserve also expanded its cash- loan auctions for banks by 50% to $75bn each thus lowering borrowing costs, further enhancing the bullish sentiment. |
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| Inflation scorches at 42-month high of 7.57%, but may cool soon |
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| INFLATION rose yet again—to a scorching 7.57% for the week ended April 19—registering a 42-month high. The last time inflation had touched a higher level was in November 2004, when it had reached 7.68%. Inflation, measured as change in the wholesale price index (WPI) from its level in the corresponding week a year ago, was 7.33% in the previous week.
However, there are some signs that the rise in the price index is moderating. The rise in the price index each week from its level in the week immediately preceding it (week on week) has moderated from 0.8% in early March to 0.1% in the week ended April 12. It moved up again, to 0.3% for the week ended April 19, the latest week for which data is available. Strong procurement of wheat, to the tune of 154 lakh tonnes, for the government’s buffer stock is likely to dampen inflationary expectations somewhat.
This moderation in week-on-week rise in the price index is unlikely to bring down the annual rate of inflation, as the base, the WPI level last year, had remained flat from April through October. This base effect is likely to keep inflation high till November this year.
The week-on-week change in the WPI from the level attained for the week ended April 12 was 0.3% against 0.1% in the previous week. While the index for primary articles moved up by 0.3%, the index for fuel and lubricants and manufactured products moved up 0.1% and 0.4% over the week, after remaining static in the previous week.
Surprisingly the commodities that saw the rise in price index are the ones where the government took measures to rein in runaway prices include milk (1%), rice (1%) , iron and steel (1.1%).
Looking at the change over a year, the price index has moved up for all the categories including primary articles (8.58%) (manufactured goods (7.42%) and fuel, power, light and lubricants group (6.9 %).
Reacting to inflation numbers, Finance Minister P Chidambaram provided hope by saying current inflation is likely to be contained. He said food prices will come down sooner than other prices. As a contingency, 154 lakh tonnes of wheat and 250 lakh tonnes of rice have been acquired. But economists feel the fiscal and monetary measures taken by authorities will take some time to show positive impact and expect inflation to hold up above 7% mark at least for next couple of months. “Inflation won’t come down below 7% for next couple of months as prices are not showing signs of cooling off in the international market and thus building inflationary pressure on domestic prices.” Crisil principal economist D K Joshi said
However, if prices in international market do not go above the existing level, the slew of fiscal and monetary measures taken by the government and RBI would lead to easing of inflationary pressure in the future and it can come down to 5.5% by the end of the 2008.” said Mr Joshi. The possibility of further stringent administrative measures such as bringing more commodities under the Essential Commodities Act, banning futures trade in some more commodities or clampdown on hoarders among others is not ruled out. |
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| CST cut hangs fire on compensation row |
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| UNCERTAINTY looms large over the reduction of central sales tax (CST) from 3% to 2% from May 1, with the Centre and states yet to agree on the compensation package.
CST phaseout has already missed the April 1 deadline. It was expected the empowered committee of state finance ministers and the Centre will be able to sort out differences that had arisen on the compensation package, and reduction to 2% can be carried out from May 1. The issue will now be discussed at the next meeting of the empowered committee in Trivandrum this month.
States, who stand lose close to Rs 13,000 crore if the CST is cut from 3% to 2%, are demanding that Centre compensate them in full. The Centre has agreed to full compensation but differences persist over the mechanism of compensation.
The plan is to bring down levy to 2% from April 2008 and 1% in 2009, before being eventually abolished on March 31, 2010, to pave way for rollout of unified goods and service tax from April 1, 2010.
The compensation package for CST phaseout — which began on April 1 last year — includes transfer of power to levy service tax on some services, removal of additional excise duty on tobacco products and textiles, VAT on imports, abolition of Form D, budgetary support and hike in floor rate of VAT.
Some elements of the package have been implemented. The central government has removed additional excise duty from tobacco, provided for budgetary support and transferred revenues from 33 existing services to states. However, it is yet to bring the 44 new services under the tax net. States have ruled out a hike in VAT floor rate as it would be inflationary. |
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| SSIs, AMCs may get FDI via green channel |
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| Proposal May Be Included In Annual Review, Move To Benefit Small-Scale Sports Equipment Makers
THE government may allow foreign investment in sectors reserved for small-scale industries and asset management companies (AMCs) through the automatic route. The move is aimed at boosting sports equipment — which source mainly from SMEs — before the 2010 Commonwealth Games in Delhi. At present, FDI up to 100% is allowed in sectors reserved for SSIs while 49% FDI is allowed in asset management. The proposals may be included in the yearly FDI review.
Once the proposal is cleared, FDI in the segments could be brought in without delay as the parties concerned have to only inform RBI rather than getting approval from Foreign Investment Promotion Board (FIPB). “However, the automatic approvals would be subject to sectoral caps and other stipulations,” a source in the department of industrial policy & promotion (Dipp) said. At present, 79 items are reserved for the SSI sector.
The government is in the process of removing the 24% FDI cap on companies in the SSI sector. Last year, commerce & industry minister Kamal Nath had indicated removing the FDI ceiling in the SSI sector.
Presently, small-scale units with FDI exceeding 24% lose their SSI status. Once the proposal is approved, the government would allow the companies to retain their SSI status even if they raise foreign equity beyond 24%.
According to data release by the ministry of micro medium and small-scale sector, there are 12.8 million small & medium enterprises in the country, which produce goods worth $140 billion. The SSI units export goods worth $33 billion, which is one-third of the country’s exports.
In the case of asset management companies, the government feels that allowing automatic approval in such cases would lead to growth of the financial sector and increase investing environment. However, the FDI limit will continue to remain at 49% for investments into the sector. At present, companies like Goldman Sachs, JP Morgan Chase and Morgan Stanley are operating in the country. |
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| Steel prices in Punjab dip by Rs 1,000-1,200 per MT |
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| Analysts expect further decline in prices by Rs 500 to Rs 700 MT In Few Days
THE spot rates of steel in Punjab plummeted by Rs 1,000-1,200 per metric tonne (MT), a day after the government announced a slew of measures to rein in rising steel prices.
The spot prices of ingot today opened at Rs 33,000 per MT, compared to Rs 34,200 per MT on Tuesday, a decline of Rs 1,200. Similarly, the rates of Saria and TMT bars have reduced by Rs 1,000-1,200 per MT.
Steel analysts expect further decline in steel prices ranging between Rs 500 and Rs 700 per MT within next couple of days.
“Because of the steps taken by the government such as imposing 15 per cent export duty on steel products, the prices are likely to further dip by Rs 500-700 per MT and thereafter the rates will stabilise,” said R Sood, Mandi Gobindgarh-based steel trader. However, the secondary steel producers have castigated the government for removing countervailing duty (CVD) on TMT bars and structural steel by claiming that it would hit the local industry hard.
“Imposition of CVD on TMT bars was the only protection for the domestic industry like ours and now with the abolition of the same, industry will have to face the cheaper products from overseas markets which will further put pressure on rates,” All India Steel Re-Rollers Association President Vinod Vashisht said.
“Rather the government should have withdrawn CVD on scrap which is our key raw material and impose export duty in iron ore,” he said while adding, “these steps must have improved the supply of steel in the domestic market.”
Union Finance minister P Chidambaram yesterday announced a series of steps, including imposing 15 per cent export on semi-finished steel and 5 per cent on galvanized sheets in a bid to contain rising steel prices. |
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| Moody’s pegs India GDP at 7.8% |
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| New Delhi: On the back of strong government spending and investment activity, the global slowdown will only have a modest effect on Indian economy whereas the country’s GDP is expected to ease to 7.8% this year, says global credit rating agency Moody’s in its latest report. The report by Moody’s Economy.com noted that slowing exports and tight monetary policy are the key downside risks to expansion this year.
Government’s current priority to improve infrastructure and reduce poverty would witness strong demand for workers and household income grow at a stunning pace this year. Public expenditure would receive a major boost in anticipation of the general election to be held in May 2009, the report said. “...However, thanks to strong government spending and investment activity, the global slowdown will have only modest effect. India’s GDP growth is expected to slow to around 7.8% in 2008, and rebound to 8% the following year as the global economy rebuilds momentum,” the report titled ‘India Outlook: A Challenging Time Ahead’ noted.
RBI on Tuesday raised the Cash Reserve Ratio by 0.25% to 8.25% in its Annual Monetary Policy. The new CRR would be effective from May 24. Pointing out that domestic demand is a key driver of expansion in the country, the report said that amid rapid wage growth, household demand would be solid. However, strong inflation coupled with high borrowing costs would weigh on household budgets and dampen consumer spending.
“Private consumption - which constitutes around 55% of the emerging giants annual GDP - is expected to climb 5% this year, slightly slower than the increase of 5.9% seen in 2007,” the credit rating agency said. The industrial production growth for this year “looks set to moderate to 7.8%, and quicken to 8.3% next year as global demand recovers”.
Softer domestic demand amid tight monetary conditions along with slowing exports are both key risks to Indian manufacturers. PTI |
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| RBI expects slowdown in growth |
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| Moderates GDP Target At 8-8.5%, Increases CRR To Tame Price Rise
Mumbai: In its bid to curb inflation, RBI on Tuesday raised the cash reserve ratio (CRR) by 25 basis points, the proportion of deposits banks need to keep with the central bank, to 8.25%, in its annual credit policy review.
Though the move came as a surprise as RBI has hiked CRR on April 17 by 50 basis points. Analysts had expected the RBI governor Y V Reddy to increase the repo rate, the rate at which central bank borrows from other banks. The reverse repo rate and the bank rate were left untouched.
The RBI expects some slowdown in the growth momentum, setting a GDP growth target of 8-8.5% for 2008-2009 against a target of 8.5% in the 2007-08 fiscal. It is also expecting inflation at a slightly higher 5.5% aganist itsearlier projection of 5%. Reddy told reporters that the danger of global recession has increased and domestic growth prospects have been trimmed due to inflation risks.
“There is a greater inflationary pressure than what we expected. As far as growth is concerned, moderation is more or less on expected lines, global uncertainties have increased and there are a number of adverse factors in play,” said Reddy.
“The global inflationary pressures have intensified and more importantly, the policies are responding to the immediate problems of financial markets in advanced countries and some of these measures taken in the interest of financial stability at the shorter end, may work against price stability,” he added.
When asked why a 5.5% rate of inflation is acceptable when that in developed nations is between 2-3%, Reddy said, “What is realistic is different from what is acceptable. So in our policy also, we have very clearly indicated that if we want successful, optimal global integration, we should go towards inflation of 3%. I think as a goal that is stated in the policy itself, but to reach 3% so many other things had to happen and that is what we are trying.”
In other policy measures the limit of bank loans for housing was enhanced from Rs 20 lakh to Rs 30 lakh for applicability of reduced risk weights at 50%, which analysts said is a positive move. This means that banks will have to provision only 50% as security for loans upto 30 lakhs as against 75% earlier.
“The move may partly help in addressing slowdown in housing loan disbursements. An important local factor that might have been taken into consideration in this policy change has been the increase in the average ticket size on home loans that has taken place in the last couple of years, given the rising property prices,” said Crisil.
If housing loans below Rs 3 lakh were to be treated as part of priority sector lending, then it would provide a boost to the sector and would reduce pressure on banks to originate or buy priority sector loans, said analysts. |
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| FM slaps duty on steel & basmati export |
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| THE government on Tuesday announced more measures to combat inflation and discipline industry, which together covered the strategies of saam (kind words), daam (material inducement), bhed (threats and abuse) and dand (penal measures) recommended by Indian tradition to persuade recalcitrants.
The fiscal package includes measures like an export duty on steel and basmati, which is aimed at disincentivising exports, and cut in Customs duties on some products like steel, skimmed milk and butter oil to ease supply crunch and soften prices.
Concluding the debate on the Finance Bill, finance minister P Chidambaram said the UPA government’s policies—fiscal, monetary and financial—were aimed at making growth inclusive.
FM doled out a booty for refinery and IT companies by extending the tax waivers and exempting all categories of electric vehicles from excise duty.
The rejig in the tax structure to counter inflation, however, would leave the exchequer poorer by Rs 1,500 crore. These anti-inflation measures are primarily driven at steel, which contributed 21.3% to current inflation which is at a three-year high of 7.33%.
Proposing the changes to the Finance Bill, which was passed by the Lok Sabha, Mr Chidambaram said: “Currently, steel and steel products contribute about 21.3% of inflation. The objective of containing domestic prices will not be achieved unless we augment the domestic supply/availability of intermediates and finished products. Despite a slowdown during 2007-08, the value of exports of steel items was as high as Rs 26,000 crore in that year. In this background, there is a case for disincentivising the export of steel.”
While the government has taken the approval of the House to impose up to 20% of export duty, it has imposed variable duty at the rate of 15%, 10% and 5% depending on value addition and the consumption of products in the domestic market. Besides, basic Customs duty on hot rolled coils, cold rolled coils has been reduced from 5% to nil. The imports of inputs like zinc, ferro alloys and met coke that are used in manufacture of steel have also exempted from Customs duty. Countervailing duty on TMT bars and structurals commonly used for construction of houses has been exempt to augment supply.
Export duty has also been imposed on basmati at the rate of Rs 8,000 per tonne even though its minimum export price has been reduced from $1,200 per tonne to $1,000 per tonne. The move is expected to cool prices of rice that have risen by 20% over the past one year. Customs duty on skimmed milk powder has been cut from 15% to 5% for a Tariff Rate Quota of 10,000 tonnes per annum. Similarly, Customs duty on butter oil, which is used for reconstituting liquid milk, has been cut from 40% to 30%. While changes in import duty rates will be effective today, changes in export duty will come into effect on the date when the Finance Bill, 2008, receives the assent of the President. |
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| RBI survey points to 8% growth balm, continued inflation pain |
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| FOR a government that is in firefighting mode on the inflation front, this could be something to cheer. A survey conducted by the country’s central bank based on responses from various professional economic forecasters has indicated that the economy could grow at a healthy rate of around 8.1% this fiscal. With the turmoil in the overseas credit markets, a slowdown in loan growth tempering demand in certain industrial segments, many agencies and forecasters had recently pared their estimate of India’s economic growth for 08-09.
But the survey—a first of its kind by the Reserve bank of India in line with the practice adopted by many central banks—shows that the economy could expand by over 8%. This is the median of the responses of professional forecasters. The survey further shows that the expectations for savings rate growth for this fiscal is still an impressive 35% while the rate of growth of investment is expected to be 36% of GDP. Over the last four years, India’s economy has grown at an average of 8.6% with the figure for the last fiscal being 8.7%.
However, worrylines remain. The macro economic survey released by the RBI on Monday has hinted that there could still be a need to tighten even if inflation cools off in the near term. This is because it believes that financial imbalances can also build up in the absence of overt inflationary pressures. “This suggests that it is important for monetary policy frameworks to allow for the possibility of a tightening even if near-term inflation remains under control—what might be called the “response option”.
The unveiling of the professional forecasters survey by the RBI could well help the market be better prepared for policy measures and reducing the possibilities of surprises. However, this is only a first step as other economic indicators such as jobs data and inflation expectations, which are released every quarter by many central banks based on similar professional forecasters survey is not yet available in India.
Another interesting aspect of the survey conducted by the central bank is that interest rates are expected to ease from the current level. Compared to the current yield of 8.14% on 10 year bonds, the survey results shows a median expectation of 7.8%. This could be an indicator of inflation being in a range of below 6 %. Imports are expected to grow 20% while exports are seen to grow 15.8%.
In its report on Macroeconomic and Monetary Developments in 2007-08, the central bank has warned of further upward pressure on prices. |
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| Inflation unlikely to come down |
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| To Hover Around 7% As Wholesale Price Index In 2008 Is Ruling Higher Than In 2007
New Delhi: Even if the government is able to contain the prices of commodities at the present level, the inflation will continue to hover around 7% level in the next couple of months. This is because government’s success to contain the price rise during April-June last year. The wholesale price index (WPI) of all commodities remained in the range of 211.5 and 211.9 between April 7 and June 16. It touched 212.5 in the week ended June 2, 2007.
The index represents average price of all commodities including food products like rice, wheat, vegetables, metals and other manufactured items. If the index remains at the same level during a period, average price of all commodities does not change.
At the same time, inflation is a measure of percentage increase in the index during last one year. In the last three months between January 5 and April 5, WPI went up sharply by 9 points from 217.6 to 226.6. During the same period last year, the index had gone up by only 2.9 points from 208.7 to 211.5. Due to this sharp WPI increase in 2008, the inflation jumped from 4.26% during the week ended January 5 to 7.14% in the week ended April 5.
Now from here, even if government’s efforts check the price rise and WPI stays at 226.6, the inflation will remain around 7% as in April-June last year the index was around 212. Having said so, prices of individual commodities can fall. As the rabi harvest season has started, the prices of wheat, rice, pulses and edible oils are likely to go down.
In 2007, prices of wheat in wholesale market fell 2.7% during April-May. However, the marginal fall during harvest season could be because of a 6.5% fall in wheat prices between January and March. However, this year, WPI went up marginally during this period. Therefore, a good harvest could lead to substantial fall in the prices in the next couple of months.
But as wheat has only 1.38% weightage in WPI, the impact on all commodities would be a limited one. Government’s decision to sell edible oil at subsidized rate will also contribute to price control. As prices remained under control in case of most of the commodities last year, the percentage rise in prices will remain at the current level of around 5.5%.
In 2007, the prices of food articles in the international market were at a lower level, which kept inflation under control. But, in 2008, global prices are ruling much higher than prices in the domestic market. Therefore, it will be tough for the government to bring down prices from the current level in the short to medium term.
In certain metals like steel, domestic prices are lower than global prices. Therefore, it will be difficult for government to lower the prices from the current level unless the global prices fall. As global prices are unlikely to fall, economists feel even best efforts of government would only hold the price line. So, a substantial fall in inflation in is unlikely. |
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| Technical textile sector may grow four-fold by 2020: Ficci |
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| NEW DELHI: India’s technical textile market could grow four fold to become a $37-billion industry by 2020, provided issues such as lack of investment and absence of research and development are addressed, a report by industry body Ficci said. According to the Ficci-Technopak report, the Indian technical textiles market has been registering a growth of 11.25%, which now stands at $8.3 billion. The growth of the sector is, however, marred by factors like lack of investment, absence of high quality R&D and database, it said. “The lack of mandatory rules for use of technical textile products, certification agencies, design standards, guidelines and skilled manpower are also hindering growth of the sector,” the chamber said. Technical textiles are materials and products used primarily for their technical and functional properties and not for use as apparel. Of the 12 technical textiles segments, the report identifies buildtech, geotech, meditech and protech would drive the growth of the sector. |
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| H-P to click on small-town SMEs |
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| HEWLETT Packard (H-P) is all set to enhance its presence pan India by tapping the SME potential in tier-III & tier-IV cities. The company intends to multiply the number of its channel partners in India. Though the company officials are tight-lipped over the India investment part, they said that a considerable amount would be spent to increase its penetration in India.
The company has also announced a $300-million global marketing campaign to target larger businesses in countries like India. The marketing strategy would include road shows, retail channel route, special training programmes for exporters, travel agents etc. Interestingly, its also plans to have a separate financing programme for the SMEs in India.
H-P India director (Commercial & Enterprise Printing, Imaging) Samir Shah says: “We foresee a huge potential in smaller cities and will enhance our penetration. The details of investment can’t be provided yet. Since H-P has the highest market share in India, we intend to push this growth momentum further. We are bound to make huge investments.”
As part of its e-governance initiative under the ‘Mission Mode Project’ in India, H-P is all set include more states and corporates. Talking about the channel programme, vicepresident (Laser jet business, Imaging and Printing group-Asia Pacific) Herbert Koeck says: “Programmes like ‘New HP Channel Programme’ offer powerful advantages to partners. HP is also introducing the new HP Office Printing Channel Programme, a comprehensive programme which has matured from a previous programme for value channels. The HP Office Printing Channel Programme is designed to help qualified partners grow sales revenue and profitability through increased access to H-P’s entire imaging and printing portfolio.
Also the company has introduced more than 25 new printing solutions including new web-based printing tools. It also showcased new colour printers and multifunction printers optimised for producing professional quality marketing materials, business collaterals and everyday documents. The new offerings include two HP LaserJet multifunction printers (MFPs), an enterprise class scanner for document capture and three specialised industry solutions. |
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| World trade growth may slip 1% this yr |
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| THE outlook for world trade in the ongoing calendar year appears bleak, with growth expected to dip to 4.5% from 5.5% in 2007. According to the World Trade Statistics 2008 report compiled by the World Trade Organisation (WTO), a sharp economic deceleration in key developed countries is only partly being offset by continuing strong growth in emerging economies like China and India.
While India’s share in world merchandise exports at $145 billion has remained more or less static at 1.06%, its rank among the world’s top service exporters has improved two places to 11 in 2007. India exported $86 billion of services in 2007, accounting for 2.7% of global service exports. China, on the other hand, was the seventh largest exporter of services in 2007 with exports worth $127 billion. In merchandise trade, China was the second-largest exporter after Germany. It exported goods worth $1,218 billion in 2007, accounting for 8.8% of world trade.
The one percentage slide in global merchandise trade in 2008 is based on the assumption of a basic scenario of global GDP growth between 2.5% and 3%, the report said. This estimate is supported by the results of the WTO Secretariat’s time series forecasting model which predicts a slowdown in the OECD area’s imports of goods and services to 3%, a further 1.5 percentage point decrease from the already subdued rate observed in 2007. The present economic growth forecast for developed markets is 1.1% while for developing countries, the growth is forecast at above 5%. |
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| Inflation down a tad, but 7% itch remains |
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| THE annual rate of inflation eased to 7.14% for the week ended April 5 from the previous week’s 40-month high of 7.41%. However, the price index for all commodities rose 0.27% and that for 25 essential commodities 0.32% over the seven days from March 29 to April 5 this year.
In other words, neither the government nor the Reserve Bank is likely to budge from their tough anti-inflation postures for now. Indeed, the RBI has hiked the cash reserve ratio for banks, and the government ordered the Monopolies and Restrictive Trade Practices Commission to investigate perceived cartelisation in some sectors.
Edible oil prices fell by 1.8% over the week, reflecting import duty cuts on crude and refined oil announced on March 31 as part of the government’s anti-inflation strategy. This contributed to the decline in inflation. But a larger contribution came from the so-called base effect —a spurt in the wholesale price index (WPI) for the week ended April 7 2007, against which the price index in the corresponding week of this year is compared to arrive at the rate of inflation.
Prices have surged, as compared to a year ago, across all categories: primary articles (7.7%), manufactured products (7.04%), and fuels, power, light and lubricants (6.77%). Inflationary expectations continue to loom over the economy due to hardening prices of commodities in the international market, and supply constraints on the domestic front. Thus, inflation is expected to hold up above 7% the for next 2-3 months, say experts
The government classifies 30 items as essential commodities, of which 27 are included in the wholesale price index with a combined weightage of 17.8%. Of these, prices of coke and kerosene are controlled by the government. This group, excluding coke and kerosene, registered an annual inflation of 6.35%, up from 6.07% for the previous week ended March 29. |
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| Imports and non-tariff barriers to help check prices |
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| THE government continues to be in war mode on food prices, using a combination of non-tariff barriers and imports to keep a lid on the situation.
While consumers can look forward to cheap one-litre pouches of vegetable oil in ration shops, traders may be in for a tough time as their harvest-time grain purchases get stymied by the threat of stock controls. That may eventually reduce food available on grocery shelves.
With Karnataka, Andhra, Madhya Pradesh, Rajasthan and Chhattisgarh in election mode, the likelihood of governments in these states imposing stock limits on wheat to appease voters has increased. Delhi has already re-activated the 200-t stock limit on chana over the weekend. “We have given states freedom to impose stock controls. Now it is anybody’s guess what they will do. There is no move to impose a uniform stock limit nationally on wheat,’’ sources here said.
Maharashtra, Gujarat, Madhya Pradesh, Rajasthan, Andhra, Karnataka, Delhi and Haryana had all imposed stock controls the last time prices spiralled a year ago. According to officials, there is no move yet to ban maize exports since there is no consumer demand for coarse grains. “If we put maize on PDS, consumers say they don’t want it. So maize exports are not on our radar at present,’’ they said. |
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| Steel firms raise prices |
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| New Delhi: The government is finally ready to check the open defiance by steel companies, which again resorted to a price hike days after agreeing to keep rates unchanged.
In the latest round of increase in rates, which started on Tuesday evening, leading manufacturers levied a surcharge to cover higher costs including more expensive ore and coal as also higher rail freight tariffs. A committee of secretaries, which met on Wednesday, immediately swung into action on the steel price front, which has emerged as the latest headache in the government’s fight against runaway prices. The panel is learnt to have recommended a slew of measures including a ban on exports and excise duty cut to cool prices in the domestic market.
The industry proposal to cut duty from 14% to 8% was discussed along with a ban on ore exports, levying export taxes and making steel imports cheaper through duty cuts. The final decision will depend on Cabinet which is expected to discuss the proposals shortly. “This is open defiance. We don’t want to use any harsh measures but it seems they are pushing us to do so,” a top-ranking government source told TOI. Government sources also claimed that they had received feelers that the industry might not go ahead with the hike. Steel minister Ramvilas Paswan told TOI that the industry had assured price stability to steel secretary R S Pandey.
A steel company executive, however, chose a defiant tone, claiming that the industry had not given any assurances to the government on keeping prices constant during a meeting with steel secretary last week. “It was the government which said that prices should be maintained. We did not say that,” the executive said.
Over the last year, steel prices have shot up by nearly 35% with domestic players diverting supplies to international markets, where prices are spiralling. In addition, production is estimated to have gone up by around 5% while consumption is growing at nearly twice that rate.
Besides, some of the companies have not been affected by the rise in coal and iron ore prices since they use inputs from their captive mines.
Along with the steel companies, the government has also not used the complete array of instruments at its disposal to check exports estimated at 4-4.5 million tonnes during April-February 2007-08.
For instance, it tried to discourage exports through an end of tax refunds under the DEPB scheme but analysts said it was a half-hearted attempt as there were other export promotion schemes which can be tapped by companies. |
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| Restating profit to lead to loss of face |
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| CORPORATE houses will soon lose the leeway they have in getting away with errors they detect in previous years’ financial statements. From April 2010, a company will have to restate the profit and loss account for a past year in case it subsequently detect an error — something the investors and regulators may not take lightly.
Today, companies need to offer only a clarification for the error in a past-year financial statement. Restatement of profits, which is the norm internationally, in case of a mistake in the past profit and loss account will become mandatory in the country as companies prepare their statements in April 2010 as per International Financial Reporting Standards (IFRS). Both IFRS and US GAAP call for restatement of profits while the Indian accounting standards do not.
“Investors make their judgement about a company based on the figures disclosed. If the company restates a previous year’s profits, the investor may get confused. Besides, this could invite the attention of regulators on whether the management and the auditor of the company have played their roles satisfactorily. Globally, restatement of profits is seen in poor light,” IFRS expert and KPMG executive director Jamil Khatri said. Almost 6% of companies listed on US stock exchanges end up restating profits.
After the accounts have been finalised, the company’s board of directors approves it first, followed by the auditors and shareholders. The statements are then filed with the registrar of companies and the tax authorities. If the changes made subsequently are significant, it is likely the authorities may ask tough questions.
Although IFRS compliance becomes compulsory from April 2011, the balance sheet for the preceding year too has to be in the IFRS format so that both could be compared. This means the effective compliance date is one year earlier than originally believed. Besides, accounting regulator ICAI recently urged companies to adopt IFRS as early as possible as it would present a clearer and accurate picture of the company’s financial health. |
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| STC to import 1.17 lakh tonnes of pulses to boost supplies |
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| NEW DELHI: The State Trading Corp on Wednesday invited bids to import 1.17 lakh tonnes of pulses. It plans to buy 1.05 lakh tonnes of yellow peas and 6,000 tonnes each of lemon tur whole (arhar) and black matpe (urad). Bids will close on April 17 and a decision would be taken by April 25. |
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| CII (NR) elects chairman, deputy |
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| CHANDIGARH: Salil Singhal and Harpal Singh have been elected as chairman and deputy chairman respectively of the Confederation of Indian Industry (Northern Region) for 2008-09. The newly elected council of CII (NR) met on Wednesday at the close of the 34th annual session in New Delhi. Mr Singhal is the chairman of Secure Meters Ltd. The company pioneered the introduction of electronic metering of power in India and is now internationally recognised for its innovative metering solutions and services. Having made its first foreign acquisition in 1995, the company has acquired companies in Europe, Middle East and Australia and exports to 60 countries. He is also the chairman and managing director of PI Industries Ltd, which is in the business of pesticides, fine chemicals and polymers. Harpal Singh is the non executive chairman of Ranbaxy Laboratories Ltd and Former chairman of Fortis Healthcare Ltd. He is chairman of Fortis Financial Services and is a member of the board of the Escorts Heart Institute and Research Centre Ltd and of Religare Enterprises. Mr Singh is also chairman of Impact Projects Ltd and Impact Agencies Ltd. Starting with the Tata Administrative Service, he has had a diverse and wide-ranging experience of over 33 years in the corporate sector. |
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| Industry seeks anti-dumping duty on goods from China |
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| INDIAN industry on Tuesday asked the government to impose a 35% anti-dumping duty on capital goods imported from China, arguing that the measure was necessary to offset the indirect subsidy that Beijing offers to its industry by way of a fixed exchange rate.
A delegation comprising L&T chairman A M Naik, Society of Indian Automobile Manufacturers director general Dilip Chenoy and Tata Motors Managing Director Ravi Kant, called on finance minister P Chidambaram and demanded that such a measure was necessary to counter the slowdown in India’s industrial production.
They contended that the domestic industry was hit by the appreciation of the rupee and has also seen its cost competitiveness eroding due to the fixed rate of exchange for the Chinese currency against the dollar. Industry representatives argued that this fixed rate of exchange translated into an indirect subsidy of around 30%
to manufacturers in China. The delegation also sought easy financing for automobiles and making special additional duty on imported cars non-modvatable to protect the local industry.
The meeting comes in the backdrop of the industry growing by just 5.3% in January this year compared to 11.6% last January. The growth rate for the first ten months of the fiscal year—April 2007 to January 2008—was down to 8.7% compared to the 11.2% registered in the same period in 2006-07.
What is especially alarming is the fact that the capital goods sector — which makes equipment that other sectors use — grew by only 2.1% in January over January last year after averaging a more than 20% growth between April and December.
Consumer durables which constitutes the automobile sector registered a decline in output in January this year compared to the same month in 2007. With a negative rate of 3.1% for the month, this sector seems to be going through a really bad slump. The ten-month growth rate for consumer durables is also minus 1.7%. |
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| Invest, do biz in Illinois |
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| IN an effort to strengthen the bilateral trade between State of Illinois, USA, and the Northern states of India a delegation led by Rajinder Bedi, Managing Director, Office of Trade and Investment (OTI), Deptt of Commerce & Economic Opportunity, State of Illinois was in Chandigarh to interact with the business community of the region.
It is felt that both the countries can interchange technology and collaborate in sectors like biotechnology, electric equipment, machine tools, logistics etc.
Mr Bedi invited industry and trade to invest in the State of Illinois saying that Illinois provided an opportunity to spread one’s trade globally. He extended this invitation to the entrepreneurs during a session on “Doing Business in Illinois” at PHD House, jointly organised by PHD Chamber, Ficci and OTI, State of Illinois.
“Think global and not local, to boost trade. It is felt that since the inception of the state if Illinois in 1964, the state has been recognised internationally as a leader in state international economic development. OTI implements a focused industry targeting and forms multiple effective Illinois global partnerships between Illinois and foreign: businesses, trade associations, universities and governments”. said Rajinder Bedi.
Punjab has over 2.04 lakh of small and medium industries and about 600 large scale industries. It leads in the manufacturing of machine and hand tools; printing and paper cutting machinery; auto parts and electrical switch gear. The state also provides more than 75% of the country’s requirement for bicycles, sewing machines, hosiery and sports goods. At par with the highest quality standards in the world, these products have carved a niche for themselves in markets across the globe.
OTI has assisted Illinois firms and organisations on foreign trade missions, foreign investment programs and domestic in-state exporting programs in every region of the State of Illinois; than any other previous administration.
Earlier, while welcoming the guests from the State of Illinois, Vikram Sahgal, Chairman, Chandigarh Committee, PHD Chamber, said. “The hinterland of Chandigarh in neighbouring HP and Haryana has emerged as a major hub of industry. There is an opportunity for development of IT sector and agribusiness in a major way apart from manufacturing including pharmaceuticals, light engineering and research & development and tourism”.
Illinois has the largest industrial market in the US and the third largest consumer market. Major exports include electrical and electronic equipment, computer equipment, transportation equipment, chemicals and allied products, metal, rubber and plastic products, medical and biotechnology equipment, food and kindred products, agricultural and construction equipment, bolts, nuts, rivets and washers, railroad equipment, packaging machinery, machine tools, environmental control equipment, power transmission equipment, industrial machinery, etc |
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| Small units may get quota in govt contracts |
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| THE government is planning a new purchase preference policy for micro and small enterprises (MSEs) which would make it binding for all central government ministries, departments and central public sector enterprises (CPSEs) to source at least 20% of their annual purchases from MSEs. It would also mandate that 25% and 10%, respectively, of the reserved procurement should be from MSEs owned and operated by the SC/ST and women entrepreneurs. A Cabinet note in this regard is under circulation, and is waiting for legal clearances.
“The new policy is aimed at giving support to the sector at a time when the process of dereservation is going on,” an official in the MSME ministry said. At present, only 34 products are reserved for exclusive manufacturing of the MSME sector and the list is likely to be pruned further during the current financial year, he added.
Under the proposed policy, no central government department, ministries, CPSEs or aided institutions can impose any special criteria like minimum turnover while implementing the new provisions.
In special cases, however, ministries or other departments may fix a minimum turnover, but they have to provide reasons in writing. At present, the government gives indirect support to MSEs through initiatives such as a non-statutory purchase and price preference policy and financial assistance for participation in international fairs and exhibitions.
The present policy is not accruing the desired results as it is not binding on any department or company. Most of the ministries and CPSEs do not even report the data relating to their purchase from MSEs, the official said. |
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| Exporters seek higher refund |
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| THE rate of refund on service tax against payment toward foreign agents’ commission for exports has come as a disappointment to the exporting community. Ignoring the RBI guideline of pegging the refund limit at 12.5% of FoB value of exports, the finance ministry has finally allowed the tax refund at 2.5% of FoB value of exports.
Exporters have become entitled to refund of that service tax from April 1, 2008. This is one of the long-awaited sops they were demanding from the government to combat rupee appreciation against the dollar. Exporters are now eligible for refund on service taxes against 16 services. The refund on service tax against payment towards foreign agents’ commission for exports is one such sop that has been recently cleared by the finance ministry.
Taking up the exporters’ cause, the Engineering Export Promotion Council (EEPC) chairman Mr Rakesh Shah said the refund rate on account of that service, which is an essential component of exports, is very poor considering that the government has allowed exporters to pay commissions to foreign agents up to 12.5% of FoB value of their exports.
Fixing the refund rate on this count at 2.5% of FoB value of exports also goes ultra vires to the RBI guideline, which has recommended that foreign commission agents should be paid up to 12.5% of FoB value of exports for export promotion. Moreover, by fixing the refund rate at that level, the finance ministry has contradicted its own stand.
The department of revenue in a previous circular has clarified that for those exporters availing of export benefits, the limit for foreign agency commission is 12.5% of FoB value of exports, claimed Mr Shah.
The EEPC chief added that most exporters pay commission to their foreign agents only after realisation of export proceeds. The period for export realisation allowed by the RBI is 180 days for exporters and 360 days for status holders. As such, if exporters have to claim service tax refund within 90 days, as fixed by a notification dated October 6, 2007, it would squeeze working capital of small and medium scale exporters who are facing this problem due to rupee appreciation on top of escalation in prices of raw materials, he added. |
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| States told to levy cess on properties along new corridors |
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| THE railways have asked states to levy cess on all new properties coming up along the proposed high-speed railway corridors in order to partfund these projects which are estimated to cost Rs 30,000 crore. States which had sent proposals for these projects include Maharashtra, Gujarat, Rajasthan, Punjab, Haryana, Tamil Nadu, Karnataka, Bihar, Jharkhand and Madhya Pradesh.
The proposed high-speed railway network will link, for instance, Mumbai with Ahmedabad and Delhi with Amritsar in just two hours.
“New commercial and residential constructions along the west-west corridor — Ahmedabad, Anand, Vadodara, Surat and Mumbai — and the north-north corridor — Jaipur, Gurgaon, Delhi, Sonepat, Ludhiana, Jalandhar and Amritsar — may have to pay a cess to avail high-speed train facility. The third corridor under consideration is Chennai-Bangalore,” a senior Rail Bhawan official said.
However, the cess would be levied on upcoming properties only. All the three high-speed rail corridors would be constructed on the public-private-partnership (PPP) model.
“As operating margins may not be big enough to cover debt-servicing, there is a valid case for funding part of debt servicing from sources other than the fare-box revenues,” the official said.
A feasibility study has been done by RITES on the Ahmedabad-Mumbai stretch. These rail systems have also generated significant interest among rail engineering companies in the world. Significantly, several leading companies with experience in building high speed rail systems have sent their top executives to India. Chairman of Taiwan High Speed Rail Corporation Nita Ing recently met top railway officials recently to discuss bullet trains for India.
High-speed trains take six times less per seat energy consumption than aeroplanes, and emit 10 times less CO2. The idea of having such trains in India was mooted way back in 1969-70. Due to cost constraints the project had remain shelved for years till rail minister Lalu Prasad revived the project in the 2007 budget announcement. |
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| Service tax refund fails to cheer exporters |
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| DESPITE the continuous increase in the list of services for which exporters would be given refunds, many exporters are not enthused. The exclusion of exporters claiming duty drawback (a scheme reimbursing exporters a part of the duties on inputs) from getting refunds of service tax has disappointed a large section of exporters. Moreover, the mandatory requirement of registration of exporters with the excise department for claiming refunds and other procedural snarls has given rise to complaints, especially from merchant exporters. The restrictive clauses in the refund provision of service tax on commission paid to foreign agents has also done its bit in taking the fizz out of the incentive.
Speaking to ET, commerce department officials pointed out that the government had made provisions of increasing the drawback amount claimed by exporters by 0.4% of the FOB value of exports, but it is not enough. “In a number of cases, exporters end up paying much more as taxes on services than the provision made in the drawback. That is why, exporters are feeling short-changed,” an official said.
According to Delhi Exporters Association president SP Agarwal, a number of services like courier are not related to the export value of goods. “There is no justification for clubbing service tax refund with duty drawback. We want the government to give all exporters separate refunds for service tax,” he said.
Till date, the finance ministry has passed notification for refunding exporters taxes paid on 16 services. These include port services, transport of goods by road and railways, general insurance, technical testing & analysis, storage & warehousing, business exhibition services and specialised cleaning services. Taxes on commission paid to foreign agents and banking charges are the latest addition on the exemption list.
However, exemption of tax on commission paid to foreign agents comes with a rider. The fineprint says the refund would be based on either the actual amount of service tax paid or 2% of the service tax on FOB, whichever is lesser. Since exporters of products such as textiles and pharmaceuticals pay about 10-15% commission to foreign agents, a 12.5% service tax charged on the commission works out to be around 1.8% of the value of exports. On the other hand, 2% of the service tax on FOB, amounts to only 0.25% of the value of exports. |
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| Assocham opposes interest rate hike to tame inflation |
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| NEW DELHI: Apprehending tightening of monetary policy by the Reserve Bank in its forthcoming annual credit policy, industry chamber Assocham said increasing interest rates will not help in containing inflation. “The price and supply conditions may get worse if the RBI resorts to raising interest rates to control the spiralling inflation and the move would not only hurt the industry but also the consumers,” according to an Assocham survey of CEOs. RBI is slated to announce the annual credit policy on April 29 amid apprehension that it would raise interest rates to control inflation. |
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| Roongta set to be SAIL CEO |
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| New Delhi: SAIL management will be overhauled with its chairman S K Roongta likely to be designated as its chief executive officer, while the number of directors on its board will be pruned to 17 to enable the PSU to infuse vibrancy in its functioning.
“We realise that SAIL needs to take quick decisions in view of its ongoing expansion. We believe that its management of the steel giant needs to be more vibrant and that is why there is a proposal to prune the number of directors on its Board from 24 to 17,” an official said. PTI |
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| Steel may again be essential good |
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| New Delhi: Within a year of pulling it out of Essential Commodities Act, the government is considering reversing its decision if the steel producers do not hold the price line.
Although the steel majors have recently reduced prices by about Rs 2,000 a tonne, the producers may again hike prices in tune with international trend.
Thus, with inflation rate at 3-year high at 7%, the steel ministry is keeping all options open to ensure steel prices were kept under check.
Steel minister Ram Vilas Paswan has written a letter to Prime Minister Manmohan Singh suggesting various measures fiscal and non-fiscal, including putting steel back into Essential Commodities Act. This is all the more significant in the backdrop of steel prices increasing by about Rs 7,000 during the past three months.
“In the three-month period since December 2007, steel prices have risen by 20-24%...possibilities of setting up a regulatory mechanism for steel and its inputs and re-classifying steel as an essential commodity may be considered by the government,” Paswan said in his letter.
However, it may be noted that after a meeting with top ministry officials, the producers had rolled back their prices this week. The government has already withdrawn export incentives being offered to steelmakers in the form of Duty Entitlement Pass Book (DEPB) scheme. PTI |
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| More incentives on cards for labour-intensive exports |
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| EXPORTS of labour-intensive products such as textiles, handicraft, handloom, carpets, leather and toys are expected to get a leg-up in the annual supplement to the foreign trade policy (FTP) to be announced later this month.
The scope of the focus-product scheme, launched in 2006, is likely to be increased to include a number of new products, mostly in the labour-intensive category. The focus-market scheme, too, is expected to include more countries. The commerce department has sought a 50% increase in the budget for the two schemes — from Rs 1,000 crore to Rs 1,500 crore.
Speaking to ET, government sources said this time the finance ministry should be liberal in providing for the schemes as the financial constraint is a bit less with the winding up of DEPB benefits for many products. “The exchequer is saving about Rs 400 crore by scrapping DEPB for steel and Rs 100 crore by removing the benefit for rice. There would also be considerable saving on the withdrawal of DEPB for about 40 more products,” an official said.
Under the focus-product scheme, exporters are entitled for a transferable duty credit scrip equivalent to 2.5% of 50% of the total FOB value for select products. The entitlement is higher at 2.5% of the entire FOB value under the focus-market scheme where the benefit is provided to encourage exports to identified markets.
The focus-product scheme covers about 80 products, including footwear, certain leather products, handicrafts and marine products. More products under these broad categories are expected to be included in the scheme this year.
The focus market scheme covers about 70 countries in Latin America, Africa and CIS. This year, the number of countries is expected to be increased. However, major markets like Brazil and South Africa will be kept out of the scheme as Indian exporters already have a considerable presence in the markets. amiti.sen@timesgroup.com
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| Exporters should change biz model: Assocham survey |
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| NEW DELHI: Indian exporters, who battled an appreciating rupee through 2007-08, need to make mammoth adjustments in their business modules, besides reducing dependence on government support to enhance their global competitiveness in the current fiscal, a survey has said. In a survey by Assocham and portal tradeindia.com, a majority of respondents felt that instead of looking for support from the government, exporters need to study details of changing designs, product development, production facilities and techniques to increase their competitiveness vis-a-vis other nations. Exporters need to make large-scale adjustments in their business modules as well as streamline operations and study global market expectations, it added. |
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| Exporters’ interest subsidy may be extended on Re woes |
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| EXPORTERS need not lose heart. While the interest rate subvention provided to exporters last year on pre-shipment and post-shipment credit lapsed earlier this week, the government seems keen to extend it with retrospective effect. Government sources said that the finance ministry has started work on the relevant notification and it would be made official soon.
Subvention in interest rate for exporters was first announced for nine sectors and the small and medium-sized exporters in July last year as a measure to mitigate the effects of an appreciating rupee. Since the rupee is continuing to play havoc with exporters’ costing and pricing exercises, the commerce department had moved a Cabinet note suggesting that the interest subsidy should be extended for some more time.
“The finance ministry is open to extending the benefit by another six months. The relevant notification may be put out soon,” an official said.
The nine sectors which were allowed a 2% subvention in the interest rates include textiles (including handlooms), readymade garments, leather products, handicrafts, engineering products, processed agricultural products, marine products, sports goods and toys.
The list was expanded to 13 sectors in November 2007, with the inclusion of jute and carpets, cashew, coffee and tea, solvent extraction and deoiled cake, and plastics and linolen.
To give a further boost to leather, handicrafts, marine products and textile, the sectors witnessing a negative growth in exports, the government provided an additional subvention of 2% on interest rate over and above the 2% already provided.
The interest rate subvention for the four sectors were subjected to the prerequisites that the interest rate should not fall below 7%, which is the priority lending rate for agriculture, following the subvention. The average export credit interest rate ranges between 9% and 9.5%. |
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| Haryana to give 90% subsidy on solar water heaters |
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| Chandigarh: Haryana will give 90% subsidy on solar water heating systems to institutions of social sector. A spokesman of Haryana Renewable Energy Development Agency (HAREDA) said that during 2007-08, solar water heating systems of 72,500 lpd capacity have been installed in various social sector institutions at a cost of Rs. 1.15 crore. He said that such social institutions included working women hostels, orphanages, deaf and dumb centres, creches, old age homes, nari niketans, bal niketans, sports hostels, charitable institutes and natural treatment centres and hostels for students belonging to scheduled caste. Already 45 institutions have so far been covered in the state under this programme. |
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| Monetary steps to cool prices of little use this time, say experts |
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| INFLATION IS LED BY SUPPLY-SIDE CONSTRAINTS AND MONETARY TIGHTENING WON’T HELP
THERE seems to be a near consensus among economists that containing inflation through monetary tightening would prove counterproductive. Unlike in February 2007, when RBI successfully checked inflation by raising rates, they argue, this time inflation is largely supply constraint led and not demand pull driven. Any credit squeeze would, therefore, hurt both demand and supply, leaving the gap between the two largely unchanged.
“In the current scenario hike in commodity prices due to supply constraints is the issue and not the money. Bank credit for the period April 2007-February 2008 was up 16.7% over the same period last year. However the loans growth between April 2006-February 2007 was 22%. This is sure sign that demand pressure is cooling down. Thus further monetary tightening led fall in production would spell disaster for an economy finding hard to come over supply constraint led inflation,” says Jayati Ghosh, Professor of Economics at JNU.
Indeed, core inflation, which excludes the prices of fuel and agri commodities, remained higher than the headline inflation between March 2007-February 2008. This implies that the major contributor to inflation was higher prices of manufactured products. This was likley triggered by increased cost of production and lower production. The growth rate of production of manufactured goods has witnessed 2.5% percentage points decline from 11.2% during the first ten months of 2006-07 to 8.7% in the same period in 2007-08.
The wholesale price index of manufactured products had risen by modest 3.3% in financial year 2006-07. But it went up 5.2% in April 2007-February 2008, a rate much higher than annual wholesale price index for all commodities which stood at 4.1% in the same period.
Mospi secretary Dr Pronob Sen concurrs, “Prices of manufactured products had remained depressed earlier due to excess production capacities and competition from imports. However, in 2007-08 higher input costs, drop in sales and lower price realisation because of fall in consumer demand, and higher borrowing cost reduced the margin. This affected the companies ability to invest and produce more, which led to a fall in production, followed by rise in prices of end products.”
Meanwhile, the rate of rise in prices of food-grains has declined in April 2007-February 2008, down from 9.7% in 2006-07 to 6.3%, following improvement in supply condition. Take the case of wheat. As the supply of wheat increased during April 2007-February 2008 of current finacial year due to both higher domestic availability and import, the rate of rise in WPI has come down. The wholesale prices of wheat grew by 6.8% in stated periord in finacial year 2007-08 against 13% in 2006-07. |
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| Industrial output to dip further: Assocham |
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| NEW DELHI: The country’s industrial production growth is likely to fall by over a third to touch 3.4% during April-July as against 5.3% in January due to worsening power situation, according to industry body Assocham. India’s industrial production growth had dipped by 25% in the last two months. The captive power stations within the industrial premises are running at half the capacities as diesel and petrol are turning expensive, the chamber said. “Even during the winters last year, the growth in industrial production remained low as a result of power deficit of 18-20%,” Assocham president Venugopal Dhoot said. |
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| Exports bounce back in Feb, but still way off target |
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| IT’S AN uphill task ahead and by all counts the game is almost over. India looks certain to miss its export target of $160 billion for this fiscal. Despite exports recording a surge of 35% in February 2008 to $14.23 billion, pulling the eleven months export figures to $138.4 billion, meeting the target is a tough call as it would require exports to touch $21 billion in March 2008. This would be 40% higher than exports in March 2007 at $15.38 billion.
India’s export growth in the April-February 2007-08 period is pegged 22.9% higher than the comparable period in the previous fiscal.
The modest performance in exports notwithstanding, exports from certain labour intensive sectors like textiles, handicrafts and some leather items are continuing to experience negative growth.
India’s imports during February 2008 are valued at $18.46 billion, representing an increase of 30.53% over imports valued at $14.14 billion in February 2007. Cumulative value of imports for the period April- February, 2008 was $210.89 billion against $161.95 billion exports in the comparable period of the previous year registering a growth of 30.21%.
Oil imports during February 2008, valued at $6.27 billion was 39.52% higher than oil imports worth $ 4.49 billion in the corresponding period last year. Oil imports during April-February 2008 were valued at $ 66.01 billion which was 26.81% higher than oil imports of $52.05 billion in the corresponding period last year.
Non-oil imports during February, 2008 were estimated at $ 12.19 billion which was 26.35% higher than non-oil imports of $ 9.65 billion in February 2007. Non-oil imports during April-February 2007-08 were valued at $ 144.88 billion which was 31.83% higher than the level of such imports valued at $ 109.902 billion in April-February 2007.
The country’s trade deficit for April-February 2007-08 was estimated at $ 72.46 billion which was higher than the deficit at $ 49.32 billion during April-February 2006-07. |
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| Trade policy may remove glitches |
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| WITH budgetary constraints limiting the prospects of new sops for exporters, this year’s annual supplement to the foreign trade policy will attempt to remove procedural impediments hampering operations. The commerce department has decided to take the finance ministry head on over unnecessary regulations perpetuating bureaucratic red-tape. It has demanded that the mandatory requirement that a customs inspector has to inspect a machinery imported under an incentive scheme on-site before production can start should be done away with. Its argument is that since there is already a bond provided by the exporter equal to the import duty waiver, the inspection could be done even after production starts.
The scheme, known as the export promotion capital goods (EPCG) scheme, allows capital goods to be imported under a concessional import duty of 5% subject to export obligations. Speaking to ET, official sources said that the inspection requirement under the EPCG scheme was creating needless problems for the industry. Once a machinery is imported under the scheme and installed, the factory owners have to send word to the inspector. |
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| ‘Inflationary pressure to stay’ |
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| New Delhi: The recent duty cuts by India can have some impact on softening prices after a couple of weeks, Asian Development Bank said on Wednesday even as it expected inflationary pressure to persist for a few more months.
In its Asia Development Outlook, released on Wednesday, ADB expected inflation to fall moderately to 4.4% this fiscal from 4.5% in 2007-08, but said it is likely to rise again to 5% next fiscal.
“Inflation is the biggest worry for India at the moment. In next 1-2 months inflationary pressure will remain, it will come down as US slows down further, at least for some of the commodities like fuels, metals,” Narhari Rao, principal economist with ADB’s India resident mission, said.
He also added the recent duty cuts announced by the government could have some impact on containing inflation after 2-3 weeks unlike RBI’s monetary policy which has a lag effect. PTI |
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| Govt asks CR steel makers to cut price |
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| THE government has asked cold-rolled (CR) steel makers to voluntarily reduce prices as it is adding to inflationary pressures. However, domestic CR steel producers say the price hike is inevitable given the sharp rise in hot rolled (HR) steel prices. They have, in fact, proposed to the government to ban HR steel exports. CR steel, consumed by sectors such as construction, automobile and other consumer products, is value-added steel using HR steel as a raw material.
As a result of increase in iron ore prices, steel prices have already shot up by 25-30% over the last three months, increasing HR steel prices to around Rs 34,000/tonne. Hot rolled steel accounts for 70-80% of the cost of producing CR steel.
In a meeting with representatives of secondary steel producers’ associations and makers of sponge iron, pig iron and CR steel on Wednesday, steel secretary Raghav Sharan Pandey said prices of CR steel should be brought down voluntarily. The government’s contention is that CR steel firms are boosting their profit margins by raising price.
However, CR steel producers have asked the government to deal with supply-side issues first. They said besides keeping a check on mounting raw material prices, the government should take measures to fill the domestic demand-supply gap of HR steel.
“As of now there’s a demand-supply gap of 2 million tonnes of HR steel in the country. While some steps have been taken by cutting down export incentives (DEPB benefit), it won’t be enough to stop the HR steel makers from exporting and therefore, additional measures need to be taken,” CR Steel Manufacturers Association president SC Mathur said.
As HR steel prices have increased significantly due to high iron ore prices, secondary steel makers say they are under huge cost pressure. “Besides iron ore, other raw materials like coke, coking coal prices and ocean freight have increased drastically. So if we do not increase our prices in such a situation our bottom line will be severely affected,” said Delhi-based Bhushan Steel director (finance) Nittin Johari.
Some CR steel makers are awaiting the next move of HR or basic steel producers. “We are only converters of HR steel into downstream products. The price increase in our product would be a function of HR steel costs. If HR prices do not go up, we too may hold prices,” said a source. However, basic steel producers are also under immense cost pressure as iron ore prices have gone up globally. They are expecting further hike in raw material prices. |
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| CII Haryana appoints Saluja as chairman |
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| CHANDIGARH: Raman Saluja has been elected as the new chairman of CII Haryana State Council for the year 2008-09 while Nirmal Kumar Minda has been named its vice chairman, the industry body said in a release. Raman Saluja is a young entrepreneur and presently works as joint MD of Oriental Engg Works, an ISO 9001-2000 certified company. |
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| Inflation check: RBI prefers stronger rupee |
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| New Delhi: Government is preparing to fight rising inflation from all fronts. While it has taken a number of fiscal measures to improve supplies of essential commodities, particularly food products, the Reserve Bank of India (RBI) will also take measures to help control the price rise.
To start with, a senior banker said, RBI will allow rupee to appreciate. The central has reduced its market intervention since last one week to buy dollar, when the inflation suddenly spurted. For the week ending March 8, the inflation had crossed 5.5% mark. It further rose to 6.68% for the week ending March 15.
As inflation had come down to around 4%, the central bank used to buy dollars, to allow rupee to depreciate from a high of Rs 39.50 in February to Rs 40.77 a dollar by March 17. But as soon as the inflation figure was out, RBI reduced market intervention.
As RBI reduced purchase of dollar, the US currency started depreciating against rupee. On Monday, as per RBI reference rate, rupee appreciated to 39.97 per dollar. On Tuesday, however, it closed around Rs 40 a dollar.
The appreciation of rupee will help containing inflation as it will bring down price of imported commodities. At present, India wants to buy almost all food articles from the international market to remove supply shortage at home. The government has reduced the import duty on edible oil, pulses and rice to zero. But food prices in the international market are much higher than that in the domestic market.
So, a section of government wants to import commodities at subsidized rates to contain price rise. Rupee appreciation will make it possible as landed price of imported items will come down automatically. This will boost supply at lower price, without forcing government to give a direct subsidy.
RBI’s decision of not buying dollars will reduce liquidity, put upward pressure on interest rates, which in turn will reduce demand. When RBI intervenes in forex market to buy dollar, it infuses rupee. This increases the liquidity, which puts downward pressure on the interest rate. If interest rate falls, it will push inflation, as demand will rise.
But, appreciation of rupee will affect exports. IT companies will be badly hit. But, it seems, they will have to live with it as government and RBI have given price checking the top priority.
However, RBI will not allow rupee to appreciate beyond a point. Lehman Brothers in a report said rupee appreciation will be used to an extent only to reduce the imported content of inflation, as sharp appreciation will affect exporters. |
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| Exports bounce back in Feb, grow 35% to $14bn |
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| IT’S AN uphill task ahead and by all counts the game is almost over. India looks certain to miss its export target of $160 billion for this fiscal. Despite exports recording a surge of 35% in February 2008 to $14.23 billion, pulling the eleven months export figures to $138.4 billion, meeting the target is a tough call as it would require exports to touch $21 billion in March 2008. This would be 40% higher than exports in March 2007 at $15.38 billion.
India’s export growth in the April-February 2007-08 period is pegged 22.9% higher than the comparable period in the previous fiscal.
The modest performance in exports notwithstanding, exports from certain labour intensive sectors like textiles, handicrafts and some leather items are continuing to experience negative growth.
India’s imports during February 2008 are valued at $18.46 billion, representing an increase of 30.53% over imports valued at $14.14 billion in February 2007. Cumulative value of imports for the period April- February, 2008 was $210.89 billion against $161.95 billion exports in the comparable period of the previous year registering a growth of 30.21%.
Oil imports during February 2008, valued at $6.27 billion was 39.52% higher than oil imports worth $ 4.49 billion in the corresponding period last year. Oil imports during April-February 2008 were valued at $ 66.01 billion which was 26.81% higher than oil imports of $52.05 billion in the corresponding period last year.
Non-oil imports during February, 2008 were estimated at $ 12.19 billion which was 26.35% higher than non-oil imports of $ 9.65 billion in February 2007. Non-oil imports during April-February 2007-08 were valued at $ 144.88 billion which was 31.83% higher than the level of such imports valued at $ 109.902 billion in April-February 2007.
The country’s trade deficit for April-February 2007-08 was estimated at $ 72.46 billion which was higher than the deficit at $ 49.32 billion during April- February 2006-07. |
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| Stable policy may lead to $200b goods exports by 2009: Survey |
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| New Delhi: The country’s total export of merchandised goods is expected to touch $200 billion by 2009, according to a Confederation of Indian Industry survey. Conducted this month, the survey highlights the views of over 300 CEOs of various companies to assess the country’s foreign trade policy and the way forward. The respondents said India would become a major player in the global market if the government ensures stability with no midterm changes in the foreign trade policy. They also called for a continuation of the existing export promotion schemes such as Duty Entitlement Pass Book (DEPB), Export Promotion Capital Goods (EPCG) and Duty-Free Import Authorisation (DFIA).
The survey emphasised on introduction of an SME export technology fund to provide a one-time funding to exports-oriented units at a nominal interest rate. It proposed that the government should simplify export and import procedures for small and medium enterprises, and also, encourage the implementation of electronic data interchange (EDI) across all ports. This would ensure better management, sharing of knowledge and faster processing.
The captains of Indian industry also highlighted the need to focus on new geographies as an export destination including Eastern Europe, Russia, Central and South America, Pakistan, the Middle East and African countries.
According to the respondents, Indian exporters are looking for new export promotion schemes which helps exporters in getting the raw material at a cheaper rate. This will make Indian products competitive at the international markets. |
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| Not in the interest of exporters |
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| No Confirmation On Extending Interest Subvention On Pre- And Post-Shipment Credit, DEPB May Hurt
IT APPEARS to be the season of uncertainty for exporters. Not only is the future of the duty entitlement pass book scheme unclear, exporters are also not sure whether they will be allowed to enjoy the interest rate subvention on pre-shipment and postshipment credit provided last year beyond March 31, when it is scheduled to lapse. Although the commerce department is pushing hard for extension of the relief on the ground that the rupee is expected to appreciate further, creating more trouble for the exporting community, there is no firm indication yet from the finance ministry on whether it is prepared to go along with the request.
Speaking to ET, official sources said the commerce department has prepared a Cabinet note on extending interest rate subvention to exporters for some more time. “Although the value of the rupee against the dollar is hovering around 40, it is just a temporary phase and the rupee is expected to strengthen to around 37 against the dollar by the end of the year,” an official said. Moreover, with the slowdown in the US economy taking the shape of a recession, spending is expected to be low in that country. All these factors together paint a not-too-bright picture for exporters in the coming months, especially for certain labour-intensive sectors like textile, handicrafts and leather, the official added.
In July last year, the government announced a relief package for exporters which included subvention in the rate of interest on pre-shipment and postshipment credits by 2% from April 1 2007 to December 31 2007 for nine sectors and all small and medium enterprises. The nine sectors were textiles (including handlooms), readymade garments, leather products, handicrafts, engineering products, processed agricultural products, marine products, sports goods and toys.
Later in October, four more products — jute and carpets; cashew, coffee and tea; solvent extraction and deoiled cake and plastics and linolen — were added
to the list of export sectors eligible for
interest subvention.
In November 2007, the government, in recognition of the fact that leather, handicrafts, marine products and textile sectors were particularly hard hit by the appreciation of the rupee in view of its low import intensity and large value-added features, decided to provide an additional subvention of 2% on interest rate for the sectors over and above the 2% already provided. The total subvention was subject to the condition that the interest rate, after subvention, will not fall below 7%, which is the rate applicable to the agriculture sector under priority lending. The government also decided to extend the subvention scheme by another three months till March 31 2008. |
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| Export sops under DEPB scheme extended |
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| IN A last minute decision, the government, on Monday, extended the duty entitlement pass book (DEPB) scheme — the popular import duty reimbursement scheme — the day on which it was scheduled to lapse. While exporters are relieved by the extension, the uncertainty on the future of the scheme remains as the government notification states that the scheme has been extended till further orders. The DEPB scheme, reimburses basic and special customs duty paid by an exporter on an imported input.
The Cabinet meeting scheduled later this week is likely to take a decision on the period for which the scheme is to be extended. Sources said the scheme was likely to be extended for a year. “The Union Cabinet may decide to extend the scheme till the end of the new fiscal, or till the time a new scheme replacing DEPB is in place,” an official said.
Exporters, however, want the DEPB scheme to continue till 2010 when the common goods & services tax (GST) will kick in. “While we are relieved that the DEPB scheme has been extended, we want it to be extended for a two year period,” Fieo president Ganesh Kumar Gupta said.
Once GST is in place, reimbursement of input duties to exporters will be easy and transparent as the GST will be common across the country.
The DEPB has been challenged on some occasions by EU countries as it is seen as nontransparent. Since the reimbursement is given on the basis of pre-determined rates in the form of freely transferable scrips, the countries allege that is not directly linked to input taxes paid by exporters and is hence actionable at the World Trade Organisation.
The finance ministry has been trying to persuade the commerce ministry to agree to merge the DEPB scheme with the alternative duty drawback scheme, but the commerce department wants that state taxes should also be reimbursed if the merger is to happen. Since it has still not yet been decided how state governments would bear the burden of the duty reimbursements, the new scheme still hangs fire. Industry federation Ficci said that the DEPB scheme should be extended till a suitable replacement is found to the scheme. |
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| Fresh measures proposed to rein in steel prices |
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| THE steel ministry has proposed a series of fresh initiatives like cutting duties in inputs like refractories, zinc and met coke; lowering excise duty on the product from present 14% to 8% curbing iron ore exports through higher export duty and introducing duty on steel exports and reducing rail transportation charges (for ore moved to ports) for iron ore. This comes even as the government is actively considering reducting import duties on steel. Steel imports today carry an import duty of 5%.
While the commerce ministry is holding meeting with iron ore exporters on Tuesday, steel ministry has forwarded a fresh proposal to the finance ministry with a set of fiscal measures aimed at curbing steel prices that have increased between 25-30% in last three months. Decisions are expected to come quickly as there are expectation that steel prices may move up again owing to global developments.
“Rising steel prices is high on government agenda of measures to contain inflation. While some movement has been made by cutting down export incentives (DEPB benefit) for steel, other fiscal measures would be considered to bring down prices in the short-term,” an official source said.
The new initiatives for the steel sector is being considered in wake of over 60% increase in steel prices during 2007-08. In fact, prices have shot up between 25-30% in last three months alone increasing benchmark hot rolled coil (HRC prices to round Rs 34,000 a tonne mark.
While government is confident fiscal measures would soften prices, analysts feel that it would have only marginal impact as government is ignoring supply side constraints. “On a production of about 52-53 million tonne of steel, there is a demandsupply gap of 2 mt. This gap has been widening rapidly now with steel consumption growing at over 13% for last few years while production growing by just 5%. A import duty cut would also not help as international steel prices are about $ 200 higher than domestic prices,” said Moosa Raza president of Indian Steel Alliance (ISA).
Besides, steel producers also feel that a export duty on steel would also not address the issue of supply constraint as rapid increase in consumption would leave the fiscal measure ineffective. They, however, support cut in excise duty to 8% that could be passed on to the consumers by way of price reduction of between Rs 1,200 to Rs 1,500 per tonne.
The industry expects that government should put all its efforts to check rising prices of inputs. The supply constrained could be addressed in coming years as ambitious expansion plans of companies starts getting realised. The production is expected to more than double by 2012 to over 120 mt. |
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| PHDCCI to take a delegation to Singapore |
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| AFTER an exchange of pleasantries and an invitation to make Singapore as a hub for furthering business into south east Asia, China and even to Japan, minister from Singapore government, Goh Chok Tong invited PHD Chamber of Commerce and Industry to mount a high powered delegation to Singapore to scout for joint venture partners. The chamber announced that such a delegation at an appropriate time with industrialists keen to do business with their counterparts in Singapore will be organised. The date for such a mission will be agreed upon mutually.
The Singapore minister chose Punjab and Haryana to visit so as to take stock of the situation realising that these two states with the highest per capita income, a large industrial base and a pool of talented professionals could be a match for promoting JVs either in India or in Singapore. |
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| Exporters body moots SME joint ventures with France |
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| COIMBATORE: Tirupur Exporters’ Association has suggested setting up joint venture in small and medium enterprises (SME) in the country with France for enhancing business relations between the two countries. The proposal was made to embassy of France economic and commercial counsellor, economic mission, Jean Louis Poli who visited the knitwear hub of Tirupur, TEA president A Shaktivel said in a release on Sunday. On the possibilities of increasing business relations between the countries, especially in the SME sector, Mr Poli has visualised existence of opportunities and promotion of business activities among SMEs in both countries, he said. |
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| Exporters wring hands over silence on DEPB |
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| POSTPONEMENT of a decision on the extension of the duty entitlement pass book (DEPB) scheme, the popular import duty reimbursement scheme for exporters, by the Cabinet on Thursday, has exporters worried. Since the scheme is scheduled to lapse in four days time, exporters are clueless about what the government expects them to do.
“We don’t know whether we should wait for the government to extend the scheme or move on to the duty drawback scheme,” Subhash Mittal from Fieo said. Exporters are reluctant to switch to the duty drawback scheme as they are comfortable with the DEPB scheme which gives them higher rates for about one-fifths of products.
About 80% of products covered under DEPB have similar rates also under the duty drawback scheme. However, for 20% of the products, the rates are lower. Switching to a new scheme also has additional problems as exporters have to apply to the government and go through all the bureaucratic procedures.
The DEPB scheme which seeks to neutralise the import duties paid on inputs by exporters through transferable scrips on the basis of predetermined rates, has been challenged at the World Trade Organisation a few times by the EU for being non-transparent. Since they can be sold in the market, they are prone to disputes.
The finance ministry has been trying to persuade the commerce ministry to agree to merge the DEPB scheme with the duty drawback scheme, but the commerce department wants that state taxes should also be reimbursed if the merger is to happen. Since it has still not yet been decided how state governments would bear the burden of the duty reimbursements, the new scheme still hangs fire.
Speaking to ET, a commerce department official said that even if the March 31 2008 deadline was breached, the government could still extend the scheme with retrospective effect.
However, as Mr Mittal points out, it would be difficult for exporters to first switch to one scheme and then switch back. “We want clarity in policies. And decisions to be taken on time,” he said. |
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| SMEs scale Great Wall to woo Dragon |
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| DIPLOMATIC relations notwithstanding, bilateral trade between India and China is growing more than 50% year-on-year and is slated to cross the $100-billion mark in three years. Much of the growth is due to initiatives being taken by small and medium enterprises on either side of the border. A publication, Business opportunities for Indian SMEs in China, says the SMEs are now looking at Chinese firms more as potential buyers and partners rather than competitors.
The study was carried out by the Federation of Indian Micro and Small & Medium Enterprises (FISME) and commissioned under project, Strategies and preparedness for trade and globalisation in India, by the department of commerce, Unctad India and DFID. The study has identified maximum potential in textiles and apparel, leather, chemicals and dyes and marine and tea/coffee sectors, and points out that opportunities lie more in specific product categories or niches than across sectors. For example, in leather alone, China imports goods worth $4 billion, much greater than entire exports from India to the rest of the world. Ironically, China so far has not been on the radar of Indian leather exporters.
The study notes that while trade in India and China is individually growing at 20-25% a year, the growth rate of trade between the two countries is growing at a scorching pace, at double the rate of 50% a year.
The study provides certain insights such as in sectors like engineering and electronics, the potential of mutualism and collaboration is enormous. According to FISME president Mohan Suresh, the concept of enhancing Indian exports to China might “sound counter-intuitive, but the study clearly demonstrates huge untapped areas where Indian SMEs are competitive but have so far overlooked the burgeoning Chinese market”. |
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| Economy to grow at 9%: UN body |
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| New Delhi: Despite global slowdown, the Indian economy will continue to grow at 9% in 2008-09, said UN economic and social commission for Asia and the Pacific (UN-ESCAP) survey released on Thursday.
“India’s economy has entered into a ‘new phase of high growth’, with expansion of 9% forecast for 2008, buoyed by investment and savings amid increasing productive capacity,” said the report. Indian economy is expected to grow by 8.7% during 2007-08 but many think-tanks expect moderation in growth in the coming fiscal.
The survey released by commerce and industry minister Kamal Nath, also said, ‘‘India could achieve and sustain a 10% growth rate by further improving the country’s business environment, by developing its physical infrastructure and human capital’’. |
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| ‘Growth may be slowest in 4 yrs’ |
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| India’s economy may grow at the slowest pace in four years 08-09 as a global slowdown reduces foreign investment and exports, finance minister Palaniappan Chidambaram said. ‘‘We think there will be some second-order effects from the US slowdown,’’ Chidambaram said.
‘‘We’re quantifying it between 50 and 75 basis points. We should still expect to grow in 2008-09 at 8% or a little bit more than 8%.’’ BLOOMBERG |
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| Amritsar textile industry seeks land for exhibition ground |
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| THE Amritsar textile industry has demanded land for a permanent exhibition ground, on the lines of Delhi’s Pragati Maidan, so that it can showcase its products.
Piara Lal Seth, president, Shawl Club (India), says, ”What the Amritsar textile industry needs is a permanent fixture, a mini Pragati Maidan which will be the pride of the city and where the industry can on an annual and regular basis display its products in an orderly fashion.”
The onus, said Mr Seth, is now on the Punjab government to heed to the industry’s demand. The Shawl Club (India), he said, has urged the state government to give it 1-2 acres of land which can be developed on the public private partnership (PPP) initiative into a permanent exhibition ground. ”We have already sent a feeler to the Punjab government in this context and hope that the state government will take action,” he said.
As a first step, the Shawl Club has taken the initiative to organise a two-day buyer-seller meet cum and exhibition in the holy city to showcase the industry’s products and also convey the message that the textile industry which encompasses the whole gamut of manufactured products including blankets, textile fabric, shawls and yarns can cater not only to the domestic buyers but to the overseas customers as well at competitive prices. This two day exercise got a major fillip with the presence of N S Rawat, director, ministry of textiles, government of India, V K Kohli, regional director, ministry of textiles and S K Chaudhuri, area director, India & South East Asia, the Woolmark Company, New Delhi.
Mr Seth told ETthe initiative behind the two day event, which concluded on Thursday, is to project the textile industry with the intention of targeting opportunities nationwide as well as the lucrative global arena. As many as 40 exhibitors showcased their products to buyers from textile rich markets of Mumbai, Delhi, Ahmedabad,Surat,Kolkata, Uttar Pradesh, Himachal Pradesh, Haryana and Jammu & Kashmir.
He said that the ministry of textiles has sanctioned a sum of Rs 5 lakh to undertake such projects and for promotion of the industry in the current fiscal and Rs 15 lakh will be given for 2008-09.
The two day conclave has brought to the fore several issues regarding the development and growth of the textile industry including solutions needed to combat global competition besides issues of high cotton prices, rupee appreciation and consequent losses in export and absence of sufficient downstream integration projects in weaving and processing.
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| New industrial estate to come up at Baddi |
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| Shimla: Cashing in on the boom that new industry is witnessing in the state, State Industrial Development Corporation (SIDC) has set out to develop 500 bighas of land for industrial purposes at Baddi.
Though only two years as special tax exemption period have been granted to the state for setting up new industrial units, the corporation expects to be able to sell these plots to applicants seeking to set up industries in the tax-free zone.
After presiding over a board meeting of SIDC, the CM on Wednesday said the cooperation was exploring the possibilities of developing a modern city centre at Nalagarh to meet the needs of area entrepreneurs.
Emphasizing upon the need to create good infrastructure for setting up industrial areas in a planned manner, he said a portion of Davni industrial area at Baddi had already been developed and 29 industrial plots had been sold by SIDC for Rs 19 crore. TNN
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| New accounting norms to transform cos balance sheets |
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| THEprofitability and net worth of companies and banks are set to see a drastic change in April 2010 as they prepare for adopting international accounting norms a year later.
The acquisitions made by companies, derivatives held by them, stock options issued by them and errors noticed on previous financial statements are going to be major areas where balance sheets of companies and banks would witness drastic changes. In some cases, their reserves and networth might go down significantly as they adopt the principle of fair valuation of financial and physical assets in place of the current practice of showing their actual cost of purchase which may not show their real market value.
This drastic change in the balance sheet of corporate houses and their susceptibility to volatility in market conditions will happen earlier than initially thought.
Earlier it was thought that companies have to make the changes in their book of accounts only on April 1, 2011—the date fixed by the accounting regulator in India for compulsorily shifting to international norms. Now, experts point out that companies have to make the changes one year early—that is, on April 1, 2010 so that they could compare this opening balance sheet on the date of transition with that of next years, a mandatory requirement.
For this, companies have to first find out the differences between their present accounting practices and the international norms, quantify them and adjust it in their reserves—accumulated profits. As reserves is one of the components of networth, it might go up or down depending on the market value of the physical and financial asset the company holds.
One of the major areas of difference could be acquisition accounting. For example, now companies show the cost of acquisition in their books. This is written off over the period of its useful life.
“The depreciation would be higher when we take the market value of the asset instead of the historical cost of purchasing it. Besides, under the International Financial Reporting System, we have to take into account the value of intangible assets too. So the higher depreciation leads to lower profits of the merged entity”, said Jamil Khatri, executive director of KPMG.
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| Withdrawal of income-tax holiday may put three refineries in limbo |
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| PETROLEUM MINISTRY WANTS TAX HOLIDAY EXTENSION FOR 10 YEARS INSTEAD OF SEVEN YEARS
THE petroleum ministry is concerned that the Budget announcement to withdraw income tax holiday for refining sector may jeopardise the fate of three refinery projects — in Bhatinda (promoted by LN Mittal and HPCL combine), Bina (promoted by BPCL) and Paradeep (by IOC). The ministry has asked the North Block to reverse its budget proposal and extend the tax holiday for 10 years instead of seven years.
“PSUs have initiated grassroot refinery projects in three states — Orissa (Paradeep), Madhya Pradesh (Bina) and Punjab (Bhatinda). Being large capital investments, it will not be possible for any of these refineries to be commissioned by April 1, 2009. These three refinery capacity will not be eligible for the tax holiday, making them commercially unviable,” he added. The Budget 2008-09 has proposed a sunset clause, withdrawing the tax holiday for those refineries commissioned after April 1, 2009.
Officials in IOC, HPCL, BPCL and LN Mittal group agree that that with the proposed change in the income tax law, all new refineries and additional refining capacity will be discouraged and projected investments may not materialise.
According to an official estimate, the total investment proposed for refining sector in the 11th Plan is over Rs 81,500. “The proposed change in the income tax (IT) Act will jeopardise the investment plan and render the projected export potential fruitless,” an official in the oil ministry said.
According to a source, the drawing of the time line as April 1, 2009 for withdrawal of the fiscal incentives would be unfair. “Less than half the projected capacity is expected to be commissioned by the end of 2008, while the balance (including three grassroot refinery projects) is expected to come on line by 2012. The proposed amendment will create a large disparity between the project commissioned till April 2009 and all those commissioned beyond the time line,” it said. At present, the section 80 IB (9) provides for a 100% income tax exemption to a refining firm on its profit for seven years.
Petroleum products accounts for about 17.5% of country’s total exports. According to a commerce ministry data, it has become largest export earner for the country surpassing jem & jewellery. In 2006-07 country exported petroleum products worth around $18.88 billion overtaking gem & jewellery ($12.7 billion).
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| Indo-Pak rangers four-day meet starts at Chandigarh |
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| CHANDIGARH: The four-day bi-annual meeting between Border Security Forces of India and Pakistan commenced here. While the Pakistani delegation is headed by major general Muhammad Haroon Aslam, its Indian counterpart is lead by addition director general of Border Security Force (BSF) G S Gill. This is the first biannual meeting between the two international border guarding forces after the formation of new dispensation in Pakistan. |
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| Singapore senior minister calls on Punjab CM |
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| CHANDIGARH: A 24-member high powered delegation of Singapore government led by its senior minister Goh Chok Tong called on Punjab chief minister Parkash Singh Badal at his residence on Tuesday and put forth proposals to make investments in infrastructure development in Punjab by the Singapore government. The Singapore minister had detailed deliberations with Badal, who evinced keen interest for making huge investment in Airport, Power, roads and bridges and housing sector in Punjab to boost the bilateral trade and investment as a follow up to the economic agreement signed by the prime ministers of India and Singapore, an official spokesman said here. The Comprehensive Economic Cooperation Agreement (CECA) in 2005 to boost bilateral trade and investment besides opening up the banking industry, liberalising the services sector and easing visa restrictions for professionals of the two countries was signed between the premiers of both countries. The signing of Agreement was aimed to pave the way for the two countries to enhance their two-way trade to over $10 billion by the end of 2005-06 and to $50 billion by 2010. |
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| Haryana racing ahead of Punjab |
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| CHANDIGARH: With Haryana’s growth rate even crossing national growth rate, the State has left way behind its ‘big brother’ Punjab and if it sustains the momentum, poverty will come to an end in the state within next 6-7 years. Haryana’s economy is growing at 11.2% as against Punjab’s estimated 6.32%. Haryana’s current tax collection would cross Rs 12,000 crore at the end of this fiscal as against just Rs 16 crore in 1966, when the state was carved out of Punjab. In his reply after the general discussion on the budgetary estimates for year 2008-09 in the State Assembly, Haryana’s finance minister Birender Singh said if the momentum was sustained, poverty will be there no more within 6-7 years. He shot down his Punjab counterpart’s recent assertion that Gurgaon alone was the state’s growth engine. He said that by similar comparison, Ludhiana, Punjab’s industrial hub, was driving its growth. On Punjab’s poor financial condition, Birender even said if Central government and the RBI permits, Haryana can lend Rs 500 to Rs 1,000 crore to the neighbouring state. Singh informed the state had kept a provision of Rs 1,550 crore in the wake of hike proposed in the sixth pay commission report. Hailing the loan waiver scheme for farmers announced in the Union Budget recently, Singh said the state government is considering to formulate a scheme to relieve the farmers from the burden of loans taken from commission agents, avoiding any loss to the agents at the same time. He suggested that while farmers were given MSP for their crops, they should be given ‘renumerative price’ and other facilities. |
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| Steel cos agree to slash prices if duty is lowered |
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| THE battle over rising steel prices today took a new turn with the steelmakers extending an olive branch to the government saying they will reduce prices provided excise duty on the alloy was brought down to a reasonable level and the same will be passed on to consumers.
“We are also sensitive to pricing issue. We suggest that the government should lower excise duty on the alloy to about 6 per cent from the current 12 per cent and we will duly reduce prices and pass it on to the consumers,” Indian Steel Alliance president (ISA) Moosa Raza said.
The ISA, which is an umbrella organisation of major steel producers, have recently written to prime minister Manmohan Singh opposing steel minister Ram Vilas Paswan’s suggestion of setting up a regulator in the sector, which among other things would routinely monitor steel prices.
“We are even open to the government mandating us to reduce prices in the eventuality of excise duty being reduced. But the government will also have to simultaneously address the contentious issue of rising iron ore prices and allocating captive ore mines to the steel producers,” Mr Raza pointed out.
He pointed out that prices have been increasing due to unprecedented rise in input costs and cited that prices of iron ore have risen by 2.5 per cent to about Rs 13,000 per tonne, coking coal by 3.2 times, natural gas by 3 times and that of thermal coal by as many times since April 2007.
“The government will have to contain the galloping exports of iron ore, which is projected at 105 million tonnes this year, up by 13 per cent, as compared to last year. We are not seeking an outright ban on exports, but are suggesting that exports be tapered off in tandem with the growth of the domestic steel industry,” Mr Raza said.
Meanwhile, the Alliance today put out an advertisement in almost all leading dailies justifying the recent hike in steel prices, wherein it contended that Indian steel industry is linked to pricing trends prevailing in global utilities and domestic producers could not remain oblivious to it.
“While steel manufacturers shared the government’s concern about current price situation..any attempt to regulate market forces operating on steel prices disregarding root causes is a retrograde step and will adversely affect growth of the industry,” Mr Raza pointed out in his letter to the prime minister.
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| Inflation hits 9-month high at 5.11% |
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| WHOLESALE price-based inflation rose to a nine-month high of 5.11% for the week ended March 1, compared to the previous week’s 5.02%. The increase was on account of a rise in the prices of nonfood articles such as raw rubber, cotton, mustard seed and some manufactured products such as edible oil, ghee, groundnut oil and aviation turbine fuel (ATF).
Attributing the rise in inflation to the increase in prices of imported commodities, finance minister P Chidambaram said the government is ready to take fiscal measures to control it while trying to make the country self-sufficient in key items. Speaking in the Lok Sabha, he also expressed hope the new WPI index, which is being formulated, will take into account the current baskets of goods and services to reflect inflation more accurately.
This is the second week in a row when the inflation rate crossed the 5%, the target set by RBI for this fiscal. Inflation was at 6.51% in the corresponding period last year.
Experts feel inflation has become a cost-push rather than demandpull phenomenon.
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| Inflation at 5.1%, FM blames costly imports |
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| RBI Under Pressure To Hike Interest Rates
Inflation have further moved up to a nine-month high to 5.11%, which will increase pressure on RBI for not lowering interest rates.
The wholesale price index touched 5.11% in the week ended March 1. In the previous week, the prices have gone up by 5.01%.
It is expected that inflation will further move up in the coming weeks. RBI governor YV Reddy had recently expressed his concern over rising food and energy prices.
Though the need of the hour is to allow the interest rates to fall to push economic growth, rising inflation is forcing the central bank to continue with the tighter monetary policy. So, RBI is in a fix regarding future course of policy on interest rates.
Considering slowdown in the economic growth, it was expected that RBI would allow interest rates to fall. But, a senior economist said as inflation has started looking up, RBI might take steps to tighten the money supply, leading to rise in the interest rates.
The continuous rise in the crude price and depreciation in rupee against dollar will also put upward pressure price. This will make RBI’s task even tougher.
FM P Chidambaram, who is facing a tough challenge to check the slowdown in economy, said the government accords ‘‘top most priority to controlling inflation’’ and ‘‘is prepared to take more steps,’’ to curb prices.’’
As the inflation hurts the poor the most, the government is determined to take tough measures to contain inflation. In fact, RBI had already said controlling inflation has a higher priority for the central bank than boosting economic growth. With election within a year, the present government can’t afford a high inflation scenario.
Chidambaram attributed the international and national factors for rise in inflation to over 5%. He said global prices of crude oil, palm oil and rice, which India imports, have been on the rise. And, this price rise in wheat, rice, edible oils and pulses contributed majorly in the inflation.
He added that the country can insulate itself against the increase in their international rates by becoming self sufficient in these items.
Internationally, commodity prices are rising, and it would not be easy to control inflation as long as India imports such items, Chidambaram said. He said interest rate is one of the effective instrument that can contain inflation. RBI should be trusted to use it as an instrument to bring price rise under control.
To contain inflation, RBI increased the benchmark interest rate in the economy. This made money costly and affected real estate and consumer durable sectors badly. As the demand is not growing, companies postponed their investment plans for expanding capacities. This led to slowdown in the capital goods sector also. In January, industrial production fell to 5.3% as against 11.3% a year back.
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| Safta lays red carpet for duty-free garment imports |
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| FOR the domestic textile sector, already bleeding due to the rupee appreciation, this may add insult to injury. The government is all set to formalise unconditional duty free access of garments from Sri Lanka and Bangladesh up to specified limits. The move is guided by the South Asian Free Trade Area Agreement (Safta).
The decision to allow duty-free imports of eight million garment pieces per calendar year from Bangladesh with the condition that some raw materials have to be imported from India was taken last year. However, under the new dispensation, exporters from Bangladesh will be allowed to export without restrictions on raw material sourcing.
Similarly, Sri Lanka may also be allowed duty free access to the Indian market up to six million pieces. For an additional two million pieces, exporters will have to pay concessional duties. “The Cabinet is expected to clear the proposal on Thursday,” an official said.
Industry experts say that the move would hurt the domestic textile industry. “The domestic textile industry is greatly disadvantaged compared to those of Bangladesh, Sri Lanka and China and giving trade benefits to these countries at a time when your industry is in great distress would have an adverse impact,” Vardhman group chairman S P Oswal said.
“It is also unfair because these countries have not extended similar benefits to India,” he added. Commenting on the trade agreement, Confederation of Indian Textile Industry (CITI) secretary general D K Nair said, “Getting into free trade agreements (FTA) with all Asian countries is against the interest of the domestic textile sector. FTAs with the US or European Union would, however, be beneficial for the Indian textile industry.”
According to experts, domestic companies will have to either bring down the prices or scale down production to make way for cheaper imports. “To slash prices is not possible under current market situation as profit margins are very thin,” Mr Oswal said.
Garment exporters, however, say that their main worry is rupee appreciation vis-à-vis dollar. “The move would affect mostly the garment companies catering to domestic needs,” Orient craft chairman Sudhir Dhingra said.
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| Steel prices may rise on hike in iron ore royalty |
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| NEW MARKET-VALUE BASED SYSTEM TO ESCALATE PAYOUT 10-FOLD
IN WHAT may impact the business plans of companies like Tata Steel, SAIL, Posco and LN Mittal group’s Mittal Steel, the government is preparing to introduce a new system of royalty for minerals that would result in over 10-fold increase in the payout to states on iron ore. The Centre is considering dumping low specific rates of royalty for major minerals and adopt royalty that would change with the ore’s market value (ad valorem). With iron ore prices doubling in the last few months, the new royalty could further depress the margins of steel companies and push up steel prices again.
“The proposal on new royalty structure for major minerals including iron ore would come up for Cabinet approval at the Thursday meet. The move is aimed at increasing the royalty earnings of states that had to make do with lower specific rates for the last several years,” an official source said.
As per the proposal, the royalty on iron ore would be fixed at ad valorem rate of 10% on all grades: lump, fines and concentrates. With iron ore prices at Rs 3,000-3,500 per tonne, the new system would substantially increase royalty payout. The present royalty rate on iron ore varies from Rs 13 per tonne to Rs 27 per tonne, depending on quality.
Along with iron ore, the new system would change the royalty regime for limestone, zinc, bauxite, manganese, diamond and uranium. The minerals are used extensively by metal-based industry. The cost pressure on the industry from royalty would come even as prices of other raw materials like coking coal, refractories and ferro alloys has also increased manifold.
While the new royalty rates would impact steel making and iron ore mining companies alike, it would enrich the states’ royalty earnings (on all non-coal minerals) by almost 100% from a level of Rs 2,014 crore (at 2006-07 production levels) to Rs 3,943 crore. The royalty collection from iron ore itself is likely to increase from Rs 247 crore to Rs 1,650 crore.
Under the new royalty structure, the states would have to earmark 10% of the royalty earnings for infrastructure development and community benefit programmes. Moreover, the benefits would only accrue to states that do not impose or repeal additional tax/cess imposed on mineral-bearing areas.
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| MSME ministry to take up more proposals for units |
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| The ministry of micro, small and medium enterprises will take up more proposals for the development of SME units across the country during Budget discussions. In Budget 2008-09, a provision of Rs 2,000 crore has been made for risk capital fund for Small Industries Development Bank of India (SIDBI). . |
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| Exports growth likely to remain close to 20 % in ’09 |
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| An economic slowdown in the US notwithstanding, India is likely to maintain the 20% growth in exports in 2008-09 but the basket may undergo a change, said a finance ministry official. "US is one of the major destinations for India. We said that in the coming year, it may not be as good as it was earlier. But that does not mean we are not performing well. We are having 20% plus growth and possibly we can continue with 20% plus," senior economic advisor in the finance ministry H A C Prasad said. |
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| India-Japan trade may touch $15 b by 2010: CII |
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| Trade between India and Japan has the potential to double in the next two years if issues like trade facilitation and non-tariff barriers are addressed, according to industry body CII. India-Japan trade can reach $15 billion by 2010 from $7.5 billion in 2006-07. New areas of trade in services, higher investment flows into India from Japan, promoting people-to-people contact are other ways through which the level of bilateral trade can increase," CII said. Bilateral trade has more than doubled since 2002-03 with trade balance in favour of Japan. "While import duties on most goods in Japan is low at present, the India-Japan Comprehensive Economic Partnership Agreement (CEPA) can raise the level of India's exports," it said in a study. |
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| SMEs told to cash in on new looks |
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| Govt Plans 70% Capital Subsidy, Other Support To SME Clusters For Adopting International Designs
SMALL and medium enterprises (SMEs) may soon get a designer touch. The government is planning makeover of the SME sector by roping in international designers, especially for companies in the textiles, pottery, and houseware business. The ministry of micro, small and medium enterprises (MSME) is in the process of finalising a proposal under which it would give capital subsidy up to 70% to units for giving an international look to SME products. Designers of international repute would be roped in for the project.
MSMEs would have to form a consortium to get funding. Funds would also be available to clusters and SME associations if they come up with a viable proposal. “We plan to assist the industry on a consortium basis as individual units are too small,” an official in MSME said. Government is in the process of finalising fund allocation for the new scheme in consultation with the finance ministry. Once the ministry gives its nod, the scheme could be launched by May-June, the official said.
The new scheme follows demand from the sector for financial support to compete with international players. The MSME sector has been exposed to tough competition after a large number of items have been dereserved over a period of time. Presently, only 35 items are reserved for exclusive manufacturing by SSIs.
Small units are also facing tough international competition because of better design availability in the Chinese and Italian markets. These designs are making inroads into the Indian market as well.
“We want to break the Chinese and Italian stronghold on the SME sector by giving a new look to Indian products. Traditional designs command less demand these days,” the official said, adding the focus would not be limited to the textile sector alone.
Though international designers may be roped in for giving the designer push to the industry, labelling and branding of products would be India centric only. The move is expected to have a positive impact on the export market that has been hit due to sharp appreciation of the rupee against the dollar. The government is of the view that even comparatively highly priced products can find more buyers by better branding and value addition.
Contribution of micro, small and medium enterprises (MSME) in country’s economy has grown significantly in the recent past. In terms of total production the sector is growing at the rate of more than 10% for the last four years. Total production by the MSE sector (excluding the medium enterprises) is expected to be Rs 4,71,663 crore in 2006-07 up 12.6% from the last year’s figure. In terms of exports, the sector is doing even better registering a compounded annual growth rate of over 20% for the last three years. Presently the sector employs 3.15 crore people and is growing at the rate of more than 4% per year in terms of employment generation.
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| India likely to be 90% of US economy by ‘50: PwC |
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| In what could be a tectonic shift in the global economic centre of gravity, the size of India’s economy would grow to 90% of the US by 2050, with China becoming even bigger than the world’s largest economy currently, according to a PriceWaterhouseCoopers report. “The global centre of economic gravity is already shifting to China, India and other large emerging economies and our analysis suggests that this process has a lot further to run. Our latest projections suggest that China could overtake the US in around 2025 to become the world’s largest economy and will continue to grow to around 130% of the size of the US by 2050,” the report titled ‘The World in 2050: Beyond the BRICs’, says. |
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| India, Japan to swap Cepa negative lists at Tokyo meet |
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| Manufacturing Goods And Many Agricultural Items Expected To Feature In List
INDIA is firming up the negative list for its comprehensive economic partnership agreement (Cepa) with Japan. Officials from both the countries are scheduled to meet in Tokyo later this month to take the talks forward and exchange preliminary negative list of items to be excluded from the agreement. While the two sides initially wanted to implement the Cepa by 2007 end, the change in government in Japan and the complicated issues involved in the negotiations delayed the talks.
Speaking to ET, official sources said both the governments were now in a hurry to move things fast and conclude talks this year. “The Tokyo meeting will be important as both sides are expected to exchange their preliminary negative lists,” an official said. Manufacturing goods such as automobiles and electronics and many agricultural items are expected to feature in the negative list.
Unctad has prepared a tentative negative list for the Cepa and Ficci is holding talks with industry to get their views on the negative list. A negative list is an important part of a free trade agreement as it includes the items that are sensitive for the domestic economy and are to be insulated from tariff cuts under the agreement.
According to Ficci officials, talks have been held with industry representatives from the eastern and southern parts in Ranchi and Chennai. Consultations are scheduled in Delhi, Mumbai and Guwahati later this month. The commerce department is scheduled to hold a meeting with the industry on March 13 to get its feedback on sensitive products and the products of interest to the country. The feedback will be used by the department to prepare its strategy for the joint task force meeting beginning on Mach 24 in Tokyo. Both sides want to increase bilateral trade to $20 billion by 2010 from the existing $7.5 billion.
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| Fairtrade earns Indian cotton space at M&S, Vericott & Oxfam |
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| THE new-age Indian consumer might be long way from supporting ethical business, but the small Indian producer is already at it. European ethical business practices are already finding their way into the life of Indians, but from the wrong end of the supply chain.
Fairtrade is a certification which ensures that products acquired by member companies have been produced under ethical working conditions. In India, coffee and cotton are procured under fairtrade practices and the products, be it garments or food, are sold at premium with a prominent Fairtrade tag.
By converting to Fairtade practices, the small cotton farmers in Gujarat and Orissa are now finding takers at global fashion houses. Their customers include European fashion labels like Marks and Spencer, Oxfam, Max Howler and Vericott.
Agrocel, an agriculture outreach initiative, pays Fairtrade price and markets the cotton, yarn and even garments made from the cotton grown by certified farmers in both the states. “We have an order to supply 10,000 pieces to Oxfam (Belgium) and orders for cotton garments from CTM Italy and Max Howler, France and Germany based Fairtrade brands.
Agrocel-linked farmers do the largest production for Faritrade. About 1,500 farmers in 70 villages have produced 1,250 tonnes of cotton that was supplied to M&S last year. This year, about 500 more farmers will join the Fairtrade initiative in Orissa,” informed Hasmukh Patel, GM, service division, Agrocel Industries Limited.
Indian companies, though not very forthcoming for their domestic brands, are sourcing cotton for overseas clients. Arvind Mills, Alps Industry, Maral Overseas and Vardhman Mills are few of the Agrocel’s India-based customers.
Fairtrade, a European quality certification brand, became known in 2005, when Marks & Spencer became the first high street retailer to sell a jeans and underwear, made from cotton, sourced from India.
According to the M&S website, the company plans to “bring even more Fairtrade cotton clothing into the stores which will add up to around 20 million garments and account for around one-third of the world’s current supply of Fairtrade cotton.”
M&S also sources Fairtrade coffee from India. Other UK companies that support the Fairtrade label for apparel and food are: People Tree, Gossypium, Bishopston Trading, La Redoute and Hug.
Agrocel, that is supported by Shell Foundation, gets about 10% revenue from domestic demand which is at Rs 5-6 crore. Bulk of it’s revenue (Rs 12-15 crore) comes from exports that include cotton yarn, fibre, fabric and garments.
“The business was running more at the farmer’s end. To make it more efficient, we helped with the marketing-linkages for example with Marks and Spencer. We are also looking at helping them establish domestic market linkages. Talks are on with players in hospitality and healthcare sectors,” said Anuradha Bhavani, advisor, Shell Foundation.
Fairtrade accreditation for cotton has increased the demand for products who support this logo.
The accreditation is based on system that the retailer has paid a fair price to people involved in production across the supply chain. The price covers cost of production and provides for a social premium, which is then collectively used to benefit the community.
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| Govt to digitise all patents granted so far: Ficci |
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| The government is in the process of digitising all patents granted so far and will make it available for the public by early next year. The Department of Industrial Policy and Promotion (DIPP) will put the task of digitising the patent database on fast track and is likely to complete it by December 2008, making it available for online public access by January 2009, Ficci said. Nodal officers have been appointed to ensur
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| Govt cuts exporters’ subsidy by Rs 600 crore |
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| The government has slashed allocations to its key export promotions and overseas market development programmes for 2008-09 by a huge Rs 600 crore, at a time when exporters are facing a rough weather on account of global slowdown and margin erosion due to rupee appreciation. The Budget for 2008-09 has cut export subsidy by Rs 300 crore while abolishing interest subsidy under the programme ‘Assistance for Export Promotion and Market Development’. |
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| Spot steel prices up by Rs 1,700 per metric tonne in Punjab |
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| JUST a day after the steel producers rose the price of the alloy, the spot steel price in Punjab has hardened by Rs 1,700 per metric tonne (MT), compounding the woes of steel consuming industry in the state.
Within a day, the steel ingot price has zoomed to Rs 37,200 per MT from Rs 35,500 per MT, while steel manufacturers further expect it to reach to Rs 38,000 per MT owing to rise in the prices of raw material.
According to steel traders, the price of sponge iron has jumped to Rs 26,000 MT from Rs 24,000 MT and the rate of scrap has increased from Rs 26,000 to Rs 27,500 per MT.
“The prices of sponge iron and scrap, which are basic raw material for Punjab-based steel producers have increased in the range of Rs 8,000-10,000 per MT within two months and it has really put pressure on steel producers to jack up rates,” said Raj Sood, Mandi Gobindgarh-based steel trader.
Punjab - a major producer of steel - has almost 200 induction furnaces and four arc furnaces spread across Mandi Gobindgarh, Ludhiana and Khanna. It consumes almost 10,000 MT of scrap and sponge iron per day for producing ingot in order to meet requirement of bicycle industry, auto parts, hand tools, fasteners and particularly construction industry.
Meanwhile, spiraling steel price has sent ripple among the Punjab’s steel consuming industry which even observed a day long bandh last month to protest against the rising steel prices.
The industry representatives have urged the state Government to reduce the CST and VAT on steel by one per cent and two per cent respectively. “If the government accepts this proposal in coming state budget, the dwindling steel industry could be saved,” said Amarjeet Goyal, Mandi Gondgarhbased steel producer.
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| India, US talk trade treaty, but stay off farm sector |
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| WHEN the European Union gets on board, the United States cannot be far behind. India and the US are planning a limited bilateral trade agreement involving a handful of sectors like human resource development, energy, infrastructure and financial services to begin with.
A private sector advisory group (PSAG) formed by the two governments—comprising research institutes—will give its recommendations on possible sectoral openings. The report of the group, which was set up during the recent trade policy forum (TPF) meeting in Chicago, will be tabled when the USIndia TPF meets again this October.
Sources said the sectoral agreement would allow the two countries to open up their economies in phases and exclude agriculture—a sensitive issue in both countries—from the trade talks, which is mandatory for a free trade agreement (FTA) under US law.
The contentious agri sector also makes it difficult for the two sides to sign an FTA. Official sources admitted as much. They told ET that the two sides would have started talks on an FTA but for agriculture. However, “they were eager to intensify trade in goods and services and investments”.
“Both sides have decided that bilateral liberalisation of trade should happen in a phased manner. We should begin by identifying some sectors where work can start immediately. The PSAG will give its report on the sectoral openings possible when the CEO’s forum and the TPF meets again in October in New Delhi,” said a source. That means human resource development, higher education, financial services and infrastructure, including the energy sector, are among the first few areas that the PSAG would examine. Investment, intellectual property and cooperation between regulatory authorities too will be studied.
The PSAG has already recommended that the two countries should start talks on a mutually agreeable bilateral investment treaty by the year-end. Cooperation between regulatory agencies like the plant & quarantine departments will also be worked upon by the PSAG.
Also, the group will look at cooperating more in the protection of intellectual property, a key demand from the US pharma industry. This demand, however, could be difficult for India to accept as it has always attempted to protect its poor from steep jumps in prices of essential drugs. Incidentally, US exports to India increased by a sharp 75% in 2007 to $17.59 billion, shrinking the trade gap between the two countries. India’s exports to the US, on the other hand, rose by 10% to $24 billion during the year. US exports to India include aviation & aircraft, engineering goods & machinery (including electrical) and precious stones & metals.
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| Kenyan Punjabis to get into realty biz in Punjab |
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| JOINT VENTURE WITH LOCAL PARTNER WITH BUSINESS INTERESTS IN KENYA
WHILE there is a semblance of truce in Kenya after the gruesome turmoil which shook the nation with several ethnic communities on war path and left the people of Indian origin bewildered, the event has now led the Punjabis especially to ponder over the issue and do some introspection.
Kenya has nearly 2 lakh people of Indian origin mostly Gujaratis and Punjabis. A few Punjabis, with roots in Punjab, have now been touring the state to not only revive connections but to also consider in what way they could invest in Punjab for a secured future.
Both Parladh Singh Bhangra, CMD, Comecon Constructions, a well known Punjabi settled in Kenya and Parminder Singh Manku, MD, Kewal Contractors, Nairobi have now decided to set up business in Punjab.
The duo have been touring Punjab to ascertain the situation and consider avenues favourable for doing business in Punjab and the surroundings. Mr Bhangra told ET here “we have decided to come and start construction business in Punjab.” Both Comecon Constructions and Kewal Contractors together boast of a turnover of $40 million and have now chosen a local partner to set up a joint venture by floating a new company.
Mr Bhangra said their local partner would be Chandigarh based Mr Harcharan Singh Ranauta, CMD, Ranauta Properties and Investments .The Ranauta Group has business interests in Kenya and has been exporting bicycles to the African continent.Ranauta Group has also big plans up its sleeve to pump in sizable funds in the agri business primarily for exports of fresh vegetables to the UK.The group has tied up with Tesco for supplies to the British market.Fresh organic vegetables such as tomatoes, cauliflower, broccoli, green peas, cabbage, parsley and celery are proposed to be airlifted to the United Kingdom from Amritsar.
Mr Bhangra said here that a new company would be floated to enter construction business in Punjab. The new company may also venture into construction activity in Himachal Pradesh especially in hills around Kasauli. While land for residential property may have been identified the Kenyans are considering to inject anywhere up to to Rs 10 crore in the new venture.
Construction activity in Kenya due to the turmoil has received a beating and several projects have come to a standstill.”The situation will only be accessed once we go back,” said Mr Manku.
Mr Bhangra said violence in Kenya has given us a big shock and Kenya has always been a peace loving nation and a major tourist potential in Africa. However, the turmoil has changed the situation. Tourism has been badly affected with major cancellations. This will have an impact on many projects and with hotel occupancy now at a low ebb earnings from tourism would sharply dip.”
He said both Comecon Constructions and Kewal Contractors would inject a sizable amount of funds into purchase of machinery and equipment to set up construction activity in the northern region. The proposed company — Cedar Infrastructure would venture into property construction and into roads and bridges and construction of bus stations. “ These are the areas which look lucrative and we will bid for projects,” said Mr Bhangra.
When contacted, Mr Ranauta said a new company was in the offing and it would be a joint venture between the three parties.He said projects would be taken up for construction in the near future.
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| Exports up 20% in Jan, imports rise a whopping 63% |
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| EXPORTS from the country continued to grow at a steady pace in 2008. Outbound shipments rose 20.47% to $13.14 billion in January, compared to $10.9 billion in January 2007. Cumulative value of exports for the period April-January 2007 stood at $124.19 billion, against $102.11 billion in the year-ago period—a growth of 21.62%.
Import growth was much higher at 63.57%, growing to $22.5 billion in January 2008 compared to $ 13.75 billion in January, 2007. In the April-January 2007-08 period, imports grew by 29.63% to $ 191.6 billion.
While exports have almost touched last year’s annual export figures of $125 billion, government officials are not quite sure whether the target of $160 billion set for this fiscal could be reached. “We would be at least close to the target, even if we don’t reach it,” an official said.
Exports have not performed as well as anticipated in 2007-08 due to a 12% appreciation in the value of the rupee affecting competitiveness. Labour intensive sectors like textile, leather, handicraft and marine products have been hit the most.
Oil imports during January 2008 were valued at $7.71 billion which is 60.81% higher than oil imports worth $ 4.79 billion in the corresponding period last year. Oil imports during April- January 2007-08 were at $57.02 billion which was 16.49% higher than the oil imports of $ 48.95 billion in the corresponding period last year.
Non-oil imports during January 2008 were estimated at $14.79 billion which was 65.05% higher than non-oil imports of $ 8.96 billion in January 2007. Non-oil imports during April-January 2007-08 were at $134.58 billion which was 36.13% higher than the level of such imports valued at $ 98.86 billion in April-January 2006-07.
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| New govt in Pak expected to implement Safta |
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| India on Monday exuded confidence that the new government in Islamabad will take immediate steps to implement the South Asian Free Trade Agreement with New Delhi and take necessary measures, including duty changes, to facilitate trade. “We are looking toward the new government in Pakistan to take more positive steps in fulfilling the agreement in Safta, which it has acceded to but not implemented. We are looking at the new administration in Pakistan to look at this positively because it is an advantageous situation for them,” commerce and industry minister Kamal Nath told reporters here after the third meeting of the Safta ministerial council. |
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| Naphtha duty may leave textile cos in knots |
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| Removal of 1% National Calamity Duty No Respite For Rupee-Hit, Sinking Industry
POLYESTER and nylon clothing are set to turn costlier by 2-3%. The imposition of 5% Customs duty on naphtha (an input for manmade fibres) is likely to push up prices of polyester textiles at a time the textile trade is reeling under the impact of rupee’s rise.
While naphtha has become costlier, the 1% national calamity contingency duty (NCCD) on manmade fabrics has been scrapped. Textile industry say the removal of NCCD would, however, have a marginal impact as it was a surcharge. “The abolition of surcharge will have no major impact, but the decision to slap import duty on naphtha is going to affect the industry adversely. It would also affect the industry’s competitiveness in the light of aggressive marketing by Chinese companies,” Confederation of Indian Textile Industry (CITI) director general DK Nair said.
Primary producers of polymers like Haldia Petrochemicals (HPL), Reliance Industries (RIL) and Gail use Naphtha as raw material. Polymer, in turn, is used in a host of downstream sectors such as plastics, paints and manmade fibres which will face margin pressures leading to escalation of prices. HPL has said it would have to Rs 300 crore extra for meeting the increased cost of naphtha. The duty on naphtha would also push up prices of plastic products by 2-3%.
“It looks as if instead of giving a bailout package to the textile industry, the finance ministry has levied a penalty on them. The industry would urge the government to allow duty-free import of naphtha at least for the use of textile industry,” Mr Nair said, adding the decision is untimely as naphtha prices are already escalating due to rising crude prices.
Textile companies may see an impact on bottom lines if they have to absorb the rising input costs (due to additional duty) and are unable to pass it on to consumers. The industry is already in the red because of the rising rupee. The sector has channelled a long wish list through the textile and commerce ministry. However, the finance minister preferred to remain silent on most demands. This is despite the fact that the Economic Survey had also acknowledged the hardship felt by the export community due to currency fluctuation.
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| Industry welcomes continuation of TUF, SITP |
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| THE textile industry has welcomed the decision to continue with the Scheme for Integrated Textile Parks (SITP) and the Technology Upgradation Fund (TUF). A few months back there was a talk of scrapping these two schemes. But, under pressure from the textile industry and the continuous strenthening of rupee, the Budget has increased the amount under TUFS to Rs 1,090 crore.
Vijay Ghai, director, Preknit, says. “We had expected some major support, especially in terms of technology up gradation and uplift of physical infrastructure etc, unfortunately nothing appropriate was announced on these fronts. Continuation of TUF would really help the industry.”
So far, 30 integrated textile parks have been approved and 20 units in four parks have commenced production.
The Budget proposes to scale up both infrastructure and production and has proposed to take up six centres for development as mega-clusters. Varanasi and Sibsagar will be taken up for handlooms, Bhiwandi and Erode for powerlooms, and Narsapur and Moradabad for handicraft. Each mega cluster will require about Rs.70 crore. In the past few months production capacity graph from the textile sector has been going down.
In July 2007-08, cotton textiles grew only 5.1% as compared to 14.3% in July 2006-07. And textile products witnessed a growth rate of meagre 3.6% in July ‘07-08 against 28% in ‘06-07. Average growth rate of cotton textiles for the first 4 months (April-July) of 2007-08 was 6.9% against 12% in 2006-07.
TUFS has been the major booster for the expansions and acquisition by the textile companies in the year 2007. To substantiate this, companies in the region like Nahar group, SEL Manufacturing Co. Ltd, MADAME, Priknit Apparels and Malwa Industries Limited, have made significant expansions in the last one year.
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| PEDA commissions 8 power projects |
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| PROVIDING impetus to the promotion of co-generation power projects, Punjab Energy Development Agency announced the commissioning of eight biomass projects of 104.25 MW capacity in the state, involving an outlay of Rs 422 crore.
The industries which are setting up these projects include A B Sugars (33MW) in Hoshiarpur, Rana Sugars (23MW) in Amritsar, Abhishek Industries (20MW) in Barnala, Chandigarh Distillers & Bottlers (8.25MW) in Patiala, Nectar Life Sciences (6MW) Mohali, Setia Paper Mills (5MW) in Mukatsar, Shreyans Industries (3.5MW) in Sangrur and A B Grain Spirits (5.5MW) in Gurdaspur, said Punjab Non-Conventional Energy minister Bikramjit Majithia.The tariff for the current financial year 2007-08 under New and Renewable Sources of Energy policy is fixed at Rs. 3.59 per Kwh, he said. PEDA provides technical and facilitation services for setting up these projects.
Keeping in view the interest shown by the industrialist the target of co-generation for next five years has been enhanced from 220 MW to 400 MW.
Majithia said industries like paper, fertiliser, textile and others having huge potential are being motivated to adopt co-generation not only to augment the state grid capacity but would also create conducive conditions for providing employment and utilisation of environment friendly resources.He added co-generation projects of capacity 30.80 MW has been commissioned earlier and with the commissioning of these 8 projects, total capacity in the state has risen to 135.5 MW.PEDA has already tied up with various projects to augment of 68 MW power capacity in the next six months. The minister said that in addition to the above, PEDA has already planned a total capacity addition of 1681 MW through various New and Renewable Sources of Energy.
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| 140 Indian companies at Russian trade fair |
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| Around 140 Indian companies will be in the spotlight when they showcase their products at the international trade fair being organised in St Petersburg on March 11-14. “The first day of the fair will be devoted to Indian industry to commemorate the Year of Russia, which is now underway in India,” said Restek Company director general and organiser of the event Igor Kirsanov.
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| Textile sector sore over lack of export sops |
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| The government proposal to raise allocation for Centrally-sponsored Technology Upgradation Fund (TUF) by around 20% will give a boost to modernisation and expansion of textile industry in the state, experts in textile and cotton marketing said here on Friday. TUF gives textile units a 5% interest reimbursement for modernising and expanding capacity.
But the textile industry is in a sombre mood as finance minister gave no sops to boost textile and cloth exports. This will ultimately lead to cut in textile production, leading to substantial increase in unemployment, they felt. As the steady appreciation of Indian currency had a negative effect on textile and garments export, the industry was expecting some relief by way of subsidising the exports to meet challenges from Pakistan and China. In the current financial year, the biggest challenge for textile and clothing industry, which is highly labour-intensive, was the run-away appreciation of Indian rupee, said PD Patodia, chairman, Confederation of Indian Textile Industries.
"We were expecting some more relief for exports, which has not materialised. This will affect the already struggling industry," Patodia said.
"Nothing much has been given to textile industry," said a senior official of Vardhman Group of textile mills. Indian rupee had appreciated almost 14% against US dollar compared to Chinese and Pakistan currencies appreciating only 6.4%, adversely affecting textile exports from India. Any decrease in India's textile exports will benefit China and Pakistan, analysts said here.
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| American diamonds are forever |
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| If American diamond-studded jewellery is more your taste, go right ahead and flaunt them. For now, gold and silver jewellery studded with synthetic diamonds will be lighter on your pocket, thanks to the 5% reduction in customs duty on rough as well as cut and polished cubic zirconia.
Zirconia, a synthetic diamond, is popularly known as American diamond. While FM has exempted rough zirconia, which used to attract 5% customs duty, he has brought down
customs duty on cut and polished zirconia from 10% to 5%. Customs duty on rough coral, largely used in jewellery for religious purposes, has also been slashed from 10% to 5%.
“Buyers of American diamond-studded gold and silver jewellery will be marginally benefitted by the move,” said Gitanjali group chairman Mehul Chokshi. Gems and jewellery manufacturers, however, were not impressed. Sanjay Kothari, chairman, Gems and Jewellery Export Promotion Council said: “FM has done nothing to improve the global standing of the Indian gems and jewellery sector.”
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| A mixed dish for industry |
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| The Union budget 2008-09 has received a mixed response from the industry here. While the import duty on the steel scrap has been welcomed along with the reduction of central excise (16% to 14%) by manufacturers, exporters in hand tool industry, hardware, diesel engine and other related sectors, still, they feel that most of their genuine demands have remained unaddressed.
"Personal income tax exemption limits have been increased but little has been done for the simplification of tax payment procedures. It is good that CST has been reduced from 3% to 2% and service tax exemption limit has been increased from Rs 8 to 10 lakh, but little has been done in terms of reducing the rate of service tax & Cenvat, the main demands of industry," said Ashwani Kumar Kohli, senior vice president Punjab Chamber of Small Exporters.
"Nothing has been done for exporters, especially those hit by huge rupee appreciation during 2007. It has increased the total loss of exporters considerably. Though FM has expressed deep concern on currency fluctuation and loss to exporters, but no income tax relief under section 80 HHC has been given to struggling exporters, who are exclusively into export production. Their request to get full income tax exemption under Section 80 HHC from 2007 to 2011 has been turned down, on the other hand 100% EOU's are getting full income tax exemptions under Section 10A & 10B," he said.
Meanwhile, Gursaran Singh president of Federation of Jalandhar Industrial and Traders Association said, "While cheaper import of steel scrap would help hand tools, hardware and auto parts manufacturers, but there are hardly any effective steps to bail out small & medium enterprises, who are struggling due to huge tax imposed on them."
Ban on steel export could have been much more effective step to help domestic and export oriented units. Freight Equalization Policy and some relief package for small industry was expected but budget has been disappointing in this regard.
"We welcome the help extended to small farmers by announcing a package for them but finance minister has not imposed any tax on big farmers, which could have widened the tax net," he said.
SPS Virk of Punjab Leather Federation said, "The budget has been presented in view of the coming Lok Sabha elections. There are sops for majority of people, but leather industry has not received any substantial help this time. Wehad been demanding export duty drawback and reduction in import duty on machinery, especially when R&D support was needed, but none of our issues have been addressed," he said.
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| Curtains up for project imports |
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| CUSTOMS CUT TO BENEFIT SECTOR; STEEL PRICES MAY COOL OFF
PROJECT IMPORTS GOT A SHOT IN the arm with the government slashing customs duty from 7.5% to 5%. Projects in the irrigation, steel, oil and gas, pipeline and mining sectors which bank on imports will benefit from this, especially with lower costs making companies source more from abroad.
The reduced customs duty will be available for select items. The list includes items of machinery like prime movers, instruments, apparatus and appliances, control gear and transmission equipment as well as raw materials needed to manufacture these items.
KPMG executive director Arvind Mahajan said projects will get a boost, especially in midstream, pipeline and steel sectors. “For power projects, the FM has announced a special countervailing duty (CVD) of 4%, making it expensive to import project cargo. Probably, this is to help local companies like Bhel,” he said.
SAIL chairman SK Roongta said the lowering of customs duty will help the steel sector. “Reduction of duty on project imports would have a positive impact on steel and capital-oriented industries,” said Tata Steel MD B Muthuraman.
However, the decision to introduce 4% special CVD for power sector imports has stirred a hornet’s nest. JSW Energy vicechairman NK Jain said that for power generation companies which want to set up more projects, it is a disappointing Budget. “The Budget has proposed to decrease CVD by 2% to 14%, but imposed 4% special CVD for specified projects in the power sector, which are below 1,000 megawatt (MW) capacity. Eventually, indirect taxes have increased by 2% for power projects,” he said. Scrapping the 5% customs duty on steel scrap may benefit secondary steel makers. JSW Steel MD Sajjan Jindal said the cut will help steel players using induction furnaces.
However, a senior Ispat Industries official said the cut would have only a marginal impact. “It will lead to Rs 60-70 crore savings per annum on import of scrap for Ispat, as it is the largest importer of scrap of about 0.6 million tonnes,” he said.
The other major impact on steel sector is an excise duty cut from 16% to 14% . It will bring down prices marginally for steel used in construction and roofing. Also, reduction in project import duty would help the industry tide over the rising cost of input marginally.
Said Srei Infrastructure vice-president Hemant Kanoria: “Though the finance minister is confident of 9% GDP growth, to my mind, unless he responds favourably to the industry’s demand to give a boost to infrastructure, we will not be able to mobilise the requisite capital for building of infra – the foundation of India.”
Lowering of excise duty on automobiles and two- and three-wheelers will also promote use of steel. “The government’s continued commitment towards ensuring double-digit manufacturing growth by carrying on with the ongoing reforms process looks reassuring, especially for an infrastructure sector like steel,” Essar Steel Holdings CEO J Mehra said.
INFRASTRUCTURE
MAJORS
L&T, HCC, IVRCL, GMR, GVK, Punj Lloyd, Gammon
STORY SO FAR
Key infrastructure development in roads, power, ports, airports, hamstrung by red tape and lack of investment over the years Companies have raised funds through various routes to finance their expansion plans. Construction companies raised an estimated $3 billion last year
Implementation still remains a problem due to fluctuating government policies
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| Power sector sees light at end of tunnel |
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| THE POWER SECTOR HAS THREE things to cheer about and one issue to sulk over. A national fund for power transmission and distribution (T&D) , a coal regulator along with a coal distribution policy, and increased budget allocation for rural electrification are all likely to benefit the industry. But imposition of a 4% special countervailing duty on imports for power plants less than 1,000 MW is causing grief.
Finance minister P Chidambaram announced this new duty even as he was cutting duties on imports for other projects to 5% from 7.5%.
The industry, predictably, is crying foul, saying that the move increases their cost at a time when the country desperately needs investment in the sector.
Industry analysts said the proposed national fund for T&D would aim to bridge the huge investment gap in the sector. The proposal for a coal regulator spells relief for generation companies hit by rising fuel prices. This is one of the recommendations of the Hyderabad-based Administrative Staff College and the Shankar Committee on larger coal sector reforms, currently under consideration by the central government, said Union coal secretary HC Gupta.
Said Coal India chairman Partha S Bhattacharyya: “The regulator should also take care of the environmental and social sustainability issues in mining. Rural electrification will pick up pace, too. The FM has allocated Rs 5,500 crore in 2008-09 to light up 5,000 villages across the country, as part of the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY). Villagers below poverty line can get free electricity connections under this scheme.
The new fund outlay will clearly accelerate the setting up of distribution and transmission backbones in many villages. Backof-the-envelope calculations suggest that it costs Rs 12-Rs15 lakh to set up a distribution backbone in a village. However, there is one proposal which is unlikely to cheer the power sector. The finance minister has amended service tax rules, which could adversely affect T&D turnkey contractors, says KEC International managing director and CEO Ramesh Chandak. “The service tax applicable on works contracts under the composition scheme for payment has been doubled to 4%. This will affect all engineering, procurement and construction (EPC) players in the industry,” he said.
POWER
MAJORS
NTPC, Tata Power, REL, PTC, PowerGrid, Rural Electrification Corporation
STORY SO FAR
India faces a huge power deficit. More than 1,00,000 MW need to be added over the next few years to sustain 8%-plus GDP growth. Govt has a crashplan to kick-start investment in generation. But more needs to be done
Private sector is keen, but bureaucratic and political hurdles remain
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| Futures squeeze: Comm traders forced to pay more |
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| FOR INDIA’S COMMODITY traders, the test of courage is not to die, but to endure. The new commodity transaction tax (CTT) and service tax on commodity exchanges will increase the cost of futures trading by at least four times. While big hedgers and arbitrageurs may be able to offset CTT against their net business profits, small investors and punters will see their gains dwindling.
Even for companies able to offset CTT, there would be an overall increase in the tax paid because CTT would be deducted from net profit, and not the net tax payable. Suppose, a company has to pay a CTT of Rs 100. It makes a net profit of Rs 500 on which the tax liability (at 33%) would be Rs 165. Earlier, tax laws allowed Rs 100 to be deducted from Rs 165, leaving the company to pay only Rs 65. Now, CTT would be deducted from the net profit of Rs 500, and the company would pay tax on Rs 400, which comes to Rs 132. So, the net outgo is higher.
Not surprisingly, India’s commodity exchanges are peeved at this indirect onslaught on their business at a time when average daily turnover barely crosses Rs 15,000 crore. “CTT needs to be brought down. Otherwise, it will drive away participants from this market and distort the price discovery mechanism,” said NCDEX MD PH Ravikumar.
Said MCX chairman Jignesh Shah: “The Budget has added an incidence of 12% service charge and Rs 17 per lakh for commodities trading, which will increase the cost by more than 800%. This taxation was introduced in the stock market with the benefit of capital gains and allowing futures income loss to be treated as business income loss. The commodities market has not received these two incentives.”
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| Just got harder for Day Tripper |
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| NEW STT TREATMENT LIKELY TO AFFECT SHORT-TERM TRADING
FINANCE MINISTER P CHIDAMBARAM may not have changed rates for securities transaction tax (STT), but his proposal to treat STT as deductible expenditure has not gone down well with the trading community. Day traders fear that it will put further pressure on their already wafer-thin margins. However, some feel that the new tax treatment may reduce short-term trading and encourage people to take long calls.
According to tax professionals, the current practice adopted by big operators and day traders is to add the STT amount to the total income, including income from trading activity and other income, and subsequently, work out the payable tax. Under Section 88E, they are entitled to get tax rebate and can pay only the surplus of total tax over STT at the end of the year. However, this benefit of setting off income tax against STT would not be available once the new proposal comes into effect.
What will be the STT impact? Say, if a day trader earns a profit of Rs 300 on a total income of Rs 1,000 (expenses of Rs 700), he pays 33% tax of around Rs 100. Assuming a Rs 20 STT, the total tax liability will be Rs 80 based on the current calculation. According to the new proposal, on the same income, expenses will now be considered as Rs 720, instead of Rs 700, as STT will be considered as an expense. So, the profit will be Rs 280, on which the trader has to pay a tax of Rs 92, Rs 12 higher than what he would have paid had the STT deduction not treated as expenses.
Currently, STT is charged at the rate of 0.125% on delivery-based buy-and-sell transactions and 0.025% only on non-deliverybased sale transactions. The rate is 0.017% on F&O sale transactions. The FM has decided to keep these rates unchanged. He, however, has given a boost to traders in F&O segment by changing the methodology of STT calculation on option contracts. At present, option contracts attract an STT on the entire notional value of the contract. This is going to change after the Budget proposals come into effect, as STT will be charged only on the premium of an option contract.
According to BR Bagri of BLB, a Delhi-based leading arbitrageur and jobber, the FM’s proposal to withdraw the rebate, allowed under Section 88E, means profit earned by day traders and jobbers would attract income tax at normal rates, in addition to STT. “This has been a big blow to these players whose income is chargeable under the head ‘profits and gains from business and profession’,” he said.
Another proposal which may worry the trading, broking and investing community is the FM’s decision to bring services provided by stock exchanges and clearing houses under the service tax net. However, some brokers do not think that it will have a major impact on cost. “Brokers who are already paying service tax will not be affected as they can claim rebate. But services like listing and data dissemination may become a little costlier for companies availing of them,” said Churiwala Securities director Alok Churiwala.
However, some market savvy investors have been taking advantage of loopholes in the STT law to avoid paying legitimate tax on business income from speculative stock trades. These investors “purchase” STT for a “fee” from other brokers/ traders who will not be able to claim income-tax rebate on STT beyond a point. Tax authorities are aware of this practice, but find it difficult to nail down offenders as all the transactions are legal and STT has actually been paid to the government.
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| EXCISE PAIN FOR PETCHEM PLAYERS |
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| BUDGET 2008 HAS MADE IT MORE DIFFICULT for export-oriented units (EOUs) to sell in the domestic market. EOUs, generally eligible to sell up to 50% of their annual sales domestically, will now have to pay customs duty at 50% of applicable rates for such sales, compared to 25% till now. India’s largest petrochemicals company, Reliance Industries (RIL), whose Jamnagar refinery enjoys EOU status, is likely to be affected by the change. Others like South Asian Petrochemicals and IG Petrochemicals, which enjoy EOU status, will also witness an erosion in their competitive advantage when selling in India.
Also, costs are likely to go up for polymer manufacturers as the finance minister has reimposed 5% import duty on naphtha, from nil last year. “Thanks to a complex regime of export benefits and duty exemptions, naphtha is exported from refineries and is imported by manufacturers of polymers, leading to price distortions and revenue losses,” he said.
This will adversely impact companies like RIL and Haldia Petrochemicals, which use naphtha for polymer production. Till now, RIL used to export naphtha from its refinery availing of the benefits of being an EOU, while its erstwhile subsidiary IPCL used to import it duty-free.
Petrochemicals manufacturers are not happy with the development. “We are disappointed by the re-imposition of 5% import duty on naphtha used in production of polymers. This is not in line with the basic rule that customs duty on raw materials should be less than that on the finished product,” said Chemicals and Petrochemicals Manufacturers Association of India president KG Ramanathan.
The general reduction in excise rates from 16% to 14% and the cut in central sales tax to 2% will help the petrochemicals industry. “The waiver of loans and interests to farmers will help increase plastic consumption in the agriculture sector,” said Supreme Industries MD MP Taparia.
The fertiliser industry will benefit from the reduction in duty on sulphur, which has been cut from 5% to 2%.
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| Mould new policy for cheaper steel to SMEs, EEPC tells govt |
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| AFTER the sharp escalation in steel prices over the past year, Engineering Export Promotion Council (EEPC) has urged the Centre to evolve a special policy for supply of steel at competitive rates to small and medium producers and exporters of engineering goods.
In this light, EEPC chairman Rakesh Shah noted that engineering goods exporters were hit hard by a 13% rise in the rupee value. Matters were further compounded in the aftermath of a 20% rise in prices of different categories of steel products, which are primary raw materials of engineering goods.
During April 2007-February 2008, steel prices on an average increased 20%, which is perhaps the highest compared to China, EU, the US, east Asia, Latin America and CIS countries, he claimed.
Credit cost is another factor that seems to be out of line with international trends. Globally, banks are reducing interest rates while it remains static in India. Hit by three adversaries — rupee appreciation, spiralling raw material prices and static interest rates — engineering goods exports from the country have just posted a 2.5% growth in rupee terms in December 2007, Mr Shah said. He was speaking at an awards ceremony on Thursday.
While delivering its role as a facilitator, EEPC intends to help setting up an industrial cluster for bell metal products at one of the places in Bankura which is famous as a production hub for such products. Currently, it has joined hands with concerned stakeholders for setting up a foundry park in Howrah.
German consul general Guenter Wehrman said Germany has been one of the leading destinations for Indian engineering goods.
India’s exports to Germany grew 30% to $900 million in 2006-07. One of the reasons attributed to the growth is Indian companies’ continuous participation in all important trade fairs in Germany, particularly the trade fairs being held at Hannover.
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| Omaxe to infuse 6k cr in Punjab, Haryana towns |
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| REAL ESTATE DEVELOPER LIKELY TO LAUNCH THREE RESIDENTIAL PROJECTS IN PUNJAB THIS YEAR
REALTY developer Omaxe Ltd plans to infuse over Rs 6,000 crore into integrated township projects in seven tier II and III towns in Punjab and Haryana. Omaxe is likely to launch three residential projects in Punjab this year and the company is aggressively doubling its land bank from 750 acres to 1,500 acres in the state.
On the company’s radar are Amritsar, Bathinda, Patiala in Punjab and Sonipat, Bahadurgarh, Rohtak in Haryana. Omaxe plans to set up integrated self-dependent townships in these districts that would be completed in next three years. In Haryana, the townships are proposed on 400 acres in Sonipat, 100 in Bahadurgarh, and 80 acres in Rohtak.
The company that was first to enter tier II and III projects in Punjab has received warm response to its high end township project in Punjab. “Better than expected response to the recently launched sample flats at luxury township in Ludhiana has done a lot of good to company’s future plans in Punjab,” Vineet Nanda, VP, marketing and sales, Omaxe said. “All the who’s who of industry in Ludhiana’s has shown keen interest in the project when sample flats were showcased few months ago, “ Mr Nanda said.
Around Rs 300 crore has already been infused into the Ludhiana projects and another Rs 400 crore would bring up luxury office suits, health clubs, spa village with in the township. Also Omaxe has sold out 75% of the 584 units built under group housing project in Derra Bassi.
Also out of 336 acres, Omaxe has sold out plots on 230 acres in Patiala and 110 acres meant for IT, biotechnology, institutes and commercial establishments is to be developed in next two years.
The company is setting up five multiplexes two each at Amritsar, Ludhiana and one in Patiala. The company’s turnover stood at Rs 1,732 crore in the third quarter this year whereas Omaxe notched a turnover of Rs 1,400 crore in 2006-07.
GREAT GOING
On the company’s radar are Amritsar, Bathinda, Patiala in Punjab & Sonipat, Bahadurgarh, Rohtak in Haryana
It plans to set up integrated selfdependent townships in these districts would be completed in next 3 years
The company that was 1st to enter tier II & III projects in Punjab, has received warm response to its high-end township project in Punjab
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| PEDA commissions eight power projects |
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| Providing impetus to the promotion of co-generation power projects, Punjab Energy Development Agency on Thursday announced the commissioning of eight biomass projects of 104.25 mw capacity in the state, involving an outlay of Rs 422 crore. The industries which are setting up these projects include A B Sugars (33 mw) in Hoshiarpur, Rana Sugars (23 mw) in Amritsar, Abhishek Industries (20 mw) in Barnala, Chandigarh Distillers & Bottlers (8.25 mw) in Patiala, Nectar Life Sciences (6 mw) Mohali, Setia Paper Mills (5 mw) in Mukatsar, Shreyans Industries (3.5 mw) in Sangrur and A B Grain Spirits (5.5 mw) in Gurdaspur, said Punjab non-conventional energy minister Bikramjit Majithia. The tariff for the current financial year 2007-08 under New and Renewable Sources of Energy policy is fixed at Rs 3.59 per Kwh, he said. PEDA provides technical and facilitation services for setting up these projects. |
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| Gems & jewellery exports up 20% during April-September |
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| The country’s gems and jewellery exports grew at over 20% in the first half of 2007-08, reviving from 2006-07, helped by cuts in import duties of rough jewels, according to the annual economic survey on Thursday. Exports from the sector, comprising diamonds, gold jewellery and coloured gemstones, formed 12% of the country’s merchandise exports in 2006-07, according to the survey presented in parliament by finance minister Palaniappan Chidambaram. The survey did not provide the growth rate for the sector in 2006-07, but said there had been a “deceleration in the rate of growth of exports” from the sector during the period. |
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| Economic Survey turns a new chapter |
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| The Economic Survey has made some significant departures from the documents churned out in recent years. A new chapter Challenges, policy response and medium term prospects seeks to provide a more analytical view of the economy. Capital flows, states’ performance and governance seem to have received particular attention.
While the structural change of the Survey is less than radical, some of the policy reform options outlined are truly radical: privatisation of coal mines, 100% foreign direct investment in rural banks, 51% FDI in rural insurance.
Chapters have been reorganised to better reflect economic dynamics. ‘Prices and food management’ has now become ‘Prices and monetary management’, an acknowledgement that monetary management has become more important in context of inflation. Food management finds a mention with agriculture now, which is appropriate as in context of rising global food prices and production volatility domestic supply would have to be augmented to meet growing demand.
The chapter on Banking and monetary management has been split. Banking together with capital and commodities markets comes under ‘Financial intermediation and markets’ in keeping with the blurring of boundaries between various segments of the financial markets.
The Survey has also attempted to provide background to the analysis through background papers. This is most evident, claims the government, in the External Sector chapter. The External sector chapter is most reflective of this new emphasis. It mentions, for instance, India’s stand on various issues at the WTO. It also has a box on tax and trade policy implications of e-commerce.
Some of the numbers have been recast to facilitate international comparison and some new ones included to facilitate better understanding and make global comparisons easier. Now that the world is looking at India this is a very relevant change in perspective.
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| Duty drawback sops fail to boost textile industry |
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| A PALL of gloom hangs over the local textile mills even as their rivals in China, Bangladesh and Vietnam are betting on a 25% growth. The duty drawback balm has failed to soothe the industry, which is expected to shed 1.5 lakh jobs by next month. Sales are expected to fall to around $8 billion by the end of this fiscal, as against $8.9 billion in the previous year.
The export driven industry took a hit in last 12 months when the dollar slipped 14% against the rupee. And, India’s failure to match the production standards and volumes of rival countries worsened the situation. The duty drawback scheme has failed to pep up the industry, which was rolled out in July 2007 with a retrospective effect from April 1, 2007. “Duty drawback is a high-sounding platitude. It is nothing but the reimbursement of taxes paid to the central government by the industry. The government should also find a way of reimbursing the tax paid to state governments,” says CMAI president Rahul Mehta.
Bangalore-based Gokaldas Exports MD Rajan Hinduja agrees: “With a rupee appreciation of 14%, the margin for the apparel sector is just 7%; so, in effect, our profitability has taken a major beating. Of
course, the government is trying its best with the duty drawback scheme, which is currently at 4%, but we have been fighting for a 6% drawback.”
CMAI has suggested several steps to bail out the sector: Says Mr Mehta: “In the short term, local and state government taxes need to be reimbursed and interest rates brought on par with global levels. In the medium term, we need to increase production by building large factories, improving our technologies in a more cost-effective manner and look at technology upgradation fund schemes (TUFS) which provide certain subsidies, loans and infuses capital investment for the sector. Finally, in the long term, we can have special economic zones and integrated textile parks.”
Kewal Kiran Clothing MD Kewal Jain makes a case for small and medium enterprises (SMEs): “Along with duty drawbacks, the government must provide more incentives for SMEs to help them mature and grow. Also, interest rate, which is around 8-9%, should be reduced to match the global rates of 3% to allow us to be more globally competitive.” Kewal Kiran manufactures leading apparel brands like Killer, Integrity and Lawman.
Last year, the government introduced a 12.5% service tax on rentals, which has hurt the apparel industry, where almost 80% of the property is rented. “We have been asking for a service tax exemption at least on exports or some income tax benefit,” says Mr Hinduja.
However, there is some hope in the horizon: The government is believed to be in favour of extending a scheme of income tax exemption for 100% export-oriented units, which is expiring in 2009.
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| Gold’s relentless climb hits imports |
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| GOLD imports have declined significantly even as international prices hit a record high of $967.7 per ounce on the Comex on Wednesday. Traders expect scrap sales to increase to stem rising prices. Scrap sales in the local market have curtailed demand for imported gold, creating a gap between domestic and imported prices.
“The imports were not more than 5 tonne in February, compared with 50-60 tonne in the same period last year. The daily offtake is also less than 10% of last year, at about 50-100 kg in Mumbai,” said Mumbai-based Riddhi Siddhi Bullion director Prithviraj Kothari.
However, he added that scrap sales are high and gold was being purchased for investment. He indicated that prices could touch $1,010 per ounce levels in the international market next week from the current $961 levels.
He said demand was likely to remain low as long as prices are high. In the domestic market, gold is trading at record levels above Rs 12,200 per 10 gram. In the futures market on the MCX, the near month contract traded at a high of Rs 12,291 per 10 gram. However, marginal demand still exists as weddings have driven some purchases by households, which would last till the end of May, say industry players.
The rise in prices was fuelled by the high oil prices, which hit a record of $101 a barrel, and the US dollar, which tumbled against other currencies.
“Gold has performed fairly well during recent times and stuck to its reputation of the best hedge against inflation, especially oil-led. However, it is rising crude oil prices and the declining dollar which pushed gold to record levels.
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| Marine products, leather & textiles show negative growth |
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A sharp rise in the value of the rupee against the dollar has resulted in negative growth in exports of marine products, leather, textile and handicrafts for the period ending December 2007 compared with the same period last year, minister of state for commerce Jairam Ramesh informed the Rajya Sabha on Wednesday.
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| Costly coal to singe carbon credit trading |
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| PUNTERS on carbon credits have a new reason to worry: the rapid increase in global coal prices. For carbon credit sellers such as India, life is good when companies in Europe burn dirty fuel and buy carbon credits from them to clean up the mess. However, that could well change if coal becomes too expensive.
The use of coal in Europe is important to maintain the head of steam under carbon credit prices. Power utilities in Europe, for instance, are major buyers of certified emission reduction (CER) because they use coal, which was till now the cheapest fuel.
The emission factor for coalfired generation in Europe is about 0.9 tonnes of CO 2 per MWh, nearly double the factor for gas-fired generation. So, utilities wanting to burn coal need about twice as many European Union Allowances (EUA) as they do for natural gas under the 27-nation bloc’s plan to limit carbon-dioxide emissions.
Consequently, the more the coal-fired stations run, the greater the demand for carbon credits and profits for Indian CER sellers. However, a combination of bad weather, transportation glitches and higher demand is pushing up coal prices.
Natural gas is the second-best option to coal. As long as coal remains cheaper relative to gas, coal is attractive as a source of power. However, while coal prices are rising, natural gas prices are flat. This has narrowed the price differential between natural gas and coal.
If coal prices continue to rise and the gap becomes even smaller, it would soon become worthwhile for EU utilities to switch to a cleaner fuel like natural gas from coal. That would impact CER demand. Generators such as E.ON AG, Germany’s biggest, can switch between fuels to cut costs.
From January end, there has been a record increase in the price of coal across Asia and Europe. Coal has rallied 11% from mid-January to $140 per tonne from $126 per tonne. Floods in Australia, severe weather in China and power cuts in South Africa restricted output. European coal prices, which rose by more than 85% last year, climbed again in January.
EU gets coal mainly from South Africa, where South Africa’s second-largest producer Anglo American was forced to shut production because of electricity shortages. South African coal for delivery to Amsterdam, Rotterdam or Antwerp reached more than $112 per tonne by January end.
More than 25% of all Europe’s thermal coal is shipped from South Africa’s Richards Bay, where stockpiles at January end stood at just over 2 million tonnes against a more usual 4 million tonnes. Market analysts don’t expect supplies to become normal any time soon, which would exacerbate coal price rise.
Meanwhile, though there has been a € 1.50 increase in secondary CER prices over last week, they have still not reached the levels seen in early January.
“This increase is a short-term price adjustment and the recovery is not yet full. The threat posed by higher coal and natural gas prices means CER demand would be under pressure. A large gap between coal and natural gas prices increases CER prices while a small gap reduces CER prices. Right now, the gap is narrowing fast,’’ said Dr Ram Babu, managing director of CantorCO2e India, local arm of a US carbon brokerage and consultancy firm.
Brokers in Mumbai, however, are bullish and believe CERs are a good buy at current prices, “Prices are likely to creep up. So we suggest accumulating at these prices.”
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| Consumer inflation hits 2-yr low |
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| Drop Across White-Collar Urbanites, Farmers & Industrial Workers
INDIA’S consumer price inflation is at a two-year low. More importantly, the drop in consumer inflation indices is across categories—white-collar urbanites, farmers as well as industrial workers. This trend is the opposite to that displayed by the wholesale price index (WPI), which has been inching up and is currently at 4.35%.
According to the latest official inflation statistics released by CSO, the consumer price index (CPI) for urban non-manual employees, or CPI(UNME), which broadly represents the white-collared employees residing in urban India, has recorded an inflation of 4.8% in January ’08 versus the same month previous year. This is the lowest level since October 2005. For a large part of 2007, CPI(UNME) reported 6-7% inflation, a level last witnessed a decade ago.
But what comes as a bigger surprise is the CPI for agricultural labourers, which is collated by the Labour Bureau. For January ’08, the consumer inflation for agricultural labourers was reported at 5.6%, the lowest since April 2006. This had galloped to a high of 9%-plus in early 2007.
The consumer price inflation for agricultural and rural labourers at that time was higher than any other consuming class in the economy. Had this not eased, it could have posed a serious problem with 2009 being a general election year.
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| Capital subsidy scheme for MSEs revived |
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| Responding to calls from micro and small enterprises (MSEs), the Cabinet has given the go-ahead to the concerned ministry to re-introduce credit-linked capital subsidy (CLCS) scheme for MSEs in the 11th Plan. The scheme which was introduced in October 2000 to provide financial support for technological upgradation of these enterprises was discontinued from April 1, 2007. The notification on the restoration is expected to be issued next week.
Micro, Small & Medium Enterprises Development (MSMED) ministry additional secretary and development commissioner Jawhar Sircar said that with the scheme’s revival, all pending claims on subsidy account to eligible MSEs would be released by the ministry within a fortnight.
About Rs 115 crore is likely to be disbursed to nearly 2,500 units as their outstanding claims on capital subsidy for taking bank loans for technology upgradation. He was speaking at a seminar on ‘SME East 2008’, organised by CII (eastern region) on Monday. The government has taken the decision to revive capital subsidy grant to MSEs for technological upgradation based on the recommendations of the Planning Commission and the National Council of Applied Economic Research (NCAER).
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| Inflation still a matter of concern, feels RBI |
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| Inflationary expectations arising out of high food and oil prices remain a matter of concern, a Reserve Bank of India official said on Tuesday. The prime concern of the RBI is to manage inflationary expectations and “we have to find ways to keep inflation under control,” said RBI executive director RB Barman. The continued pressure of globalisation and the liquidity overhang still poses a serious challenge to ensuring financial stability, Mr Barman added. |
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| LALU SIGNALS END OF THE ROAD FOR FREIGHT FREEBIES |
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| BANKING on the economic boom to boost earnings, railway minister Lalu Prasad has attempted to deftly marry pragmatism with populism on the freight front to keep India Inc happy without actually giving anything away. The token reduction in freight rates for petrol & diesel (5%), fly ash (14%) and goods destined for the North-East (6%) would not lead to major losses in revenue. While only a small volume of petrol & diesel are moved by rail, the 6% discount for North-East does not apply to all commodities.
A clear message has also been conveyed to the industry not to expect any further reduction in goods tariffs by emphasising that the process of rationalising freight charges is now complete. So, not hiking freight tariffs is the major sop for India Inc. The railways could have opted for a modest hike in goods tariffs keeping in mind the ongoing economic boom and the effect of inflation, which is yet to be tamed.
The shadow of polls is also visible in the promises showered on the industry in terms of better connectivity with ports and sector-specific long-term plans for steel, cement, coal and container business—topped up with the Rs 75,000-crore plan to boost infrastructure for a high-density network. That’s pretty long on promises, and clearly short on give-aways. Since this could be Lalu’s last full-fledged Budget as the UPA’s railway minister, promises such as a seven-year blueprint for infrastructure leave a lot on the plate for the next government to tackle. Lalu has also indicated that railways would foray into door-to-door logistics, increasing competition in this sector. The industry has been responding positively to such initiatives and there is a demand for transporting all commodities on private goods trains. “Private freight operators should be allowed to transport all commodities instead of a listed few—which is hampering the growth of private operators and their investments,” said Federation of Indian Export Organisations (Fieo) president Ganesh Kumar Gupta. The move to improve connectivity to ports would help exporters, and the Railway Budget 2008 holds several promises since it is investment-oriented, he added.
For 2008-09, freight target has been fixed at 850 million tonnes, just 60 tonnes more than the current fiscal’s target of 790 million tonnes. Considering that the increase in freight loading during the current fiscal is estimated at 62 million tonnes, the railway minister seems to have gone for a rather modest target. This could be due to the realisation that utilisation of assets cannot be stretched much now. Even the incremental loading of 42 million tonnes during the first nine months of the current fiscal has not been found to be enough inspiration to fix a more ambitious target.
It is estimated that railways would earn much more from movement of foodgrain and fertiliser compared to earnings of Rs 3,300 crore and Rs 1,700 crore, respectively, in the recent past.
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| NRIs change tack, opt for direct remittances |
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| Remittances Go To Current Account; Deposits To Capital Account
India is the largest recipient of remittances by its diaspora across the world with annual inflows of over $20 billion for almost four years now. But a chunk of this money is not new money sent by migrant Indians. Almost half the money is conversion of NRI deposits into the accounts of their relatives back home. But this year there is a slight shift in the pattern with NRIs opting for direct remittances, instead of parking them in deposits.
Remittances are reflected in `private transfers’ in the balance of payments. It comprises remittances for family maintenance, local withdrawals from Non-Resident Rupee Account, gold and silver brought through passenger baggage, and personal gifts/donations to charitable/religious institutions.
According to the latest data analysed by the RBI, of the total remittances (private transfers) amounting to $19 billion during April-September’07, $8.3 billion was local withdrawals of NRI deposits. While $9.4billion was on account of inward remittance for family maintenance. The share of this component which contributed a significant share of remittance flow to India at about 60% in 1999-2000 dipped to 47% in 2006-07. In the first half of 2007-08, however, the share of inward remittances was about 50% of total remittance flow to India.
According to the RBI, in the recent past, a rising trend of local withdrawals can be attributed to the income levels of migrants, ease of transferring money through NRE deposits and rising investment opportunities domestically. A recent survey on the pattern of remittances indicates that not all the money which comes in the form of remittances for family maintenance is actually used for the purpose it is sent for. With the Indian markets booming and offering attractive returns, NRI money is increasingly flowing into lucrative avenues such as stock markets and real estate.
Given the trend in these other markets, a senior banker points out that NRIs have gone slow on parking their money in NRI deposits and are increasingly choosing the remittances route which helps them earn a better return than on bank deposits. This also explains the reason why the share of remittances, which was seen dipping until 2006-07, has again improved in the first half of FY’08.
What distinguishes remittances from NRI deposits is that, while remittances are treated as private transfers, which are included in the current account of the balance of payments, inflows from overseas Indians for deposits in the NRI deposit schemes are treated as capital account transactions. The RBI study notes that a major part of outflows from NRI deposits (on the average 85% of total outflows) is in the form of local withdrawal from NRI deposits. These outflows, however, are not actually repatriated and are utilised domestically.
The Reserve Bank study says that given the better investment opportunities domestically and higher interest rates, it is expected that the inflows may continue through the route of local withdrawals.
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| Strong rupee hits traditional crafts hard |
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| THOUSANDS OF CHIKANKARI, JAIPURI SANGANERI, BAGRU WORKERS LOSE JOBS IN VIEW OF FALLING REVENUES
CHIKANKARI from Lucknow, Jaipuri Sanganeri and Bagru prints and Phulkari from Patiala have received international acclaim but closer home these traditional crafts that involve intricate embroidery are facing the gallows. The rupee appreciation has severely hit exporters from Rajasthan, Uttar Pradesh and Punjab. These exporters who have been sending their prized collections to Europe, England and even the US since decades, are now experiencing grim times with a 25-30% drop on export revenue forcing them to lay off thousands of employees. In Uttar Pradesh about 2-3 lakh artisans, mostly women working from their homes, are estimated to be involved in making chikan clothes. So is the case with Phulkari makers in Punjab and artisans in Japur.
“We are facing tough days. Not only revenue has decreased but also there is a drop in export orders. Most difficult task is to find workers as a large number have switched over to other jobs. There are around 350 units in operation generating around 70,000 direct and indirect jobs,” says a leading garment exporter from Jaipur Manmohan Badgotra. The Rs 650-crore industry which was growing at 20% a year witnessed a down slide of 30% last year. Garment Exporter Association of Rajasthan (GEAR) general secretary Rajaram Kandoi told ET: “Many exporters have packed their bags in recent times. And those who are still waiting for the sun to shine again are feeling the heat.”
The exporters are trying to explore new potential markets. But hit badly by revenue deficit, they are in a tizzy. “We need to pump in huge capital for exploring opportunities in emerging markets like Latin Amercia, Russia and Australia. Once bitten twice shy – in present scenario, no exporter wants to take risk,” Mr Kandoi added. Exporters in UP are working to standardise sizes, new designs and packaging to increase exports. Though traditionally chikan garments like kurtas, shalwar-kameez, sherwanis were made, the demand of international customers has led to westernised chikan dresses also being manufactured.
“The trade mark hand block printing of Jaipur is out due to dissimilarity in designing. Exporters, now, go for screen printing, which is done through machines. Things can improve only when we set up processing units in Jaipur. For that, we have approached Rajasthan government and deposited Rs 4 crore for allotment of land. But for the last 4 years, we have been waiting for the government’s nod,” adds Mr Kandoi.
Indian fashion designers have popularised these crafts in India and overseas including international fashion houses to an extent but the sole support of the Indian fashion industry isn’t enough. With the Union Budget around the corner, demands for financial packages from the government are also rising. Federation of Rajasthan Home Textile and Handloom Exporters Association president Satish Katta said: “The overheated rupee has robbed off 12-15% from the profit of garment exporters. For medium exporters accounting for turnovers less than Rs 20 crore, rupee rise is spelling a doom. The government should compensate exporters with the loss they are suffering due to rise in the rupee value which comes out to 12-15%. It should increase the drawback from 7% to 12% and handover at least 50% income-tax exemption on exports income. The government should further handover exemptions on excise duty, VAT and other taxes.”
Director of Manohar Lal Kapoor and Sons, one of the leading exporters of chikan from Lucknow, Girish Kapoor adds that the scenario for chikan exporters is grim. “Our exports are likely to reduce by as much as 30-40% due to the rupee appreciation against the dollar. With no special package coming from the government for the small niche segment of traditional textile handicraft exporters we are facing a bleak future.”
Concurs Puran Dhingra, owner of Patiala-based Dhingra Phulkari House exporting Phulkari garments, “We export to Malaysia, Spain, France, England and many places across Canada thanks to the NRI connection. The beauty of our products is creating a rise in demand from new countries like Russia but we don’t have the monies to think of growing our business. Unless the government supports us, we will find it tough to preserve our tradition.”
According to Lucknow Chikan Handicrafts Manufacturers Association president Gopi Shyam Tandon about Rs 200 crore worth of chikan products are made annually, of these Rs 20 crore worth are exported annually. “Most of the chikan garments are exported to countries like England, France, Saudi Arabia, UAE, Australia, USA, Netherlands et al. But chikan exports are bound to fall drastically. Being a small segment of the overall exports from the country, the government is also not very responsive towards our problems and demands.” Chikan exports are also threatened by imitation embroidery work from China and Bangaldesh and the scenario looks even grimmer after the abolition of ‘quota system’ in China from 2008. “The central government should at least enhance the duty drawback to about 20% to give chikan exporters some breathing space for survival. Further the state government should announce refund of local taxes like service tax, Octroi etc so that we can continue to be in business,” adds Mr Kapoor.
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| Power situation in Punjab during summer may be worst |
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| CHANDIGARH: Punjab may face severe power shortage in the coming summer, contrary to last year's period, as the state is expected to experience power deficit of 300 lakh units during this period. "Power situation in the state during summer will be one of the worst situations as the gap between demand and supply of power will exceed over 300 lakh units per day," Punjab State Electricity Board advisor Padamjit Singh said.
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| Centre to give Rs 150 crore for Nano City, IISER |
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| THE Centre has earmarked Rs 150 crore for the development of Nano City and Indian Institute of Science Education and Research (IISER) in the Knowledge City at Mohali.
In a meeting held between officials from the Central department of science and technology and their counterparts in Punjab, it was decided that both the institutes, funded by the Centre, would officially begin operations by October.
“The institutes will begin functioning by October this year but we are planning that the institutes would begin functioning from an existing facility and then be moved to the Knowledge City once the infrastructure is ready,” said Punjab state secretary Science and Technology AS Chhatwal.
Nearly 35 acres and 125-130 acres for the Nano City and IISER respectively have been acquired by Greater Mohali Area Development Authority, that are waiting to be transferred to the GOI such the development can begin.
“The land has been acquired by GMADA and the areas for external development have been demarcated. The total area will be transferred to the centre for development soon,” added Mr Chhatwal.
Punjab Chief Minister Parkash Singh Badal has directed GMADA to begin proceedings of transferring the combined 160-acres area to GOI at the earliest.
According to Punjab chief secretary R I Singh, the three institutes in the Knowledge City-Nano City, IISER and Bio-Technology City have already commenced operation from a temporary accommodation in the State Institute of Public Administration.
However, for the bio-tech city, which will be developed by the department of bio-technology, no meetings have been held so far.
Earlier, the ministry of biotechnology was to fund the 80-acre biotech park out of the total 400 acres making up the entire Knowledge City situated in Sector 81 of Mohali.
As a proposed model, the biotech park would have industrial and business units that would be leased out to private companies further helping in generating revenues.
Mr Ramasami, from the Centre’s behalf, said it would make all necessary clearances in this regard shortly to initiate the construction work by the months of May-June this year and it would take 18 months to complete the entire project.
Mr Ramasami was accompanied by joint secretary Sanjiv Nair, adviser A Mukhopadhyay and adviser and head Science and Engineering Research Council (SERC) V Rao Aiyagari.
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| Excise sops for six Re-hit sectors |
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| PMO, Finmin Approval For Extension Of Interest Waiver Too
BUDGET 2008-09 is likely to provide a bailout package for six labourintensive sectors hit most by the appreciating rupee. Textiles, gems & jewellery, handloom, handicraft, marine and leather could be given excise duty waivers and an extension of interest rate subvention which runs out next month-end. Sources said the package had more or less been finalised with the finance minister and the Prime Minister’s office giving finishing touches to it.
Speaking to ET, sources said the V Krishnamurthy committee set up by the PMO had recommended special measures for the six sectors. “Though all recommendations may not be accepted, the finance ministry is likely to provide excise waiver and interest rate subvention,” an official said.
Gems and jewellery sector, which operates on very thin margins, could get a special package.
The duty rates are likely to be cut on certain items, like manmade fibres, leather goods and fishing equipment. All six sectors have experienced negative growth in exports in rupee terms in the first three quarters of the fiscal.
Domestic production has also taken a beating due to cheap imports. The performance of textiles and handicrafts has been especially bad. Textile and handicraft hubs like Tirupur, Moradabad, Ludhiana and Jallandhar have seen many closures in the past year.
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| Security check holds up VC fund for defence SMEs |
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| A RS 1,200-crore venture capital fund being set up for small & medium enterprises (SMEs) in the defence sector has run into red tape. The fund, with advisors such as former RBI deputy governor Vepa Kamesam, Lt Gen VJ Sundaram, who is leading the flight vehicle design team for Prithvi, and Tata Strategic Electronics CEO Rahul Chowdhry, has been put on hold by the Foreign Investment Promotion Board (FIPB). Lack of clearance from the defence ministry and ‘potential conflict of interest’ related to the advisors of the company are cited to be the reasons behind the hold-up. This is the first venture fund of such size being set up to invest in Indian defence SMEs. The move comes at a time when MNCs are vying for multi-billion dollar defence deals, including a mega order for fighter aircraft.
The fund is promoted by Rajesh Narayan who was earlier director and India head (specialist finance) at ANZ Investment Bank. The segments of investment identified by the fund include military aircraft, helicopters, radars, submarines, missiles, rocker launchers, simulators, tanks and torpedoes. Investment would be made in SMEs which are vendors for these products. Many SMEs supply components, technology and design for such products. The fund plans to raise $100 million (Rs 400) crore initially with subscriptions from foreign investors, with provisions to scale up investment by $200 million (Rs 800 crore).
Christened India Rizing Fund, the VC fund has informed FIPB that it would look at other sectors at a later stage. Since issue of units to foreign investors by VC funds requires clearance by FIPB, the issue was taken up recently, but deferred for seeking views of the defence ministry.
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| Indian Designers To Be Showcased Globally |
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| GOOD news for the likes of designers Manish Malhotra, Tarun Tahiliani and Ritu Kumar. In a move to revive garment exports, the government has decided to promote Indian designers in the global market. The designers would get monetary support from the commerce department for organising shows in the international market. Initially, about a dozen designers would be given funds, the names to be decided in consultation with the Fashion Design Council of India (FDCI).
On an average, an international show in Milan or Paris costs Rs 70-80 lakh for a single designer. Part of this would be funded by the commerce ministry under the market access initiative scheme (MAIS). “We have released a few crores for designer shows on an experimental basis, and this sum would be increased substantially after seeing the initial response,” an official in the department of commerce said.
FDCI would oversee the proper utilisation of funds. Also, the council would submit to the ministry names of the focus countries for the initiative. Italy, France, the US and UK are expected to be in the list of focus countries. The move has been taken seeing the declining trend in garment exports from India. The textile ministry and the commerce ministry are working together to promote the export of value-added garments instead of pushing just volumes. The move is being taken to preempt any price fluctuation in the international money market. The recent sharp appreciation of the rupee has hit garment export as the industry is more focused on exporting volumes than value-added items, said the official.
“It is good news that the government has realised the benefit of value-added exports, mainly in the ready-made garment sector. Such steps would go a long way in making the country’s presence felt in the international market,” FDCI executive director Sumeet Nair said.
MAIS is an export promotion scheme formulated on focus product-focus country approach to evolve specific market and specific product through market studies and surveys. Under the scheme, the government provides assistance to export promotion organisations, trade promotion organisations, national level institutions for enhancement of export through accessing new markets or through increasing the share in existing markets.
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| Sidbi to help set up exclusive stock exchange for SMEs |
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| TIRUCHIRAPALLI: Small Industries Development Bank of India (Sidbi) has said it will take the initiative to establish an exclusive stock exchange for small and medium enterprises (SMEs). Sidbi chairman and managing director RM Malla said the National Stock Exchange had requested Sidbi for crystallisation of the proposal. Sidbi and Infrastructure Leasing and Financial Services will be the equity partners in the venture. |
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| Global price flux may ruin fertiliser subsidy bill maths |
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| TIRUCHIRAPALLI: Small Industries Development Bank of India (Sidbi) has said it will take the initiative to establish an exclusive stock exchange for small and medium enterprises (SMEs). Sidbi chairman and managing director RM Malla said the National Stock Exchange had requested Sidbi for crystallisation of the proposal. Sidbi and Infrastructure Leasing and Financial Services will be the equity partners in the venture. |
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| Exporters get another Rs 500cr interest relief |
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| New Delhi: The Centre on Thursday approved a fresh Rs 500 crore assistance to help exporters make up for the loss in orders due to strenghtening of the rupee.
While the government had earlier announced a 2% interest subsidy for exporters of some labour-intensive goods like textiles, leather, marine products, handicrafts, and carpets the Rs 300 crore allocated for the purpose was found inadequate following a comprehensive study undertaken by the Reserve Bank of India.
RBI also said that some of the demand for subsidy will come during the next financial year too and the government should provide for that too, sources involved with the exercise said.
With the latest announcement, government’s bailout package has crossed the Rs 5,700 crore mark. Earlier this week, the government exempted three more services from payment of 12.36% tax in a move that surprised many since it came barely 10 days before the budget.
“The measures will ensure mitigation of the effect of rupee appreciation across the export sectors, make them internationally competitive and will also enable them achieve export targets,” an official spokesperson told reporters after the CCEA meeting.
Under the scheme, exporters are given two per cent relief in pre-shipment and post-shipment credit in specified sectors. The interest rate can, however, can not go below 7%, the floor set for farm loans. Sugar is the only sector where mills have successfully lobbied with the government — in what they termed was in the interest of farmers — to grant them loans at zero interest, thanks to the high subvension levels.
The scheme, the spokesperson said, “will provide relief to exporters and mitigate (their) hardships on account of unanticipated and steep rupee appreciation.” The export of traditional items especially handicraft, textile and carpets have suffered on account of 15% appreciation in the value of rupee against the dollar in the last 16 months.
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| Auto parts cos likely to get leg up with upgrade fund |
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| INDICATIONS ARE THAT IT WILL BE MODELLED ON THE TEXTILE UPGRADATION FUND
EVEN as D-Day approaches, the buzz is getting stronger that a modernisation-cum-upgrade fund for the auto components sectors is on the cards. Lately, the automobile sector is abuzz that the finance minister may introduce the fund in Budget 2008-09 to give a fillip to the domestic auto component sector which is poised for a big leap with new cars being introduced in India from domestic as well as global players.
Indications are that the fund will be modelled on the lines of the Textile Upgradation Fund (TUF), which has improved the competitiveness of the domestic textile industry, and will be offered at a much cheaper rate.
Rane Group chairman L Ganesh, whose company is a leading auto component maker in the country, told ET: “Auto component makers are largely concentrated in the small and medium sector. Therefore, they need some sort of helpline to upgrade their operations to increase their competitiveness at a time when Chinese manufacturers are aggressively dumping auto components in India. These units have limited access to capital, human resources and technology.” In addition, the Free Trade Agreements with Thailand, Singapore and other Asean countries too, are likely to emerge as a threat to the auto component industry.
In this light, the budget may not tinker with the import duty on auto components which now stands at a flat 10%. “This is unlikely to happen in this budget,” feels Mr Ganesh.
Incidentally, the size of auto-component market touched Rs 60,000 crore in 2006-07 while it is expected to touch Rs 72,000 crore in 2007-08. The sector saw imports of about Rs14,644 crore in 2006-07 which is likely to touch Rs 19,000 crore in 2007-08. Exports on the other hand was Rs 12,643 crore in 2006-07 and it may touch Rs 15,100 crore during 2007-08. “The Indian auto ancillary industry is expected to touch $40 billion by 2014,” the industry sources added.
Some of the leading multi-national companies like DaimlerChrysler, Volvo, General Motors have already announced their plans for sourcing auto components from India. A number of states in the country are also setting up auto components park. India is looking at an additional investment of Rs 60, 000 crore in the next couple of years. Therefore, the auto ancillary sector is poised to take a big leap.
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| US rules out FTA with India for now |
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| CHICAGO: Not willing to tread the path taken by the European Union and ASEAN for market-opening trade pacts with India, the US on Thursday said it was not ready for a free trade deal with the world’s second-fastest growing economy, as it could not fully open agricultural imports from American farmers. “Quite honestly, it would be quite difficult, at this point of time for India to imagine doing that kind of a deal with the United States considering its sensitivities in agriculture,” US trade representative Susan Schwab said on the sidelines of the India-US Summit for Small and Medium Enterprises here. Ms Schwab said the US wants “almost 100%” coverage meaning if India desires to have an FTA, it has to allow a zero duty market for everything, including highly-sensitive agriculture products.
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| Re makes an about turn but importers, cos stay unhedged |
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| Traders Bullish In Long Term, Rising Currency Brings Relief To Exporters
BREAKING off from the almost one-year old appreciating trend, the rupee is now fast moving in the opposite direction. The local currency, which threatened to breach even the 39-mark versus the dollar barely a couple of months ago, dipped to 40.23 levels on Wednesday.
What’s more surprising is that a large number of importers and corporates, that has raised external commercial borrowings, have left their exposures unhedged. Possibly, they feel that the present slide in the rupee is only a temporary phenomenon.
According to a senior forex dealer from a multinational bank, in the current scenario, importers who have longertenor liabilities may not lose out much.
The yield on the annualised premia stands at around 11 paise, which means that if the rupee is trading at 41.22 in the spot market, one could buy dollars through a one-year contract at 40.34 in the forward market.
Players having to service liabilities immediately may be affected to a greater extent since near-term premia are trading at a discount. The long-term view on the rupee still remains bullish. While ECB borrowers typically have a longer-time horizon of around 2-3 years, importers, especially oil companies, could suffer if the rupee does not retract to below 40 levels in the spot currency market, said a forex strategist from a foreign bank.
Forex traders said that as long as premia on forward contracts trade at a discount, there will be plenty of incentive to maintain long positions on the dollar. On Wednesday, the rupee ended the day at 40.20 levels compared with the Tuesday’s closing levels of 39.91/92. The local currency dipped to a five-month low of 40.23 levels during the day, after opening at 39.94 levels.
Acute dollar shortage caused premia on forward contracts up to eight months, to continue trading at a discount. The yield on the one-month contract closed at a discount of 5.31% (4.56%) while that on the six-month contract ended at (0.53%). The annualised premia closed at 0.33% (0.56%).
However, exporters were seen selling dollars on Wednesday, in a bid to avail of the fall in rupee levels versus the dollar. Forex market officials feel that the inflows from foreign investors could be the way to ease out the situation, as the central bank is unlikely to intervene in the forex market at this juncture. Fearing a slowdown in the US, markets across the globe have turned risk aversion. This has caused most FIIs to trim their positions in emerging markets, thus leading to most currencies weakening against the dollar.
When FIIs exit the domestic markets, they end up ploughing back profits to their home countries. For this purpose, they purchase dollars from the local markets, thus causing the rupee to weaken against the dollar. It may be recalled that the rupee had breached the 40-mark against the dollar way back in September 2007, on the day when the US Federal Reserve announced the first cut in key interest rates in 2007.
Traditionally, it has always been the exporters who were at the gaining end, given that the rupee was more on a depreciating mode against the dollar. However, only in the past few years, the Indian rupee made its way to being Asia’s best performing currency as it rose by more than 11% against the dollar during the whole year. This had made importers and borrowers of foreign currency loans a greater beneficiary of the scenario in the forex market.
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| PSIEC, STC in deal to boost exports from Punjab |
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| THE Punjab Small Industries & Export Corporation Ltd (PSIEC) has signed an MoU with the State Trading Corporation of India Limited (STC) to use later’s offices abroad to give impetus to exports from the state.
PSIEC will also seek help from STC to import raw materials like steel, HR coils/sheets, scrap, coal, coke, minerals/metals and other products for the benefit of SSIs. PSIEC warehouses will distribute the imported materials in the state.
Acoording to the MoU, PSIEC MD S S Rajput and STC CMD Arvind Pandalai have agreed to cooperate with each other for trading of thermal coal, cooking coal, HR rolled steel coils (HRC) and other steel products by effecting domestic trade in and around Punjab.
Both parties have agreed to pool in their individual organisational strengths and share information. Both parties will export the goods and services to other countries and PSIEC will offer quotes to STC.
Once this synergy statrts giving results, STC may be allowed to utilise PSIEC warehouses for such imports/purchases for servicing PSIEC customers.
STC will also arrange for the registration of the STC-PSIEC brand name for sale of products in various states.
As per the agreement, the two parties will bear their own costs and there will not be any obligation on either party to share or reimburse costs for either of the parties.
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| Soros, Google float fund for SMEs |
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| New Delhi: The Soros Economic Development Fund (SEDF), Omidyar Network, and Google.org have come together to create a $17 million investment company just for India. The company called Small to Medium Enterprise Investment Company for India will provide equity capital to small and medium businesses in under served markets.
The idea is to create jobs and spur greater economic participation for a larger segment of the population. The joint investment company where SEDF and Omidyar have put in $6 million each and Google has invested another $5 million, will be providing equity capital ranging between $500,000 to $3.5 million to to Indian SMEs.
‘‘The idea is to finance under capitalised and under invested sectors with high social returns. For example, a waste collection company or a company which does skill training for lower income people would score over a tech company or a BPO for funding,’’ says Reuben Abraham, ISB director and SEDF board member.
Abraham is the senior advisor leading the India team. The company will be located at the Indian School of Business, Hyderabad to leverage the school’s SME expertise. They plan to hire an investment advisor and two experienced senior investment analysts to run the India operations.
The idea behind the company came up two years back when investor George Soros visited India. They realised, even though SMEs hire a huge number of people, financing is a problem. ‘‘Most SMEs make investments in $3-$5 million range, leaving out a significant portion of this market. Our company will fill that ‘missing link’,’’ says Abraham.
Blackstone to invest up to Rs 242cr in Allcargo Global
Private equity firm Blackstone group will invest up to Rs 242.4 crore in Allcargo Global by subscribing to equity shares of the logistics service provider on preferential basis.
The board of directors of Allcargo Global at its meeting on February 19, has approved raising up to Rs 242.4 crore by way of issuance of securities or instruments to Blackstone and its affiliates on preferential basis, it said.
“It has been really fulfilling to have our business strength endorsed by none other than a fund of the stature of Blackstone. This I believe is true value creation for the stakeholders of the company, who will be able to reap the benefits in the years to come,” Allcargo Global CMD Shashi Kiran Shetty said. PTI
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| Let sun not set for IT tax sops |
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| INFORMATION technology and telecommunications are the key sectors supporting the country’s phenomenal growth. We expect the finance minister to give due importance to the sector while finalising hisBudget.
One of the top concerns is the expiry of tax concessions available to the IT industry after fiscal 2008-09. The industry gets tax exemptions under the section 10A/10B of the Income-Tax (I-T) Act under the software technology parks of India (STPI) scheme. The scheme, however, would come to an end in 2009 under the sunset clause mentioned therein.
The finance ministry should realise that the software sector is one of the largest employers in the service sector and is growing at over 33% year. Employment by the sector is growing at 26% a year. It is also a major contributor to export earnings. Total export from the sector is expected to touch $40 billion this year and $60 billion by 2010. Also, the sector contributed 5.3% of the country’s GDP in fiscal 2008, a big jump from 1.2% in fiscal 1998. However, the sector has been badly affected in the last one year because of a steep rise of the rupee.
If the government does not address the sector’s problems it would give wrong signals to the industry and would see a decline in investment and forex earning.
It should also be noted that small and medium companies cannot move to SEZs very easily, and would be badly affected by the expiry of the scheme.
Also, the government should protect the BPO sector which is facing intense competition from other countries like Russia, Ukraine, Hungary, the Czech Republic, Vietnam and the Philippines. Many of these countries are offering tax holidays, free space, reimbursement of salaries and training costs, among other sops to companies setting up centres. Most of these companies also have superior infrastructure, resulting in lower operational cost.
Also, it is the tier III & IV cities that actually offer cost advantage to the companies coming to India. Not continuing tax incentives beyond 2009 may result in an adverse impact on the development of the IT/ITeS industry in tier III & IV cities. This would lead to the increase in the cost of operations.
I hope the FM finds some ways to ward off such lurking dangers. Also, I expect that he takes some steps towards improving the education system of the country to tackle the talent crunch faced by many sectors, including the IT and ITeS sector. The country’s infrastructure also needs a push, which is essential for the development of the electronic hardware industry. While the government has taken steps for the development of the electronic hardware manufacturing, including the implementation of semiconductor policy, a lot still needs to be done on the tax front.
The prime minister’s special task force has also suggested to bring down excise rates on all types of hardware production to 12% from the prevailing 16% in the first phase and to reduce it further to 8% in the next phase. However, I expect the Budget to be in line with the 11th Plan and Planning Commission recommendations.
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| Textile machinery sector needs a booster dose |
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| THE coming Budget could give support to the capital goods industry with a view to stimulating investments in the economy. Particularly needed is an incentive package for the domestic textile engineering industry, considering that government’s own estimate says the textile sector would place fresh demands for machinery worth Rs 1 lakh crore in the next five years. (Whether this estimate holds true even after the decline in textile exports due to the rupee’s rise is another question). Anyway, the government has an obligation to salvage the textile industry from its current morbidity and spur its growth, given that it is highly employment-intensive and potentially, a smashing forex earner).
Currently, the Indian textile machinery industry is a pigmy, compared to the textile industry. In 2006-07, its turnover was just Rs 3,000 crore. There is not a single unit in India that manufactures modern weaving machines (shuttle-less looms) and large processing facilities.
European machinery giants like Sulzer, Picanol, Saurer and Truetzchler are anxious to shift production to the Indian subcontinent to cater not only to the huge Indian market but also to Pakistan, Bangladesh, Indonesia etc. If they set up production base in India, they would be able to sell at 60% of their current prices to Indian consumers. This, in turn, would be a huge cost advantage to Indian textile and garment industry.
What can the Budget do? A technology upgradation fund would be an additional incentive for the FDI waiting at the doorsteps. Setting up of sectorspecific parks in locations near the existing machinery manufacturing activity is another policy option.
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| PSIEC, STC in deal to boost exports from Punjab |
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| THE Punjab Small Industries & Export Corporation Ltd (PSIEC) has signed an MoU with the State Trading Corporation of India Limited (STC) to use later’s offices abroad to give impetus to exports from the state.
PSIEC will also seek help from STC to import raw materials like steel, HR coils/sheets, scrap, coal, coke, minerals/metals and other products for the benefit of SSIs. PSIEC warehouses will distribute the imported materials in the state. Acoording to the MoU, PSIEC MD S S Rajput and STC CMD Arvind Pandalai have agreed to cooperate with each other for trading of thermal coal, cooking coal, HR rolled steel coils (HRC) and other steel products by effecting domestic trade in and around Punjab.
Both parties have agreed to pool in their individual organisational strengths and share information. Both parties will export the goods and services to other countries and PSIEC will offer quotes to STC.
Once this synergy statrts giving results, STC may be allowed to utilise PSIEC warehouses for such imports/purchases for servicing PSIEC customers.
STC will also arrange for the registration of the STC-PSIEC brand name for sale of products in various states.
As per the agreement, the two parties will bear their own costs and there will not be any obligation on either party to share or reimburse costs for either of the parties.
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| Punjab seeks more subsidy for solar power plant |
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| THE Punjab government has asked the Centre to grant more subsidy for installation of 10 MW solar power plant. The move comes at a time when Reliance Industries has evinced keen interest to tap the renewable energy sector in the state. Recently Suzlon Gujarat Wind Park had signed two MoUs with Punjab Energy Development Agency (PEDA) for the setting up of two wind power projects of 50 MW each in the district of Hoshiarpur and Mukatsar at an estimated cost of Rs 500 crore.
The state has a tremendous potential in non-conventional sources of energy, which has to be optimally utilized to further augment the power generation. Group president of corporate affairs RIL, Dr A Shankar has, however, asked the government to enhance the subsidy component for the installation of projects based on non-conventional sources of energy in the state.
“We have deliberately chosen Punjab as the investment destination because it had an investor-friendly climate coupled with pro-investor policies,” Dr Shankar said.
The government has even been exploring the potential in the wind energy in Punjab to be harnessed especially for the agrarian sector. Punjab chief minister Parkash Singh Badal has earlier stated to make Punjab a power surplus state by adding 6,000 MW within next three years.
“We would soon take up the matter with the ministry of renewable and non-conventional energy for the reviving the subsidy on the solar water pumping sets which had been discontinued by the centre from the past few years,” stated the chief minister.
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| 3 more export services eligible for tax refunds |
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| NEW DELHI: Exporters will now be able to claim service tax refund on three more services. The new services include services provided by the goods transport agency in relation to transportation of export goods from the place of removal to the actual place of export i.e. inland container depot or port or airport, services provided in relation to transportation of export goods in containers by rail and courier services provided to an exporter in relation to transportation of documents, goods or articles relating to export, to a destination outside India. The services eligible for refund now total 13.
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| Fin min differs with comm min’s new definition of services |
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| GOODS & SERVICES CANNOT BE TREATED ON PAR UNDER FOREIGN TRADE ACT, FEELS MoF
THE trade in services is set to acquire a new meaning with the government planning to define the term services. The new definition is expected to be in tune with the taxation laws.
Services would be defined by amending the Foreign Trade (Development & Regulation) Act, 1992, an official source said. The aim is to bring clarity in the trade of services, it added.
The proposal, mooted by the commerce ministry, has been vetted by the finance ministry. The finance ministry is, however, not in complete agreement with the commerce ministry’s proposal and has suggested to keep the new definition in line with the provisions laid down in the tax laws as all services are not taxed in the country, sources said.
The Foreign Trade (Development & Regulation) Act covers trade in goods but does not have a provision for trade in services. The commerce ministry has proposed to extend coverage of the Act to facilitate trade in services, sources said. It has proposed to replace ‘trade in goods’ with ‘trade in goods and services’ in the Act.
The finance ministry, in its comments on the proposed move, has made it clear goods and services cannot be treated on par under the Act. This is especially because all cross-border services are not treated as imports or exports like goods. The practice is also followed internationally. Considering the complexities involved in determining the place of supply of service provision and its evolving nature, like classification of goods for Customs purposes, classification and determination of place of supply of services for international trade in services would have to done as per the provisions laid down by revenue department.
Moreover, there are also no uniform practices in deciding whether a crossborder transaction of service is import or export. This is especially in the case of services like telecom, broadcasting and electronic commerce, the ministry has pointed out. Sources said the proposed changes will have to be carried out keeping in mind that the provisions do no have an implication on taxation of services and service tax collections.
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| Tax sops for EOUs may live for a year more beyond ’09 |
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| THE government may give another lease of life, albeit a short one, to 100% export-oriented units (EOUs). The income-tax sops enjoyed by these units may be extended by a year beyond March 2009. The tax exemption available to EOUs is set to end next year as the sunset clause kicks in.
If accepted, the proposal will enable EOUs to get income-tax exemption till March 31, 2010. An announcement to this effect is expected in the Budget.
The V Krishnamurthy committee, set up by the prime minister to give suggestions on helping exporters cope with the rupee’s rise, had recommended that the sunset clause be pushed back by a year. According to official sources, the one-year extension will ensure the decision on extending the tax sops for a longer term vests with the new government, which is expected to be in place by mid-2009.
EOUs and Software Technology Parks of India (STPIs) get income-tax exemption under Section 10A/10B of the Income-Tax Act. The sunset clause will set in for the exemptions in 2009. In the last Budget, the government had imposed minimum alternate tax on both EOUs and STPIs.
While the Krishnamurthy committee has recommended a one-year extension of sops for EOUs, it is silent on STPIs as the recommendations are only for manufacturing activities. However, the IT minsistry is pushing for extension of sops for software exporters as well. Ministry sources said while there might not be a blanket extension of sops for STPIs, small and medium IT units may be allowed to enjoy tax benefits.
Interestingly, the PM’s Economic Advisory Council (EAC), headed by C Rangarajan, is not in favour of extension of sops. Even last year, it had recommended the sops be discontinued.
Sources said despite EAC’s recommendations, the Centre was considering continuing with the sops for some time as there was immense pressure from industry, which is reeling under the impact of a continous appreciation in the value of the rupee. Moreover, there are concerns of the economy slowing down and an overall slump in global demand. Economic thinktank Icrier, which conducted a study on behalf of the finance ministry, has also recomended the schemes be extended.
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| Boost agriculture sector for true inclusive growth |
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| A TRILLION-DOLLAR economy with more than $220 billion in foreign reserves, favourable supply-side factors, demographic dividends and high domestic savings - it’s a perfect recipe for making India the investment destination for any prospective investor.
The other side of the coin: a dismal 2.2% growth in agriculture leading to distress in the sector and jeopardising the lives of 253 million Indian farmers. The result is suicides and decline in domestic food security. For the first time since the famed green revolution, India has been importing staple foodgrain such as wheat.
Add to this the 836 million (77%) of India’s population which lives on income below Rs 20 per day, with nearly 457 million working in vulnerable conditions in the informal sector with virtually no access to proper health, education and social security, and you get the classic Indian paradox.
This paradox is that while liberalisation has created new wealth, it has in the process widened the gap between rich and poor. The effect of reforms have not percolated down to the common man. It seems to have made life more difficult, with essentials such as food, clothing and shelter becoming very expensive.
If this trend continues, it will not only create social tensions but will also stall the Indian growth story. Clearly an urgent mid-term correction is imperative. The state needs to intervene and revive agricultural growth on high priority, help the unorganised sector and rejuvenate rural economy.
I believe that in the 21st century, agriculture will continue to be the most fundamental instrument for sustainable development and poverty reduction. Sadly, it has been neglected for too long. The government must implement the report of the M S Swaminathan Commission on the Farm Sector in totality. This is possible only if government targets a growth rate of 7-8% for agriculture for the next 10 years from the dismal 2.2% currently.
As the Swaminathan Commission report says: “The time has, therefore, come when we should focus on the well-being of the women and men feeding the nation than just on production. It is clear that the human dimension must be the principal determinant of agricultural policies and not just production in physical terms.”
The phenomenal growth in direct and indirect tax collections should be comforting enough for the Finance Minister and the UPA government to make this a Budget for the agriculture sector, unorganised sector and rural India.
This Budget should set right the anomalies of wealth distribution and enable the Aam Aadmi to have proper access to education, health and social security. Only then will the process of liberalisation be inclusive and sustainable.
The author is former chief minister, Andhra Pradesh
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| Poll yr may see support of Rs 10,000 cr over GBS |
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| Additional Provision To Be Allocated To Social Sector Programmes
APART from the normal gross budgetary support (GBS), that is being finalised at Rs 2,40,000 crore, the government is likely to make a additional provision of Rs 10,000 crore in the Budget to fund social sector programmes in the course of the year. The move indicates that some popular announcements may be made in the course of the year in the light of the general election next year.
“The provision of addition Rs 10,000 crore is part of a two-tier GBS, a system that made its beginning in the previous Budget. While Rs 7,000 crore was earmarked last year under additional GBS, this year the additional support is likely to be increased by over 42%,” a source said. The additional GBS is likely to be allocated to sectors such as agriculture, rural development, health, women and child development, water resources and urban infrastructure.
While GBS for next year is likely to be increased by 17% to Rs 2,40,000 crore for 2008-09 from a level of Rs 2,05,100 crore in the previous fiscal, an additional Rs 10,000 crore would be provided as special grants to ministries and states. Taken together, the total GBS for next fiscal would be Rs 250,000 crore. The finance ministry and Planning Commission seem to have agreed on the GBS for next fiscal well in advance this year after the prime minister’s office intervened to bring a balance between economic goals and political ambitions of the government. The finance ministry was initially willing to give only Rs 2,28,725 crore as GBS in the coming fiscal against ministries’ demand of Rs 344,761 crore.
According to the convention, ministries put their demands (of fund requirement in a fiscal) to the Planning Commission. The commission prunes it and sends the derived number to the finance ministry. The finance ministry, the mobiliser of the fund, suggests further cut according to available resource for the fiscal. After both the finance ministry and the Plan Panel narrow down their differences on the requisite number, the same is presented to the prime minister, who revises the figure and the final GBS figure is reached at. The GBS figure may be enhanced later in the year in revised estimates. “The GBS figure is not static. It may be revised even after a figure is announced in the Budget,” an official said. Depending upon the success and failure of a scheme, the government may also enhance or cut budget for an individual scheme during the fiscal.
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| FIEO suggests setting up exchange neutralisation fund |
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| KOLKATA: Taking cognisance of the adverse impact of rupee appreciation among a vast section of exporters, the Federation of Indian Export Organisations (FIEO) has pleaded with the government to set up an exchange neutralisation fund and fix the value of the dollar vis-a-vis the rupee on a quarterly basis solely for the purpose of exports. FIEO, while placing a charter before the finance and commerce ministries, has also pitched for allowing small and medium exporters to avail of cheaper export credit in foreign currencies. |
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| PETROL, DIESEL PRICES HIKED BY Rs 2 & Re 1 |
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| THE government has finally bitten the bullet after several rounds of deliberations on raising auto fuel prices. Despite the Left’s opposition, it has raised petrol and diesel prices by Rs 2 per litre and Re 1 per litre from February 15. Petrol now costs Rs 45.52 per litre in Delhi (up from Rs 43.52 per litre) while diesel is priced at Rs 31.76 per litre (up from Rs 30.48 per litre).
“In line with the principle of equitable burden sharing, the government has decided on partial restoration in retail prices wherein an increase of Rs 2 per litre for petrol and Re 1 per litre for diesel is being made in the retail selling prices (in Delhi) from Friday,” oil minister Murli Deora said.
The Left parties have predictably demanded an immediate rollback, failing which they have threatened to launch nationwide protests. The matter is expected to be raised in the Budget session, which begins on February 25.
The effective increase in prices of petrol and diesel could be marginally higher than Rs 2 per litre and Re 1 per per litre due to adjustment of local levies. Consequently, in Mumbai, petrol would now be sold at Rs 50.51 per litre (from Rs 48.38 per litre) and in Chennai Rs 49.61 per litre (from Rs 47.44 per litre). Diesel in Mumbai would now be Rs 36.08 per litre (from Rs 34.94 per litre) and in Chennai Rs 34.40 per litre (from Rs 33.30 per litre). “Increases in other locations will be made in line with net increase at Delhi and applicable taxes and duties,” an official in the petroleum ministry said.
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| Punjab traders on bandh to oppose steel price rise |
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| JALANDHAR: Traders in Punjab on Thursday observed bandh protesting against the government inability to put a check the increasing price of iron and steel. "Last two months have witnessed a huge increase in the price of steel up to Rs 8,000 per metric tonne and such sudden increase in the price of raw material is proving to be slow poison for the small scale sector" Federation of Jalandhar Industrial and Traders Associations President Gusrsharn Singh said here. Out of the total goods manufactured in Punjab 25% were consumed in domestic market and 75% of finished goods exported to other countries, the supply of the booked order was adversely affected due to steep hike in raw the material, he said. Due to frequent changes in the prices of pig iron, the industry was virtually on the verge of closure as it was not able to book any order as it was difficult to quote the competitive rates and in the circumstances, especially in export, Singh claimed. Singh suggested that the government should immediately put a ban on the export of iron and steel apart from removing the import duty on scrap. Punjab government should also review its decision of imposing the entry tax on steel scrap from other states, he added. The Centre should again implement the Freight Equalization Scheme on the raw material as it was in the past, he said. The protesters, from 27 associations of industrialists and traders, threatened that if their demands were not taken into account they would hold a protest march in front of Parliament. Later they submitted a memorandum to the Deputy Commissioner. |
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| Punjab to hold fresh auction for sand, gravel quarries |
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| THE Punjab government has decided to hold fresh auction of sand and gravel quarries, for which the notice would be issued by February 20 and the process would be completed by March 31.
The move comes at a time when the government has not been able to achieve its target of collecting Rs 200 crore as stated in the current year’s budget. Collection during the current fiscal so far is around Rs 12 crore according to the Punjab industries department.
“Depending upon the decision on the special leave petition (SLP) pending before the Supreme Court, the quarries will be auctioned,” said director cum secretary industries, Punjab, V K Janjua.The Punjab and Haryana High Court had earlier recommended that the auctions should be held on the khasra number basis.
Mr Janjua added that the department has already collected khasra numbers of quarries to be auctioned, even though it was a difficult task as the river kept shifting its course.
Currently in Punjab, there are more than 650 sand and gravel mining sites for which the government has even decided to club the quarries while auctioning, depending on their feasibility and economic viability. “There is also a proposal to increase the rates of royalty of all minor minerals and to give the contracts for two years instead of three. They arrangement of clubbing the quarries will not only yield better price for the government but it will also help in checking illegal mining from river-beds,” said Mr Janjua.
Politicians and businessmen in the region have a strong hold in the largely unorganized sand and gravel business worth crores in the state. The business is largely concentrated in the districts of Ropar, Mohali. Gurdaspur, Patiala and Ludhiana along the riverbeds of the Sutlej, Ghaggar and Beas.
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| 6 cos attend bidders’ conference for 2k mw talwandi sabo plan |
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| CHANDIGARH: The representatives of six out of nine shortlisted companies for 2,000 mw Talwandi Sabo Thermal Power Project on Thursday participated in the bidders' conference for Request for Proposal (RFP) that was held here. The companies which took part in the meeting were Devona Thermal Power and Infrastructure, Gujarat Paguthan Energy Corp (CLP Power India), Lanco Infratesch Consortium, Larsen and Toubro, Reliance Power and Sterlite Industries India. The representatives of Essar, Jindal Power and Torrent did not attend the meeting but a PSEB official said that these companies were very much in the fray for developing this power project. PSEB had shortlisted nine companies for placing their price bids which were to be submitted by June 18. In the meeting, senior officials of the PSEB answered the queries of companies relating to coal availability, rail connectivity and land acquisition for this project. PSEB had already launched a Special Purpose Vehicle (SPV) Talwandi Sabo Power (TSPL), a wholly-owned company of Punjab State Electricity Board for this project. This project, which is proposed to be developed at Village Banawala in Mansa district, would entail an investment of Rs. 10,000 crore. The land acquisition process for acquiring 2,113 acres has already been announced by the government while the payment of land compensation would start this week and possession of the land would be taken very soon, said an official. Power Finance Corp has sanctioned a loan of Rs.265 Crore to PSEB towards purchase of land for this project. |
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| Cess may part-finance farmer debt relief |
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| 1% CESS ON DIRECT TAXES & 2% ON INDIRECT TAXES PROPOSED
TO PART-finance the biggest debt relief package for farmers, amounting to a staggering Rs 60,000 crore, the government is examining a proposal of introducing a cess on direct and indirect tax collections. The agriculture ministry has proposed imposition of a 1% cess on direct taxes and 2% on indirect taxes. This is expected to yield Rs 8,500 crore per annum. The cess is one of the ways of financing the farmers’ package. It is being examined by finance minister P Chidambaram.
However, the government is caught between the pressure of an impending election and that of catering to debt-ridden farmers. Sources say the government may not be able to introduce a cess in an election year. “The chances are remote,” a source close to the development said.
The proposal should be within the Fiscal Responsibility and Budgetary Management (FRBM) framework. The government could also resort to off-balance sheet accounting and issue bonds instead. It is yet to finalise the modalities of the package.
However, critics feel the cess collections will be a minuscule compared to the requirements of the sector. Gross bank credit to agriculture and allied activities was Rs 2,30,000 crore in March 2007.
The government is planning to create a separate subhead for debt relief for farmers in its Expenditure Budget to account for the Rs 60,000-crore loan waiver package. The package consists of Rs 30,000 crore in NPA writeoffs for 31 debt-prone districts. The Centre also plans to rope in state governments to share 20% of the burden. Banks and farmers will also be a part of the one-time settlement.
The package, expected to be one of the big-ticket announcements in the Budget, will include waiver of overdues from the small and marginal farmers estimated at Rs 25,000 crore. It is understood that more than half of the farmers come under this category. According to estimates, the total overdue in the case of direct agriculture advances is nearly Rs 90,000 crore. While NPAs account for Rs 30,000 crore, the overdue above one year and less than one year account for as much.
All loanees on or before March 2006 may be eligible for the package. Farmers who are ineligible for new loans because they defaulted on two instalments of interest repayment can now take fresh loans. The MoF is also considering involving farmers in the payback of the dues over a period of five years. “The starting point is the write-off of loans which will make farmers eligible for fresh loans. However, it will not mean putting money in the hands of the farmer,” a source said. The scheme will largely involve writing off the unpaid loans of the small and marginal farmers over four years.
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| Punjab exempts wood industry from NOC |
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| THE Punjab government on Wednesday exempted the existing wood-based industries from obtaining NoC from district magistrates. The order would benefit 6,000 wood-based units. This was disclosed by Tikshan Sud, forest minister, Punjab. The Central Empowered Committee (CEC), constituted by Supreme Court has allowed licences for 6,000 units in the state.
Mr Sud said that district forest officers have been directed to issue licences to existing wood-based units (approved by CEC) without insisting NoC from district magistrates.
“The Punjab government is committed to promote wood-based industry to help farmers in getting good return for their farm grown wood and advancement of crops diversification. It was with lot of efforts that the Punjab government obtained permission for licensing these 6,000 wood-based units. All these units were facing lot of problems in getting NoC from district magistrates that was pre-requisite for issuing of licence under existing procedures.” said Mr Sud.
The Punjab forest department has decided to withdraw this condition in public interest with the concurrence of the CEC.
The minister said that besides providing huge relief to these 6,000 units, this decision would give a boost to employment generation in these units and also help the state in generation of extra revenue through taxes that had diminished due to closure of this industry.
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| Punjab footwear industry seeks 4% VAT in budget |
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| CHANDIGARH: Punjab's footwear industry has sought reduction of VAT from 12.5% to 4% with a view to spur its growth which is in doldrums. Describing the present high tax structure as ‘blockade’ in industry's growth, the industry representative in its pre-budget memorandum to Punjab government has sought to keep VAT rate at par with garment industry. |
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| Services export to be redefined |
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| MOVE TO CORRECT PROCEDURAL ANOMALIES
THE government is likely to redefine the export and import of services. The proposal is part of the initiative aimed at correcting procedural anomalies that have gripped services exports leading to large-scale litigation in service tax. An announcement in this regard may be made in the Budget.
At present, export of service is defined as service being used outside India. Sources said the definition was quite open-ended and, therefore, led to increased litigation. The effort is now being to make this definition more specific to prevent tax demands going into litigation.
“A condition exists in the export of service rules that ‘service should be used outside India’ to qualify as export of service. This condition is ambiguous and restricts the benefit. The rules need to be amended to bring clarity,” says Ernst & Young senior professional Bipin Sapra.
For example, a large number of foreign companies set up liaison offices before setting up full-fledged subsidiary. The primary job of this office is to carry out facilitation work and exploratory work for the parent. The service tax department is some cases has raised demands against these liaison offices which deliver service to an overseas customer. Similarly, in the case of money transfer agents, there is ambiguity. Service tax is charged both when the service is used to receive or send funds.
If the proposal goes through, it is expected to give substantial relief to large number of multinationals who operate through liaison offices, commission agents of MNCs and money transfer agents.
The government had carried out changes in the export rules in Budget 2007 as well. However, the change brought about by knocking from the export of service definition “delivered outside India” did not solve the problem completely. This time, procedural simplification including effective dispute resolution is high on government’s agenda because of growing litigation in service tax. Procedural simplification should allow the government to unlock the tax demand accumulating in disputes.
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| Ashwani Kumar urges finmin to support Punjab SMEs |
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| NEW DELHI: Minister of state for industry Ashwani Kumar has urged the finance ministry to provide fiscal support to the rupee-hit small and medium enterprises of Punjab. “The small and medium enterprises in Punjab are facing problems owing to rising rupee and hardening interest rates. I have written to the finance minister to give concessions to the sector,” Kumar told reporters here on Wednesday. |
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| Punjab steel consuming industry to observe bandh |
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| CHANDIGARH: The steel consuming industry of Punjab has decided to observe a complete bandh tomorrow to protest against the spiraling steel prices. "We have unanimously decided to close down our businesses for the whole day tomorrow, to protest the unjustified hike made by major steel producers of the country, which has hit hard the steel consuming industry of the state," Narinder Bhamra, member, All Industries and Trade Forum said. |
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| Budget must address problems of skill shortage |
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| WITH just a fortnight away to go for the Union Budget 2008-09, it is time to give a wish list on what is expected. The Indian economy has been sanguine with GDP growth of 9.25% in 2006-07, inflation below the danger mark and sustainable interest rate. However, over 9% growth recorded in the past three years has not witnessed a commensurate jump in employment especially in the services sector. Since growth is largely services sector driven, the Budget must address the problems of skill shortage especially in the tourism and travel industry. The Prime Minister has been talking of skill development mission. This mission must emphasize on skill development in travel and tourism sector with emphasis on public private partnership. This being the high growth area will increase employability of the youth. The hospitality industry has been severely hit by the devaluation of dollars against rupee. The Budget must also address the problems being faced by the hospitality industry.
The Centre is racing against time to ensure 1.15 lacs hotel rooms before 2010 Commonwealth Games. Haryana is also providing 10,000 rooms to meet the demand. The Centre, in the last Budget, had provided tax benefits for setting up hotels in Faridabad and Gurgaon region. These tax benefits must be extended to the whole NCR region which will increase the construction activities in the whole region especially Sonepat, Rohtak and Rewari.
India, which is a melting pot of diverse faiths, is seeing a phenomenal growth in religious tourism. Kurukshetra in Haryana has to be developed as a major religious spot. his segment, however, is in need of infrastructure especially budget hotels and connectivity to support the boom. Therefore, the budget hotels for the religious places need to be given tax benefits which are essential for tourists to have complete experience. India would need to have world class infrastructure for the promotion of tourism and we must plan regulatory mechanism which will stimulate investments in the infrastructure sector.
The author is minister for tourism, forests, environment, sports & youth affairs
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| PHD Chamber seeks more funds for development |
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| CONCERNED over allocation of adequate funds for developmental activities in Punjab, the PHD Chamber of Commerce and Industry has urged the Punjab government to allocate more funds for new projects and eventually spend 60% of expenditure on development in the last year of 11th plan. The second year of current plan provides an opportunity to consolidate the growth process in tune with the national target of 9% economic growth, says the chamber in its 2008-09 prebudget memorandum.
The chamber feels that the adoption of the Punjab Fiscal Responsibility and Budget Management (Amendment), Act 2007, underlines the commitment of the Punjab government to restore the financial health of the state. Thus, the budget for 2008-09 provides an opportunity to implement an action plan and in this connection the chamber suggests levy of user charges to cover up 50% of cost of public economic and social services, better targeting of subsidies, restructuring of government departments and disinvestment of PSUs & rationalisation of public expenditure.
The chamber feels the SAD-BJP government should follow an establishment and wage policy which provides for the total salary bill relative to revenue expenditure net of interest payments and pensions not in excess of 35% in the terminal year of 11th Plan for which a beginning be made in the next fiscal. This would be a major challenge since the committed expenditure of the government in the last fiscal was 76%.
With 2008-09 Punjab budget to be presented on March 11, the chamber feels efforts towards strengthening public services and utilising public services in most efficient manner be considered. In this direction, the tool of E-governance be employed in a holistic manner and ‘Digi-Gov’ be adopted as a state policy to enhance productivity and efficiency.It cites that Gujarat has implemented this with some success.
With value added tax (VAT) having benefitted the state in terms of sizeable revenues, current target being Rs 5,800 crore, its implementation needs to be fine tuned.
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| FM unlikely to levy a new cess |
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With Polls In Sight, Budget May Spare Taxpayers From More Burden
New Delhi: The shadow of elections on Budget 2008 is likely to see FM P Chidambaram avoid taking recourse to any fresh cesses to fund key schemes and projects despite a high subsidy bill thwarting government’s effort to provide a huge jump in public spending.
Chidambaram, who has almost made it a habit to announce a cess or surcharge in every budget, now collects almost 15% of his total tax collection through various such measures. While cesses and surcharges were estimated to mop up over Rs 77,000 crore this year, the Centre can hope to collect more thanks to buoyancy.
For finance ministers, starting with Yashwant Sinha, these levies have become an attractive tool also because the spoils do not have to be shared with the states, unlike central taxes which are to be distributed in line with the finance commission’s prescription every five years.
Though the FM is set to announce large outlays in social sector projects, largely under the flagship programmes, health mission and Sarva Shiksha Abhiyan, he is somewhat constrained by the Rs 100,000 crore that is being eaten up by food, fuel and fertiliser subsidies. The massive subsidy bill has also crimped options on physical infrastructure, limiting its focus even with regard to roads and ports. Here too, the effort has been directed towards private partnership, which is not viable in areas like tribal belts of central, east and west India or the north-east. There are few alternatives to government spending.
While buoyant revenues have made Budget planning easier, the temptation to opt for cesses to boost spending on infrastructure has not found favour. Consultations between the FM and PM Manmohan Singh have veered around to the view that cesses were not only unpopular — increasing burdens on the “aam admi” would risk a backlash — but should not be overdone either.
Already there is a road development cess on every litre of diesel and petrol and a 2% education cess in addition to the 1% levy introduced last year ostensibly to allocate more resources for secondary and higher education.
Creating more ring-fenced funds would not be a good idea as it could trigger popular disgruntlement, all the more so when there are indications that income tax rates will not be changed. In the event, cesses would be a deeply unpopular option coming on the back of price rise in commodities.
While the government is looking to deliver a boost to education, health and agriculture, the quantum of increases in budgetary allocations might well be restricted. Here, too, officials involved in budget-related discussions said that there was a skew towards social sector spending. It is expected that secondary and higher education and primary health centres will be focal points in government’s planning.
There is a sense of relief in government that the move to introduce OBC quotas in centrally-supported higher educational institutions has been grounded for now by a legal challenge in the Supreme Court. This allows the Budget to concentrate on secondary education and upgrades of regional and vocational institutions.
Officials admit that there is pressure on the fiscal responsibility front despite higher revenues.
Government’s aam aadmi focus has meant that flagship programmes command a major chunk of resources without it being clear how far they have been able to assist in rural asset creation or employment.
Even the plan to extend the National Rural Employment Guarantee Act to all districts will mean at least a doubling of expenditure from Rs 12,000 crore last year. But, political compulsions have ensured that government is unable to effect a Rs 2 and Rs 1 rise per litre of petrol and diesel.
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| US slowdown to hit all, says IMF |
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| Dominique Strauss-Kahn, the managing director of the International Monetary Fund (IMF), warned that emerging economies aren’t immune to weakness in the US and urged countries to relax fiscal policy to cushion the slowdown.
Predictions that the global economy had ‘‘decoupled’’ from the US were overly optimistic, Strauss-Kahn said in New Delhi. ‘‘No region will escape entirely unscathed,’’ he said. ‘‘The industrial and emerging economies are more like two horses yoked together.’’
The IMF chief said strong growth in emerging markets had been based in part on improved economic policies from governments. Trade had also played a role, he said, and this was likely to be undermined
by US slowdown. In the past, he said, a 1% decline in US growth has led to a decline in growth in emerging economies of 0.5% to 1%, depending on trade and financial links to US.
Strauss-Kahn last month broke with IMF tradition and argued for more active use of fiscal policy to offset economic weakness, and he repeated that call on Wednesday. ‘‘Governments may also need to deploy fiscal policy,’’ he said.
‘‘Unless the situation improves, the fiscal authorities in countries with low fiscal risks should prepare to exploit the headroom in a timely and targeted fiscal stimulus that can add to aggregate demand in a way that supports private consumption.’’
He said that a fiscal boost would not be appropriate in all countries, including India, which he said had fast economic growth and high public debt.
Strauss-Kahn conceded to IMF failures in warning about the crisis in subprime markets in the US ‘‘The fund did warn our members and warn the world about the crisis,’’ he said. ‘‘But perhaps we did not warn forcefully enough.’’
He also said the fund did not foresee how the turmoil would spread. ‘‘The recent market turmoil has made it very clear that we need to pay greater attention to the links between real and financial sector developments,’’ he said. ‘‘We stand at the corner of Main Street and Wall Street.’’ BLOOMBERG
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| Industrialists protest hike in iron and steel prices |
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| Jalandhar: Cracking down on the Centre for its indifferent attitude towards industries in the state, industrialists on Monday held a protest march here to oppose the hike in prices of iron and steel.
The industrialists who were protesting against the hike in prices of steel by up to 35% in the country held the Centre directly responsible for price hike.
Addressing the protest march, Gursharan Singh, president of the Federation of Jalandhar industrial and traders association said the industry of the state whose considerable produce-- about 25%, is consumed in the national market and the rest-- 75%, is exported, is on the verge of closure due to hike in prices of raw materials of iron and steel.
He also said the selling price of goods is already low in the international market but with the increase of prices of raw materials, the cost price has increased a lot due to which the industry is finding it hard to survive in the international market.
Gursharan alleged that due to policies of the union minister for iron and steel Ram Vilas Paswan, industrialists are facing a major problem.
He further alleged that Paswan in nexus with major steel stockists and manufacturers had allowed steep hike in the prices of steel.
‘‘How is it possible that the prices of the steel increase by up to Rs 8,000 per tonne and the minister is ignorant about it?'' questioned Gursharan.
Criticizing the pro-agriculture policies of the successive governments at the Centre and state level, Inderjeet Singh, president of Chamber of Industrial and Commercial Units Ludhiana said industries play a vital role in the infrastructure building of the country which should not be ignored by the government.
‘‘For all-round development, government should encourage industries and agriculture side by side,'' added Inderjeet.
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| Punjab continues to face severe power shortage |
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| PUNJAB continues to reel under severe power crisis for the past one-and-a-half month because of the failure of winter rains and significant fall in generation of hydro power.
With the demand for power outstripping the supply by 150-200 lakh units per day, all the sectors including rural, urban and particularly industrial have been adversely affected due to power shortage.
The grimness of the power situation in the state could be gauged from the fact that the Punjab State Electricity Board (PSEB) had been forced to impose power cuts ranging between 6-10 hours in rural and urban areas, resulting into a lot of inconvenience to power consumers.
According to PSEB officials, the demand for power in the state during this winter has reached 950-1,000 lakh units per day but the PSEB could manage to supply just 800 lakh units per day from all of its resources.
Besides dry weather conditions and low generation, the noncompletion of second phase of Lehra Mohabbat thermal plant of 500 mw has also compounded the power woes. “Had this project been completed in the stipulated time, the power situation could have been better,” pointed out an official of PSEB.
They further pointed out that the increase in demand for power from agricultural sector also widened the gap between demand and supply.
Hit hard by the power shortage, Punjab industry has vociferously chastised the state government for not supplying sufficient power to especially power intensive industry even in winter and opined that the power shortage was threatening industrial growth.
“We are already suffering on account of rupee appreciation and spiraling steel prices and now the power shortage has turned out to be a last nail in our coffin,” said Charanjit Singh, a bicycle exporter.
The power situation in agricultural sector is quite worse compared to other sectors where the power cuts have been extended to 8-10 hours per day by the PSEB. The situation got further complicated for farmers because of frost conditions prevailed in this region during 10-15 days back.
“We were advised by experts to apply light irrigation in order to neutralize the impact of frost. But we could not do so because of long hours power cuts imposed by the board, which resulted into damaging the crop,” said a potato grower.
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| India to grow at more than 8%: IMF MD |
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| MUMBAI: Praising India for its macroeconomic policy and structural reforms, the International Monetary Fund on Friday said the country would grow at more than 8% (this year), which was “wonderful,” considering there was forecast of a global growth slowdown. IMF managing director Dominique Strauss-Kahn, while delivering a lecture at RBI, added that emerging market economies like India and China could not remain immune to a global crisis, which has complex linkages. |
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| We do not see any limits to our SME role |
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| Sidbi will continue to motivate banks and institutions to lend more to micro and medium enterprises, CMD RM Malla tells Sangita Mehta
HAVING spent a large part of his career with developmental financial institutions like IDBI and IFCI, RM Malla has recently taken charge of Small Industries Development Bank of India (Sidbi) as CMD. Mr Malla speaks about his future plans for the institution.
Given that private banks and foreign banks are aggressive on building the micro, small and medium enterprise (MSME) portfolio, how does Sidbi plan to position itself to meet competition?
One of the major roles of Sidbi is to motivate banks and others to lend more to SMEs by providing them refinance which contributes above 50% of our total sanctions. We have also taken strategic steps to build the MSME portfolio to showcase that lending to this sector can be done profitably. For speedy delivery of credit with relatively smaller loans, we have leveraged technology and system for faster appraisal methodology by implementing credit appraisal and rating tool developed in-house for loans up to Rs 50 lakh. Cluster-focused business development strategies are being adopted by Sidbi to meet the credit requirements of specific MSME clusters. It helps in mitigating credit risk and gives lender an opportunity to cut transaction cost. Opportunity to finance industrial infrastructure projects in areas of textiles, food processing, etc are being identified. Given limited branch network arrangements like sourcing, referral, cobranding has been made with NBFCs or banks.
Many SMEs now have a wider horizon in terms of overseas markets. How is Sidbi addressing this requirement of such units considering the limitations that it has on funding overseas projects and also products they need?
We are negotiating foreign lines of credit to fund worthwhile projects from any part of the country. An MSME being set up abroad cannot be financed by Sidbi, but if an Indian MSME acquires or sets up a unit abroad and proposes to take loan against its Indian set-up which has the repayment capacity, the acquisition or setting up can be funded in India.
In the past, Sidbi had sought a banking licence. Is that proposal being renewed, especially in the background of other institutions like ICICI and IDBI converting themselves into banks?
Currently, we do not see any restriction on Sidbi as far as the financing and promotion of MSMEs are concerned. And we do believe that there is a role for such specialised institutions for the promotion and development of the MSME sector in the country. Today, we extend almost all kinds of assistance to MSMEs. We are working out various ways of providing umbrella services for MSMEs, including extending working capital facilities. Recently, we have partnered with IDBI Bank for providing working capital to MSMEs by using their technology platform.
The latest initiative which has been talked about is the SME exchange which you are promoting along with NSE and others? What is the update on it and the strategy behind this move?
SME exchange is on our agenda and we are working towards it. The idea is to encourage access to capital market by MSMEs. This will have numerous advantages not only to MSME units, but also enable new private equity and venture capital flow to this sector, as they will find it easier to exit through stock market mechanism which has transparent price discovery mechanism.
What is the status of SFCs? Given that most of them are ailing, how is Sidbi planning to turn around the SFC portfolio?
SFCs have been instrumental in assistance to the first generation entrepreneurs. However, over the years, there has been deterioration of assets. Sidbi as a key stakeholder and lender has taken proactive steps to restructure SFCs through strategic MoUs which is a unique effort on the part of Sidbi. Restructuring strategies inter alia included restructuring of loans, interest concessions, capacity building of SFCs, imparting training on critical areas like Credit Management, ALM, NPA, Risk Management, etc. While these measures are showing results, sustained efforts are required to bring the SFCs back on track.
For a long time, there has been a standoff between IDBI and Sidbi on the price at which Sidbi will acquire shares of SFC from IDBI. What is the status on it?
It is not correct to say that there was a standoff. Both institutions have had their own perceptions and points of view. As the time passed, these have got resolved and the issue has since been sorted out. It has been decided to transfer the equity of SFCs held by IDBI to Sidbi.
What are the challenges that you face at Sidbi being a term lending institution and how do you plan to cope with the same?
Though traditionally a refinancing agency, it started funding MSME projects directly on a progressive way and has increased its retail assistance portfolio.
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| PC may revert to 12.5% rate for dividend tax |
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| 15% RATE HASN’T LED TO HIGHER REVENUES WHILE DISCOURAGING INCOME DISTRIBUTION
A QUEER proposal involving a rejig in dividend distribution tax (DDT) is doing the rounds in the finance ministry. Though the government had raised DDT rates in the last Budget to 15% from 12.5%, the proposal is one of the options being looked at by the government to give some relief to India Inc. A minor tinkering in the DDT rate would not have a drastic impact on the tax collections, but would have a positive impact on the overall sentiment.
Although, the proposal to revert to the earlier rate looks queer, given that the finance minister had talked about vertical equity last year, sources in the government said a decision on this is still ‘very much open’. The proposal is among one of the options being looked at by the government to give some relief to India Inc, a source said. A possible reduction in DDT rates is plausible also because the increased rates has also not led to a significant hike in revenues on this account. More, a higher rate of DDT discourages companies from distributing their wealth among their investors.
Though, the effective rate of corporate tax is much lower at about 19.26% than the statutory rate of 30%, there is pressure on the government to give some relief to the corporate world using the cushion available due to boom in revenue collections. Giving relief on this count would encourage corporates to share wealth with their investors and thereby bring some cheer in the stock market as well.
However, the finance ministry is expected to take a wholistic view and a reduction in DDT rates may come only if the surcharge is left untouched. A final decision on the proposal would be taken at the highest political level. Since, this is the last full budget of the UPA government, the effort is on to give something to all sections of the society including the industry. The government wants to unveil some measures in the budget that would also mitigate the impact of the slowdown in the developed economies like the US.
Finance minister P Chidambaram had raised the DDT rate in the last Budget. “I believe that my tax proposals have brought about more horizontal equity. It is also necessary to improve vertical equity. Having regard to the capacity to pay, I propose to raise the rate of dividend distribution tax from 12.5% to 15% on dividends distributed by companies”, he had said presenting the proposal in Budget 2007.
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| Small trader may get excise amnesty |
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| AN amnesty scheme for the chhota aadmi (small man) who has evaded or short-paid excise duties is on the cards.
The UPA government is looking at a settlement scheme to allow taxpayers who have committed technical offences pay a portion of their excise dues and end litigation. The proposed scheme would cover individuals running their own business and companies. In India, companies with a turnover of Rs 1.5 crore pay excise.
It would be akin to the Kar Vivad Samadhan Scheme, 1998, where taxpayers could voluntarily settle their dues at reduced rates, avoid fines and penalties and get immunity from prosecution.
With over 60,000 cases on technical offences pending in various appellate forums, the proposed scheme could help declog the system and enable the government garner some revenues, a senior official said.
It is reckoned many individuals and small companies commit technical offences as they are not well-versed with excise rules. They are normally charged a penalty for such violations. While the nuts and bolts of the scheme are being worked out, the idea is to give relief in cases where the disputed excise duty is around Rs 10,000. It could cover service tax disputes as well, though a final view is yet to be taken.
The proposed scheme will ease the workload of tax administrators and enable them to focus on large excise evasion cases. A formal announcement is expected in Budget 2008.
The Kar Vivad Samadhan Scheme, launched by former finance minister Yashwant Sinha in 1998, was more broad-based as it was open to all taxpayers who had direct and indirect tax arrears. Those who faced prosecution charges for concealing income were debarred from the scheme.
However, the response was lukewarm and the government realised a modest Rs 400 crore from tax payers. The Comptroller & Auditor General of India (CAG) criticised the scheme, saying it had failed to declog the system and only provided an escape route to debtors.
An amnesty scheme, like the Voluntary Disclosure Incentive Scheme (VDIS), was perceived in some quarters as one that penalised honest tax payers and rewarded dishonest ones.
The proposed scheme would be designed carefully to avoid such criticism. Safeguards are set to be in place to check misuse. “It’s a good idea to settle the minor cases through a compounding mechanism. Litigation is a time-consuming process in our country. By design, court procedures are slow. The institution of Settlement Commission is a good mechanism to get the blocked money faster. I think the finance minister should give a second look to restore the coverage of Settlement Commission to excise and Customs duty evasion cases. It is no good to wait for 10 years to collect the money when the commission can help you get it right now,” finance ministry former joint secretary T R Rustagi said.
Excise revenues, which used to be the largest contributor to the tax kitty, now account for less than a quarter of the total budgeted revenues of Rs 5,48,122 crore. The dip has been due to a host of factors including area-based and SSI exemptions. It is looking at various ways to step up revenue collection from excise and a settlement scheme could be a small part of the solution.
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| Inflation may rise to 4.5% by March end |
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| MUMBAI: Inflation could rise to around 4.50% by March end fuelled by firming food and increasing fuel prices, but will not attain alarming proportion, leading economists say. A hike in domestic fuel prices, if effected, could push inflation up further, a few economists said, though none expected it to spiral alarmingly. Inflation, though still benign, has risen by over 1%, from 3.01% in end-November to 4.11%, primarily fuelled by firming food and globally-high fuel prices. |
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| Govt may consider FDI in specific retail sectors: Nath |
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| NEW DELHI: The government may allow foreign direct investment for specific sectors such as electronics and sports goods in retail if an expert study going into the issue foresees no impact on the neighbourhood mom-and-pop stores. “We are expecting the ICRIER report on retail by February end. Certainly, we can be more flexible in retail areas like electronics and sports goods. However, I want to see the whole report and make sure what I believe is correct and is backed by a report,” commerce & industry minister Kamal Nath said. |
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| PFRDA expects pension money transfer to MFs by April 1 |
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| NEW DELHI: Paving the way for investing a part of Rs 4,500-crore retirement money of government staff in capital markets, interim pension regulator PFRDA expects the Centre and 19 states to transfer the money under New Pension Scheme to three fund managers by April 1, 2008. “We are hopeful the NPS contributions of the employees of the central government and 19 state governments would be transferred to the fund managers by the respective governments by the beginning of next financial year,” PFRDA chairman D Swarup said here. |
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| FM may ask banks to raise credit, lower interest rates |
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| NEW DELHI: With economic growth likely to slow down to 8.7% this fiscal, public sector bank heads are expected to come under pressure from finance minister P Chidambaram when he meets them on Tuesday to raise lending to the manufacturing sector and cut interest rates. “Some public sector banks have reduced interest rates, but other banks should also bring down interest rates considering there is ample liquidity in the system and deposit rates have come down,” official sources said.
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| Report on relief for Re-hit exporters expected this week |
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| NEW DELHI: The Rangarajan Committee, which is considering relief for the rupee-hit exporters, is likely to submit its report to the Prime Minister’s Office this week, suggesting benefits that may be announced in the Budget. Issues like service tax refund for more sectors and sunset clause on 100% EOUs are also under examination by the panel.
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| Centre ropes in Unido to map SME clusters |
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| AN EXTENSIVE exercise to map the large number of small & medium enterprises (SME) clusters in the country is likely to begin soon. The department of industrial policy & promotion (Dipp) has approached Unido — the UN agency for promoting economic development in developing countries — to map SME clusters in the country with the primary objective of better realisation of their export potential. Unido might turn the exercise into a more exhaustive one by roping in statistical organisations NSSO and the CSO, and gathering data for other interested parties like the Small Industries Development Bank of India (Sidbi).
Speaking to ET, Unido South Asia regional office head Philippe Scholtes said that the DIPP had recently approached it to carry out the project. The level of ambition of the project was yet to be determined. “We will identify clusters all over the country, look at the products that are being manufactured and also identify the markets where they are being sold,” he said. Once the exercise of data collection begins, Unido could expand its objectives depending on the institutions that want to use the data, Mr Scholtes said.
Sidbi is already in talks with Unido about how the mapping can help the bank in its objectives of getting to understand the financial requirements of the SME segment. “Sidbi wants to see if it could use our survey to find out more about how SME clusters source their fund,” Mr Scholtes said. The Bureau of Energy Efficiency (BEE) and the Industrial Standard Organisation are also interested in the exercise. “The BEE wants to understand the pattern on energy consumption in SMEs,” he said. At the moment, there is not much data available on Indian SMEs.
Unido plans to build on the existing data collected by the NSSO and the CSO by employing field workers to collect data on various aspects of SME clusters including production and employment. “I have prepared a project plan which has been submitted to the DIPP for approval,” Mr Scholtes said.
Unido is also open for roping in the NSSO and the CSO in the exercise to take advantage of the institutions’ experience and workforce.
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| Inflation soars to 5-month high of 4.11% |
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| A SPIKE in the price of food items pushed up wholesale price inflation to a five-month high of 4.11% in the week ended January 26. It stood at 3.93% in the week before. Inflation was ruling at 6.69% in the same period a year ago. The wholesale price index rose 0.2% to 217.6 points from 217.1 in the previous week, an official release said on Friday.
Meanwhile, the provisional figure for the week ended December 1 has been revised to 3.89% from 3.75%. Inflation is fuelled mainly by a rise in food articles such as maize, moong, wheat, condiments and spices and bajra.
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| Export of non-basmati rice banned |
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| NEW DELHI: The Centre has prohibited all exports of non-basmati rice with effect from February 7. While the government had already banned the export of non-basmati rice in October last year, some exports were being allowed to honour prior commitments of exporters undertaken against valid irrevocable commercial letters of credit was being allowed. However, the fresh notification of the directorate general of foreign trade prohibits exports against such letters of credit also. |
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| PM’s panel on manufacturing urges for sops in Budget |
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| NEW DELHI: The prime minister’s panel on the manufacturing sector is understood to have suggested urgent fiscal measures in the Budget to reverse deceleration in growth in several sectors, including textile and leather. The high-level committee, headed by National Manufacturing Competitiveness Council chairman V Krishnamurthy, has submitted its report to the Prime Minister’s Office. |
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| Nath sure of exports reaching $200b in 2008-09 |
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| BANGALORE: Even as India struggles to meet the export target of $160 billion in the current fiscal, Union commerce minister Kamal Nath is confident that exports would touch $200 billion in 2008-09. Speaking to the media on the sidelines of an FKCCI and FIEO meeting, he said, “we would be announcing (the export target) during the end of March but I think there should be 20% growth,” he added.
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| Reservation era nears an end for small units |
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| Govt Knocks Off 79 Items From SSI List
New Delhi: Almost 17 years after the process of reforms began in India, one of the last remaining legacies of the licence-permit raj era is now almost obliterated. The commerce and industry ministry on Friday ended the monopoly of small-scale units on 79 items, leaving just 35 on the reserved list that once had as many as 873 items.
While industrial policy reforms began with the new industrial policy statement of PV Narasimha Rao in July 1992, governments remained wary of intruding on the politically sensitive issue of reservation for small-scale industry (SSI) till the end of the 1990s.
Thus, while at the turn of the millennium the number of items reserved for SSI units had come down from its peak of 873 in 1984, well over 800 items remained on the list.
Since 2002, the scenario has changed dramatically. In these last seven years, around 790 items — including things like farm equipment, toothpaste, ice cream, footwear, detergents and even garments — have been knocked off the list.
Thus, for the first time in over 40 years, there are today as few as 35 items reserved for SSI units. When the policy of reservation was first introduced in 1967, there were just 47 items reserved for smallscale manufacturers. However, what was till then an administrative decision was given legal backing by an amendment enacted in 1984 to the Industries (Development and Regulation) Act, 1951. That year also saw the number of items reserved reaching a peak of 873.
The policy of reservation meant that it was routine in the late 1990s and early years of the millennium for visitors to Nirman Bhavan to see flocks of anxious businessmen clustering in a narrow corridor on one of the upper floors, waiting to plead with babus in the SSI ministry to ensure that their sector was kept within the ambit of reservation so that they could escape competition from large industrial houses. Friday’s announcement effectively reduces this to a fringe show.
Reservation means that units producing the reserved items cannot go beyond a stipulated cap on investment in plant and machinery.
In the old days, therefore, it was standard practice for mass consumption items covered by the reserved list to be farmed out by large marketing companies to dozens of small units, thereby negating economies of scale.
What it also meant was that some companies resorted to manufacturing completely new class of products. So, if ice cream was reserved for small scale units, a large player could always produce, say, ‘frozen desserts’.
Apart from the steady trickle of dereservation over the last decade, one of the measures taken to get over this problem without confronting the political problems involved was to allow foreign investment even in reserved items with the caveat that such units would have to fulfill an export obligation. For players who were already manufacturing items that were suddenly reserved in 1967, the government came up with what was carryon-business licence which capped their capacity, and fixed the location of the plant and the goods produced.
Friday’s derservation means that pastries, hard boiled sugar candy and tooth powder can be manufactured by large units too. Similarly, buckets, paper bags, paper cups, envelopes, letter pads, paper napkins might not be manufactured only in small units but also in specialised factories. The same for sesame and rapeseed oil, which are not solvent extracted, a host of chemicals and dyes paints be it distempers.
Electrical goods, which includes geysers, hot air blowers and toasters too are out of the reserved list, as are ballpoint and fountain pens.
What about the remaining 35 items? The government is keeping its fingers crossed. “If industry is willing, we will do away with the reserved list altogether,” said a senior official in the ministry.
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| Inflation breaches 4%, fresh worry for govt |
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| New Delhi: Raising fresh hackles for the government in an election year, there was bad news on the economic front for the second day in a row with inflation breaching the 4% mark after nearly five months. Inflation based on wholesale price index (WPI) touched 4.11% for the week ended January 26, from 3.93% in the previous week and 6.69% in the corresponding period last year, as both primary and manufactured goods became costlier.
Had it not been for the status quo on petroleum prices, with the government barring companies from raising petrol, diesel, cooking gas and kerosene rates, the situation would have been worse with inflation estimated to be at least 5%, if not higher. “The government has understated numbers by 1-1.5% by keeping oil prices unchanged,” said an economist.
What’s worse is that the price situation could only get grimmer in the coming days if Central Statistical Organisation’s projection of 2.6% rise in farm production proves correct. Economists said it will put further pressure on food prices as local output will be low, adding to already tight supply woes, while internationally commodity prices are rising.
In addition, oil minister Murli Deora said in Bangalore on Friday that the government now needs to increase retail fuel prices, though moderately, in addition to cutting taxes to lower the burden of record crude costs on state-run firms.
The only silver lining seems to be coming from the industrial sector where investment rate, according to CSO estimates, have jumped further, and is expected to increase demand, ease supply constraints and lower prices.
At present, inflation is within RBI’s comfort zone of under 5% and also within its medium term target of 4-4.5%.
“Inflation is coming back to where it was initially expected to be. We maintain the view that inflation should be between 4.0-4.5% by the end of the financial year,” said Shuchita Mehta, chief India economist at Standard Chartered Bank. “We still remain concerned over high agri-commodity prices as well as local crude oil prices which might keep the central bank on hold for an extended period of time despite weakness on the global economic front.”
On Thursday, CSO said the economy was expected to grow 8.7% this year prompting those like DK Joshi, principal economist at rating agency Crisil, to predict a tougher job for RBI and the government due to the downward pressure on growth, thanks to the scenario in the US, and an upward pressure on prices.
Even the Prime Minister’s Economic Advisory Council had suggested caution on prices due to rising global oil and food prices. For the week ended January 26, Price of salt moved up 5%, while maize, moong and wheat too were more expensive.
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| Growth set to ease as industry, farm misfire |
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| THE Indian economy is sustaining its growth momentum, with the Central Statistical Organisation forecasting growth in the current fiscal at 8.7%. This is slower than the 9.6% growth achieved in 2006-07 and 9.4% registered in 2005-06, but on par with the average annual compound growth rate achieved over the four years of high growth commencing in 2003-04.
Relatively slow expansion in industrial and farm output is responsible for the slowdown in growth.
What is truly remarkable about the national income figures put out by the CSO is the investment rate, which has climbed to a historic high of 38.5% of GDP. This augurs well for future growth prospects of the economy. And savings are projected to grow to 37% of GDP, another historic high. The CSO has revised upwards the savings and investment figures for the past two fiscals as well, points out ICRA chief economist Saumitra Chaudhuri.
The CSO figures also reveal that economywide price rise would be limited to 4.5% for the year as a whole. The forecast also brings out the real slowdown in exports. In rupee terms, export growth would be just 8.6%.
The CSO’s figures are marginally lower than the forecast by the Prime Minister’s Economic Advisory Council in its report which said the economy would grow at 8.9 % this fiscal. While both forecasts estimate non-farm GDP growth to be 10.1%, CSO’s farm growth estimate, at 2.6% against 3.8% last year, is sharply lower than the EAC’s forecast of 3.6%. There is every likelihood of this estimate being revised upwards, an optimism shared by the finance minister.
Mr Chidambaram on Thursday sounded confident that the economy will grow at a rate of “close to 9%” this fiscal. “I am reasonably confident that figures may be revised and economy will grow at close to 9%. The Central Statistical Organisation figures are lower than what I had anticipated. We are disappointed but not despondent,” Mr Chidambaram said. Poor figures are mainly because of projected low rate in the agriculture sector, he said.
GDP at factor cost at constant (1999-2000) prices in the year 2007-08 is likely to attain a level of Rs 31,14,452 crore as against Rs 28,64,310 crore in 2006-07,” the advance estimates of national income released on Thursday said. The GDP grew at 9.1 % during the first half of this fiscal. It grew at 9.3 % in the first quarter and 8.9% in the next. The advance estimates showed a further moderation during the rest of the year. The total value of the Indian economy at current market prices stands at Rs 47 lakh crore ($1.175 trillion) The per capita income at current prices this fiscal is estimated to be Rs. 33,131 as compared to Rs. 29,642 last year, showing a rise of 11.8%. There is 20% increase in the estimated gross fixed capital formation at current prices this fiscal at Rs. 16,25,914 crore as against Rs. 13,46,501 crore last year.
Economists attributed the slowdown to higher real interest rates and a slowdown in consumer demand. “But this is not a collapse. The drivers of India’s growth such as growth in capital formation and infrastructure up-gradation, still remain intact,’’ Lehman Brothers economist Sonal Varma said. In addition to the moderation in manufacturing sector which was expected, what is worrying experts is the slowdown projected in the farm sector despite a good monsoon. The advance estimates revealed that agriculture and allied activities will likely grow at a much slower rate of 2.6 % during the fiscal, against 3.8 % in the previous year. “Agriculture is the only major worry. Slowdown in agriculture growth does not augur well for prices of farm products,” CRISIL Principal Economist D K Joshi said.
As per official statement, manufacturing growth is likely to come down from 12 % last fiscal to 9.4 %. Mining and quarrying sector is estimated to grow at 3.4 % as compared to 5.7 % in the previous financial year. Among the booming services sector, trade, hotels, transport and communication activities are likely to expand by 12.1 % from 11.8 %. However, finance, real estate and business services are estimated to grow at 11.7 % as against 13.9 %.
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| Rising Re to help India Inc profit 12-15% more: Assocham |
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| NEW DELHI: Industry body Assocham said strong rupee against dollar will increase the profit margins of India Inc between 12-15% in long run as exporters are bringing in new technologies with cheaper imports for expanding their existing capacities. “The sectors that are likely to gain a great deal with rupee becoming stronger include petro and petro products, engineering goods, gems and jewellery, drugs as these have imported inputs,” Assocham president Venugopal Dhoot said in a statement while releasing a report on “Impact of Rupee Appreciation on India’s Exports vis-a-vis Economy” here on Thursday. The chamber has recommended in its report that if companies are able to expand their capacities in the rupee appreciating scenario, they would have positive benefits in the long run because demand for Indian products in developed countries is not going to slowdown. |
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| Slowdown: Economy to grow at 8.7% |
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| New Delhi: Just when you were getting used to 9% growth, the government’s statistics office on Thursday said GDP would rise by 8.7% in the current financial year, compared with 9.6% last year and 9.4% in 2005-06.
While Reserve Bank of India’s interest rate hike to keep inflation under check is expected to see the manufacturing sector grow by 9.4% in 2007-08, compared with 12%
last year, construction activity is also likely to slow down. But the blame mainly fell on the usual suspect — agriculture — with farm output projected to rise by 2.6% this year, as against 3.8% in 2006-07.
The Central Statistical Organisation’s estimates, however, have already been questioned, with finance minister P Chidambaram saying the agriculture ministry, which released crop output estimates on Thursday, “not sharing the assessment that agriculture growth will be only 2.6%”.
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| FM still betting on a 9% performance |
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| New Delhi: While lower than estimated agriculture growth has pulled down overall rise in GDP, FM P Chidambaram pointed out that agriculture ministry had estimated production of most crops would touch record levels this year.
Appearing satisfied with the double-digit services growth and 9% rise in industrial production, he said, CSO, which had estimated that farm output rose 3.7% in first half, may have been conservative.
FM pulled out estimates released by CMIE, National Council for Applied Economic Research and rating agency Crisil — which projected farm sector growth between 3.4% and 3.9% — to argue his case. PM’s Economic Advisory Council (EAC) had, however, been conservative, forecasting farm sector growth at 2.5%.
CSO officials said, like every year, they had used the agriculture ministry’s data for area under cultivation. “You have hard data for eightnine months and the projection is on the basis of past trends. There is already talk of poor winter rains affecting crops in north India and it is difficult to say what the rabi crop will be like. But that has not been factored (in CSO’s estimates),” an official said.
Barring RBI, most agencies had estimated that the economy would grow by nearly 9% this year. While RBI estimated 8.5% growth, CSO’s estimate is closer to IMF’s 8.75% projection.
Chidambaram appeared optimistic of growth being closer to 9%. “I am a bit disappointed but not too despondent. The final news will be better because these are conservative estimates... Let’s see how agriculture turns out. A 3.1% agricultural growth will mean 9% (GDP) growth,” he said.
But if the 2.6% farm growth projection proves to be correct, it could mean bad news on the price front. “This will put further pressure on prices since domestic food stock is not strong and globally, food prices are rising. There will be a downward pressure on growth due to global factors and upward pressure on inflation due to food and oil prices,” said Crisil’s DK Joshi.
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| Budgee arrives in Delhi in style |
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| BRAVING the mist and the cold Mr B has started his tour of the capital on Wednesday. Don’t get confused, Mr B is Budgee - ET’s new rock star masquerading as a Piggy Bank to collect Budget wish list from Delhiwallas which will be then presented to the finance minister for his Budget exercise. On Thursday, Budgee will feel the pulse of the Gennext, you can meet him in Delhi University and Amity University Noida from where it will zip off to HCL Technologies in Noida to mingle with the techies. If you want to say hello to Budgee in the morning, come and join the fun at 10, Rouse Avenue near ITO when he comes calling on the Burmans of the Dabur Group.
On Wednesday Ranbaxy baron Malvinder Singh, multiplex king Ajay Bijli, the big boss of Shell Vikram Mehta came out from their respective corner rooms to say hello to Budgee. He rocked the the hip and happening malls of Delhi and Gurgaon. Who knows, along with that of the corporate chieftains, the wish list of the college girl at Priya complex — for cheaper LCDs — may actually come true in the coming Budget.
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| KKR picks up 2.5% stake in Bharti Infratel |
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| PRIVATE equity firm Kohlberg Kravis Roberts & Co (KKR) has picked up 2-2.5% stake in Bharti Infratel for $250 million, reports Our Bureau from New Delhi. Infratel is the hived-off telecom tower arm of Bharti Airtel. This is the second major placement in Infratel.
In December-end, a clutch of international investors lead by Singapore government’s investment arm Temasek had picked up 8-10% stake in the company for $1 billion. Other global investors who were part of that deal were Investment Corporation of Dubai, Goldman Sachs, Macquarie, AIF Capital, Citigroup and India Equity Partners.
This takes the total private placement made by Bharti Infratel to $1.25 billion. Bharti Infratel owns over 20,000 sites across the country.
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| Net, e-trade players eye service tax exemption |
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| AFTER the IT industry, it’s the Internet and e-commerce players who are demanding tax sops. In a representation to the finance ministry, the Internet and Mobile Association of India (IAMAI) is demanding a five year moratorium on service tax levied on Online Services and Advertisements. Currently, the industry is paying a tax of 12.36% on online ads and services.
“The total industry size including search, banner and classified is not more than Rs 700 crore and the quantum of service tax is, therefore, about Rs 90 crore. It’s not a large sum for the government, but a sizeable one for the industry, the exemption of which may help it grow,” says IAMAI president Subho Ray.
Larger companies avail of this medium for customer acquisition but the lower cost and targeted reach makes it the primary vehicle of advertising for SMEs and individual.
Says Times Internet (TIL) director Upen Roop Rai: “The industry is at a nascent stage. Any tax sop from the government will definitely boost the industry. On the e-commerce front, any benefit will help the small industry to get into transactional mode.”
The classified sites in India also offer individuals their basic services free unlike the print media. For example, hosting a curriculum vitae on a job site does not cost any money to an individual.
Adds Smile Interactive Founder CEO Harish Bahl: “As in the US, waving off taxes on ecommerce goods will not hurt regular retail businesses. It will increase business in remote places or in rural areas lacking in infrastructure.” Smile Interactive has incubated e-commerce businesses like Quasar media, Zoomtra.com and Tyroo which has Yahoo.com as a JV partner.
“Since the export component is minimal, it does not enjoy fiscal benefits like the software and services and BPO industry,” Mr Ray adds. The association has members such as Indiatimes.com,
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| Retail wants service tax load off rent |
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| As rising rents threaten to derail retail, players want the Centre & states to take a friendlier view. Hospitality sector sees room for creating tourism infrastructure while the country’s second-largest job creator wants a reality check on taxes.
THE hype around retail is reaching a crescendo with the organised play projected to touch $30 billion by 2010 from $14 billion now. But retail, the world’s second oldest institution after family, is grappling with an array of serious issues threatening the big picture.
With consumption at the heart of India’s growth story, retailers expect the Centre to impress upon the states to take a broader view of the sector. With the states having a major say in the affairs of this sector, the Centre’s role is largely to facilitate ‘the institutionalising of retail’, they said.
However, there are issues such as removal of the 12.36% service tax on commercial rentals where the FM can play a role in the Budget. With soaring real estate rentals threatening to derail the growth engine, many retailers believe the imposition of service tax in last year’s Budget needs to be reviewed.
As real estate component accounts for nearly 40% of the operating costs for fashion retailers, many international brands are delaying their India foray in favour of markets like Russia.
International retailer Zara, which is unveiling aggressive Russian plans, is a case in point. Mall rentals across the country have jumped 30-45%. The picture is not different for a large format grocer, who works on thin margins. “With lease rentals at current levels it is impossible to sustain a large chain of stores. A softer tax regime is needed, considering we are the largest tax contributor to the government in many states,” said Big Bazaar CEO Rajan Malhotra.
Retailers argue that states need to de-couple the sector from commercial real estate play in tax and regulatory treatment, like the case of differential energy bills for retailers in Mumbai. A different FSI or plot coverage rule for retail would not only soften the rising rental blow immediately, but also go some way in institutionalising the sector. Not surprisingly, it finds expression in retailers seeking ‘industry status’.
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| Tax & FDI top realty wish list |
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| THE real estate industry, the second largest employment generator in the country after agriculture, is awaiting the Budget with a list of expectations. Finding a place on the list are simplification of the incometax structure, reduction in service tax and clarifications over FDI related issues.
The industry would be tracking FM’s policy announcements for ushering in sectoral concepts such as rental housing and real estate investment trusts (REITs) to make housing more affordable for the common man and help the industry raise funds for development.
The Confederation of Real Estate Developers’ Association of India (CREDAI), the apex body of builders in India, has asked for a total restructuring of income-tax provisions currently governing the real estate sector.
“We have asked the government to have a relook into various I-T Sections like 80-IB (10). Similarly, various sops given in the Income-Tax Act for facilitating affordable housing and real estate need to be examined. The government should also look into reducing various levels of taxation at Centre, state and local governments,” Rajnikant Ajmera, president, CREDAI said.
“To further drive FDI momentum in Indian real estate, and to further encourage foreign investors and developers, industry experts suggest the lowering of the minimum threshold of FDI below 50000 square meters. This would allow FDI to feature in inner city projects,” Anuj Puri, chairman and country head JLLM said.
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| Mohali-Baddi and Mohali-Phagwara expressways planned |
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| Both Projects To Require Rs 4,821 cr Investment
VEHICULAR movement around Mohali-Baddi and Mohali-Phagwara in Punjab is all set to ease, become safer and faster with the proposal to build expressways.
Two Expressways one around Mohali covering Lalru-Mohali-Baddi with a proposed length of 65.3 km and another covering Mohali-Phagwara with a proposed length of 99 km are being conceptualised. Punjab Infrastructure Development Board (PIDB) has requisitioned the services of Feedback Ventures as a project developer on retainership basis for the Mohali-Phagwara expressway. and for the Lalru-Mohali-Baddi Expressway, IL&FS has been chosen as project developer. These two companies will help devise the projects right from the documentation stage till the time the contract is awarded to the private builder, to be executed on build, own and transfer (BOT) basis. A private player would be involved to execute the projects along with the requisite investment to be recovered later from toll tax.
Talking to ET here on Tuesday, PIDB MD Sukhbir Singh Sandhu indicated that the allignment for both the projects had been done and the next process would be the acquisition of land. He said the exp r e s s w a y around Mohali covering Lalru-Mohali-Baddi would involve an investment of Rs 2,660 crore of which cost of 1,497 acre land is estimated to be around Rs 1,205 crore. Around 3 km of the expressway will fall in Himachal Pradesh.
Similarly, the cost of the Mohali-Phagwara Expresway will be Rs 2,161 crore of which cost of land around 2,470 acres is estimated around Rs 500 crore.
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| UK to set up visa centre in Punjab |
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| BRITAIN has offered to open a visa centre in Punjab to facilitate peoples to immigrate to the UK legally. This would check the growing trend of illegal immigration to the UK, said the United Kingdom minister of state, home office, Liam Byrne while speaking at a luncheon meeting hosted by Punjab chief minister Parkash Singh Badal here on Tuesday. The meeting was held in honour of the visiting British delegation led by Mr Byrne.
Mr Byrne said that his government would initially open a visa centre either at Chandigarh or Jalandhar and later it would be converted into a full-fledged consulate. He also evinced keen interest to extend cooperation to the Punjab government in upgrading technical skills and knowledge through experts and teachers exchange programmes in primary and secondary education with a special focus on the student exchange programme to acquaint the students of India and the UK with one another's cultural and social background.
Appreciating the initiative of Mr Byrne for opening a visa centre in Punjab, Mr Badal said that it would prove to be a milestone in further improving the bilateral ties between the economies of the UK and India besides strengthening the bonding between the Punjabis here and their brethren settled in Britain. He said that Punjabis had a strong presence in the UK besides Canada, the USA and Italy and it was satisfying to observe that Punjabis had always contributed immensely towards the economic prosperity of the land of their adoption.
Mr Byrne assured the chief minister that Britain was looking forward for collaborating with leading universities and educational institutions from Punjab with some of its reputed institutions in the UK. He also urged Mr Badal to send a delegation of educational experts and academicians to explore the ways and means in this regard. Taking part in the deliberations, Punjab chief secretary R I Singh asked Mr Byrne to facilitate the Punjabi youth to be suitably employed in the ventures of IT, industry and agro processing units in the UK.
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| STPI benefits may live beyond 2009 for SMEs |
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| PMO EXPECTED TO PITCH FOR SPECIAL DISPENSATION TO SMALL EXPORTERS
SMALL and medium enterprises (SME) in the software export business may continue to enjoy income-tax benefits for some more time. The Prime Minister’s Office (PMO) is expected to pitch for a special dispensation to small exporters when the tax breaks available through the Software Technology Parks of India (STPI) scheme lapse in 2009.
An indication to this effect has been given to the information technology ministry which has been insisting that the sunset clause for STPI tax sops should be scrapped. The concession to SME software exporters is to compensate them for rupee appreciation.
The Prime Minister’s Office (PMO) is likely to ask the finance ministry to consider extending income tax sops to small and medium companies in the software exports. It is felt that the finance ministry may not be averse to a special dispensation for small exporters instead of allowing tax breaks for everybody. Telecom and IT minister A Raja had met Prime Minister Manmohan Singh in this regard.
The PMO’s intervention was sought as the finance ministry initially did not favour a proposal from the department of information technology (DIT) for retaining the tax breaks for STPI units beyond 2009.
Mr Raja has apprised the Prime Minister about the losses that STPI units would face on expiry of the STPI scheme. Dr Singh’s attention was also drawn to the fact that end to the tax sops may discourage investments and lead to brain drain yet again.
Sources in the government said that the finance ministry may agree to the middle path of retaining tax incentives only for the small and medium companies. The extension may be for a period of another three years which the finance ministry would do by amending the sunset clause under the scheme.
“Big companies like Infosys and Wipro no longer need any promotional schemes to get ahead and this has been mentioned by many including N Narayanamurthy of Infosys. The smaller ones, however, need some support to come at par,” a senior official in the DIT said.
While big companies have been able to hedge against the 15% appreciation of the rupee against the greenback, SMEs have been hit hard.
Nasscom had sought 10-year extension for the tax sops saying that domestic as well as multinational IT companies have started making investments in other countries fearing expiry of the STPI scheme. “We are concerned that both MNCs and Indian companies are beginning to increase their spread of investment to other destinations,” telecom and IT minister A Raja told ET.
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| US exports to India leap as trade gap shrinks |
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| US EXPORTS to India increased by a sharp 75% in the first eleven months of 2007 to $15.85 billion, bringing down the trade gap between the two countries. India’s exports to the US, on the other hand, rose by 10.9% to $22 billion in the January-November 2007 period, compared with exports in the same period of the previous year.
US exports of aviation & aircraft to India increased 33.85%, engineering goods & machinery (including electrical) went up by 19.73% while precious stones & metals recorded growth of 11.10% in the first eleven months of the fiscal.
Indian diamonds & precious stones exports to the US went up by 26.12%, textiles by 22.88%, pharmaceutical products by 3.25%, electrical machinery by 5.07%, organic chemicals by 4.92% and machinery by 4.61% during the period.
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| India, Malaysia begin negotiations on CECA |
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| KUALA LUMPUR: India and Malaysia on Monday began negotiations on opening their markets through an agreement that will not only cover trade in goods and services but also investment. The first meeting of the trade negotiating committee on signing a comprehensive economic cooperation agreement (CECA) started here. The TNC is also the co-chair of the India-Asean Free Trade Agreement negotiations. Malaysia, which is keen on a CECA with India, has taken a tough stand in the India-Asean talks demanding more market access for its palm oil. |
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| Gulf offers key market for Indian textiles: Vaghela |
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| DUBAI: With the Indian government taking a series of initiatives to boost its textile exports, the Gulf region could emerge as an important destination for the country’s products, Union textiles minister Shanker Sinh Vaghela said. Mr Vaghela, heading a delegation of the textile ministry and industry, is on a four-nation tour to Turkey, Greece, Egypt and the UAE to promote Indian textiles abroad. |
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| 2% export sop may stay |
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| COMPANIES in the leather, textile, marine and handicrafts sectors may be in for some extended support. The government is likely to continue the 2% subvention in export credit for these sectors by another year in the forthcoming Budget. The current interest rate subvention facility is slated to expire by the end of March.
There is a lot of pressure on the finance ministry to extend the sop as exporters of the identified sectors are continuing to feel the pressure of an appreciating rupee. Though the finance ministry was initially against extending the scheme, it has also veered around to the view that exporters in these sectors need to be supported for some time.
The recent rate cut by the US Fed is expected to mount pressure on the rupee and the government does not want to take any chances, particularly in a year which will witness elections in 10 states. The sectors most hit by the rupee appreciation are job-intensive sectors like handicrafts, leather and textiles.
The interest rate subvention for the four sectors will continue to be subjected to pre-requisites. The interest rate should not fall below 7%, which is the priority lending rate for agriculture, following the subvention. The average export credit interest rate ranges between 9% and 9.5%.
Ministry sources said all four sectors had witnessed negative growth in exports during the current fiscal. While certain sectors of the leather industry, like footwear, continued to grow marginally, other sections of this employment-intensive business suffered a set-back in the first three quarters of the fiscal.
It seems unlikely that the exporters’ demand of extending the interest rate subvention to other sectors will be met. “The four sectors already getting the benefit have been identified as the ones which need to be supported the most. The government does not have the resources or the inclination to provide the sop across the board,” an official said.
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| Budgetary support likely to jump 17% |
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| THE last full Budget of the UPA government is likely to see an estimated 17% jump in the gross budgetary support (GBS), providing for over Rs 2,39,000 crore as public expenditure. It is understood that the Prime Minister Office (PMO) has in-principle approved the final fund allocation from the budget. The focus of the budetary support will clearly be on the social sector.
Sectors like railways, urban infrastructure and power — which are capable to generate their own resources — would have to bear a cut in their share to enable diversion of funds to priority areas like health, education and rural development. The allocation of funds assumes significance in the light of elections next year.
Even as ministry-wise allocation of funds is being worked out by the Planning Commission, its is expected that certain ministries would get the lion’s share. The list includes names of agriculture and cooperation ministry, ministry of health, ministry of women & child welfare, higher education, ministry of social justice & empowerment, ministry of tribal affairs, ministry of urban employment & poverty alleviation. They may get a double digit growth in their budgetary allocations for 2008-09 compared to current year.
According to an official source, the government has almost finalised the GBS for 2008-09 which is expected to be 16-17% up from the current year’s figure of Rs 205,100 crore. The finance ministry had initially pegged the budgetary suppport at a lower amount of Rs 2,28,725 crore against a total demand of Rs 3,44,761 crore put forth by the various ministries.
According to the convention, ministries put their demands (of fund requirement in a fiscal) to the Planning Commission. The Commission prunes it and send the derived number (GBS) to the finance ministry. The finance ministry which is responsible for doing the belance act between government’s revenues and expenditures gives in its recommendations on the proposed spend. The final decision on the GBS which in a way lays down the expenditure on various government programmes is taken by the Prime Minister.
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| Punjab priority sector credit needs Rs 41.5k cr: Nabard |
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| THE district potential linked credit plan (PLP) for Punjab prepared by Nabard for 2008-09 projects that the total priority sector credit need would be to the tune of Rs 41,664.16 crore. Of this, 53% or Rs 22,298.52 crore will be crop loan, term loans to the agriculture and allied sector would be 11% or Rs 4,584.90 crore with the total agriculture sector needing Rs 26,883.42 crore while projections for the non farm sector are Rs 6,095.45 crore or 15% and the other priority sector 21% or Rs 8,685.27 crore.
In the current fiscal, as per data available with Nabard, the target for the current fiscal is Rs 30,424.02 crore. However, the achievement for the first half of 2007-08 up to September last is Rs 14,415.97 crore against the half yearly target of Rs 14,552.68 crore. Of the total target of Rs 30,424.02 crore for the current fiscal the target under crop loan is Rs 16,703.55 crore, term loans to agriculture and allied sector Rs 3,811 crore taking the total credit needed by the agriculture sector to Rs 20,546.75 crore. The target for the non farm sector is Rs 4,464.59 crore and other priority sector Rs 5,412.67 crore.
According to the Nabard status focus paper Punjab 2008-09, the total priority lending during 2006-07 stood at Rs 28,824 crore as against Rs 24,211 crore in 2005-06 thereby registering a growth of 19% as against 31% recorded in 2005-06.The lending in 2004-05 was of the order of Rs 18,459.50 crore.
The paper points out that the commercial banks play a dominant role in the lending under the priority sector. Around 70% of the total disbursement is shared by commercial banks only. On the other hand, the cooperative sector which is traditionally being associated with agriculture loans has witnessed a decline in its share. However, the share of the regional rural banks (RRBs) has remained around 20.5%.
Crop loan registered an increasing growth rate during the past three years and constituted 51% of the total credit flow under priority sector lending and 77% of total agricultural credit during 2006-07.
Agriculture term loan has improved its share from 13.25% in 2005-06 to 16% in 2006-07 of the total priority sector lending. Though this is a welcome trend however, this level of investment credit under agriculture is still far short of a level that would make the agriculture sector grow somewhere near 4 %.
Under non farm sector, the credit flow increased marginally by one per cent to 15 % in 2006-07 from 14% in 2005-06 of the total priority sector lending.Non farm sector has huge potential to provide supplementary source of income to farmers and its checks the exodus from rural area.
On the other hand,the credit flow under other priority sector though increased in absolute terms, its growth has declined by one per cent to 18% in 2006-07 from 19% in 2005-06.
The paper states that rural indebtedness continues to be a serious problem among Punjab peasantry. According to NSSO (2005) estimates, Punjab has the third largest extent of indebtedness in India ( 65.4%) after Andhra Pradesh and Tamil Nadux. Moreover, the magnitude of indebtedness is the highest in India with per household indebtedness at Rs 41,576. Punjab farmers used 62.4% of the outstanding loans in agriculture. One of the reasons for higher consumption loans is lack of social security schemes which expose farmers to the risk of falling into vicious circle of permanent indebtedness.
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| Service tax rate may be retained at 12% |
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| BUDGET 2008 is likely to spare people a hike in the service tax rate. Under considerable pressure to deliver a people-friendly Budget, the government may leave the service tax rate unchanged even though some more services like business class domestic air travel and toll plazas could be subjected to service tax. The current service tax rate is 12%.
Sources said policy makers at the highest level were against any tinkering with the service tax rate. The fear of a rise in inflation has not subsided and the likely consensus at top levels is that the government cannot not take a chance with anything which could increase inflationary pressures. This is more so because this is the last full Budget of the United Progressive Alliance government. Also, 10 states will be going to the polls this year.
While the focus in this Budget would be on consolidation and redefining some services to bring about more clarity, the finance ministry was examining some new services which it could bring under the tax net, sources said.
Business class international travel is already subject to service tax. The ministry now favours bringing business class domestic travel also under the service tax net. Toll plazas on national highways could also be subject to service tax. Various field formations have conducted surveys for collecting data on this services in the past year. A recommendation to bring this service under the tax net was also made by the Directorate General of Service Tax.
Some services like tourism, business auxiliary and business support could be consolidated to ensure that any confusion or overlap in categories is not used to avoid taxes. Redefinition of import and export of services, which continues to be a grey area leading to litigation, is also being looked at. The finance ministry had initiated this exercise last Budget, when it had brought all telecom services under one head.
Besides, the services which are to be transferred to states as a part of their compensation package towards central sales tax phase out, which include amusement parks, coin-operated machines, legal documentation and certification services, are also set to come under the tax net. However, sources said the finance ministry was still examining if other services like pre-school education, higher and technical education and healthcare, which have also been offered to states can be brought under the service tax net this Budget. The 2009 Budget is likely to be a vote on account since the term of the present Parliament ends in May 2009.
Services account for 50% of the country’s gross domestic product. But, service tax collections contribute less than 10% to the government’s tax kitty. The government is expected to collect Rs 50,200 crore from service tax in 2007-08 (Budget estimate).
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| Mohali industry body slams steelmakers |
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| The Mohali Industries Association (MIA) is apprehensive that the unbridled increase in the steel prices in the last 3-4 months has put the industry in a piquant situation.
The association says that the rising steel prices have broken the back of SSIs. It alleged that the steel manufacturers have formed a cartel and are resorting to unjustified price increases.
The profits of the steel companies are apparently booming. SAIL has declared 32% increase in profit for the quarter ended December 2007, says the association.
The association states that with the increase in steel prices, it has become impossible to service orders in hand, both domestic and international, because at the time of booking orders steel prices were lower. The industry is therefore, unable to meet its obligations, bringing bad name and resulting in blacklisting of companies. Hundred of units are being forced to close down rendering lakhs of workers jobless.
Anurag Aggarwal, general secretary, MIA, said that in view of the skyrocketing steel prices, it had now become impossible to book fresh orders. Moreover, the instability in the market is making things uneasy and future business planning has come to standstill which is again forcing the units to shut shop,” he said.
He said SSIs supplying to OEMs are also under great pressure as it is becoming more and more difficult to cope up with the increase in raw material prices. The prices are settled with the OEMs on long term basis and they do not entertain any requests for frequent price increase. As a result the SSIs are incurring erosion of capital and huge financial loss.
Mr Aggarwal urged the government to immediately ban exports of raw materials to other countries.”By exporting cheap raw material to other countries we are not being able to compete in the international market. It seems that we are back to British Raj where raw material was exported from India and furnished good brought back,” lamented Mr Aggarwal.
The association demanded that customs duty on import of scrap be reduced so that scrap can be easily available. Further, due to levy of entry tax in Punjab, arrival of scrap has decreased to very low level. It has created shortage of material leading to price rise.
The Punjab government should take steps so that there is no harassment on import of scrap from other states, he said.
He also called for intervention of steel ministry to regulate the steel prices and direction to steel manufacturers so that they can increase the prices only once to twice a year to bring stability in the market.
He said the price of steel had increased by Rs 1,500 on January 1 last and again by Rs 3,000 per tonne on Friday last.
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| Rising input costs force cycle makers to up cost |
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| WITH steel prices going up by almost 15 per cent in the last one month, cycle manufacturers in Punjab, mainly in Ludhiana, are compelled to enhance the costs of finished products (cycles) further, a move that may further impact their exports. Steel is widely used in industry like cycle, fastners, re-rolling etc. Hot rolled coil is now priced at Rs 29,000 per ton exclusive of all taxes and duties. This is $100 higher than the global prices.
Sample this: Steel prices, in 2002 used to be close to Rs 13,000 per metric tonne. Exports have declined from Rs 800 crore in 2005 to Rs 650 crore in 2007, largely owing to the fact that steel prices have almost doubled in the past three years. The rise in prices has forced entrepreneurs to import steel from overseas. Experts say exports will decline further if stringent measures are not taken.
United Cycle & Parts Manufacturers Association (Asia’s largest association of cycle & bicycle parts) general secretary Varinder Kapoor said, “Already 25% of the units have closed shops, and 25% have defaulted in loan repayment. Steel prices have doubled in the past three years. Our bank borrowing limits have not been enhanced. Under this situation exports are bound to decline further.” India is the second largest bi-cycle producer in the world, next only to China, with 90% based in Ludhiana.
A month back ET had reported that mavens of the cycle industry, like Hero, Avon, Eastman Industries Limited, Deepak International, SADEM industries, August Industries, TI cycles are in a move to make the most , by putting up offices in China, so as to enhance their exports to other Asean countries. Rising cost of steel has hit other sectors like fasteners, induction furnace, rerolling mills etc as well.
These industries are already in the doldrums for the past few years due to rise in input cost. As a result, companies are diversifying into auto components and hand tool manufacturing. Almost 10 to 20% of induction furnace units in ‘Mandi Gobindgarh’ (steel capital of Punjab) are on the verge of closure. Most of the units have reduced the capacity to 50%. Around 50% of scrap is being imported. ‘Mandi Gobindgarh’ in Punjab houses almost 400 units (300 re rolling mills and 100 induction furnaces).
The representatives of All India Steel Reroller Association feel that nothing much has been done so far by the state government and the SSIs are dying a slow death. With a new and strict policy on the import of scrap already in place that has caused shortage of raw materiel, it is more a game for big players.
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| US recession a threat for most, including India |
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| DECOUPLING, the theory that the rest of the world doesn’t have to catch a cold if the US sneezes, which was all the rage last year, could easily go down as one of the shortest–lived buzzwords in economic theory. As economists, analysts and wealth managers frantically look for explanations to give their clients after the carnage in the Asian markets, a new buzzword has started doing the rounds–recoupling. This one argues that growth economies or not, the the rest of world is still umbilically attached to the state of the US economy, maybe a lot more for Europe and somewhat less for Asia.
Goldman Sachs, which with its BRIC reports becomes some kind of messiah for emerging markets, has now put out an investor note titled ‘Signs of recoupling in Europe’. “Our view that the US will now fall into recession this year increases the risks to growth in the rest of the world,” it says.
This view seems to be reflected in report after report from western economists, wealth managers, analysts and media commentators, as market reports in Europe are busy writing off the ‘myth’ of decoupling. So, is it time to start worrying? Not yet. The good news is that a number of economists and Asia watchers believe that Asian economies—especially India—are still ‘safer’ havens in a downswing of the global business cycle. While Europe may not be able to decouple from an American recession, India, largely driven by domestic growth, is expected to weather any such storms more easily than others. “The US is the world’s biggest economy and events there will have a global impact. The business cycle still exists, it hasn’t been abolished in India and China. The direct linkage, via export markets, is much less for India than, say, even China. India will be slightly impacted, but overall the key driver for India will be domestic factors and what happens in the Indian economy,” says Gerard Lyons, Standard Chartered’s chief economist globally.
The bad news is that gloomy global investor sentiment, and more adherents to a recoupling school of thought, could create mood swings in the Sensex. Even here, there’s a silver lining; “You must remember that this time the retreat was extremely orderly, the processes and systems held up. Even five years ago, a shock like this would have created chaos in the stock markets,” points out Sonjoy Chatterjee, director, ICICI Bank.
So what is the argument for recoupling? It goes something like this: US’ problems last year were mostly domestic, based on housing, but as signs of recession deepen, Europe, at least will not be able to escape the ill-effects and will take a hit on domestic growth. The alternative ‘growth’ engines of China and India, despite their large domestic consumption, will not be able to fill the gap left by the US. While India may be reasonably shielded from the impact, China’s export-based economy may follow the American drummer. Stephen Roach, chairman of Morgan Stanley Asia, an adherent of the view that you can’t have both globalisation and decoupling in the same world space, pointed out in his Davos blog that the US consumed over $9.5 trillion in 2007 - fully six times the combined consumption totals for China ($1 trillion) and India ($650 billion).
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| Rising Re takes toll, exports grow 16% |
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| INDIA’S exports grew by 16.04 per cent in December 2007 in dollar terms but managed a paltry rise of 2.54 per cent in rupee terms, as the domestic currency strengthened against the greenback.
Exports went up to $12.31 billion in December 2007 amid exporters’ concerns over appreciation in rupee against the dollar. The local unit has risen more than 12 per cent against the US dollar in 2007.
In rupee terms, exports were valued at Rs 48,569.64 crore, growing by just 2.54 per cent in December 2007.
Imports during the month were valued at $17.68 billion, up 18.06 per cent, from $14.97 billion in December 2006. In rupee terms, imports increased by 4.31 per cent to Rs 69,731.56 crore in December.
For the April-December period of 2007-08, India’s exports stood at $111.04 billion, registering a growth of 21.76 per cent from $91.2 billion in the corresponding period of the previous fiscal.
The country’s trade deficit for April-December period of the current fiscal widened by about 35 per cent to $57.82 billion from $42.85 billion in the year-ago period.
“The export figures are encouraging. The next three months - peak period for exporters - are likely to see exports in the range of 40 billion dollars,” Federation of Indian Export Organisations Director General Ajay Sahai told PTI.
He said at the current rate, exports would be in the range of $145-150 billion for 2007-08, falling short of the $160 billion target set by the government.
Commerce Secretary Gopal Pillai has maintained that India will be able to achieve exports worth $150 billion despite the slowdown in the US economy and the impact of rupee’s appreciation.
“Exports of $150 billion are certain this year. If there is a surge, they could even go up to $155 billion,” Pillai had said.
Sahai, however, said cut in the US interest rates would lead to further appreciation of the rupee which would impact exporters’ margins.
The rupee has appreciated by about 15 per cent against the dollar in the last one year impacting export growth, particularly of labour intensive sectors such as textiles, leather, marine products and handicrafts.
Imports for the April-December period of current fiscal grew 25.97 per cent to 168.87 billion dollars, compared to 134.05 billion dollars in the year-ago period, according to official data released here today.
In rupee terms, exports grew by 7.74 per cent in April-December 2007, while imports were up by 11.54 per cent.
Oil imports during December 2007 were valued at 5.96 billion dollars, up 23.78 per cent from 4.81 billion dollars in 2006. For the ninemonth period of the current fiscal, oil imports were to the tune of 49.31 billion dollars, 11.68 per cent higher than 44.15 billion dollars in the corresponding period of previous fiscal.
Non-oil imports during December 2007 were 11.71 billion dollars, up 15.34 per cent from 10.15 billion dollars in December 2006. During April-December 2007, non-oil imports grew 32.99 per cent to 119.55 billion dollars as compared to 89.89 billion dollars in the same period of previous fiscal.
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| Rising rupee takes toll, exports grow 16% |
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| India’s exports grew by 16.04% in December 2007 in dollar terms but managed a paltry rise of 2.54 per cent in rupee terms, as the domestic currency strengthened against the greenback. Exports went up to $12.31 billion in December 2007 amid exporters’ concerns over appreciation in rupee against the dollar. The local unit has risen more than 12 per cent against the US dollar in 2007. In rupee terms, exports were valued at Rs 48,569.64 crore, growing by just 2.54 per cent in December 2007. Imports during the month were valued at $17.68 billion, up 18.06 per cent, from $14.97 billion in December 2006. In rupee terms, imports increased by 4.31 per cent to Rs 69,731.56 crore in December. For the April-December period of 2007-08, India’s exports stood at $111.04 billion, registering a growth of 21.76 per cent from $91.2 billion in the corresponding period of the previous fiscal. The country’s trade deficit for April-December period of the current fiscal widened by about 35 per cent to $57.82 billion from $42.85 billion in the year-ago period. |
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| Bankers seek dollar loans for exporters from fx kitty |
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| BANKS have made a plea to Reserve Bank of India seeking dollar loans for small exporters out of forex reserves.
Indian exporters, who have been badly hit due to the rising rupee, are willing to pay rates over 300 basis points over the London inter-bank offer rate (Libor) - much more than what RBI earns by deploying forex reserves in oveseas securities.
With the US Federal Reserve slashing the Fed Funds rate by 125 basis points over a span of merely ten days, the six-month Libor is currently quoting at 3.01%. This implies that exporters would be shelling out an interest rate of around 6% in offshore markets for dollar loans.
Now, the rate shelled out at 300 bps over and above the Libor works out to be still cheaper than exporters pay for rupee loans taken from commercial banks in India.
Thus, banks and ADs have requested the RBI deputy governor, Shyamala Gopinath in a recent interaction asking if forex reserves available with the central bank can be used to lend dollar loans to exporters.
According to Global Trade Finance’s MD and CEO, Arvind Sonmale, demand for dollar and eurodenominated loans from exporters have seen a massive rise. “We are experiencing a very heavy demand, even as the pricing for these loans have gone up. Sosme exporters are even willing to pay 500 basis points over Libor to get such a loan,” he adds.
GTF, a trade finance body, charges a prime lending rate of 12% for rupee-denominated loans. With the six-month Libor quoting at 3.016%, even at 500-basis points over this, the rates are considerably cheaper than rupee-denominated loans. The excess demand has resulted in a squeeze of foreign-currency funds for banks as well, as they have only two ways of raising these funds — NRE deposits and external commercial borrowings (ECBs). While the NRE deposits are running out, ECBs are difficult to come by because of the aftermath of the subprime crisis.
Bankers feel that if these exporters are lent these loans at 100 basis points over the Libor, it could prove cheaper for them. This could be considered, given that larger corporates do manage to get dollar loans more easily due to their relationships with banks, said a senior banker.
Hinduja Group’s chief financial officer, Prabal Bannerjee said, “if the loans are to be advanced against exports, then it should be allowed. However, it will be primarily towards enhance working capital. However, the central bank had, in its recent policy statement, expressed its reservations about forex dealings for exporters. So, the RBI is bound to be cautious in its approach to such a request, but if it comes through, it will be of great help to exporters.”
Echoing a different view, Mahindra and Mahindra’s general manager, treasury, G Chandrashekhar pointed out that such measures should be used purely as a transitionary measure, for lending a helping hand to smaller exporters.
Whether the country’s forex reserves should be used for such purposes is a totally different argument. From the longer term perspective, the real solution lies in helping them gain alternative inputs and competitiveness through some amount of hand-holding, he added further.
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| Inflation rises to 3.93% |
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| RISING prices of some manufactured items and industrial oils pushed up inflation to 3.93% for the week ended January 19, although a few food items such as eggs turned cheaper on fears of bird flu in some parts of the country.
The wholesale prices-based inflation was at 3.83% in the previous week and 6.31% during the corresponding week a year ago. Although the price index is still below Reserve Bank’s target of less than five per cent for this year, inflation may rise further with the government likely to take a decision on hiking prices of petroleum products soon. This could explain RBI’s steady stance on interest rates at a time when many were expecting a rate cut to spur slowing industrial production.
Announcing its quarterly credit review, RBI Governor Y V Reddy had said: “Inflation is broadly in line, but not as comfortable that we lift our vigil on stability.” Finance Minister P Chidambaram had also said yesterday: “We are confident that if keep firm hands on the wheel, the Indian economy will sail through turbulent waters. We are maintaining a balance between growth and inflation.”
This is the first inflation data released after the RBI’s announcement of its credit review on January 29, but took into account price figures of two weeks ago.
While prices of industrial oil like furnace oil rose by two per cent, light diesel oil went up by one per cent. Some manufactured products like textiles, metals and food products also became costlier, while prices of primary food items like vegetables and pulses came down.
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| Tight margins, competition squeeze auto parts cos |
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| FAT sourcing deals. Million-dollar acquisition stories. Bulge-wallet reserves. India’s auto component companies never had it so good, right? Well, not exactly. Behind the deal frenzy and sourcing saga, there’s an alternative reality — of
margin squeeze, competitive pressure and search for scale.
Speak to any top-auto component CEO and the feedback is almost identical. While those at the top of the heap are going after foreign deals like never before — Amtek, M&M, Bharat Forge, Sona, Rico among the most active — back home, the pinch is beginning to hurt. The sector is facing the double whammy of a stronger rupee, which is decreasing profitability in the export business, and a lower tariff regime which is helping imports and increasing competition in India.
According to the Automotive Components Manufacturers’ Association (ACMA) exports
are estimated to grow at 15.8%, while imports are likely to grow at more than double that rate — 35% — this fiscal.
The industry has been lobbying hard for some duty reversals, particularly since the tariff rate is expected to come down further to ASEAN levels this year.
“Our profits are shrinking. While the dollar debacle has cut our margins, the flooding of imports from China and our free trade agreement (FTA) partner Thailand is making us uncompetitive. India has become a net importer of components. The pressure on prices and profitability with cost increase due to increase in higher interest rates is making us uncomfortable,” ACMA President Sanjay Labroo said.
Original equipment makers or vehicle manufacturers are looking at China and Southeast Asia to source cheaper components. Customs duties on vehicles have consistently come down in the last three years — by 5% in 2005 and 2.5% each in 06 and 07. That has meant price cuts for import-heavy or all-import cars, which is a good thing for consumers.
Trouble is, that segment is a mere 8-9% of the total market. The rest of the car market sources components locally and that’s what has propped up India’s automotive competitiveness.
To be fair, the component industry is fighting the import threat and export squeeze by focusing on cost reduction, R&D and product development spend. Hence the demand for a moderate rate of taxation to stay globally competitive.
Ashok K Taneja, President of Shriram Pistons & Rings Ltd, said: “Skilled manpower development needs special emphasis. There is shortage of skilled work force and India’s advantage in developing low-cost components of global quality will be lost if the talent resource is not generated.”
The component industry is reeling under the peak customs duty of 10%, which are at all time low, the recent blow came with duty coming down to 7.5% on selective components.
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| Punjab budget on March 11 |
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| THE Punjab Assembly’s budget session will start from February 25 and continue till March 19. Disclosing this here on Wednesday, a spokesman of the Punjab government said that the session would begin with Governor's address on February 25 and the budget would be presented on March 11.
The Cabinet allowed the state government to sign a memorandum of understanding with the Centre and NABARD to amend the provisions of Punjab Cooperative Societies Act, 1961, to revive the short term credit structure. In pursuance of the representations from trade and industry, the cabinet decided to grant ex-post facto approval to reduce the rate of VAT on furnace oil from 12.5% to 4%. The cabinet also approved to amend the Punjab Value Added Tax Act, 2005, regarding deemed assessment to enable the registered dealers to deposit a sum by way of composition money, at Rs 300 per lakh of the gross turnover with a minimum of Rs 1,000.
The cabinet also granted approval to amend sub-section 5 of section 19 of the Punjab Value Added Tax, 2005 relating to input tax credit on schedule 'H' goods.
The cabinet also decided to grant ex-post facto approval for allowing subsidy to all categories of consumers for neutralizing the impact due to increase in electricity tariff for the year 2007-08.
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| NCAER revises GDP forecast to 9.1% |
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| NEW DELHI: Economic think-tank NCAER on Wednesday revised its GDP forecast upward to 9.1% for the current financial year, against the earlier estimate of 8.9%, mainly on account of increase in investment activity. According to NCAER, the industrial sector is expected to record a rise of 9.1%, against the earlier estimate of 9%. |
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| Asia will continue to grow, but slower than 2007 |
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| New Delhi: Having served at World Bank, Citigroup and IMF, Stanley Fischer is now the governor of Bank of Israel. He spoke to TOI about the issues facing the global economy and India-Israel trade.
Q: How do you see the US situation panning out in the coming days and how is it going to affect your economy, our economy and China? A: It seems pretty clear that there is a significant growth slowdown in the US based largely on the rapid increase in unemployment rate. How deep will it (slowdown) be is difficult to tell at this stage. There are various estimates but growth will be slower than last year, and significantly so.
Because so many countries are exporters to the US, including us, including you, of course, including China, there will be an impact on exports. There’s been a lot of talk about the decoupling hypothesis but there is a sense in which we are already decoupled and in a sense we are not. Asia will continue to grow at rates, which are very high by the standards of the West but I don’t think Asia will grow in 2008 at rates it grew at in 2007.
Q: What are the forces at work here?
A: Basically it’s export growth. Whatever impact it will have on investment. Your growth is partly because of rapid increase in investment ratio and there could be an impact on that. But in the first round the impact will be on export and in later rounds, on other areas also. It’s very hard to tell how it will affect capital flows. There are only two views. One is it will go up and the other is it will go down. The go-up view is that US savings are bound to go up because consumption is going to go down a bit. The other is people will become more cautious and less interested in foreign investment. But I suspect the interest in growth poles of the world, BRIC, will continue, probably foreign investment component will not decline since it did not decline even during the Asian crisis to any significant extent.
Q: Should India move fast on capital account convertibility given that it managed to stay away from the Asian crisis in 1997 because it was largely cut off ?
A: It will not be a one shot event and it should not be a one shot event. We are now completely liberalized but the process took us 15 years. It should be a very long process but maybe you are trading off some growth for some less stability.
Q: What are other issues that are similar with India? A: We have very much this problem of exchange rate, capital inflows, and export interaction where when you open up to capital flows, if you are attractive, you may find yourself getting a lot of capital inflows. Then you are going to get an exchange rate appreciation. We have got that. Or you might get what you have got here which is large capital inflows, which to a large extent are being offset by intervention. Then you face a sterlization problem.
Q: One of the two institutions you have worked in is in the midst of a crisis and the other is always fighting crises. A: In the case of Citi, I leave it in the capable hands of Mr Vikram Pandit. Obviously, there is a set of lessons for the whole system. On IMF, the new managing director is very ambitious...he’s clearly about to downsize the Fund significantly to deal with the financial problems but more importantly he has to redefine or reaffirm the mission.
Q: What about India-Israel relations?
A: We think there are considerable possibilities to enhance trade. We have been discussing a free trade agreement. It’s a decision for India to take.
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| Hand tool industry demands ban on iron & steel exports |
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| PUNJAB hand tools industry is in the doldrums.With growth slipping last fiscal, the industry is saddled with high input costs as prices of iron and steel have sky rocketed and export returns are declining due to rising rupee. The industry has demanded ban on exports of iron and steel and also withdrawal of customs duty on scrap. The industry also demands that a sufficient quantity of billets and blooms be sent to Mandi Gobindgarh and Ludhiana in Punjab by main producers like SAIL and TISCO.
Sharad Aggarwal, convenor, hand tools panel, Engineering Export Promotion Councuil (EEPC), says the average growth in the last few years was nearly 20%. However, because of sharp increase in input costs especially of iron and steel, the growth has slowed down.
Mr. Aggarwal told ET on Monday that during 2006-07 the industry had exported hand tools worth $182.95 million as against $204.76 million in the previous year, indicating a fall of 10.90%. Hand tools exports during 2003-04 stood at $136.41 million which went up to $172.74 million the following year indicating an increase of 26% and during 2005-06, the growth was 18 %.
He said in the past few months, iron and steel prices have skyrocketed and this has affected the entire engineering industry which is a major user of iron and steel." In fact, iron and steel prices have been rising throughout the last year. However, the increase has been particularly more pronounced in the last one month."
He said last year steel prices ruled at Rs 26,000 per tonne and a month ago it went up by Rs 3,000 to Rs 29,000 per tonne and pig iron from Rs 20,000 per tonne to Rs 22,000 per tonne. Presently, iron prices, he said, were hovering around Rs 32,000 per tonne and pig iron Rs 26,000 per tonne. Similarly, he said, there has been an increase of 10% prices of steel items like flats and rounds adding to the woes of the industry.
Mr. Aggarwal said iron and steel form 60-65% of the total cost of production of the hand tools industry. Every 10% increase in iron and steel prices add nearly 6% to the cost of hand tools production.
Hand tools industry employs nearly 80,000-90,000 people all over India and consists of over 500 tiny and small scale units and produces tools worth Rs 1,000 crore annually.
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| Chamber urges Punjab to expand e-governance |
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| New Delhi: The Punjab government should undertake e-governance on a wider scale to be able to reduce administrative cost and raise efficiency, besides streamlining the processes of recruitment, budgeting and planning, PHD chamber has said.
Under the programme 'Digi-Gov', PHD Chamber said the public sector employees would interact by electronic mail instead of moving paper files and letters, streamlining the internal government administrative processes and systems. The chamber suggested to Punjab chief secretary R I Singh to usher e-governance in the 11th Five -Year Plan. The initiative would reduce the administrative cost, improve ability to meet citizen demand, improve operating efficiencies and staff effectiveness, thereby changing the way government works, it said. It said this would prevent duplication, repetition and make the procedures simple and fast. PHD said procedures such as manual copying, indexing of documents and storage of paper form in illmaintained backrooms would be replaced by electronic documents under the new system. E-governance empowers senior officials to take right decisions at the right time with ease, thereby optimising resources, reaction time and enhancing efficiency, it said.
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| Houses for poor may fetch tax sops to developers |
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| THE government may restore tax benefits to real estate developers for constructing houses for the economically weaker section (EWS). The scheme was discontinued last year.
Under section 80(1)(B) of the Income-Tax Act, developers constructing houses with an area of up to 1,000 sq ft in Delhi and Mumbai and 1,500 sq ft in other cities can avail of tax exemption on profits. The urban housing ministry has asked the finance ministry to consider the proposal.
According to an housing ministry estimate, the urban housing backlog with increased urbanisation in India assumes alarming proportions, especially for the EWS and low-income group (LIG), which constitute more than 99% of the total housing shortage of 24.71 million in urban areas. This magnitude of backlog is evident by the fact that 21% of India’s urban population lives in slum-like conditions and 35% in one-room tenements. “In order to give this segment of the society better life and housing at affordable rates, there is a need to incentivise the industry,” an official said.
Public housing agencies have been at the forefront of providing housing for the EWS. Given the magnitude of the housing shortage and budgetary constraints of both central and state governments, it is amply clear that public sector efforts will not suffice in fulfilling the housing demand. “Therefore, the private sector has to play a more proactive role in taking up housing programmes on a massive scale for the poor and low-income groups with social commitments,” the official said.
The government also intends to involve the private sector in the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) for completion of 1.5 million dwelling units in the country by the end of 2012.
According to National Housing Bank (NHB) data, the government has not been able to meet its target of housing for low income groups. In 1999-2000, against a target of 44,000 units in LIG, only 27,000 were constructed, while in the economically-weaker section (EWS) category, against a target of 96,571 units, only 28,541 were constructed.
The housing ministry is of the view that the premium housing has already taken off in a big way and the private sector’s contribution to the segment has been well established and with market forces determining a return on investment here, the private sector will continue to build in the category.
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| Exports, output slowdown may keep Customs duty peak intact Rising Re & Elections Likely To Stop PC F |
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| PEAK Customs duty, which stand at 10%, is unlikely to be cut in Budget 2008 following slowdown in the manufacturing sector and negative growth in labour-intensive exports.
Senior officials said while the Centre wanted to reduce duties for the fourth successive year to meet the self-imposed target of achieving Asean levels by 2009, the Prime Minister’s Office (PMO) had asked the finance ministry to look into the industry’s request of a status quo. The industry has said a reduction in peak duties will spell more trouble as it was already grappling with a steadily-appreciating rupee.
It is understood prime minister’s economic advisory council (EAC) has also favoured the continuation of the Customs duty structure to give relief to the domestic industry.
While peak duty stands at 10% today, the target is to bring it down to 4.5-5% by 2010. Duties on a large number of items like polyester products and certain metals have been reduced to 5%. However, if the government decides not to deviate from its planned strategy of bringing average peak down to 5% by 2010, the duty cuts on most products will have to be much sharper in the following year.
Domestic sectors that would get a reprieve if further import duty cuts are not implemented include airconditioners, refrigerators, washing machines, picture tubes, specified plastics and other capital goods that have been witnessing a slowdown. Import duties on all the products are at the present peak duty of 10%.
Lack of buoyancy in indirect tax collections could also act as a deterrent against Customs reduction as it would have an adverse impact on collections. However, a final decision on peak Customs duty will be taken by the Centre after several more rounds of discussions at the highest level.
It would be a difficult decision for a prime minister and finance minister who are acknowledged as reformists globally but have to face elections the following year.
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| Textile, apparel exports show downward trend |
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NEW DELHI: The country’s total exports may be rising at around 20% but overseas sales of textile, apparel and handicrafts have declined during the first five months of this financial year, according to Reserve Bank of India (RBI) data. ”Exports of textile and textile products and handicraft continued to register a declining trend,” the RBI said in a study on India’s foreign trade in 2007-08. There was a 3% decline in apparel and 16% fall in silk textile export in dollar terms, it said. Export of textile and products declined due to reduced off-take by major markets like the US, the UK and Italy.
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| Excise sops to HP partially withdrawn |
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| Shimla: Putting an end to excise exemptions for peripheral industrial activities, the central government on Friday amended the area-based excise exemption benefit for Himachal Pradesh and Uttarakhand.
Excise and income tax exemptions were granted to these two states and also special category states in the north east and Jammu and Kashmir in 2003 by the NDA government to promote industrial activities. An official communique stated, ‘‘In order to ensure genuine industrial activities in these regions (Himachal Pradesh and Uttarakhand) it has been decided that benefits of duty exemption should not be admissible to goods in respect of which only peripheral activities like preservation during storage, cleaning operations, packing, re-packing, labelling or re-labelling, sorting, alteration of retail sale price, etc take place.’’
The order comes into effect from January 18 and is applicable to all existing, upcoming or proposed units involved in such operations. An industry department official, on conditions of anonymity said, ‘‘If such a notification has been issued, many industries, especially in the pharmaceutical sector, could be hit badly.’’
It may be mentioned that many states, including Punjab, Haryana, Gujarat, Andhra Pradesh and Tamil Nadu, have been objecting to the excise exemptions
permitted especially to the pharmaceutical industry in HP and Uttarakhand.
The communique further explained that the exemptions were intended to encourage industrial development by creation of basic infrastructural facilities and to generate employment opportunities for the local people. ‘‘The new excise regime would ensure that the intended purpose of promoting substantial industrial manufacturing activities through grant of fiscal incentives is fully met,’’ it stated.
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| India, Pak to ink pact to start trade across LoC |
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| TRADE across Line of Control (LoC) from Jammu and Kashmir to Pakistan occupied Kashmir (PoK) is likely to begin by July, according to Union minister of state for commerce and industry Jairam Ramesh.
"Before the SAARC meet in July we will sign the agreement with our counterparts in Pakistan. We believe that by that time there will be a new government in Pakistan," he said.
The LoC land custom station has been identified at Salamabad and Chakan-da-bagh in Poonch district. The Pakistan and the Indian governments have agreed on nine items to be traded across the LoC. These include, carpets (rugs, wall hanging, shawl embroidery),wooden work items(cricket bats and wood carving items), furniture, silk and silk products, fresh flowers, fruits and vegetables, Kashmir saffron, Kashmir wazwan, medicinal and aromatic plant and lastly pulses, mushroom and basmati rice.
According to Mr. Ramesh, 80% of the items have been included in the list form the original list of 14 items sent to Pakistan for trade.
Currently from Jammu and Kashmir the Rawalakot-Poonch and the Srinagar- Muzzafarabad bus service are the two links for the people of Kashmir to meet their relatives across the LoC. Traders in Kashmir had earlier been anticipating that road between Srinagar and Muzzafarabad commonly called Rawalpindi road or Jhelum Valley road would become another Wagah-Attari border.
The Indian government is also waiting for Pakistan to clear the Kargil-Skardu and Jammu-Sialkot road link. "I want to remove the word 'border' from the dictionaries and instead use the term 'connectors'," said an emoted Mr Ramesh on his maiden visit to the Wagah border on Friday.
Speaking to ET, the minister said that with Sri Lanka and Bangladesh been removed from the list of countries from where foreign direct investment was banned ,there was a strong case now developing to remove Pakistan from the list on a case to case basis. "Investment not trade will be the engine of growth in the years to come. In the fear that antisocial elements will take benefit we are blocking the way of genuine businessmen. TCS and Reliance will be more than keen to explore opportunities," he said while adding that even Mr Ratan Tata's 'Nano' car could be produced in Pakistan. The minister cleared that 100% FDI would be allowed only through the FIPB route.
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| Inflation rises to 3.79%; may dampen rate cut chance |
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| WHOLESALE price-based inflation rose marginally to 3.79 % for the week ended January 5, after remaining at 3.5% for two weeks in a row. The rise was mainly on account of some fuel items like coking coal, non coking coal, furnace oil, naphtha and manufactured products like butter, coffee, edible oil became dearer during the week under review. This is even as prices of seasonal commodities like fruits and vegetables came down.
Though, inflation was way below the 6.37% recorded a year ago, analysts expect RBI not to soften its monetary policy stance this month. This is because inflationary clouds are still looming over the economy, in the wake of a possible hike in fuel prices. The Prime Minister’s Economic Advisory Council too has projected inflation to go above 4 %, if prices of petrol and diesel are raised.
CRISIL director and principal economist D K Joshi said though inflation has gone up marginally it will remain range bound due to a combination of tight monetary policy and currency appreciation which will make imports cheaper and contain price rise. However in the wake of rising inflationary expectations it is unlikely RBI will take any interest rate cut, he said.
“RBI would not ease monetary policy. It is going to keep all the key rates unchanged in its upcoming review,” HDFC Bank chief economist Abheek Barua said.
Economists feel keeping fuel prices untouched would help in containing inflation artificially but would distort the fiscal position of the government.
“In the backdrop of strengthening crude prices in the global market, which is ruling above $90 per barrel, the under recoveries of oil companies are mounting. The companies are bailed out by the government by issuing oil bonds which is an off-budget liability on government. Thus, any delay in taking decision on passing on burden would result in a fiscal cost,” said Mr Joshi.
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| ‘Remove Pak from negative FEMA list’ |
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| Attari/Amritsar: Terming the twenty-first century as ‘century of investment', union minister of state for commerce Jairam Ramesh said foreign direct investment (FDI) should be allowed from Pakistan by removing it from the negative list of Foreign Exchange Management Act (FEMA) which in turn would pave for Indian companies to invest in Pakistan.
Jairam Ramesh was here to hold a review meeting at Attari Land Customs Station on Friday. He said Pakistan as well as Bangladesh were on the negative list of FEMA but in the recent past, government had issued a notification allowing FDI from Bangladesh through Foreign Investment Promotion Board (FIPB). ‘‘I am strongly in favour of removing Pakistan from the negative list of FEMA,'' he said while adding that there shouldn't be any
fears about investment coming from Pakistan. ‘‘If there are apprehensions that Dawood Ibrahim would invest in India, his investments have already come into the country,'' he said. However, he said the FDI could be allowed from Pakistan on case-to-case basis subject to security approval.
On denial of MFN status to India by Pakistan, the minister said Pakistan government had fears that once MFN status was granted to India, its goods would sweep through the Pakistani markets giving serious setback to local industry. ‘‘The fear is the same as the one we have about China, that if we open our markets for them, they would dump their goods into Indian markets,'' he said, adding that India feels China is not a transparent economy.
He said despite Pakistan not giving MFN status to India, the export of goods to Pakistan in the last financial year had touched 1.4 billion dollars. Trade with Pakistan is of much significance for India since it facilitates trade with Afghanistan despite the fact that Pakistan has given transit facility to Afghanistan to export its goods to India and not to the Indian businessmen to use Pakistan as transit for export of goods to Afghanistan.
Disturbed state
Jairam Ramesh assured to take up the issue of declassifying Punjab from the status of a disturbed state which was given during the days of terrorism. ‘‘Till now, I was not aware that Punjab is a disturbed area,'' he said. He also recommended increase in the Centre's share from 50% to 75% for development of Amritsar under Jawahar Lal Nehru Urban Renewal Mission.
Disturbed to see the poor infrastructure of Amritsar, Jairam Ramesh talked to Montek Singh Ahluwalia, deputy chairman of planning commission over phone and asked him to develop infrastructure of the holy city under Jawahar Lal Nehru Urban Renewal Mission. ‘‘Cities like Bangalore have received Rs 800 to Rs 1200 crore for development,'' he said, adding that infrastructure of 63 cities was presently being upgraded under the programme and in Punjab, four cities including Amritsar, Jalandhar, Ludhiana and Mohali also fell under the category for development under the project. Under the scheme, 50% funds were provided by the central government while the rest of the share was given by state government and the respective municipal corporations. Referring to deputy commissioner of Amritsar Kahan Singh Pannu, he said according to the DC, the money couldn't be received from the Centre since state and local bodies were unable to contribute their funds. He said he was upset to see the poor infrastructure on the roads leading to Golden Temple.
On giving special economic sanctions to the neighbouring states, he said, ‘‘They will end in 2010,'' adding that central governments must have a different approach to Punjab.
Trade across LoC
The government has identified Slamabad in the Poonch district of Jammu and Kashmir for carrying out trade across the LoC, said union minister of state for commerce Jairam Ramesh. He added that both the nations had exchanged a list of products for trading activities and that India had sent a list of 14 items, out of which Pakistan had approved nine, including carpets, handicrafts, furniture, silk, dry fruits, flower and spices, saffron, ‘wajwan', medicinal herbs and coriander. ‘‘The trade will be to-andfro,'' the minister added. He said though trade was to begin in the month of January, due to the political scenario across the border, it was expected to take off before the SAARC summit scheduled for July.
The minister mooted a proposal for Co-prosperity Zone of Amritsar and Lahore. However, he added that there was no proposal to open any new gates across the international border with Pakistan in Punjab. He also necessitated upon the need of opening a visa centre at Amritsar.
ICP at Attari
The Integrated Check Post at Attari land border would be developed at a cost of Rs 90 crore, said union minister of state for commerce Jairam Ramesh. He said a total of 13 ICPs were being developed in the country at the cost of Rs 900 crore. He also held a meeting with the officials belonging to Customs, BSF and the district during his visit to Attari land border on Friday.
He said seven ICPs were being developed across the India-Bangladesh border, while four were being raised on the Indo-Nepal border, and one each at Indo-Myanmar and Indo-Pak borders. He said for developing an ICP at Attari, a total of 120 acre land would be acquired. ‘‘There will no Nandigram-like incident. The process of acquiring land will be fully transparent,'' the minister claimed. The Centre had already released Rs 12 crore for the purpose.
He talked about setting up an animal quarantine station at Attari and a parking facility for at least 500 trucks, besides installing scanners for security clearance of trucks arriving from Pakistan.
Ramesh ‘strolls onto’ Pak land
Attari/Amritsar: Union minister of state for commerce Jairam Ramesh crossed the Radcliffe Line to take a ‘stroll' inside the Pakistani territory. However, he was without any legal travel documents. Accompanied by some officials, the minister reportedly went up to the conference hall of Pakistan Rangers |
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| Exports from STPI in FY 08 up |
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| CONTINUING to remain on top of the list in software exports from Software Technology Parks of India (STPI), Mohali, Infosys Technologies in the first nine months of 2007-08 has bagged exports worth Rs 156.96 crore as against Rs 127.28 crore in the corresponding period last year showing an increase by Rs 29.68 crore.
Close on the heels is Dell International Services with exports during the first nine months of the current fiscal at Rs 100.77 crore up from Rs 74.44 crore in the corresponding
period of the previous year indicating an increase by Rs 26.33 crore. Quark Media’s exports during the period touched Rs 46.84 crore down from Rs 65.38 crore during the same period of 2006-07 while Fidelity Information Services (I) PL (Second Foundation earlier) achieved an export turnover of Rs 29.25 crore up from Rs 20.21 crore in the corresponding period of previous year thereby indicating an increase of Rs 9.04 crore notching one place up to the fourth position.IDS Infotech Ltd reported a higher export turnover during the first nine months of the current fiscal at Rs 23.10 crore as against Rs 22.18 crore though it has slided to the fifth position in the process.
Data available for the first nine months of 2007-08 indicates that exports by the STPI Mohali rose to Rs 464.16 crore up by Rs 89.50 crore from Rs 374.66 crore in the first nine months of the previous year. Of the total exports of Rs 464.16 crore in the current fiscal till December last the five companies Infosys Technologies, Dell International Services,Quark media, Fidelity Information Services and IDS Infotech have notched up exports worth Rs 356.92 crore while these companies achieved exports worth Rs 309.49 crore in the same period of the previous year of the total exports during that period of Rs 374.66 crore.
Data available also indicates that Infosys Technologies achieve an export turnover of Rs 174.23 crore during 2006-07 while Dell was at second position at Rs 97.70 crore.Quark Media had achieved an export turnover of Rs 95.97 crore, IDS Infotech Rs 28.58 crore and Fidelity Information Rs 30.66 crore.
The last five years data indicates that exports from STPI Mohali has been consistently going up and indications are that by the end of the current fiscal exports would cross the Rs 700 crore mark.
Last year, exports from the region stood at Rs 560.76 crore as against Rs 423.04 crore in 2005-06. During 2004-05 exports from the region were of the order of Rs 267.79 crore as against Rs 181.95 crore in 2003-04.These during 2002-03 were to the tune of Rs 103.35 crore.Thus, the total exports from the region in the last five years are of the order of Rs 1536.89 crore.
Dr Sanjay Tyagi, additional director, STPI-Mohali said that the number of units registered with the STPI has risen to nearly 125 and those which came into production last year their results are naturally reflected in exports during the first nine months of 2007-08.To that extent exports during the first nine months of the current fiscal have risen by nearly Rs 90 crore. “Usually in quarter 3 and 4 exports go up and it is expected the current year will result in a better performance than last year,” he said.
Mr. Tyagi told ET here that the software exports target for the current year is Rs 700 crore and said that this should be achieved going by the present trend.
He said on an average nearly 20-25 companies were added annually to the list of those in the software export arena.
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| Soaring pvt equity flows may get portfolio investment tag |
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| PRIVATE Equity (PE) flows, which stood at $17 billion in 2007, should be treated as portfolio investment, feels the government’s key economic policy think-tank, the Prime Minister’s Economic Advisory Council (EAC). The panel has highlighted the lack of clarity in on this count and called for simplification.
“Inflows of PE investments have also been quite large. Since, in most cases PE flows constitute less than 10% of the capital of the company being invested they should ideally be reported under portfolio capital, and not under FDI,” the EAC said the review of economy for 2007-08.
While the EAC assumes that PE funds act like portfolio investors, ground realities point to a different scenario. In such cases, the investment is more like FDI rather than a portfolio investor. There are cases of PE funds taking management control of companies in a bid to improve financial performance, even in case they do not have a majority stake. Blackstone, for example, took over Gokaldas Exports –– a large player in the readymade garments segment. Actis, similarly, runs Punjab Tractors and Phenix Lamps, while ICICI Ventures manages RFCL. India Value Fund, another PE, holds the reins at Shringar Cinema.
The EAC review points out that in the first quarter of 2007-08, there was a difference of about $2.5 billion between the sum of net purchases by foreign institutional investors and overeas equity issuance by Indian companies though ADRs and GDRs. It feels that the this differences could be on account of PE investments since many PE investors are registered under common ownership of registered FIIs.
With the overall capital inflows being pegged at $103 billion, much higher that the Council’s own July ‘07 projection of $58 billion, the think-tank has recommended continued use of sterilisation to counter the excess flows in remaining part of the 2007-08.
The EAC had suggested a threepronged approach to deal with large inflows in the economic outlook released in July — allowing rupee to appreciate, absorbing capital and sterlising, imposing policy restrictions and facilitating outflows. The total foreign investment is estimated at $27.8 billion, a little more than first half of the current fiscal. However, the total surplus on capital account is estimated at over $103 billion or 8.7% of the GDP in 2007-08, significantly higher than the $58 billion projected in the July ‘07 outlook.
Since this would put pressure on the rupee to rise, the Council has advised the government to give clear signals to the industry to make adjustments alongwith a transitional package.
“Clear signals should be given to Indian industry to make adjustments through productivity increases and to tap the booming domestic market. However, some transitional package targeted specifically at labour intensive industries may be called for,” it said.
EAC chairman C Rangarajan also pointed that the capital flows may see some tempering in the next fiscal in the backdrop of developed economies witnessing recessionary trends due to subprime crisis.
The government has taken various steps to counter flows including tightening external commercial borrowings, clamping down on investments through participatory notes and liberalising remittances.
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| Finance, commerce ministries spat over export sops peaks.FINMIN PUTS FOOT DOWN ON A SERIES OF CONCES |
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| WITH Budget preparations gaining momentum, the finance ministry has put its foot down on a series of concessions proposed for export promotion. As a result, the revenue department is heading for a standoff with the commerce & industry ministry over various issues including exemption from central sales tax (CST) and state-level value added tax (VAT) for special economic zones (SEZs), retention of Section 10 B of the Income Tax Act, replacement of the duty exemption pass book (DEPB) scheme and total exemption from service tax for all exports. While the proposal for CST exemption to SEZ goods has been referred to the law ministry, the empowered committee of state finance ministers has been asked to look into zero rating of VAT for supplies to SEZs.
While revival of Section 10 B ––which is set to expire next year –– is being studied by the Prime Minister’s Economic Advisory Council (EAC), another panel set up by the Prime Minister’s Office (PMO) is considering sops for hardware manufacturing. So many issues related to export promotion have got bogged down in ‘committee mania’ as revenue concerns have been cited by the finance ministry to reject these demands, most of them from the commerce & industry ministry.
On CST exemption to goods manufactured in SEZs, the commerce department had explained that imports are exempted from this levy. Since goods coming into the domestic market (technically described as domestic tariff area) from SEZs are considered imports, they should not be subject to CST. However, the finance ministry has not agreed to this contention and the ball is now in the law ministry’s court.
On zero rating of VAT supplies to SEZ units and developers, many states not allowing this concession. As the industry took up the issue with the commerce department, officials of the finance ministry pointed out that it had to be sorted out by the empowered committee of state finance ministers. Development commissioners of SEZs are now collecting details to present the case before the state finance ministers. Barring Gujarat, Tamil Nadu, Karnataka and Kerala, zero rating is not available to SEZ units, developers and co-developers now. Commerce department officials feel that the finance ministry is not taking active interest in getting the issue resolved by urging state governments to concede the industry’s demand.
One area where the commerce department has already conceded defeat is making the Centre responsible for exempting exporters from paying state input taxes. With the finance ministry ruling out the possibility of the Centre footing the bill for states, the government is working out a mechanism through which the state governments can compensate exporters. With the issue of state tax exemption hanging in balance, the plan to replace the popular DEPB scheme with the duty drawback scheme and the state tax exemption scheme has also been indefinitely postponed.
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| PM panel cuts growth projection to 8.9% |
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| FARM sector growth, that almost made up for the slow down in the manufacturing sector in the first two quarters of the fiscal, is expected to support economic growth in the current fiscal at a shade below 9%, a top economy think tank advising the prime minister said on Thursday. The economy is expected to grow at 8.5% in the next fiscal, said C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council said here on Thursday.
Policy makers, however, cannot rely on the mood swings of weather Gods and ignore the slow down in the manufacturing sector, particularly, consumer durables that showed a negative growth of 1.3% in the fist half of the fiscal compared to a positive growth of 12% a year earlier. Successive interest rate increases to fight inflation has taken a toll on demand for consumer durables as well as nondurables, said C Rangarajan. The manufacturing sector that has 79.4% weightage in the index of industrial production has dipped to 9.8% in the second quarter as against 11.6% in the year ago period. It grew at 10.4% during the first half, lower than 11.2% a year earlier. Electricity generation and mining were more or less the same during the comparable half years, making manufacturing sector the only culprit for the slow down in industrial output.
The panel forecast an 8.9% growth for the 2007-08 fiscal based on robust agriculture growth expected to grow at 3.5% as against its July outlook of 2.5%. A reasonably good rabi crop and absence of weather anomalies would support growth the next fiscal. Farm sector has grown at this pace in each of the last three quarters compared to an average of 2.4% for past 20 quarters. Other risks that could play spoilsport are inadequate power supply and a severe recession in the US and Europe that would force them to cut back on their imports from developing world including India. Since India is less dependent on external markets unlike China, a mild recession in rich countries will not affect the country’s economy, Mr Rangarajan said here while releasing the review of the economy. However, the flip side is that the pressure on prices of oil, food and other raw materials is likely to continue, making inflation management in 2008/09 quite challenging, he said. Also, short falls in power generation could impact the economy more seriously in the coming months than ever.
Asia’s third largest economy has been racing above 8% in the last 11 quarters on the trot and had scaled 10% in two quarters along the way. The panel also predicted that income per person will rise to 7.2% in real terms for the third successive year of above 7% real increase in per capita GDP. The economy would have a size of $ 1.2 trillion which translates to a per person income of above $ 1,000, the panel said.
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| US seeks cut in import duty on Harley Davidson, alcohol |
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| NEW DELHI: The US on Thursday demanded that India cut import duty on a host of items, including cult motorbike Harley Davidson and alcohol, as it seeks to have a bigger pie of the fast expanding market here. US assistant secretary for commerce David Bohigian met government officials, including secretary in the department of industrial policy and promotion Ajay Shankar in this regard. “India imposes 10% higher tariff than other countries,” Mr. Bohigian said, adding that he was expecting a breakthrough soon on the US demand for reduction in import duty. Besides seeking reduction in tariff, the delegation from the US commerce department is believed to have made a strong pitch for the American aircraft manufacturer Boeing. Public sector Air India is on a huge expansion drive, requiring a new fleet of 110 aircraft in the next three to five years. |
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| Moody’s pegs growth in 2008 at 8% |
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| MUMBAI: Rating agency Moody’s has forecast that the Indian economy will grow by around 8% in ‘08, marginally slower than estimated 9% growth in ‘07. In a report released from Sydney the rating agency said that although the economy’s fundamentals remain strong and its prospects upbeat, growth will moderate in 2008 as domestic demand eases and exports cool. According to Moody’s, tight money conditions will dampen demand for credit and take some steam out of consumer spending. But despite monetary tightening, Moody’s feels that RBI is unlikely to raise rates further, for fear of putting further upward pressure on the rupee that would crimp growth, and also to avoid a potential loan crisis that could quickly dampen consumer and business sentiment. |
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| Growth will slow down to 8.5% in 2008-09, says PM’s panel |
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| New Delhi: While there may be signs of growth moderation during the current and the next fiscal, the Indian economy has for the first time logged an average 8% growth during a five-year period.
The latest estimates released by the Prime Minister’s Economic Advisory Council on Thursday has estimated that the economy would grow 8.9% this year — compared to 9.4% during 2006-07 — and is projected to see output rise 8.5% next fiscal.
While there is clearly more optimism in the farm sector, thanks to abundant rains, interest rate hike and appreciation of the rupee seem to have impacted the double-digit manufacturing growth story, which the panel headed by C Rangarajan predicting 8.9% growth during the current fiscal. In fact the impact of RBI’s twin measures seem to have been much higher than was expected earlier with the EAC lowering the forecast from 11.3% in the July outlook.
With the panel suggesting that oil prices need to be hiked to factor in the rise in global crude rates, inflation could immediately cross the 4% level, from the 3-3.5% range.
Despite the gloomy picture on manufacturing, the per capita income is projected to grow above 7% for the third successive year and for the first time, close the year above the $1,000 mark, while the Indian economy would be nearly $1.2 trillion.
In 2008-09, growth rate is expected to dip further as the demand for consumer goods is expected to see a moderate rise, while the farm sector is assumed to be growing at around 2.5%. Even the usually buoyant service sector is likely to see slower growth in trade, hotels, transport and communication.
While Rangarajan was quick to point out that this was the baseline scenario the actual level of rise in economic activity would depend on how the subprime and credit woes play out in the coming months. If it is mild then the impact on India — which the report said was less dependent on the rest of world than China — might be moderate. But in case the problem was deep then it could impact Indian trade and capital flows, Rangarajan said.
With warning of pressure on rupee to appreciate in the immediate future, EAC said government should send “clear signals” to the industry to adjust through productivity improvements and tapping the domestic market instead of focusing on exports.
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| Industry not keen on plot conversions |
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| AS the Chandigarh administration reportedly prepares to revise prices of converting industrial plots to commercial plots in the Industrial and Business Park on a proposal sent by the estate office, the industry is not taking the news sitting down. As per sources in the administration, the revisions and increase in conversion rates as per the ‘Chandigarh Conversion of Land Use of Industrial Sites into Commercial Activity/Services in Industrial Area, Phase-I & II, Chandigarh Scheme, 2005’ policy, go along with the rules according to which the conversion prices should be 50% of the average price of the auctions in the last three years. However, the escalating land prices in Chandigarh have propelled the Estate Office to do a rethink.
The revision, which spells a hike for plot owners, has not met well with industrialists and industry associations alike. Chamber of Chandigarh Industries president Surinder Gupta told ET: “We are giving a representation to the administration to stall the process since the revision would not only mean a huge hindrance to the small plot owner but also a hassle for the big lot owners who have given applications already. The calculations must also take into account the price of the land in the total calculations to reach the right reasonable price.”
Federation of Small Scale Industries of Chandigarh general secretary Rajiv Gupta says, “I think that there should be no hike; people who have already opted for the conversions are facing high rates but the small players have no option but to opt out. The administration must think of some concessions to the smaller players else the hike would seem biased towards having only larger players and not having a level field for all. Further, the increase is coming at a time when there are barely two months left for it to expire.”
An industrialist who did not wish to be named said that the policy changes and hikes are destroying the industry in the Park and the industry and commercial areas cannot co-exist. “Since 80% of the industrial plots are below 2 kanal area, the conversions would be of no use since they are not allowed to apply,” added the person.
The industry is also of the view that if there has to be an increase, the rise should be in effect from March 18 onwards.
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| Single bank account for exporters, importers |
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| NEW DELHI: Exporters and importers will need to maintain only one bank account for their transactions with different government departments and agencies like Customs and ports with the launch of etrade project from April. The commerce ministry has advised different government wings, including the Customs authorities, Directorate General of Foreign Trade, Container Corporation of India and airports, to facilitate electronic payment. |
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| China is India’s largest trade ally |
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| Beijing: China has become India’s biggest trade partner surpassing US, which has held that position for a long time. India-China bilateral trade reached $38.6 billion in calendar 2007. During this period, India-US bilateral trade was just $34.6 billion, according to Indian government sources.
The Sino-Indian bilateral trade has increased 53% over $24.9 billion in 2006, adding $13.7 billion in one year. The prime ministers of the two countries have revised their existing target for 2010 from $40 billion to $60 billion.
However, China might face severe pressure in maintaining its No.1 position if the first tranche of payment for the proposed aircraft purchases is sent out to US in 2008. India is awaiting the supply of Boeing aircraft from the US this year and is likely to send out some payment soon.
“It is difficult to says that China will lose its position, India-China trade would grow even faster if the discussions during the recent visit of Prime Minister bears fruit in 2008,” an official said.
The two countries have just signed a protocol on tobacco and are in discussions for enhanced trade in vegetables and fruits produced in India. If flows of these commodities begin and Beijing continues its expected growth in exports to India, US might it difficult to unseat China in 2008, sources said.
“China is a big market for tobacco. They buy from different places in the world. We are able to supply good quality tobacco at very competitive prices. I am sure India will get a piece of the Chinese market of this product,” commerce minister Kamal Nath told TNN in Beijing recently.
The main difference in the two trade segments is the story of Indian surplus and deficit. With US, India managed a surplus of $7 billion out of total trade of $33 billion in the 2006-07. The surplus is believed to be $7.8 billion in the calendar year 2007.
However, The situation is opposite in the case of India-China trade where India suffered a deficit of $9.6 billion in calendar year 2007.
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| Electronic items prices may fall 10% on proposed 4% excise cut |
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| PRICES of electronic goods like LCD TVs, home-theatre systems and high end mobile phones may fall by 8% to 10%, according to early indications of the 2008 Budget exercise. The finance ministry is inclined to reducing duties on consumer electronics to 12% as compared to 16% now. At the same time, the ministry has indicated that it was not in favour of reducing excise on raw materials like plastic and intermediaries like components.
The move to reduce excise on electronic goods is to bring them at par with computers and laptops which are taxed at 12%. This move would rationalise the excise structure and bring excise on all similar products at the same level.
Presently there is a three-tier tax structure on electronic hardware items –– raw materials, components and finished products. All of three stages attract an exise duty of 16%.
“Bringing down tax on raw materials would not be possible as raw materials are used by several industries and consists of several different items and it would require a rejig of the whole duty structure. But we are certainly looking at providing some relief on the component and finished product basket,” a government official said. The duty cut is in line with the government’s plans to encourage the hardware manufacturing. Most of the country’s hardware needs are now met through imports and the government is planning to change this trend by encouraging investment in IT hardware manufacturing.
“There is almost complete dependence on imported hardware and even software for the entertainment and electronics goods sector is imported. The government’s move is aimed at reversing the trend,” an official in the department of information technology said.
The exise cut for electronics items may come as a boost to LCD TV and plasma TV makers. According to an estimate by the department of information technology, the popular size for TVs in 2005-06 was 26” which increased to 32” in 2006-07.
In the current fiscal, officials feel, 42” TVs may take the lead.
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| Chandigarh to invite EOIs for selected plots in IT park |
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| THE Chandigarh administration will be inviting fresh expression of interests for some plots in the Rajiv Gandhi Chandigarh Technology Park (RGCTP) next week. The sites have been demarcated in the SEZ and non-SEZ areas in phases I and II and have not been allotted for over a year.
In phase II, the SEZ notification has been given by the Ministry of Commerce and an area of 3 acres with an FAR (floor area ratio) of 1.0 has been put on the block for Rs 1.15 crore per acre.
For the particular site, expression of interests from companies in the information services sector having a turnover of more than Rs 100 crore a year and the ability to begin operations within three years of the allotment, has been set as the criterion. The administration is keen on inviting companies engaged in software development over BPOs.
Another three built-to-suit sites, ranging between 0.55-0.66 acres each, in the SEZ area have also been put on the block. The criteria remaining same for the companies interested, other than the turnover which should be minimum Rs 10 crore a year and more than 100 employees should be on the company’s roles at the time of application. At an allotment rate of Rs 1.5 crore per acre the permissible FAR has been kept 1.25.
In the non-SEZ or the STPI area in phase I, three sites of 1.10, 0.9996 and 0.90 acres will be allotted as well. With an FAR of 1.25 the rate of allotment has been fixed at Rs 1.50 crore per acre. The criterion for these sites is the same as the built-to-suit sites in the SEZ area. To be opened next week, the allotment procedure will remain open for three weeks. The allotment this time would be different in terms of prices, since the administration hiked the land rates last week.
As per the new approval by the city administration, the price per acre for the main campus site has been put at Rs 60 lakh (FAR 0.50) further extendable to 0.75 on extra payment. Earlier, the allotment had been done on freehold basis, but in future all allotments in RGCTP will be on leasehold basis.
The new rates on leasehold basis are 50% over and above the present rates on freehold basis with the allottee liable to pay 2.5% of the allotment rate every year as Annual Ground Rent for first 33 years, 3.5% for next 33 years and 5% for the next 33 years. The allotments will also follow the new Chandigarh Estate Rules, 2007, therefore all sites allotted will not be allowed to be transferred before 15 years from the date of allotment and the initial lease will be for 33 years extendable for another 33 years twice, making it as a total lease for 99 years. With these allotments, land will be fully allotted in RGCTP Phase I and II.
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| Haryana to host Partnership Summit 2008 in Gurgaon |
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| CHANDIGARH: The Haryana government will host the Government of India, Haryana government and Confederation of Indian Industry Partnership Summit-2008 from 16th to 18th January in Gurgaon. Termed ‘Emerging Consensus: Inclusive and Sustainable Development’ the event would also host the launch of an Industries Web-Portal of the state. Prime minister of Hungary Ferenc Gyurcsany would participate in the summit along with over 1,000 dignitaries from 30 countries of the world. Ministers from Ethiopia, Ontario, Sri Lanka, Zambia, El Salvadore, Bhutan, UAE, UK, USA, Malaysia, Singapore, Egypt, Indonesia, Australia, Japan, Syria, Iran, Poland and African Union were expected to participate in. |
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| Punjab to bail out farmers from financial mess |
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| CHANDIGARH: In order to bail out farmers from the current financial mess and improve the condition of Primary Agriculture Cooperative Societies (PACS), Punjab government is now going to market consumer goods on CSD pattern in the state. Addressing a press conference here after concluding a workshop on Strengthening of Cooperatives in Punjab, cooperation minister Capt. Kanwaljit Singh said that farmers in the state were facing a serious financial crisis and it was only cooperative movement which would be able to bail them out. |
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| Excise on plastics may be halved |
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| THE government is considering a proposal to slash the 16% excise duty—tax on production levied at factory gate—on plastics by half to drive up consumption of plastics in various sectors like agriculture, packaging, irrigation, geo-textiles, healthcare, lifestyle, automobiles and infrastructure.
The move is expected to spur price reduction in polymers used in a variety of industries from auto accessories to medical devices. This would achieve the twin objective of fighting inflation as well as increasing the percapita consumption of plastics outlined in the new petrochemicals policy. The idea is to drive up demand for the Rs 55,000 crore plastic processing industry, which 33 lakh people depend on for their livelihood.
The finance ministry is favorably considering the chemicals and fertiliser ministry’s
recommendation, but the final decision could be influenced by overall revenue considerations, said an official. Now the government gets Rs 7,300 crore revenue from the plastics processing industry, said the source. Exporters get refund of various levies that they pay for the nearly $1.9bn turnover.
The government is also considering to slash the 5% customs duty on naptha for producing materials other than polyethelene and polypropylene to meet the domestic demand for naptha. Now producers find it more attractive to export than to meet the local demand. Naptha attracts nil duty for making these two polymers. The intention is to boost the plastic processing industry which has about 22,000 units and 15 rawmaterial producers.
China has successfully created a world class plastic processing industry. It controls half of the global footwear market and a little less than three-fourths of the global toys market. The neighbour exports 7.5 million tonnes of processed plastic every year. The government also wants the per capita consumption of plastics to considerably go up from the present 4.5 kg which compares poorly with the world average of 25 kg and 30 kg of China.
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| Economy to grow 9.1% in 2008-09: CMIE |
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| MUMBAI: India's economy is expected to grow by 9.1% in the next fiscal year beginning April, fuelled by robust investments and buoyant consumer spending, the Centre for Monitoring Indian Economy (CMIE) said in its monthly review released on Monday. "With fresh investment proposals continuing to pour in, we expect the current economic growth to be sustained in the near future," it said. CMIE expects the economy to grow by 9.1% in 2007-08 too, higher than the central bank's forecast of 8.5%.
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| Decision on petrol hike on January 17: Deora |
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| HYDERABAD: Union petroleum minister Murli Deora on Monday said a decision on the fuel price hike will be taken at a group of ministers meeting on January 17. "On January 17, the group of ministers meeting under the chairmanship of Pranab Mukherjee is taking place in Delhi. That time, it will be decided," Deora said.
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| Ficci seeks infrastructure status for solar energy projects |
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| NEW DELHI: Industry body Ficci has sought infrastructure status for solar energy projects to give a fillip to renewable and environment friendly source of energy that holds potential of reducing the country's power deficit. Ficci president Habib Khorakiwalla has asked the finance minister to treat solar energy projects at par with conventional energy and allow 10-year tax holiday. |
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| Govt’s Diwali gift: Rs 10 coin |
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| WITH smaller coins getting out of circulation, the government is planning to roll out Rs 10 coin during Diwali. The finance ministry will soon invite global tenders for manufacturing 30 crore pieces of Rs 10 coins worth Rs 300 crore. The centre of approximately 7.71 gm, 17-mm diameter bimetallic composite rimmed Rs 10 coin will be an alloy of copper and nickel (cupro-nickel) while the rim will be of Al-Bronze (aluminium, copper and nickel). It is believed that only foreign suppliers will be able to supply these coins due to their unique composition.
In addition to the Rs 10 coin, the government has also decided to roll out 200 crore and 80 crore pieces Rs 2 and Re 1 coins worth Rs 480 crore. Sources said SAIL’s Salem Steel and Jindal Stainless Steel have bagged the contract to manufacture blanks of Re 1 and Rs 2 coins at an estimated cost of Rs 200 crore.
Trial runs have also begun for introduction of plated coins (with a low value metal as base and a plating of nickel to give it shine and endurance), a first for the Indian mint market. The Security Printing and Minting Corporation of India, the government company responsible for printing notes and stamping coins, is expected to invited global tenders for it soon.
Introduction of the Rs 10 coin was also recommended by the Tarapore Committee, deliberating on currency management. The committee was, however, not in favour of parallel supply of notes and coins of the same denomination. It had suggested complete phase-out Rs 5 notes. The suggestion is unlikely to be implemented due to shortage of coins of the denomination.
The government conceived introduction of Rs 10 coin over two years back. However, the trial runs of the earlier coin did not succeed resulting in the delays in its introduction.
Interestingly, RBI is empowered to issue coins of up to Rs 1,000 denomination and notes of up to Rs 10,000 or any other denomination specified by the government of India.
Coins of 5 paise, 10 paise and 25 paise have disappeared from the market while use of 50 paise coins too have become minimal. Currently, Re 1, Rs 2 and Rs 5 coins are used as singles. Coins up to 50 paise are called small coins while one rupee and above are called rupee coins.
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| India may be hub for i20 export |
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| Hyundai Motors India on Sunday said it is planning to manufacture its premium hatchback i20 in India by the end of this year for sales in overseas markets. “We may produce i20 by the end of 2008 at Chennai plant,” HMIL senior vice-president (sales & marketing) Arvind Saxena said. Initially, the car will be produced with an intention to cater to the overseas market as the company has not firmed up plans to launch it in the domestic market, he said. The new car will be a step above Hyundai’s global car i10, rolled out here in October last year. i20 will be produced from HMIL’s upcoming second facility at Chennai. HMIL has been stepping up efforts to make the country its export hub for small cars, with 50% of its total capacity meant for the overseas market, he added. —Our Bureau |
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| Imports from China rising fast: Ficci |
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| • NEW DELHI: Imports from China have increased at a much faster pace than those from India's other trading partners, even as the two countries are considering a market enlarging regional trade agreement, industry body Ficci has said. "India's imports from China have increased over eight-fold since 2001-02 whereas increase in our imports from the world was only three-fold during the same period," Ficci said. This has increased China's share in India's imports from around 4% in 2001-02 to 9.4% in 2006-07, while India's share in Chinese world imports continues to be 1.3%, it said. The chamber further said not only is the average growth rate of Chinese imports is very high, but share of China has also increased significantly in India's imports over the last six years.
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| PIO remittance to touch $40 b this fiscal |
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| • NEW DELHI: It's not just the foreign investors who are pumping in billions of dollars into India. Persons of India origin living abroad too are chipping in wholeheartedly. The total PIO remittance is expected to cross $40 billion in the current fiscal ending March, according to research and analytics firm Evalueserve. This would represent a four-fold surge from just about $10 billion in the fiscal year 1997-98. The figure stood at about $27 billion in fiscal year 2006-07. Compared to this, the increase in foreign direct investment (FDI) into the country during the period has been just about $5 billion — from $3.4 billion in 1997-98 to $8.4 billion in the last fiscal.
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| FIEO pegs export loss due to rupee rise at $7 billion |
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| • MUMBAI: A sharp appreciation of rupee against US dollar is estimated to have led to loss of exports worth about $7 billion over the last one year, according to the Federation of Indian Export Organisations (FIEO). The organisation’s president Ganesh Kumar Gupta said: "Importers are not willing to give even 1% rise as they can get same goods from our neighbouring countries, whose currencies have not appreciated like the Indian rupee." Responding to suggestions that exporters could look to invoice their exports in currencies like euro, he said importers are not willing to go for such measures. He said if immediate measures are not taken, the country will lose markets for products like garments. In fact, some Indian exporters themselves are setting up readymade garment factories in countries like Bangladesh, Sri Lanka and Jordan to deal with the challenge.
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| Delhi plans SPV to convert parks into tourist magnets |
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| • NEW DELHI: Parks and gardens in the Capital are in for a major face-lift with the Delhi government planning to set up a special purpose vehicle (SPV) to convert them into tourist magnets in view of the 2010 Commonwealth Games. A novel proposal to set up a flower and garden society would soon come up before the Delhi Cabinet for its approval to spruce up and re-decorate the parks in keeping with their character. Once given the green signal, the society would be entitled to take a decision to improve the looks of gardens and parks spread across the city.
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| Punjab inks MoU with UN tourism agency |
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| THE Punjab government today inked a memorandum of understanding (MoU) with United Nations World Tourism Organisation (UNWTO), a specialized agency of the United Nations, for the formulation of a tourism development master plan for the state. "Punjab has a tremendous tourism potential which needed to be tapped optimally," said Punjab chief minister Parkash Singh Badal. Punjab principal secretary, tourism, Geetika Kalha and executive director of UNWTO Harsh Verma signed the memorandum. Having identified tourism as one of the major sectors, the state is committed to achieve a high degree of sustainable development with optimum utilization of rich and wide variety of tourism resources.
The plan would be prepared for next 15 years, which would define the tourism policy and strategy, identify tourism products and services and develop these besides a five-years marketing action programme, two pilot demonstration projects and a training programme on destination development and management. The project would also include series of initiatives to bring together the tourism private sector and the Government to realize its full potential, said Mr. Verma. Punjab's tourism resources cover an extensive range of religious, heritage and cultural, natural, medical and commercial tourism.
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| City beautiful shows ugly side, Chandigarh crime up |
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| IT has long been held as one of India's most organized and well-protected cities, but Chandigarh could be fast losing that enviable reputation with all types of crimes going up substantially in 2007.
Vehicle thefts, murders, rape, rioting, robbery, snatchings, accidents and criminal trespass are some of the serious crimes that showed an upward trend as the city beautiful began to show its ugly side.
The 114-square km union territory, which is the twin capital of Punjab and Haryana, has the highest density of vehicles among Indian cities with over 650,000 registered vehicles against a population of just 1.1 million.
But it has also emerged as a favourite haunt for motor vehicle thieves in the region. The last year saw 852 cars and other vehicles being stolen compared to 582 in 2006.
Car thieves operating in the city target high-end vehicles like Scorpios, Toyota Innovas, Skodas as well as Marutis and latest motorbikes. On a single night last month, eight vehicle thefts took place in an area under the jurisdiction of the Sector 36 police station. Many vehicles were stolen from manned paid parking lots.
What is even more embarrassing for the Chandigarh police is the fact that the recovery rate of stolen vehicles is quite poor. Only 210 of the 852 vehicles stolen in 2007 were recovered. In 2006, only 181 vehicles were recovered.
"This is a small city with many exit points. Thieves take advantage of the fact that they are out of the city's limits within minutes of stealing a vehicle. Most cars are taken to Nepal via Uttar Pradesh and Bihar and to northeast states and even Jammu and Kashmir," Chandigarh's inspector general of police SK Jain said.
"We are introducing technical surveillance of parking lots. We have been asking motorists to install anti-theft locks in their vehicles," Jain added.
The police's record in other cases of theft was quite sorry as well. While 'other theft' cases jumped from 705 in 2006 to 888 in 2007, police could manage to make only 381 recoveries in 2007 against 441 recoveries in 2006.
Snatchings have increased too - up from 118 in 2006 to 179 in 2007. Police could solve only 69 of these cases last year.
For a city promoted as north India's biggest commercial centre and increasing numbers of IT and software companies setting up facilities, the rising cases of rioting - up from 44 in 2006 to 79 in 2007 - is also cause of concern.
Murder and rape were up too. There were 19 murders in 2007 against 12 in 2006. And 22 cases of rape reported, three more than the previous year.
The capability of the city police in solving crime cases has taken a beating. In 2007, the total crimes committed were 4,496. Of these, only 2,703 cases were solved. In 2006, the total crimes committed were 4,043 and 2,998 cases were solved.
Accidents in the city, said to be one of the best managed, have generally shown an upward trend. There were 417 accidents in 2004, 529 in 2005, 525 in 2006 and 538 in 2007; 148 persons lost their lives on city roads in 2007, five less than in 2006.
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| Industrial growth plunges to 5.3% in Nov |
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| THE sharp deceleration in the growth rate of index of industrial production (IIP) is a signal for the government to take a re-look at consumer spending and loosen money supply a bit, commerce & industry minister Kamal Nath has said, indicating the need for a possible reduction in interest rates. The minister, however, stressed on the need to guard against inflation and said the calibration has to be done carefully. “It is tight-rope walking,” he said.
Speaking to reporters on the sidelines of a function, the commerce minister said the sharp drop in IIP growth rate to 5.3% in November 2007 from 15.8% in November 2006 indicated a deceleration in industrial growth, but things would improve. “I am confident that on an annual basis it (IIP) will go up,” he said. Mr. Nath said the government will have to ensure that consumer spending is not completely deflated. At the same time, inflation has to be guarded against as the country “did have a bout of inflation”, he said. “There has to be a balance. Calibration has to be done carefully,” he added.
The government has been concerned for a while over deceleration in manufacturing. Prime Minister Manmohan Singh recently formed a group to be headed by National Manufacturing Competitiveness Council chairman V Krishnamurthy to devise a strategy for reviving growth.
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| Steel may not see hike in duty |
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| STEEL industry may not get further protection from surge in steel imports in the forthcoming Budget. The steel ministry has proposed status quo with respect to 5% Customs duty on finished and alloy steel, ignoring demands made by primary steel makers. It would mean added pressure for domestic steel companies which are already expecting lower margins with a price surge in inputs like coking coal and iron ore.
In its pre-budget memorandum to the finance ministry, the steel ministry has suggested that 5% duty on steel should be maintained at the current level citing a comfortable demand-supply situation. The ministry, however, did not account for 78% increase in imports during 2007-08 (April-November period) as against the same period of previous fiscal. This is the single largest rise in steel imports over last few years.
“Though the steel imports is only marginal at 3.16 million tonne (mt) till November 2007, the trend is disturbing that should not have been ignored by the steel ministry. This becomes important, especially, at a time when rupee is hardening,” said a senior official of a private sector steel company.
While status quo on customs duty may not be a welcome move for primary producers, sources said the duty atleast would be maintained and not withdrawn under pressure from secondary producers. The secondary producers like rolling and rerolling mills and makers of other value added products feel that 5% duty should be withdrawn to bring about more true pricing for domestically produced steel.
The Budget, however, may provide a major relief to the steel industry through lower duty on inputs like melting scrap, zinc, coking coal and refractories. The steel ministry has proposed that duty on melting scrap and stainless scrap be brought down to 0%. A 5% duty was imposed on scrap couple of years back to prevent dumping when its prices had fallen sharply.
It has also suggested that 5% customs duty on coking coal and refractories should be withdrawn while 5% duty on Zinc, another raw material used in steel making be reduced to 2% level.
To curb exports of iron ore, the ministry has said export duty should be levied at ad valorem rate of 10-15% freight on board (FoB) value rather than the present fixed rate. Last Budget introduced export duty on ore at a fixed tariff of Rs 300 per tonne for grades over 62% and Rs 50 for lower grades
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| Choice group plans 5 hotels in Punjab,To Set Up All-Suite Hotel In Ludhiana/ To Invest Rs 1,000 Cr N |
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| CHOICE Hotels is planning to set up five hotels in Punjab, which includes an all-suite hotel in Ludhiana, the only one of its kind in the country. Of the remaining four, two will be in Ludhiana and one each in Amritsar and Bhatinda.
Along with its various promoter companies, the Delhibased group plans to invest over Rs 400 crore to set up budget hotels across the state in the next three years. Nationally, the company and its promoter companies plan to invest Rs 1000 crore in the next three years for 32 such projects.
“We plan to have most of the hotels ready in the next 2-3 years to meet the expected demand during the Commonwealth Games in 2010,” said Choice Hotels India CEO Vilas Pawar.
The 120-room Clarion Suites in Ludhiana will open during the end of 2008. The all-suites hotel will come up at over Rs 130 crore and its facilities include a 5,000-square-foot spa, and 15,000 square feet of banqueting. The hotel has already got mega project categorisation by the Punjab government and is owned by Agaya Paul Singh, a non-resident Indian based in Vancouver. Ludhiana will also have a 50-room Comfort Inn by the group by the middle of this year. This budget hotel will come up at a cost of Rs 20 crore while a 60-room Quality
Inn Hotel will open at GT Road by early next year, at a cost
of Rs 35 crore.
The Choice hotel in Bhatinda will also be a Comfort Inn. This 56-room Comfort Inn will come up at a cost of Rs 30 crore. Amritsar will have another Comfort Inn, with 40 rooms, in 2008. The budget hotel is promoted by Gurcharan Singh Khurana of Khurana Hotels and Apartments.
All the hotels planned by the group in Punjab will be under the franchise and management contract.
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| Chandigarh unveils new excise policy |
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| CHANDIGARH, which aims to house the cheapest liquor in the country, has come up with its new excise policy for the year 2008-09. Country liquor and Indian made foreign liquor (IMFL) will now be available in pouches of 150 ml each while six new categories of IMFL have been introduced. Both the measures are aimed at boosting retail trade. As per the administration, the UT excise policy, developed in line with the Union Ministry of Food Processing Industries Model Excise Policy in the beginning of the year 2006, has been successful in dismantling the cartel, bringing down retail rates, improving ambiance of the vends and expanding the range of brands on retail shelves.
In addition to the availability of liquor in pouches, the import fee has been fixed at a uniform rate of Rs 2 per proof liter for both country liquor 50 and IMFL 60 degree from Rs 1.75 while IMFL 75 degree has been increased to Rs 2 from Rs 1. Franchise fee levied on brands of other distilleries bottled in the bottling plants of Chandigarh has been abolished. The bar licences of five-star hotel and above category have been allowed to procure liquor also from authorized sources outside Chandigarh on payment of additional licence fee/permit fee/import fee.
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| GDP may slip to 8.4% in 2008: World Bank |
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| • LONDON: India is likely to witness further moderation in economic growth with the gross domestic product (GDP) slipping to 8.4% in 2008, says a World Bank report. India's economic growth rate, however, was likely to marginally improve to 8.5% in 2009, said the World Bank's 'Global Economic Development: Technology Diffusion in the Developing World' report released here on Wednesday. Having touched a high of 9.4% in 2006, India's GDP growth rate moderated to 9% in 2007 and is expected to slip further in the current year, the report said. The modest easing of GDP growth rate, the report said: "Reflects a firming ...(of) Indian import demand that yielded a negative export position, further underpinned by strong appreciation of the rupee." However, the rupee appreciation mainly on account of increased capital flows has helped India keeping under check inflation, which touched 3% in November, breaching a five-year low of wholesale price index (WPI)-mark, the report said. In addition to the impact of slowdown in the US economy, the upcoming risks which can have a bearing on India's growth include spiraling crude oil and commodity prices, the report added. |
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| India to continue witnessing dynamic growth in 2008: UN |
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| • UNITED NATIONS: India will continue to witness dynamic growth in 2008, driven by investment in the manufacturing and service sectors, and will be "largely insulated from weakness in the global economy," a new United Nations report has said. The Asia-Pacific region as a whole is also likely to continue to see strong economic growth this year, despite uncertainties posed by a slowing United States economy, it predicted. Key Economic Developments and Prospects in the Asia-Pacific Region 2008, published by the UN Economic and Social Commission for Asia and the Pacific (ESCAP), stated that the region's resilience will be underpinned by strong growth in India and China and high commodity prices. "Asia-Pacific economies are well prepared to manage continued uncertainty in the external environment over the coming months," chief ESCAP economist Ravi Ratnayake said on Thursday at the launch of the report in Bangkok |
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| India, US mull bilateral investment agreement |
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| • WASHINGTON: A bilateral investment agreement between India and the United States is expected to be discussed next month in Chicago when commerce minister Kamal Nath is scheduled to meet US Trade Representative Susan Schwab. "In the private sector, we are hopeful of moving forward to pursue and conclude a mutually beneficial agreement between India and the United States. India has negotiated many investment agreements with countries around the world," said ambassador Susan Esserman, former Deputy US Trade Representative. "Given the increased stature of our relationship, the incredible increased investment on both sides it would be the appropriate logical next step. And we in the private sector are very enthusiastic about this possibility," Esserman said at the US Chamber of Commerce. |
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| MoUs with Italy, Hungary on agriculture approved |
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| • NEW DELHI: The government on Thursday approved signing of MoUs with Italy and Hungary for cooperation in agriculture and food sectors, information and broadcasting minister P R Dasmunsi said. The pacts will promote further bilateral cooperation, joint activities and exchanges between India and the two nations through exchange of scientific delegation and experts. The MoU with Italy on agriculture and phytosanitary issues will be signed during Prime Minister Manmohan Singh's forthcoming visit to that country. The MoUs will remain valid for five years, Mr Dasmunsi said. |
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| Sri Lanka cuts taxes on food imported from India |
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| COLOMBO: Faced with the grim prospect of a crippling island-wide traders' strike, the Sri Lankan government has drastically cut taxes on essential foods, most of which are imported from India. Essential Food Commodities Importers and Traders Association media secretary Hemaka Fernando said the government had cancelled the taxes imposed December 25 and introduced more reasonable rates. This would enable the India-Sri Lanka trade in essential foods to survive and the people of Sri Lanka to get essential commodities at reasonable prices. The commodities on which taxes have been cut include onions, potatoes, moong beans, chick peas, yellow split peas, chillies, sugar and split lentil. Most of these are imported from India. |
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| Big guns vie for Amritsar airpor |
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| THE DEVELOPMENT of Amritsar airport has received expressions of interest from a number of companies including Reliance Energy, Tata Group, Emaar MGF, GE, Gammon, Larsen and Toubro Ltd, Unitech and DS Constructions. With the last date for the request for qualification being extended to January 14, more companies are expected to submit proposals. The airport is one of the 35 non-metro airports to be developed through public-private participation.
The Airports Authority of India had decided last October to undertake commercial operation and maintenance of the terminal building and development of the city side, including cargo facilities, of the Amritsar airport through public private participation on a commercial operation, maintenance, development and transfer basis. For developing a floor area of 41,000 square metres comprising the terminal building and city side of over 30 acres, more than seven companies and three international airports have given initial expressions of interest, according to AAI sources.
Operation and maintenance of the commercial space in the building, developing and managing the cargo facility and city side development are the basic demands of the AAI the private companies will have to fulfil.
According to sources, DLF, along with Fraport, has given its proposal to the AAI while the Tata group has bid for the project along with Changi Airport and Larsen & Toubro has joined hands with Zurich Airport. When contacted, L&T denied any association and instead, an executive, who did not wish to be named, said the company had bid for the airport development on its own.
“We have submitted our expression of interest for developing Amritsar airport and are keenly exploring more such opportunities. In this airport, the scope of work is for the non-aeronautical operations, including city side development,” said D S Constructions general manager Rafi Q Khan.
While Reliance Energy’s association with any international airport is unclear at the moment, company executives agree to have submitted its proposal for developing the Amritsar airport.
Sources in the AAI also said a number of other companies, including Emaar MGF, have bid for the project. “This is a request for qualification and we have submitted our proposal. We have formed a consortium comprising Emaar MGF, Emaar, GE & Gammon with Emaar MGF being the lead member,” said an official communiqué from Emaar MGF.
“The date for receiving the requests for qualification has been extended to January 14. From this, the number of companies may be reduced,” said Amritsar airport director Arun Talwar, while adding the possibility of more companies applying. According to reports, K Raheja group, Nagarjuna Construction Ltd, Unitech Ltd, GMR group and GVK group have also bid.
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| Metro Cash N Carry joins retail war in Punjab |
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| THE INDIAN arm of German retail behemoth Metro Cash & Carry will be launching its operations in Punjab soon, even as others are waiting in line.
Metro Cash & Carry India is likely to invest Rs 600 crore to start its chain of distributioncum-retail centres in the state, beginning with units in Chandigarh, Jalandhar, Ludhiana and Amritsar by the second quarter of this year. Another chain, Tata Chemicals’ Khet-Se Agriproduce India, too, is expected to get its clearance for its Rs 90-crore project, to be implemented in two phases.
“These ventures will result in creation of 2,700 jobs for local youth and impart training in modern management practices. Besides sourcing vegetables, fruits and other fresh items directly from local farmers, thereby eliminating the middlemen, the company is committed to work along the entire agriculture supply chain to build direct supply sources, reduce wastage levels and help farmers realise better financial value for their produce,” said Metro Cash & Carry India’s managing director Martin Dlouhy.
Metro circles said each store would offer direct employment to 300 people. An additional 150 people will get employment indirectly per store.
“One of our main efforts here in India is improving the entire supply chain. Over 95% of the range of products offered to our business customers is going to be sourced from India,” said Mr Dlouhy, without mentioning the commodities to be procured from Punjab and adjoining states.
The stores, to be spread over 1 lakh to 1.5 lakh square feet, would be built over 7 acres. The company is procuring land in Punjab. “Our preference is to buy land; however, we also consider long-term lease (eg 99 years). Real estate price or lease conditions are very important for us as our business model is based on low margins and low costs. And this is still the major problem for us in India,” said Mr Dlouhy.
According to government officials, the company will set up distribution centres at Mohali, Patiala and Bathinda in the second phase, which will provide over 18,000 items — both food and non-food — to kirana stores, hotels, restaurants and businesses in Punjab.
According to Khet-Se Agriproduce India Pvt Ltd CEO GR Goves, the company plans to set up its first distribution centre(DC)-cum-CPPC (collection cum primary processing centre) in Malerkotla, primarily to serve Ludhiana and also other adjacent cities. “In Ludhiana, we plan to open two cash and carry stores which will be franchised outlets. Later, we also propose to open centres to service Amritsar, Jalandhar and Chandigarh,” he said. The Tata Kisan Sansar network already present in Punjab, apart from doing contract farming with farmers, will also provide them with good quality seeds, advise them on agricultural practice and superior soil inputs.
With an amendment likely to the Agricultural Produce Marketing (APMC) Act to allow private sector firms to procure farm produce directly from farmers rather than buying from a government procurement agency, more players will enter the market.
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| Another NRI meet on Jan 14 |
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| Chandigarh: The NRI is the flavour of the season. Close on the heels of Punjab government's NRI Sammelan comes another high-profile event aimed at addressing the concerns of the Indian diaspora.
The event - Indian Diaspora: Migration and Development - is scheduled to be inaugurated by minister for overseas Indian affairs Vayalar Ravi on January 14 in the city.
Significantly, the focus would be on Punjab, which is in urgent need of a new outlook to meet the expectations of its acclaimed expatriates. In fact, the occasion would offer an opportunity to consolidate and review the proposals emerging out the two-day NRI Sammelan.
A galaxy of star speakers, including chief justice of Punjab and Haryana High Court Vijender Jain, are expected to elaborate on various problems being faced by the diaspora. He would be inaugurating a session aimed at discussing issues like illegal migration, NRI marriages, forced marriages, proxy marriages, custody of children and senior citizens.
There would be a discussion on Punjab government's policies and procedures towards building a relationship with NRIs.
Interestingly, the speakers would also take up a rather important and timely topic: ‘Can the diaspora be a strategic asset in the economic and social prosperity of Punjab'.
With the state's finances in doldrums and the chief minister going full steam in inviting FDI for infrastructure development, the debate is likely to suggest ways and means to come out of the situation.
Illegal migration
‘‘The event will sustain the momentum generated by NRI Sammelan and suggestions coming out of it will be considered by the government as mandated by Parkash Singh Badal,'' said HS Mattewal, Punjab advocate general. ‘‘Illegal migration is an important topic. The conference will lead to dissemination of information about legal ways of migrating,” said Ranjit Malhotra, consular correspondent of Italian Embassy for Punjab and Chandigarh
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| PSUs may be punished for missing targets |
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| CENTRAL public sector enterprises (CPSEs) that miss annual targets should now brace to face the music. The government is likely to curtail CPSEs decisionmaking power if they miss their annual targets.
These public sector units may lose certain powers to take financial and administrative decisions including those in the areas of mergers and acquisitions.
The new norms would be applicable for all CPSEs including the Navratnas like ONGC, IOC, NTPC and BHEL among others. The government, however, may impose lesser penalties for companies in the social, financial, trading and consultancy sectors while primarily targeting the CPSEs in manufacturing and mining sectors.
“We have directed formulation of stricter rules for signing of yearly memorandum of understanding (MoU) by the CPSEs with the parent ministry. The department would formulate severe penalties for companies not following the new norms,” an official in the department of public enterprises (DPE) said.
As per a letter of the DPE dated November 16, 2007, all CPSEs including the sick and loss making are required to sign the MoU and follow the new norms. Even the CPSEs which have been approved by the government and are under formation are required to sign the memorandum with the parent ministry under the new guidelines.
The department has prepared a list of activities on which the a particular company’s performance would be judged. The activities would also carry negative marks in case of non-compliance. The companies will be awarded negative mark of 1 for each 15 days delay in submitting the draft MoU, while their performance would be rated as poor if they do not sign the MoU before March 31.
A poor marking would result in the government taking stricter actions against the company’s board and management and curtailing their powers to a certain extent. The company’s would also have to face penalty for delay in submitting performance evaluation report, audited accounts, balance sheets and any type of data that the department may require from time to time
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| Ludhiana firm gets approval for Rs 213-crore SEZ |
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| LUDHIANA-BASED Malhotra Land And Colonizers Private Ltd on Monday got the Centre’s approval to set up an auto-engineering special economic zone, taking the number of SEZs in Punjab to 12.
The company plans to invest close to Rs 213 crore on 300 acres in Ludhiana for the project. It is expected to generate employment for 12,000 people.
“We have got approval from the Union government. It will take us almost a year to develop the project. The SEZ will house both medium and large scale industries,” said Malhotra Land And Colonizers MD Ashok Malhotra.
Around eight more projects for Punjab are awaiting approval, which can translate into an investment of Rs 4,000 crore in the coming months. The SEZs in the state will be located at Ludhiana, Rajpura, Amritsar, Mohali and Jawaharpur. The state government has already notified SEZ projects of Ranbaxy and Quarkcity in Mohali.
Realty major DLF may set up an SEZ in Ludhiana, apart from its four SEZ projects in Amritsar. The company has got formal approval from the Centre. Other companies that have got formal approval to set up SEZs in Punjab include Rockman projects Limited, Shipra Estates, Vividha and Mridula groups.
More projects are likely to come up in the state. Lark Projects from Mohali has asked for 10 acres and Sukhmani Towers from Jawaharpur asks for 28 hectares while Rema Textiles also has similar plans.
Few months ago, Videocon Industries Limited had shown interest in setting up an SEZ in Punjab. The company is still in negotiations with the Punjab government and has asked for 2,500 acres. The SEZ will house electronics, hardware- and agrobased industries. The project cost will be Rs 500 crore.
“The investment can go up to Rs 500 crore. I feel Punjab is an ideal locations as politicians are keen to have industrial projects here,” said a spokesperson from Videocon Industries Limited.
If all 234 formal projects approved by the Centre so far become operational, it will translate into an investment of Rs 3,00,000 crore and generate 4 million additional jobs. Compared with the exports of Rs 22, 840 crore in 2005-06, exports from SEZs grew to Rs 34,787 crore, a growth rate of 52% in just a year.
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| Health, education main sectors for investment at NRI Sammelan |
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| A PLETHORA of investment proposals for Punjab has come from the Indian diaspora who attended the NRI Sammelan in Chandigarh. According to HS Bains, media advisor to the chief minister, education and healthcare dominated the agenda and most NRIs came out with lucrative proposals in these two fields.
Balbir Singh Multani from Germany has proposed to set up a state-of-the-art hotel management institute to provide world class education in the field of hotel management and catering and a media institute in Mohali to run crash courses in journalism and mass communication.
Norway-based Satinder Singh has proposed to set up solar power projects in the
state for power generation. Mr Singh said he could provide technical know-how in collaboration with the Punjab Energy Development Agency.
UK-based TP Singh has proposed to set up a film and TV institute in the state as Punjab had a tremendous untapped potential to exploit the talent of budding artists.
DS Khera from Canada has submitted a proposal for setting up a vocational education centre at Alohran village in Nabha sub-division. He also offered to set up a driving training school in the state to train young drivers as Canada could offer tremendous potential in the field of heavy driving. “Canada still needs more than 5,000 drivers,” he added.
Former premier of British Columbia Ujjal Dosanjh has urged chief minister Parkash Badal to immediately update laws, rules and regulations, especially those relating to property, revenue, rent and tenancy as most of these acts had become redundant. His wife, Raminder Dosanjh, offered to give special advice on revamping the school curriculum to make it more result oriented and need-based and to explore a tie up with the British Columbia’s ministry of education. NRI teachers Mohini Basra from Canada and her sister Kulwant Padda from the USA have offered to stay back in India to train school teachers, especially for teaching English. They have also suggested sending students from Punjab to Canada under “family exchange programme” to apprise them with the culture of Punjabi families settled there and also send students of Punjabi NRI families settled across the globe to Punjab to acquaint them with the culture of Punjabi families.
In addition to this, Small Business and Entrepreneurship Minister of Canada Harinder Singh Takhar evinced keen interest in setting up manufacturing units in small industry sector in collaboration with the Canadian government as Punjab had an excellent network of hosiery, automobile parts, sport goods, hand tools and machine tools industry
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| 8 mega projects await Punjab nod Include Spinning Plant, Beer-Making Unit, IT Park, Multiplexes And |
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| SEVERAL new mega projects proposals have been submitted to the Punjab government for approval which include spinning units, a beer manufacturing unit, a knowledge-based IT park, multiplexes and hotels. Barring the beer manufacturing unit, these projects would involve investments of over Rs 100 crore each.
Ludhiana-based Malhotra Land Developers and Colonisers Pvt Ltd intends to set up a Rs 176 crore knowledge-based IT park adjoining the Palm City, a township project on Chandigarh-Ludhiana highway near Kohara Chowk. The proposed project will be spread over 53.63 acres and is proposed to be funded by the promoters contribution, through internal accruals and term loans from banks and financial institutions. While the park would employ 2,000 people, the project would be completed in three years from the date of approval. Nearly 60% of the area would constitute the industrial belt, 30% as residential area and the rest will be utilised for commercial purposes.
Kaur Sain Spinners Limited has put in a proposal to inject Rs 120 crore to expand its yarn manufacturing unit from 16,128 spindles to 49,728 at Doraha, Ludhiana. The first phase of expansion is proposed to be completed by February and the second by March 2009.
Jindal Cotex Limited is planning to pump in Rs 138 crore in a new venture in Ludhiana. The ISO 9002 company, which has been in business for over seven years having a capacity of 23,472 spindles and engaged in the manufacture of synthetic yarns, has approached the Punjab government for concessions.
According to the company MD Sandeep Jindal, by September 2008, 28,000 spindles would be spun in the new facility with further addition of 22,400 spindles within the next four months. Later the dyeing and garments manufacturing unit will come up involving a total investment of Rs 138 crore, proposed to be funded through internal accruals, IPO and debt.
Mr Jindal said the company is already exporting to markets in South Korea, Bangladesh, Spain, Italy, Indonesia and Latin America. He said the new project was being set up over 20 acres and the entire project was expected to be completed by June 2009.
InBeau India International (P) Limited proposes to invest Rs 65 crore in a beer manufacturing unit on 21.71 acres in Pathankot, which is proposed to be funded through share capital and banks loans. The project would take 24 months to fructify from the time it gets the government nod. The project will employ 800 people the company may also go in for exports.
Proposals have also been given for two multiplexes to be set up involving an investment of Rs 104 crore by L R Builders Pvt Ltd and Heaven City Developers Limited. L R Builders propose to set up a multiplex and a hotel at Sherpur Chowk in Ludhiana over 5,300 sq yards area which when completed in 30 months after getting the approval will employ nearly 1,800 people.This is proposed to be funded by the promoters and through loans from financial institutions. Similarly,Heaven City Developers propose to set up a multiplex on Zirakpur-Patiala road, district Mohali over 4.91 acres with an investment of Rs 135 crore. The project will take nearly 3 years for completion and would generate employment for 300 persons.
Besides this, Seven Seas Resorts Pvt Ltd propose to set up a 4 star hotel in Mohali district on Zirakpur-Patiala road with an investment of 120 crore. The project to be spread over 4.92 acres would take three years for completion after the government approval and would employ 400 persons. The promoter would pump in Rs 60 crore as equity while another Rs 45 crore would come as loans from banks.
Ishan Developers and Infrastructure has also drawn up plans to set up a five-star hotel and a shopping mall at an investment of Rs 252 crore in Mohali. Rakesh K Sharma,CMD of Ishan Group and MD Ishan Developers & Infrastructure Ltd, said the company was in dialogue with hotel chains for a possible tie-up
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| Punjab CM to open service industry meet on January 12 |
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| Chandigarh: The international conference being organized by International Punjabi Chamber for Service Industry (IPCSI) here on January 12 would focus on exploring opportunities in skills development, vocational education and employment generation for youth in domestic and overseas job markets. This was stated by AR Kohli, patron, IPCSI and former governor, Mizoram.
Interacting with mediapersons here on Sunday, he said the conference, being held in conjunction with 6th Annual Parvasi Divas 2008, will be inaugurated by Punjab chief minister Parkash Singh Badal.
Kohli said Punjab brought green revolution, white revolution and made unprecedented progress in developing small-scale industries. Time has come now for Punjab to usher in a new revolution in economic growth by developing skills including soft skills and enhance the overall personality of its youth to international standards.
Although India has been making impressive strides in developing its economy, nearly 500 million of its citizens were not literate, he said. It is estimated that more than 300 million are unemployed, while about 45 million unemployed are registered with employment exchanges.
Kohli was of the view that the Indian corporates should also take concrete steps to provide on-thejob technical training and financial incentives to improve the skills and ability of the country's manpower. However, what is needed today is to evolve a mechanism for constant interaction between industry, academia and government, he said.
Equally important was the educational infrastructure. Indian diaspora can play a major role in building educational infrastructure and in setting up schools, colleges and even universities, the IPCSI patron said.
The chief secretary, Punjab will chair the first technical session on January 12 while deputy speaker of Lok Sabha and member of Parliament from Amritsar will attend the afternoon session. In the evening, Haryana chief minister, Bhupinder Singh Hooda would be the chief guest at the interface on "Haryana - An Investment Destination" between with tourism minister Kiran Choudhary and prospective investors and others. Kohli said that many NRI investors and entrepreneurs, domestic corporates, ministers, embassies, high commissions, government officials, educationists, HR developers and some international agencies were expected to participate in the conference
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| Erring PSU staff can be penalized post-retirement |
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| New Delhi: Central public sector undertaking (PSU) employees, who might have committed serious lapses while in service, will not be spared of any penalty if found guilty after retirement. Currently, such employees simply escape the vigilance’s noose as well as any punitive action on their superannuation — unlike their counterparts in civil services and public sector banks.
The Central Vigilance Commission (CVC) has issued a circular to all PSUs — including bigwigs like ONGC, NTPC, SAIL, Air India, Gail, HPCL, Oil India Limited and Power Grid Corporation — last month, asking them to bring an amendment to the existing Conduct, Disciplinary and Appeal (CDA) rules “to enable imposition of penalty on public sector employees after their retirement”.
Confirming this to TOI, chief vigilance commissioner Pratyush Sinha said, “The circular has been issued to all PSUs. Though some of them have already made the required amendment, the remaining have been asked to do it by January 20.” Talking about its rationale, Sinha said it would act as a major deterrent for those who indulge in serious lapses just before their retirement taking advantage of the absence of any strict provisions of postretirement penalty.
“There was a situation where even disciplinary proceedings could not be continued against them beyond retirement,” Sinha said, adding that while the public sector banks had already incorporated such provisions in their CDA rules, such a stipulation had been there for civil servants and other central government emplyees for long.
The commission, in its circular dated December 28, 2007, cited the exact provision which was incorporated by public sector banks and asked the PSUs to follow the same which has also been upheld by the Supreme Court through its judgment in a case concerning Punjab National Bank in May last year.
The circular has, however, also spelt out why the provision had so far eluded the PSUs. It observed that since the PSUs were non-pensionable establishments, there was no possibility of imposing any penalty on such deviant employees who might have committed serious lapses while in service just before retirement.
The gratuity amount also could not be witheld unless the person had been terminated consequent to disciplinary proceedings and the question of terminating an employee or imposing a penalty retrospectively after retirement was not legally tenable, it said in its two-page note forwarded to PSUs.
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| RIL, Essar arms in race to flag pipeline space Co Laying Pipeline First To Escape Stricter Regulatio |
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| IT’S race against time for Reliance Gas Transportation Infrastructure (RGTIL) and Essar Steel for construction of their pipelines. RGTIL’s Kakinada-Basudebpur-Howrah gas pipeline and Essar’s Dabuna-Paradeep slurry pipeline would cross over in Orissa. The company that lays its pipeline first may be able to claim ownership of the junction while the other may have to follow security-related regulations. This assumes significance as a huge pipeline infrastructure is being built over five years to supply natural gas to domestic and industrial consumers.
The government may come up with conditions in cases where the pipelines of two companies cross at a point. Consequently, the company completing the project first would enjoy owner pipeline status with the power to block the other project in case of conflict of interest.
The unique situation has arisen in the case of Reliance Industries (RIL) affiliate RGTIL’s proposed Kakinada-Howrah gas pipeline and the Dabuna-Paradeep iron ore slurry pipeline of Essar Steel Orissa. The pipelines are expected to cross over at certain places. As this poses safety risks, the government has decided the pipeline constructed first would be given the owner tag and the second pipeline would be called the other pipeline. The other pipeline would have to seek government permission and follow stringent guidelines for crossing the owner’s pipeline.
“The crossing of pipelines has created a new challenge for the policy makers. In the case of RGTIL and Essar Steel, as the two projects are yet to begin construction, we have decided the pipeline coming later would have to follow technical and safety guidelines to ensure seamless crossing over,” a ministry of petroleum & natural gas official said.
RGTIL’s 1,100-km Kakinada-Basudebpur-Howrah gas pipeline has been authorised by the ministry. The company also proposes to extend the line from Basudebpur to Bhopal in Madhya Pradesh via Cuttack, a distance of 1,200 km. The pipeline is intended to feed the industrial belt.
The Essar Steel Orissa’s proposal for a 254-km long iron ore slurry pipeline would feed its proposed sixmillion-tonne steel plant in the state. Essar would set up an iron ore benefaction plant near Barbil in Keonjhar
district from where ore would be carried to Paradeep through a 254-km long slurry pipeline.
The proposed policy, vetted by the Oil Industry Safety Directorate (OISD), for crossing puts the other pipeline at a considerable disadvantage compared to the owner pipeline on security grounds. As per the policy, the other pipeline would have to be installed below the owner’s pipeline and the pipes would need to have thick walls to withstand pressure. At the crossing point, there can be no joint on the other pipeline and only a full length pretested pipeline of around 12 m would be used under the existing owner’s pipeline, sources said.
The policy also makes the owner of the other pipeline liable for damages caused in the process of installation. In case of damage, the owner of the other pipeline would bear the repair cost. Besides, the company would also have to inform the owner before starting maintenance work in the pipeline.
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| Small car to be hot story at Auto Expo |
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| TEN years ago, when Tata Motors launched the Indica at the 1998 Auto Expo, the first glimpse vox populi verdict was, ‘Eh gaddi Maruti ka baap hai’. When the ninth Auto Expo kicks off at Pragati Maiden in less than 48 hours, yet another Tata product will hog most of the limelight. Only this time round, the glare will be international as well. The Rs 1 lakh ‘people’s car’ will be the star of the expo this year as the global media and nearly every automotive company under the sun participates in the biennial event. India’s growth story is hot. But India’s small car story is hotter. Which makes this year’s expo, something more than the usual gawk fest.
Like 1998, the focus this year too will be on the small car. But unlike then, this is the second wave with the focus strictly above and below the current B-segment range. Lined up for a dekko at the expo this year is a formidable roster. The Honda Jazz, the Volkswagen UP! concept, Polo, Fox and Beetle, the Suzuki Splash and A-Star concept, the Fiat Grande Punto, the Skoda Fabia and the Bajaj ‘lite’ four-wheeler will all vie for attention this year. Of course many of these small cars have already been world premiered.
The Splash and Jazz at Tokyo in October for instance, the UP! concept at Frankfurt in September and the Skoda Fabia at Geneva. But their debut in Delhi is important because they are all due for a roll out on Indian roads. The Grande Punto, Jazz, Splash and A-Star in 2008-2009 and the Polo in 2010. The Fabia is officially debuting at the expo.
The small car focus this year is understandable. Apart from the Rs 1 lakh car and the A-Star (which was developed with Indian expertise), all the other models are global platforms. India’s growing importance as a small car hub is attracting the attention of a cross-section of MNC players looking for a bigger footprint here along with some cost-saving sourcing for their home markets. That’s why the expo premieres are important this year with as many as 20 local and international launches lined up for the next one week.
Says Rajiv Dube, president-passenger vehicles division, Tata Motors: “With global developed markets registering a slowdown and the growing focus on carbon emissions, the attention of the world is turning to emerging markets and smaller vehicles. Small cars constitute more than 60% of the passenger vehicle market in India and have caught the attention of the world not only for being the product of choice for the large first time car owners but also for their relatively benevolent footprint on the environment. It’s good to see that India showcasing its strength to the world in a significant way.”Of course that doesn’t mean the adrenalinpumping luxe car drool factor will be missing this year. The line-up there too is formidable with the creamy layer car segment totting up fabulous growth in 2007. Due for debut or dekko at the expo is the new BMW M3, the iconic Mini and the rest of the Beamer stable. Daimler will launch the new C Class and show the SEM SLK sport, CLS Class and CL Class apart from its entire local range, Volvo Cars will showcase the S80 executive and D5 sedans, the XC90 D5 SUV and the soon-to-debut C70 convertible
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| Edu-centric NRI meet on Jan 12 in Chandigarh To Focus On Vocational Education, Employment Generation |
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| CLOSE on the heels of the NRI Sammelan held here, Chandigarh will be hosting another congregation for non-resident Indians, the Parvasi Punjabi Divas, to be held on January 12. To be organised by the International Punjabi Chamber for Service Industry (IPSCI) and held on the occasion of the 6th Annual Parvasi Divas 2008, vocational education and employment generation along with skill development will be the focus of the meet.
Ways to synergise education with employment generation and encouraging the youth to take up vocational training to make them employable for domestic and overseas job avenues will form part of the discussions to be held between many NRI investors and entrepreneurs, domestic corporate, ministers, embassies, high commissions, government officials, academics, human resource professionals and international agencies.
Emphasising on the need for Indian companies to take concrete steps to provide on-the-job technical training and financial incentives to improve the skill of workers; evolving a mechanism for constant interaction between industry, academia and government and developing educational infrastructure was important and something the Indian diaspora could help achieving, said AR Kohli IPCSI patron and former governor, Mizoram.
Punjab chief minister Parkash Singh Badal will inaugurate the conference with the Punjab chief secretary chairing the first technical session and deputy speaker Lok Sabha and member of Parliament, Amritsar in the afternoon session. At the evening session, Haryana chief minister, Bhupindrer Singh Hooda will be the chief guest at the interface on “Haryana – Investment Destination” with tourism minister Kiran Choudhary and prospective investors.
Quoting a recent study showing that 53% of employed youth suffer some degree of skill deprivation while only 8% of youth are directly employed, Mr Kohli said India was faced with a grim situation, even after 60 years of independence. He added that India’s literacy rate was 61%, compared with 99% in Germany, 99% in Japan and 98% in South Korea. Secondary school enrollment in India is 25%, compared with 100% in Germany and Japan and almost the same percentage in South Korea. In India, 8% of students go for higher education compared with 40% in Germany and Japan and 80% in South Korea.
Mr Kohli said only 5% of India’s workforce had vocational education, while in Germany, Japan and South Korea it was 70%, 80% and 95%, respectively. There is an urgent need to bridge the demand-supply mismatch. Mr Kohli said there would be an increased onus on the diaspora to help the country become better in all fields.
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| NRI investors seek less red tape |
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| WHILE the Punjab government is exulting about the massive turnout at the non-resident Indians’ conference in Chandigarh and Jalandhar, NRI investors are still looking for a secure and red-tape free scenario. Over the years, successive governments (Congress and SAD) have failed to curb bureaucratic hurdles to ensure a favourable investment environment for NRIs. The government had announced setting up of an empowered committee to look into fast clearance of projects but it remains to be seen whether projects like the investment of Rs 1,500-crore in a few seven-star hotels across Punjab by Indian-American hotelier, CEO of Hampshire Hotels and Resorts, Sant Singh Chatwal will actually take place.
The state government has four more years to go and this gives NRIs like Mr Chatwal, Dr Ruby Dhalla, MP, Brampton, Springdale, Ontario and Sukh Dhaliwal, House of Commons member for Newton, North Delta, Ontario hope that their projects will not be put under the scanner by other political party, as has happened in the case of projects, passed by the former Congress government.
In his speech, Mr Chatwal said he was interested to invest in the state as long as he got co-operation from the Punjab government. He will observe closely and if all goes well, will invest Rs 1,500-2,000 crore.
“The fact is that amendment of many outdated laws is not a state subject. This puts NRIs in a tough spot and they keep hovering around the courts for years. No NRI will feel safe to invest until and unless the process is fast. This has to be done at the Central government level,” said Mr Dhaliwal.
Taking cognisance of the complaints by the NRIs, Punjab chief minister Parkash Singh Badal announced the setting up of an empowered committee look into the expeditious clearances. This would be headed by the chief secretary. Commissioner NRI Affairs and the secretaries of the concerned departments would be members.
Mr Badal added that another high powered committee, with NRI representatives as members, would be constituted to look after the problems and difficulties faced by the Punjabi diaspora.
Police stations for NRIs soon
Parkash Singh Badal revealed the state’s plans of setting up NRI police stations in six districts of Punjab, namely Jalandhar, Hoshiarpur, Kapurthala, Moga, Nawanshahr and Ludhiana, reports Our Bureau from Chandigarh. Having a jurisdiction of an entire district, all police stations will have a superintendent of police (SP) NRI Affairs in charge, reporting to DIG- NRI Affairs. In other districts, SP headquarter will handle NRI cases. This is the first time that the state government has made an elaborate set up for tacking NRI related problems. While all police stations will have a web-enabled hot line, all revenue records will be put on website such that NRIs can get details of their properties from anywhere across the world. The state government has approached the Punjab and Haryana High Court to help create a special fast track court for NRI related problems. The number of such courts could subsequently go up depending on the need. Deputy Commissioners from all the 20 districts in Punjab will prepare lists of NRI cases for their respective district and the existing backlog will be cleared within six months.
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| ‘Manifold increase in NRI philanthropy’ Priority Shifts From Religious To Social Sector |
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| Jalandhar: While Punjab has not been able to attract much NRI investment in the entrepreneurial sector, a reason why the state government is bending backwards to woo them during the NRI Sammelan, a multifold increase has been witnessed in their philanthropy efforts in the social sector.
A study conducted in 28 villages of six blocks of Doaba region, which boasts of maximum number of NRIs from the state, has revealed that their donations in the last five years from 2002 to 2007 were equivalent to what had been contributed two decades earlier, from early 80s till 2002.
“Moreover, their focus have shifted from religious places to social sectors like education, health and infrastructure amenities,” said Satnam Chana, editor of monthly journal, who conducted the survey. Chana had earlier supervised a ground level survey of 477 villages in 7 blocks of Doaba region in 2002 about the funds received and the type of community projects undertaken by NRIs during the previous years.
According to the survey, around Rs 200 crore were contributed by them in 477 villages (more than Rs 40 lakh per village) and if the results of study were to be extrapolated, Doaba region (which has around 3,500 villages) would have received, even according to modest estimates, around Rs 1,600 crore in two decades upto 2002 for community projects, said Chana, whose study is to be presented at a seminar being organized by CRRID at Chandigarh in mid-January.
While a number of NRIs had migrated in 60s and 70s, their philanthropy efforts started in early 80s, Chana said. About 28 villages were selected at random for resurvey, out of the 477 villages surveyed earlier, to compare any shift in trends in philanthropy by NRIs.
While over Rs 14.12 crore were received by these 28 villages from NRIs for development in around two decades before 2002, in the following five years their contributions have been pegged over Rs 11.53 crore, which works out to about Rs 40 lakh per village.
Earlier, NRIs had mainly focused on religious places, but now a decrease has been witnessed for shrine development while contributions have increased in education and health sectors. The 2002 study showed that 96% of villages received money for religious places but the share has declined to 75% now. “Moreover, earlier, their efforts were at the individual level. But they were organized now and development committees or panchayats of the villages were also being involved,” the survey revealed.
The survey had revealed that most of the NRIs were unaware of the matching grant scheme started by state government. “Their main source of inspiration was the concept of Dasvandh (donating one tenth of one’s income) and the value system propounded and emphasized by the Sikh Gurus,” Chana added
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| NRI dream project slow in materialising |
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| Jalandhar: The state government may have plans of hosting an NRI Sammelan to solve the problems of those staying outside the country but it has not been able to implement some of the plans it has had for their development all this while due to bureaucratic hurdles.
The much propagated NRI Bhawan, which was to be constructed by the NRI Sabha near the office of divisional commissioner, Jalandhar, is one such project, the foundation stone for which was laid by the then chief minister Captain Amarinder Singh on July 19, 2002.
However, the land was transferred to the sabha only in the 2004 and it took three more years for the government to get the sale deed registered for the land in the name of the sabha.
Due to this delay in the transfer of land, work on the NRI Sabha project could not be initiated.
President of NRI Sabha, Giani Resham Singh, said the delay in transfer of land was caused mainly due to the obstacles created by certain bureaucrats who never wanted this project of the NRIs to become a reality.
He further alleged that certain bureaucrats tried everything so that registration of lease deed was not finalized but their manipulations could not work after the change of guard in the state.
"We have adequate funds and after getting the land we will try our best to complete the building soon," added Giani.
Meanwhile, the chairman of the sabha and the commissioner of NRI Department, Punjab, AS Chatwal also admitted that due to some problems the work on the building had been delayed.
However, he said now almost all the work was complete and the sabha had called for the proposals from various architects for the building. When asked whether it was an unplanned effort on part of the government he declined to comment
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| Chandigarh gets intl airport UT Gains After Haryana-Punjab Bicker Over Mohali Name In Project |
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| Chandigarh: In what would be a great leap forward for Chandigarh and its neighbouring states, an MoU for the much talked about international airport was signed here on Friday. This would be the second international airport in the region after Raja Sansi at Amritsar and will be an extension of the existing domestic airport here.
Union civil aviation minister Praful Patel, Punjab chief minister Parkash Singh Badal, his Haryana counterpart BS Hooda were there along with Airport Authority of India (AAI) chairman K Ramalingam to oversee the small function that marked the beginning of what many said was a momentous project.
But the day, important for both Punjab and Haryana as much as the UT, saw high drama that could have actually turned the whole affair very sour, maybe even leading to the project being shelved for now.
It all happened after Hooda’s surprise insistence on being a joint partner at the eleventh hour in the venture that initially only had Punjab
and AAI as signatories. Significantly, Punjab had earlier made an offer to Haryana and Himachal Pradesh to join the project in September 2007. But neither state had showed interest following which Punjab decided to go it alone along with AAI. No official was willing to say what made Hooda change his mind now, leaving a lot of sullen faces around on the Punjab Bhawan dias where the function was held.
Eyewitnesses revealed Hooda threw a tantrum at the foundation stonelaying ceremony of the new integrated domestic terminal building at the Chandigarh airport itself and objected to Punjab using `Mohali international airport' as the name for the project. He reportedly took Patel aside and lodged his protest. He also called up prime minister Manmohan Singh in the morning, triggering hectic parleys between Delhi and Chandigarh. The PM then asked Patel to sort out the matter. Soon, politicians from Punjab, UT and their Haryana counterparts discussed the contentious issue again following which the MoU was reworked and Hooda became a partner. To substantiate their claim, Haryana cited two letters, one written on November 19, 2007, and then on December 7, laying equal claim to the upcoming airport.
`Haryana felt that Punjab was trying to lay its claim on Chandigarh by calling the new facility `Mohali international airport’,’’ an official present on the occasion said.
A belligerent Hooda was heard saying: ``We have as much right on Chandigarh as Punjab. It is the capital of both the states. How could they have unilaterally decided on such a big issue?’’
The CM’s political advisor, Varinder Singh, added, ``How can they call it Mohali airport’ by just giving 250 acres of land. We can also give land. It's more a question of legality than of building an airport.’’
Punjab politicians and officials, though, had their own take on the schism.
Haryana was offered partnership in Sept: Badal
Chandigarh: Clearly looking miffed at Haryana’s stand on the Chandigarh international airport, Punjab chief minister Parkash Singh Badal on Friday said that they had offered partnership to Haryana in September but there was no categorical response.
Punjab officials added, ``They (Haryana) did not respond to the offer then but started writing letters to AAI against the proposal in November when it became clear that the project was on for Mohali. In any case, without the land, which only Punjab can provide, there can be no international airport.’’
However, in the bargain Punjab lost the privilege to name the venture `Mohali international airport' as was advertised and tom-tommed earlier. Patel was quite clear that the airport would be known as Chandigarh international airport. `After all, Chandigarh is the joint capital of both Haryana and Punjab,'' he said diplomatically.
Now, after the joint partnership, AAI would be holding 51% stake while Punjab and Haryana would be putting in 24.5% each.
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| Promoters may need state nod for factory expansion |
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| FACTORY owners with expansion plans have a regulatory hurdle ahead. The government is all set to make it mandatory for them to get the state government’s permission before going in for physical expansion of existing businesses.
As per existing guidelines under the Factories Act, occupier of a factory is not required to take permission from the state government for expansion of a factory if it is within certain specified limits. The ministry of labour is bringing amendments in the Factories Act of 1948 to make it mandatory for the occupier to obtain the state government’s permission prior to any expansion plan, however small.
“It is possible that such expansion may involve hazards to the safety of workers as well as the people in vicinity of the factory. The ministry wants to amend Section six of the Factories Act in order to vet all expansion plans,” a government official said.
The amended Factories Act, which has been finalised by the labour ministry, would soon be sent to the Cabinet for formal approval.
The government is of the view that extension of space as well as replacement of plant and machinery should not reduce the minimum clear space required for safe working around the plant or machinery or pose a danger to workers or people around the space. The government, through the proposed amendments in the Factories Act, also wants to minimise adverse effects on environmental conditions from steam emissions , heat , dust and fumes which are also injurious to heath.
The New Factories Act also proposes to ban smoking within the premises of factories. At present, there are no rules on putting any curbs on smoking inside factories. “Smoking has now been recognised as a health hazard not only to the person smoking but also to others who are working nearby,” a labour ministry official said. Apart from saving environment from hazardous effects of effluents, the new Factories Act would disallow people below age of 18 years to work near any machinery in motion
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| Tata Steel, SAIL come together for mining options |
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| STEELMAKERS Tata Steel and Steel Authority of India Ltd (SAIL) unite to face the global competition. The two companies have agreed to join hands for coal mining in the country and considering to extend the similar coperation in sharing iron ore resources. They may even consider joint steel production at a later stage.
“Being the oldest steel making companies, Tata Steel and SAIL have high degree of cultural compatibility. The two should have started JV operations long back. But its better to be late than never,” Tata Steel managing director B Muthuraman said. SAIL and Tata Steel on Thursday signed an agreement to establish a 50:50 joint venture company for coking coal mining in India.
Mr Muthuraman said that this cooperation could be extended to joint mining of iron ore and steel making if it helps both the companies. SAIL chairman S K Roongta said that he didn’t rule out a possibility of JV in iron ore mining ands steel making. “A beginning has been made with coal. Cooperation in new areas cannot be ruled out if it proves to the advantage of both the companies,” he added.
The two companies would initially invest about Rs 12,000 crore in four coal mining projects. Later, they would scale up operations to reduce their import dependence. The JV operations in coal would only be the beginning with both companies open to expand cooperation in iron ore mining and steel making also at a later stage.
The yet to be named JV company for coal will identify, acquire and develop coal blocks in India. Four suitable medium coking coal in the state of Jharkhand with reserves of around 600 million tonne (mt) are under evaluation for this purpose by a joint working group of both the companies. The total investment in all these projects may be of the order of Rs 12,000 crore. However, the new company would initially be capitalised with only Rs 2 crore. On allotment of coal blocks, the JV will develop and carry out mining operations for captive use of SAIL and Tata Steel. The company would largely participate in bids for coal blocks required by the companies for there future requirements. However, the agreement gives freedom to both the companies to bid individually as well if a particular coal block is of interest to only one of the partnering companies.
To a question, Mr Muthuraman said that JVC would restrict itself to domestic market initially. He also ruled out any possibility of Tata Steel picking up equity in a coal SPV formed by five PSU companies for acquiring coal properties abroad
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| DC’s Rs 25-Lakh Hot Rod Races For Auto Expo |
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| TO fulfil the growing appetite for luxury cars in India, noted car designer Dilip Chhabria plans to launch his sports car range under his own DC brand. The newly-designed car S, positioned in the Rs 25-lakh price band, will be unveiled at the Auto Expo to grab attention of the niche customers for the first indigenouslydeveloped super luxury product.
DC Designs (DCD) managing director and chief designer Dilip Chhabria said: “It all depends on the people’s response to the product. If the feedback is good, then there is a positive business case for the production of the car. We are aiming at a limited 300 units in the first year of the launch. We will homologate the product and launch it in the domestic and certain overseas markets and the project will entail an investment of Rs 60 crore.”
The company plans to source critical parts like engines, transmission, suspension and the brake system from various global manufacturers. The company will develop the chassis, body frame and lighting indigenously apart from the design.
“It will bear the DNA of a Ferrari and a Lamborghini with similar dynamic performance. It will zoom to 100 kmph in 3.7 second and will have a host of customised options for customers but will come with a price tag of around Rs 25 lakh. There is a big market for such luxury cars and huge opportunity to tap the potential,” Mr Chhabria added.
According to the Society of Indian Automobile Manufacturers, the super luxury segment is the fastest-growing category in the country. Currently dominated by the German majors like Daimler, BMW and Skoda Auto, it grew at 26% to 4,922 units during April-November from 3,922 units last year.
DCD will also unveil its most expensive concept car, the super luxury Ambierod — inspired from India’s oldest Ambassador with American Hotrods — at the Expo. The car, like the S sports, has been developed with 50,000 manhour inputs by the company. In the Rs 4-crore price range, the Ambierod carries an automated instrumental panel backed by satellite navigation system, rear vision camera, three LCD televisions, internet and videoconferencing-enabled flat bed and multicoloured mood lighting. It will be the first car in India having all these features in a single product.
“We are bringing in the best of world features in the Ambierod, which is enriched with the 600 car designs we have produced. It’s a tribute to the great Ambassador in its golden year and we have blended complete digital controls in a retro car, something never showcased at the Indian Auto Expo,” Mr Chhabria added
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| India’s first online serial coming soon |
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| IT IS time to switch off your TV and log on to the Internet because the country’s first online serial would be launched very soon. “The serial may be launched by early next year. It will be a revolution in the online medium,” says Puneet Johar, MD, Tangerine Digital Entertainment, the brain behind the concept. What is also new about the online serial is that the cast and crew would be selected through an online talent hunt.
Mr Johar adds that the winners of the talent hunt under various categories will come together to write the script, act and direct the online serial under the guidance of the Tangerine staff. “The online talent hunt itself is new. We have launched it on our social networking site Campus 18 which offers a wide choice for today’s youth to interact, make friends and showcase their talents, all in one,” says Mr Johar. Campus 18’s hunt called the Digistars: War of Videos’ for the India’s ‘Best Video Talent’ includes prizes for film making, acting, editing and more.
The winner for the Best Video will get a contract to make 10 short films on Campus18 and a Cash Prize of Rs 25,000. While the winner of Best Performance will get a contract to make his/her own stand up show on campus18 & Cash Prize Rs 25000. The winners of other categories will get a chance to create online interactive serial which will be showcased on Campus18. The winners will be selected by a nationwide poll with a jury vote having equal weightage and the last date for entry is January 16.
“Digistars is our first such attempt to identify and reward the talented story tellers; be it via acting, editing, writing, music or direction. Many more such initiatives will follow soon,” says Mr Johar. While critics point out that online serial is a far-fetched idea since only very few people in India have access to Internet, Mr Johar refutes such claims and adds that since social networking sites are already a hit among the youngsters of the country, the serial promoted to such a channel would also be a success. Bollywood actress Rakhi Sawant who participated in the reality show, Nach Baliye says that though new shows and ideas keep springing up on TV, the internet medium continues to be unexplored.
“Television in inundated with reality shows. Orkut and other such networking sites are popular and may be the serial might just make it big provided there is a good team working behind it. It is a new concept and only time will tell whether it works or not.” Selection of winners for ‘Digistars - War of Videos’ will be undertaken by the Campus18 editorial team along with a panel of judges from entertainment field.
“Social networking sites along with other sites where one can upload their own videos are popular among youngsters. Campus 18 is a combination of all and hence we are tapping into this market,” says Johar. He adds, “Though talent shows have been a regular affair on TV, we are just giving them an alternative.” Though Mr Johar refused to give out any story ideas for the serial, he said that everything from writing the script to final production would be handled by the winners. “The serial will definitely be different from what is currently available on TV and would also be in sync with what today’s youngsters want to watch on TV,” Johar adds
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| Punjabis shocked at turmoil in Kenya |
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| THE turmoil in Kenya following the re-election of President Mwai Kinaki has left the Indian community mainly Punjabis and Gujaratis in a state of shock. The onslaught on business establishments, looting and burning of vehicles mainly trucks owned by Punjabis in Kenya has made the Indian community to stayput indoors.
Speaking to ET over phone from Nairobi, Parladh Singh Bhangras, CMD, Comecon Constructions, said that though the situation today was calm, there was no settlement between the warring factions. Punjabis numbering around 1.5 lakh in Kenya, he said, were mainly into transport, manufacturing, hotels and farming.
He said the meeting scheduled to be held today between the parties concerned had been postoponed till Tuesday next. Already, business had come to a standstill and many transporter’s vehicles had been torched in the clashes between the police and protesters disputing the relection of President Kibaki.
He said the Punjabi business community was apprehensive about the turn of events and many had taken refuge in homes with depleting rations.” We had never anticipated such an event and Kenya has the reputation of being one of the most promising democracies with a strong economy and one of the most sought after tourist destination in Africa.” Comecon, which has interests in hotel bsuiness with the group company managing one of the largest hotels in Kenya, Leapord Beach resort, has many cancellations following the clashes after the recent presidential elections. Comecon has an annual turnover of Rs 80-90 crore and this would be hit, said Mr Bhangra.
“Hotel bookings by and large has been affected and much of the Kenyan economy is primarily based on tourism,” he said.
He said prices of essential commodities like petrol and milk had shot up substantially and were now in short supply. The Punjabi community which was huddled indoors was apprehensive of moving out of their shelters and was feeling the pinch of depleting rations.
“Lets hope wisdom will prevail and the situation will come back to normal,” said Mr Parladh.
Another Punjabi who has interests in mining iron ore in Kenya , Harcharan Singh Ranauta, who returned to Chandigtarh from Kenya before the elections on December 27, and is also into exporting bicycles from Ludhiana to that countr,y said the turn of events would leave a scar on the minds of the people and business would be affected. Ranauta’s Copac group in Kenya which employs nearly 2,000 people including a few Punjabis and has mines at Voi between Mombasa and Nairobi, said work at the site had come to a standstill and people were now facing shortage of rations.
He said there would be as many as 200 Punjabi families in Kenaya with businesses of nearly Rs 100 crore each.Another Punjabi, Pritam Singh Panesar was the second largest rose grower in Kenya, he said.
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| NRI brings speciality hospital to Haryana in memory of father |
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| FOR NEARLY a million residents of this backward area of Haryana, it is a blessing indeed. A multispeciality hospital has opened here, thanks to a US-based non-resident Indian (NRI).
The 55-bed multi-specialty nonprofit hospital, with facilities for 24-hour intensive care unit (ICU) and emergency trauma services, started operations Saturday here in Haryana’s Faridabad district, adjoining the Indian capital.
It has been built by Ohio-based NRI Rajesh K. Soin in the memory of his father, Sukhdev Raj Soin. The NRI’s Nasdaq-listed company in the US has interests in defence equipment manufacturing, software development and other products.
At hand for the inauguration of the hospital were Ohio Senator George Voinovich and Congressmen Mike Turner, Phil Gingrey, Rob Bishop and Steve Pearce.
Nearly 100 villages spread over an area of 4,600 sq km in Faridabad and Mewat - among the most backward districts of Haryana - will benefit from the new hospital. Villagers will now not have to travel to big cities to avail of top health facilities.
The smiles on the faces of villagers from this village and surrounding ones said it all.
“We dont’s have take patients to hospitals in Faridabad (town) and Delhi. The hospital is a boon,” said Puran Lal, resident of Khera Sarai, one of the most populated villages of the area.
“The facility will particularly be beneficial to women,” said sarpanch (headwoman) Gayatri of Rundhi village.
Even though Raj Soin originally hails from Jammu city, he chose to set up the Sukhdev Raj Soin hospital in this part of Haryana after land was donated to the hospital trust and the Soin Foundation by the Maharishi Dayanand memorial campus based here.
“Every individual has the right to good healthcare. We want to provide comprehensive, cost-effective and sustainable and specialized healthcare at par with international health quality standards at the doorstep of the villagers who otherwise cannot afford it,” Raj Soin told IANS.
The hospital, which will further be expanded to 150 beds and add a medical college later, will have surgical and super-speciality services like neuro surgery, gastroenterology, ophthalmology and paediatrics.
Medical facilities will be offered freeof-cost to poor patients. Drugs will be made available at highly subsidised rates, Soin said.
Located close to the Delhi-Mathura highway, the new hospital will also cater to accident victims
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| New goal: Bharti wants to set India’s football rolling Mittal Co To Invest Heavily And Enter Into A |
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| SUNIL Mittal’s Bharti Group has a new ‘goal’. It is not a business of another kind. He wants India to qualify for the 2018 football World Cup. “Whatever it takes, our ambition is to see India qualify for the 2018 World Cup,” Mr Mittal told mediapersons on Friday. Bharti will invest a couple of hundred crores and enter into a collaboration with the All India Football Federation (AIFF) in a public-private partnership to build Indian football. Mr Mittal also said Bharti would make significant investments towards establishing a world-class football academy and talent development programme.
Indian corporates have been associated with football since quite some time now. Mahindra United, Dempo, Salgaocar and JCT are all clubs owned by corporate houses while Vijaya Mallya’s Kingfisher sponsors the two Kolkata clubs, East Bengal and Mohun Bagan. Osian’s recently bought a club in Delhi. It also owns the Durand Cup property. But this is the first time that a corporate house is investing so in Indian football largely and nationally.
India had qualified for the football World Cup once, way back in 1950. The country made it to the World Cup in Brazil by default due to the withdrawal of several countries, but could not take up their place in the competition because FIFA insisted that all players at the World Cup finals wear football boots. Despite boasting of some of the oldest football clubs and the third-oldest tournament in the world (Durand Cup), India is ranked 143rd in the world. While Indian cricketers enjoy iconic status, its football players suffer in anonymity.
Unveiling plans to ‘electrify football in the country’, which Mr Mittal described as languishing because of the popularity enjoyed by cricket, he said: “Football is the world’s most popular sport. It unites the World. Our vision is to develop a rich football culture in India. To achieve this vision, we will look at partnering with leading international football clubs and institutions like Manchester United and IMG. We had enough dose of cricket and I think it is the time to start a programme to make India a football-nation. In 10 years we want India to be on the world stage.”
The Bharti Enterprises chairman also signed a memorandum of understanding with Priya Ranjan Dasmunsi, Information and Broadcasting minister and AIFF chief. The MoU envisages that both parties jointly set up a comprehensive national football development programme, including a worldclass academy
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| Hi-tech ambulances to ply on highways One For Every 50 Km Of Highway; Six States To Be Covered In Fi |
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| New Delhi: India, which records a road accident death every two minutes, has finally rolled out the ambitious Integrated Highway Trauma Care System.
Under the programme, one state-of-the-art ambulance, equipped with a portable ventilator, advanced life support systems, oxygen cylinders and a defibrillator, is being provided by the Centre to man every 50-km stretch of the 3,000-km-long highway network, covering the Golden Quadrilateral and the North-South and East-West corridors.
The ambulances will provide instant care to accident victims within the ‘golden hour’ or the crucial first hour after the accident. Over 100 state government hospitals have also been identified, which will be given a grant of Rs 4 crore each by the ministry to set up a trauma care centre, ICU and communication system to deal specially with hit-and-run cases.
Under the first phase, the health ministry was to launch the project in six states — Andhra Pradesh, West Bengal, Karnataka, Tamil Nadu, Orissa and Maharashtra. But lack of initiative and planning has cost Maharashtra dearly.
At a meeting of the programme’s steering committee on December 27, the ministry decided to include Gujarat in place of Maharashtra under the first phase.
A health ministry official told TOI: “For the past six months, the ministry has been asking Maharashtra to prepare an MoU according to which the Centre would finance the programme for the next five years after which the state will have to bear its cost.”
“But Maharashtra’s officials don’t have a clue about how to start the project. Besides getting a Rs 50 lakh grant from the Centre to employ additional staff on contract in its district hospitals, the state would also get the ambulances for free. The state would not have to bear any cost of upgrading its hospitals and trauma centres with equipment and staff till 2012. The Maharashtra officials, however, came completely unprepared for the December 27 meeting.”
“Gujarat, on the other hand, was to be covered under the second phase. But it already had its survey reports ready, had identified gaps and started civil work in anticipation. The ministry had no choice but to choose Gujarat over Maharashtra under the first phase itself,” the official added.
Nearly Rs 42 crore will be divided among these six states over the next one year. The ministry official said: “We have already started giving out the grants. By April, the programme will start to run in Andhra Pradesh and Tamil Nadu.” The Cabinet Committee on Economic Affairs cleared the programme on December 13. Finance minister P Chidambaram said the proposal entailed setting up 140 trauma centres at a total cost of Rs 732 crore during the 11th Plan period (2007-12).
“These centres will be equipped with ambulances, blood banks and burns departments to handle cases of all kinds of injuries,” Chidambaram said. Because India faces a serious shortage of specialised emergency paramedics, the ministry is also starting a special one-year course on emergency care in several teaching hospitals and medical colleges.
At present, an estimated 1.27 lakh people are seriously injured on the road in India every year of which 80,000 people die. This is 10% of all accident deaths globally.
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| Punjab focal points to be revived Property Tax May Replace House Tax: Minister |
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| Sangrur: The state government is all set to revive industrial activity in the state in a big way. Every possible help would be provided to industry, and to start with, the industrial focal points across Punjab would be revived at a cost of Rs 40 crore. Established more than two decades ago, these focal points are presently in a bad shape.
Stating this here on Thursday, industry and local government minister Manoranjan Kalia said a committee would be formed to find a way to effectively revive these points to promote the small scale industry. He said apart from this, a level-playing field would be provided to the influential NRIs to invest in Punjab. The minister added that infrastructure was being upgraded to prevail upon NRIs to pump in foreign money in the state. He said during the two-day NRI conclave, Punjab government hoped to get commitments for a handsome investment. Kalia added that the state government had asked for a package on the lines of those given to Himachal Pradesh and Jammu and Kashmir in order to promote industry.
About restarting octroi in the state, Kalia said as Punjab was facing an acute resource crunch, an alternate arrangement and hard measures were badly needed. He said to compensate the states municipal councils, a proposal of levying unit-based property tax had been floated, and in it separate parameters would be fixed for old and new houses on the assessment of house owners. He also indicated that property tax could replace house tax. Kalia said the government had short-listed 44 towns of the state to be developed with funds to be procured under the urban renewable scheme. He said 100% sewerage facility would be provided at these places.
Assuring 100% sewerage and potable water supply at Sangrur, he presented a cheque of Rs 1 crore to the deputy commissioner. Later, accompanied by SAD general secretary Prem Singh Chandumajra, he laid the foundation stone for a modern bus stand at Lehragaga to be constructed at a cost of 1.42 crore. SAD leader Parkash Chand Garg and district BJP president Jatinder Kalra were also present on the occasion
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| Tatas’ foray into Bangladesh market to turn smoother GOVT TO LEVERAGE FDI ACCESS TO ENSURE SPEEDY CL |
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| THE government is using its decision to allow foreign direct investment (FDI) from Bangladesh to push for speedy clearance to the Tata Group’s plans to invest about $3 billion in the neighbouring country. A notification has now been issued to allow FDI from Bangladesh through the Foreign Investment Promotion Board (FIPB) route, Jairam Ramesh, minister of state for commerce, said on Thursday.
Pakistan and Bangladesh were the only countries figuring in the FDI negative list of Fema. With the government allowing investment from Bangladesh, the only name in the negative list now is Pakistan.
Bangladesh has been sitting over the Tata Group’s plan to invest $3 billion in power, steel and fertiliser units in the neighbouring country. The government could not effectively push the case of the Tata Group since FDI from Bangladesh was not allowed till the recent notification was issued. “The Tata investment would be the single largest FDI in Bangladesh; more than all the FDI the country has received till now,” Mr Ramesh told ET. Sri Lanka also used to figure in the negative list of FEMA, but was taken off after the country entered into an free trade agreement (FTA) with India which is now being developed into a Comprehensive Economic Co-operation Agreement (CECA).
Prime Minister Manmohan Singh and external affairs minister Pranab Mukherjee fully backed the move to remove Bangladesh from the FEMA negative list, Mr Ramesh said. It will not be possible for India to lobby strongly for speedy clearance to the Tata proposals in Bangladesh. The minister of state for commerce had written to Mr Mukherjee last year, urging the government to allow FDI from Bangladesh.
“Investment is a two-way street. How can we push for permission to Indian investment in other countries if we do not permit them reciprocal market access,” Mr Ramesh wondered. The minister of state for commerce had flagged the issue during a meeting organised by the Indo-Bangladesh Chamber of Commerce & Industry in Dhaka last year. The efforts to allow investment from Bangladesh have borne fruit now.
Rather than the automatic route managed by the RBI, the government will subject all investment proposals from Bangladesh to FIPB scrutiny. This, officials feel, would take care of security considerations.
Mr Ramesh said the north-eastern region would benefit due to flow of investments from Bangladesh. Food processing, textiles, pharma and bamboo-based industries in the region could receive FDI from Bangladesh, he felt.
Neighbouring countries were running a huge trade deficit with India as they could not export much to India. In the case of Sri Lanka, for example, the deficit was as high as 10:1, Mr Ramesh said. After FDI from Lanka was allowed, Indian companies like IOC managed to tapped the island-nation’s emerging market. As a result, the trade deficit has now almost halved as imports have increased.
Allow FDI from Pakistan: Ramesh
Security considerations notwithstanding, Mr Jairam Ramesh, minister of state for commerce, India should not block FDI from Pakistan. “Pakistan should be removed from the FEMA negative list for FDI, paving the way for Indian companies to invest in the neighbouring country,” Mr Ramesh told ET. The comment adds a new twist to the plan to screen all FDI for security consideration. Interestingly, the comment comes at a time when the security apparatus is working on a comprehensive law to screen FDI on national security grounds
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| Social issues to be part of Punjab NRI Sammelan agenda |
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| WOMEN married to non-resident Indians from Punjab have long faced problems in getting justice when their husbands abroad cheat them. Illegal immigration has been another problem for Indian and overseas authorities. The NRI Sammelan being organised by the Punjab government in Chandigarh and Jalandhar on January 5 and 6, respectively, may be able to offer some solutions.
This year, the function, normally touted as an investment forum for NRIs from Punjab, will focus on social issues such as ‘holiday marriages’ (in which Punjabi NRIs marry during their holidays in Indian and subsequently abandon their wives) and illegal immigration.
There will be discussions on NRI family law related problems, including the proper method of registering marriages in India, applicability of a decree of a foreign court pertaining to divorce or matrimonial relief in India and the position of Indian law on parallel proceedings regarding divorce or matrimonial relief in India and a foreign court. NRIs’ property-related problems such as seeking eviction of tenants from rented property in Punjab, initiating legal proceedings for claiming possession or ownership of agricultural or commercial property from a foreign country, the course of succession in the absence of a will of an NRI will also be part of the discussion.
The need to amend provisions of the Emigration Act, 1983 to curb illegal migration the Punjab government's initiative in framing legislation to prevent human trafficking and a consolidated work permit regime will also be discussed. For repatriation of funds, the forum will also have detailed analysis on foreign investments by NRIs under the automatic route, the difficulties in seeking government approval and the time required for the procedure.
Fast-track resolution of criminal cases against NRIs has been an important requirement of Punjab. Of the 14,000 public offenders in the state around 1,000 are NRIs. According to the law, look-out circulars are maintained by immigration authorities at all international airports for NRIs who are declared public offenders. The Punjab police may review their lists and approach criminal courts jurisdiction to seek appropriate judicial remedies for public offenders
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| Chandigarh airport likely to get international terminal |
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| A MAJOR plan to upgrade the civilian enclave at Chandigarh airport will be implemented soon, with the Airports Authority of India (AAI) proposing to build an international terminal building and independent access to the airport.
The runway would be extended subject to release of land by the Indian Air Force and the Union Territory administration, an official spokesperson said, adding that the AAI had sought about 300 acres from the Punjab government to provide independent access from the city.
An agreement will be signed in Chandigarh on Friday between AAI and the Greater Mohali Area Development Authority (GMADA) to develop the international terminal complex in the presence of Civil Aviation Minister Praful Patel, who will also lay the foundation stone for its construction.
A joint venture company with AAI holding a 51 per cent stake and GMADA retaining 49 per cent will be set up to develop and operate the civil air terminal. GMADA would acquire the required land from Punjab and hand it over to the joint venture firm, she said.
Besides the terminal building to cater to 700 passengers with four boarding bridges, AAI plans to build an apron to park three aircraft and remote stands to house eight wide-bodied planes. It will also construct three link taxiways, a parallel taxi track, a cargo complex and hangars for activities of the Flying Club
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| Godrej plans JV for developing factory lands |
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| Mumbai: The Godrej group, which is one of the beneficiaries of the Urban Land Ceiling (Regulation) Act (Ulcra) being repealed, is looking at developing real estate at some of its factories in India.
The group has some 100 factories across India, and these include prime areas like Mohali and Ambattur (Chennai). With some parts of the manufacturing likely to be relocated to tax free zones like Himachal Pradesh, there is a possibility of a lot of factory land being freed up for development.
‘‘Wherever there is a scope to develop real estate at factory land, Godrej Properties will enter into joint ventures with the respective group companies,’’ said Adi Godrej, chairman, Godrej group.
For instance, Godrej Lawkim had recently entered into a JV with Godrej Properties to develop a property in Thane. A similar JV could be forged with Godrej Agrovet where the company has around around 110 acres of land in the outskirts of Bangalore. However, these will require the requisite clearances from boards of the respective group companies.
The group would proceed with such moves only if ‘‘positive’’ changes are brought about in the regulatory framework by the state government, post Ulcra repealment.
Godrej, like others in the real estate sector, wants the government to modernise the regulatory framework. The group is waiting for changes to be made in the FSI (floor space index) regulations.
Once there is clarity on the policy front, it hopes to go ahead with its plans on developing real estate.
The Rs 7,500 cr group is planning to adopt an integrated development strategy on real estate.
The growth story in real estate is expected to continue for the next few years on the back of housing demand for the growing young urban population in India.
To capitalise on this opportunity, Godrej Properties has entered into development opportunity in Hyderabad, Bangalore, Goa, among others
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| It’s quite patent for domestic pharma cos Three years into the patent regime, domestic pharma cos ha |
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| CONTRARY to Indian pharma companies’ fear that global pharma majors will dominate the Indian market in the post-patent era by launching patented products, domestic pharma companies have strengthened their hold in the Rs 35,000crore Indian drug market three years into the patent regime.
In fact, global major GlaxoSmithKline, which was No. 1 in India in 2005 when India became trade-related aspects of intellectual property rights (TRIPS) compliant, has slipped to the third position at the end of the 12-month ended November 2007 with 4.85% market share. World’s largest company Pfizer corners only 2.53% (9th position) of the Indian market.
However, industry experts feel that three years are too short a period to analyse the impact of the patent regime and draw any conclusions. Says Indian Pharmaceutical Alliance secretary general D G Shah, “The actual impact will be seen after 7-10 years when global companies would launch a basket of patented drugs. Some of them have recently set up subsidiaries in India and planning to launch patented products in the market. Generic products would continue to be the major source of revenue for Indian companies for the next 15-20 years.”
At the moment, Cipla (5.15%) and Ranbaxy Laboratories (4.92%) are ranked number one and two in market share and this growth among Indian companies can be attributed to organic growth. They have not done any major acquisitions unlike companies abroad which largely grow on the strength of mergers and acquisitions.
Says Cipla MD Amar Lulla, “The actual impact will be seen in India when global companies launch products in which they enjoy a monopoly. ‘’ According to him, Indian companies’ growth was driven by product launches and also due to the economic growth which has made medication affordable.” India’s largest company by sales Ranbaxy Laboratories has 18 brands in top 300 brands of the Industry, with 9 brands featuring amongst the top-100 league.
Though product launches have been the main force behind the growth, it was the shares of existing products that grew significantly in November. Of the 10.3% growth witnessed in November-2007, existing products account for about 5.3% while the new product range is about 4.0%. Chronic therapy categories was the high growth thereupatic category, growing by 18.5% while acute therapies grew by 7.5%, a company source said.
A report by McKinsey & Company indicates that in absolute growth, the India domestic market will have the third largest incremental sales opportunity in the world, adding close to $14 billion and taking the market size to $20 billion by 2015. An industry source partly attributed the rise of the Indian Industry to the growing realisation among Indian companies that it is fundamental to be market leader on home ground before it can become a global major.
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| RBI ropes in HCL Comnet for infotech overhaul |
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| IN ONE of the RBI’s largest IT implementations in the recent times, the central bank is setting up two large data centres in Maharashtra and completely overhauling its IT infrastructure, consisting of legacy applications and software, to move to modern, more robust systems. The exercise will cost RBI close to Rs 100 crore, and the contract has been awarded to software exporter HCL Technologies, sources said. Under the terms of the contract, HCL will set up the two centres and maintain them for the RBI for seven years. A part of the contract also involves moving the different applications that are running across locations and consolidating them at a single place on web and Java-based platforms. The RBI spokesperson confirmed the development, but declined to comment on the implication of the move for banks, citing security reasons. An industry source said this was probably RBI’s first data centre.
Of the two data centres that RBI is setting up, one would be located at Navi Mumbai (where others such as Bombay Stock Exchange also have their infrastructure) and the second, which will function as a disaster recovery centre, will be based at Nagpur. The implementation and maintenance of the project will be handled by HCL Comnet, the HCL Tech arm that provides infrastructure management services, the source said. HCL Comnet officials declined to speak on the development but said the firm was also taking on domestic clients. The development indicates that HCL Technologies is getting serious about the domestic market, which is becoming more lucrative with larger contracts from the government and private sector players. Last year, Infosys Technologies said it would also take on select domestic contracts in a departure from its earlier stance of not taking on domestic business because of low margin.
LOGGING ON
RBI awards contract to
HCL Comnet, tech arm of software exporter HCL Tech
HCL Comnet to set up two
data centres in Maharashtra
The tech co will maintain
these centres for 7 years
Will also consolidate
different applications at a single place on Web and Java-based platforms
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| Broadcasters may get Customs relief With Tech Witnessing Convergence, Duty Structure Applicable To I |
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| BUDGET 2008 may bring in some duty cuts for the broadcasting sector (manufacturers, MSOs, cable TV operators) and bring it in line with the IT and telecom sectors. The broadcasting sector is faced with various Customs, excise and service tax slabs. A committee appointed by the Centre with representatives from Trai, I&B ministry, Prasar Bharti, consumer organisations, broadcasters, MSOs, DTH players, cable operators, distributor associations and technical experts, has recommended that since technology is witnessing convergence, the duty structure applicable to the IT and telecom sectors should be extended to the broadcast industry.
With telecom players having entered the broadcasting space through emerging technologies like IPTV and DTH, cable operators also want to offer services like IPTV and voice connectivity. The committee has therefore recommended that there should be a level playing field and the industry should be given incentives similar to those offered to telecom infrastructure players. The recommendations are likely to be incorporated in the government’s national plan for digitalisation and have been submitted for considerations to the relevant ministries for the forthcoming Budget.
Currently, import duty on set top box is zero. However there is a 10% customs duty levied on some of the components imported by manufacturers. The committee believes that this needs to be corrected. Similarly, set top box makers should be exempted from additional customs duty of 4% that is charged on certain components and items like viewing cards. The committee has also recommend that the excise duty or CVD of 16% levied on some set top boxes components should be brought down to 8%. The committee has come to the conclusion by comparing duties to those enjoyed by telecom infrastructure players.
Other equipment used in digital infrastructure, such as digital head end equipment attracts a Customs duty is in the range of 7.5-10% which needs to be removed to encourage consumers to go digital. Other key recommendations include rationalising the 16% excise duty on manufacturing of set top boxes to 8% as the telecom industry faces no excise duty on locally manufactured cell phones. For the DTH sector too, rationalisation in duty structure on set top boxes and the satellite dish as part of the hardware required has been recommended.
The committee also believes that DTH and the cable sector face the burden of multiple taxes which includes service tax, entertainment sector, license fee and VAT among others. The committee has recommended formation of a separate committee to suggest a unified taxation structure on both the sectors. In addition the committee believes that both the sectors should be categorised as part of the service sector and thus only service tax should be charged
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| Punjab cabinet approves Mohali airport |
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| THE Punjab cabinet on Wednesday formally approved the setting up of an international airport at Mohali. A spokesman of the Punjab government said the cabinet, which met under the chairmanship of Punjab chief minister Parkash Singh Badal, also approved the memorandum of understanding (MoU) to be signed between the Airports Authority of India (AAI) and Greater Mohali Area Development Authority (GMADA) on January 4.
The Cabinet also gave its approval to the housing & urban development department to arrange funds for the acquisition of 300 acres and any other allied expenditure beyond the scope of the cost of the land acquisition through its agencies
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| No leeway for PSUs on Clause 49 |
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| SEBI chairman M Damodaran has ruled out flexibility for public sector companies in complying with Clause 49 of the listing agreement that deals with the appointment of independent directors.
Government-owned companies should be on the same footing as private players when it comes to corporate governance, he said on Wednesday.
Mr Damodaran also said institutional investors, including domestic mutual funds, would be allowed to start short selling from February 1. The statement comes a day after RBI gave its nod to the proposal to allow foreign institutional investors to lend, borrow and sell shares of Indian companies with some safeguards.
Retail investors are already doing it, Mr Damodaran said on the sidelines of a seminar on corporate governance here. Short selling was banned in 2001 in the aftermath of the Ketan Parekh scam. Short selling implies selling borrowed shares in anticipation of falling prices.
The Sebi chairman also said the regulator will review the 10% limit on stake held by directors or other shareholders to be considered as an insider for the purpose of the new insider trading norms. The regulator had said on Tuesday that purchase and sale of shares by insiders would be considered insider trading if the transactions happen within six months. Profits made through such deals have to be returned to the company, the regulator has said
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| Minimum price for rice export raised to $500/t |
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| THE government has raised the minimum export price of rice to $500 per tonne to discourage exports and make more foodgrain available in the domestic market. The commerce ministry agreed to the proposal sent by the food ministry advocating the hike, an official source said. The director general of foreign trade has issued the notification fixing the minimum export price (MEP) at $500 per tonne FOB or Rs 20,000 per tonne FOB.
The government on October 25 had decided to partially lift a ban on the country’s rice export by fixing the MEP at $425 per tonne. The Centre had imposed the ban on exports of non-basmati rice on October 9 to build buffer stock and improve domestic supplies. The food ministry has also informally told the commerce ministry to ensure that not more than eight lakh tonnes of non-basmati were rice exported out of the country during the current year, the source said, including shipment under humanitarian grounds. The main reason for limiting the export quantity is to increase domestic availability as prices of common varieties of rice have shot up by Rs 2-3 per kg in the last two months, the source said.
The All India Rice Exporters Association could not be contacted even as some exporters have supported the move. “When the government is spending so much amount in terms of providing water and electricity at subsidised rate, it has the first right over rice cultivated in the country as food security is more important than foreign exchange,” a leading rice exporter said.
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| Steel cos to announce price hike |
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| DOMESTIC steel producers are likely to announce a hike in steel prices with effect from Tuesday as galloping raw material costs including coal and iron ore eat into their margins. Domestic mining giant National Mineral Development Corporation (NMDC) has raised longterm contract prices of iron ore fines by 47.5%, bringing the price to Rs 1,783 per tonne. This move is bound to hit the bottom lines of steel producers hard making their demand for captive ore mines even stronger. This price hike is likely to be between Rs 1,500 to Rs 2,000 per tonne.
“We will announce a price hike on January 1. NMDC has hiked ore prices by Rs 574 with retrospective effect from October 1, and we are reviewing the impact of this hike on final product prices. Prices are bound to go up ,” Seshagiri Rao, director finance of JSW Steel said. SAIL has decided a price hike between Rs 500 to 700 per tonne for various product categories.
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| Finance ministry refuses to bail out Madras Fertilizer Decision Could Set Precedent Of Denying Finan |
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| IN a major setback to the government’s programme to restructure ailing PSUs, the finance ministry has rejected a proposal to give financial assistance to revive Madras Fertilizer (MFL). MFL is one of several PSUs seeking funds from the government.
“The finance ministry is not in favour of providing additional working capital to MFL in the light of the precarious financial condition of the company. The decision could set a precedent denying financial assistance even to revivable PSUs that have been identified by the department of public enterprises,” an official source said.
In the case of MFL, the finance ministry’s stand could mean virtual closure of the company that has been reeling under severe losses for the past few years. The restructuring package for the company was finalised by department of fertiliser (DoF) and sent to the Cabinet Committee on Economic Affairs (CCEA) for approval. The CCEA, however, has now returned the Cabinet note asking them to revise the note in the light of the finance ministry’s stand.
“Since the department of expenditure (DoE) and the planning commission have strong reservations, DoF may hold further inter-ministerial consultations and revise their note,” CCEA said while sending back the proposal.
Restructuring proposal of the sick public sector company included cash assistance of about Rs 500 crore and providing additional working capital for its revival. However, the department of banking ruled out any possibility of providing additional working capital.
MFL has got accumulated losses of Rs 513.7 crore which may go up to Rs 665.57 crore by the end of the fiscal 2007-08. The paid-up capital of the company is Rs 161 crore.
DoF has also asked for loan and interest waiver amounting to about Rs 350 crore. DoE, however, is not ready for any such measures. It has recommended that aid may be provided to the company up to March 2008 to save it from closure. DoE has also asked the need for constituting a study under a consultant to devise a proper restructuring framework.
MFL is incurring huge losses mainly on account of under recoveries because of subsidised sale of urea and complex fertiliser NPK. While the company is incurring a loss of Rs 3,100 per tonne on the sale of urea, the same is Rs 1,500 in case of NPK.
DoF, meanwhile, seems to be in no mood to let the company go for closure. “We are in the process of revising the financial restructuring proposal and would soon send it again for the Cabinet’s consideration,” an official said.
MFL is a joint venture company between the government of India and National Iranian Oil Company (NIOC), an undertaking of the government of Iran
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| Nov exports grow 26.8% to $12.4 b |
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| THE New Year has started on an encouraging note for the export sector with 26.82% growth in November 2007 to $12.43 billion compared to $9.8 billion in the same month of the previous year. The figure was, however, lower than the $13.30 billion worth of exports during October 2007 when exports, thanks to last-minute Christmas orders, registered a high growth of 35%.
According to figures released by the commerce department on Tuesday, cumulative value of exports for the period April-November 2007 was $98.39 billion against $80.59 billion (Rs 3,68,807.15 crore) registering a growth of 22.08%.
Commerce department officials, however, point out that there has been a drop in exports in labour-intensive sectors including textiles, leather, handicrafts, carpets, plastic & linoleum. “The threat of further job losses still looms large,” an official said.
Imports during November 2007 valued at $19.83 billion represented an increase of 29.26% over imports valued at $15.34 billion in November 2006. Imports for the period April-November 2007 was $151.19 billion as against $119.09 billion registering a growth of 26.97%.
Interestingly, the percentage increase in non-oil imports has been much higher than that of oil imports so far. In November 2007, non-oil imports registered a 35.30% growth over November 2006 to $14 billion. In the April-November 2007 period, the sector grew at the rate of 35.24% to $107.8 billion.
Oil imports in November 2007 were valued $5.82 billion which was 16.72% higher than oil imports valued at $ 4.99 billion in the corresponding period last year. Oil imports during April-November 2007 were valued at $ 43.34 billion, higher by 10.19% over oil imports worth $ 39.33 billion in the corresponding period last year.
Trade deficit for April-November 2007 was estimated at $ 52.80 billion, which was higher than the deficit at $38.48 billion during April-November 2006
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| Indian robots labour on global shopfloors Country Fast Emerging As A Major Hub For Industrial Robots |
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| THEIR robots may look cool, act smart and amuse kids with their intelligence. But when it comes to doing hard work, Indian robots are winning hands down.
India is fast emerging as a major hub for industrial robots. American, Korean and even Japanese firms are using these robots. Some companies are now going a step further and developing robots that can clean homes and keep an eye on intruders.
In about two weeks, Ahmedabad-based Grid Bots will launch Robograd — a robot that can clean homes and keep an eye on intruders, says the company’s co-founder and technical officer Pulkit Gaur. “Robograd will not have a torso. We believe that if robots are made to look like humans, consumers mistake them for toys and don’t take them seriously,” the 26-year-old adds. His robot, priced at Rs 10,000, would roll out across India. The company is hoping the robot will find an international market due to its price and utility.
But the bulk of India’s robots are industrial, and their demand is growing because companies across the world want to cut costs. Tranter, a US-based company, has replaced manpower with robots that it acquired from Precision Automation and Robotics India (PARI), one of India’s biggest robotics firms. The Rs 200-crore PARI’s robots now take care of the entire process — from pouring milk to boiling it and condensing it and finally placing it on the conveyer. “The company used to spend about five minutes on every unit. Now it spends only a minute. You can imagine the savings,” says PARI director, Mukund Kelkar.
PARI claims its industrial robots are used by companies like Caterpillar, Hitachi, Bosch, Emerson Power, American Ayle, Honeywell and by the Indian subsidiaries of firms like Samsung, Philips, LG, Suzuki, Renault, Ford, Honda and Hyundai because of their flexibility. “Like our robots at Tata Motors were installed for welding and pressing automation when Indica was launched, but came useful also during the production of Indica V2 and the Indigo,” says Mangesh Kale, who co-founded the company with Ranjit Date.
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| Rangarajan to decide package for exporters |
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The fate of exporters battling rupee appreciation has now slipped away from the hands of the finance ministry and the commerce department. The final shape of the proposed package for exporters would now be decided by Prime Minister’s economic advisory council chairman C Rangarajan. The PMO has asked the former RBI governor to give his views on hike in the credit provided under the duty entitlement pass book (DEPB) scheme and other export incentives. Dr Rangarajan would also look into the demand for bringing more services under the exemption list for exporters.
Speaking to ET, commerce ministry officials said the revenue department had shot down most of the proposals made by the commerce department in a recent note to the Cabinet Committee on Economic Affairs (CCEA) on the grounds that they were outside the domain of the commerce & industry ministry. Therefore, the PMO had to step in.
While the commerce department has acknowledged that the proposals on interest rate subvention was an issue for the consideration of the finance ministry, it has argued that all other proposals including increase in remission under various schemes was its concern as well. “All proposals that have a direct effect on the country’s foreign trade are our concern as well,” an official said.
Mr Rangarajan will examine whether there is a need for a 1% enhancement of DEPB and duty drawback rates. He will also look at the proposal for grant of duty free tradeable scrips –– at 2% of the FOB value of exports –– for 100% EoUs, SEZs, gems & jewellery exporters and units which do not avail of drawback or DEPB.
The tricky issue of identifying more services linked to exports, for providing exemption to exports, will also have to be decided by the EAC chairman. The finance ministry has given exemption on only 12 services while the commerce department has made a case for about two dozen services.
“There is no deadline for a decision on the issue. We, at the commerce department, are hoping that the sops come early as the delay would result in many more job losses,” the official said
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| Govt may unweave 2 textile biz-friendly schemes |
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| IN WHAT may come as a further setback for the textile industry, hit hard by the appreciating rupee, the government may soon scrap two schemes aimed at supporting local entrepreneurs — the apparel parks for export scheme (APES) and the textile centre infrastructure development scheme (TCIDS). The schemes were introduced in 2002. In fact, the textile industry is apprehensive that the government may also decide to stop financing the projects already sanctioned under the schemes worth about Rs 465 crore.
A government study initiated to examine the implementation of these schemes concluded that the programmes have not been successful in evoking interest among entrepreneurs. “There was a design defect in these schemes as these were implemented on the initiative of state governments without the assurance of interest among entrepreneurs,” an official said.
The government is now planning to take a detailed assessment of the programme to decide about its sustainability in the 11th Five-Year Plan. The Planning Commission, too, has suggested that the government should assist only such programmes where there is an active interest among entrepreneurs.
The government has so far sanctioned 18 projects under TCIDS and 12 under APES involving a total monitory assistance of Rs 271.06 crore and Rs 191.70 crore, respectively. An amount of Rs 172.50 crore has been spent on these schemes during the 10 Plan.
However, it is not clear whether the government would continue to provide financial support to the projects which have already been sanctioned or they would be forced to wind up. “If the government decides on scrapping the scheme, we would pitch in for making an arrangement so that the sanctioned projects do not get affected,” said a textile ministry official.
Under the APES scheme, the Central government gives a grant of up to 75% or Rs 10 crore of capital expenditure incurred by the state government on the infrastructural facilities of the apparel park, while the remaining 25% is borne by the agency. Despite the fact that the scheme is centrally sponsored, the Centre has not set any standard and, as a result, state governments follow different approaches for implementating the scheme.
Under the TCIDS scheme, the Centre gives an assistance of up to 50% (maximum Rs 20 crore) of the critical components of the project. The projects is aimed at improving manufacturing from textile clusters.
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| More security for power major issue in Punjab |
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| THE issue regarding payment of additional security for power and illogical electricity duty is snowballing into into a major storm. Trade and industry in Punjab is resorting to agitation as the additional security issue is keeping consumers on tenterhooks.
The supply code prepared by the Punjab State Regulatory Commission is to be implemented from January 1. Under this code, there is a provision for the review and payment of additional security. The relevant text in this regard reads: “For existing consumers, the licensee will undertake the first such review of security (consumption) (earlier called advance consumption deposit), within twelve months after revision of tariff subsequent to the date of enforcement of the supply code.”
It is clear that question of additional security will arise only within 12 months of the tariff order after January 1. Some sections of Punjab State Electricity Board(PSEB) have spread panic among the consumers that additional security provision is going to be implemented from January 1.
As per the provision, consumers who get monthly bill, have to deposit security which is twice the amount of consumption. For those consumers who get bimonthly bills have to deposit three times the consumption of one month as additional security. Regulatory Commission has provided for interest on the security.
Even when Punjab was reeling under severe power shortage in 1980s and new projects were starting, this duty was not revised, laments P D Sharma, president, Apex Chamber of Commerce and Industry(Punjab).
Mr Sharma said that the Punjab government had changed the basis of this duty from specific to ad valorem in 2003. Firstly, it was around 5% and later raised to 10%.
At present, industrial consumers are paying electricity duty of 40 paisa per unit. There is no octroi in the state but there is octroi of 4 paisa on a unit of power. Therefore, the industry has to bear 44 paisa as tax on electricity duty which has no basis at all, he averred
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| Punjab industry pleads for lowering duty on electricity |
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| PUNJAB is among the few states in the country which a high duty on electricity at the rate of 10% while most other states have duty on specific basis.
Punjab too had electricity duty on specific basis for decades at 11 paise a unit. However, in 2003, the then state government changed it to ad valorem basis at 5%. When the Punjab State Electricity Regulatory Commission (PSERC) reduced the tariff rates of power, the state government raised the duty to 10%.At the present, the burden of electricity duty is 40 paisa on industrial consumers in Punjab and 46 paisa on domestic and other consumers in the state. In addition to this,there is octroi of 4 paisa a unit although there is no octroi in the state.Thus, the total burden of state government tax on electricity is 44 paisa per unit for industrial consumers and 56 paisa for domestic and other consumers. Nothing can be more unfortunate than this,laments P D Sharma, president, Apex Chamber of Commerce and Industry(Punjab).
He said the Centre has formulated a scheme under which all state taxes have to be refunded to the exporters.Among these taxes, electricity duty is prominently placed.
The commerce ministry has estimated that the burden of state taxes on an average accounts for 3.5% burden on the value of export. In the scheme, the central government has provided that in case the states do not refund these taxes, the Centre will adjust these against the allocations to the respective states.
In Punjab, Mr Sharma said industry mostly depends upon exports which may be direct or indirect.This means the state government has perforce to return the duty.
Apart from this provision the duty burden from 11 paisa to 44 paisa is a very huge amount.Punjab started new power projects in 1980 on a very high scale.Even at that time the duty on electricity was not raised.He felt that at this juncture the Punjab government has come down upon the the power consumers heavily by its grossly wrong policies on power.
Therefore, he said the chamber which represents a cross section of the industry in the state is of the opinion that the state government should take steps to reduced the duty to the old specific rates to lessen the burden.
Mr Sharma also lamented that the Punjab State Electricity Board (PSEB) was contemplating to have its own police for tackling power theft.This issue was raised in the past also and the government had to withdraw.Stating that this provision has the potential of mischief Mr Sharma indicated that the normal laws are adequate enough to check power theft.PSEB has already provided for very heavy penalties for power thefts and there is hardly any need to set up its own police force.This is “ a dangerous move and industry opposes it strongly,” he said.
Meanwhile, the Punjab government on Saturday decided not to collect electricity bills from existing industrial units in advance in the state.This has come as a relief to the industry.The government has clarified that the first review of security (consumption) would be undertaken for the existing consumers by the PSEB in 12 months after the issue of tariff order for 2008-09.
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| SMEs see high attrition due to Re rise |
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| New Delhi: Small and medium enterprises are witnessing a large scale attrition as the rising value of rupee has impacted margins of these units, particularly in the H2 of 2007, Assocham said.
Paying capacities of SMEs to employees have been eroded due to rupee rise, which shrunk their margins and affected manufacturing. “Attrition rate, which was more prevalent in ITeS, BPO and the services sector during the first half of 2007, is now visible in SMEs as these succumbed to pressures arising out of rupee rise as also slowdown in core sector output,” Assocham president Venugopal Dhoot said.
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| New royalty norms to curb iron ore export |
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| THE steel industry can rejoice. The government is planning to put further restrictions on iron ore export by introducing a system of royalty for minerals. Under this, royalty rates on iron ore are proposed to be calculated on freight on board (FOB) values in case of exports and on gross sales value in case of domestic sales. The move is aimed at discouraging exports and increase states’ royalty earnings. The Centre has already imposed an export duty of Rs 300 per tonne on high grade iron ore to discourage exports.
At present royalty on iron ore is calculated on a fixed rate basis with states getting between Rs 10 and Rs 27 per tonne of ore. Once the new formula (ad valorem) is implemented, states’ royalty earnings are expected to increase manifolds as royalty rates would be higher for ore compared to other minerals or metals. “The proposal has been endorsed by the interstate council chaired by the home ministry. It would now be taken up by the Cabinet,” a source said.
He said changes may be included in the new mineral policy that has failed to get the centre’s approval due to sharp differences with the mineral bearing states. As the new royalty formula has been endorsed by the council, its implementation may also pave the way for smooth passage of the policy.
The proposed royalty formula could push up royalty rates on iron ore exports (FOB value) by up to Rs 400 per tone considering ad valorem rate of 10% and ore export rate of about $100 per tonne. Alongwith the Centre’s export duty, the total duty on iron ore meant for exports may constitute about 25% of its value. “This would be big disincentive to export iron ore that needs to be conserved for the growing steel industry in the country,” said a steel company official.
As per the inter-state council’s recommendations, there should be unit-based royalties for lower value bulk minerals and ad valorem for higher value commodities. Where exploration and production of minerals and metals needs a boost (gold, copper, diamond), it has been suggested that that royalty rates should be low ad valorem or unit based. Higher royalty rates has been recommended on raw material (ore) than on products and it has been suggested that states could consider deferment of royalty or a reduction as per the prevailing situation.
In return for higher royalty rates, the Centre may ask states to create a fund and set aside about 15% of royalty earnings for development of human capital in the mineral area
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| DTC removes many Indian cos from buyers list for 2008 |
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| THE diamond industry, which is reeling under the impact of appreciating rupee, is headed for more trouble that could adversely affect rough diamond supplies. Diamond Trading Company (DTC), distribution arm of De Beers Group, has removed several Indian companies from its list of sightholders for the next three years starting 2008.
Sightholders are the clients or buyers of DTC and are authorised for bulk purchase of rough diamonds. Though DTC sightholders list will be official by March, around five to 10 Indian companies have been excluded with a couple of new ones added in the 2008 list.
A prominent player in diamond industry on conditions of anonymity said in next five to seven years only 15% to 20% of the current cut and polished diamond business would be left in the country as there would be serious supply problems of rough diamond. "The only option for the Indian companies will be to move their units to Africa," he said. More than a dozen Indian companies have already moved their units to Africa, he added.
According to the figures by Gem and Jewellery Export promotion Council (GJEPC), imports of rough diamond fell by over 48% in November at 96.31 lakh carats valued at $532.38 million against 185.6 lakh carats valued at $906.2 million in November 2006. The imports between April to November fell by 3% at 1,085.04 lakh carats valued at $6,278.3 million against 1126.32 lakh carats valued at $5530.42 million in corresponding period last year.
However, because trading activities are gradually shifting from Antwerp to Dubai and India, the exports of cut and polished diamonds have gone up. Exports of cut and polished diamonds rose to 30.07 lakh carats in November valued at $912.09 million against 22.04 lakh carats in November 2006 valued at $696.94 million. Between April to November, it rose to 261 lakh carats valued at $8,526.35 million against 211.45 lakh carats valued at $6,351.03 million between April to November 2006.
According to an official from Livingstones, one of firms to be delisted, there would be problems in sourcing. "We would have to source now from the open market where price is expected to be higher then what we were paying to DTC," he said. There may also be problems of availability and quality, he added.
DTC recently announced 79 sightholders of which 75 will be offered supply through DTC London and DTC South Africa and rest four will receive sights through new independent joint-venture operations-DTC Botswana and Namibia Diamond Trading Company, selling rough diamonds to clients in Botswana and Namibia for the first time. During the previous contract period (2005-07), DTC sold all of its rough diamonds to approximately 93 clients entirely through DTC London which offered sights in London and Johannesburg.
According to industry sources, around 40% to 50% of rough diamond supplies by DTC come to India and more than 50% of its sightholders are from India.
However, Ashish Goenka from Suashish Diamonds said that supplies from DTC to India would still remain the same. "The cake is still the same, the players have changed. India remains a very important centre for DTC and they have always supported the Indian diamantaires," Mr Goenka said. He added that DTC has followed a very rigorous and thorough robust process in assessing its customer list. Suashish are the DTC sightholders in India and Botswana. Mr Goenka said trading aspect of the sector will also pick up alongwith the manufacturing side.
Exports from the gem and jewellery industry fetched $ 17.1 billion in 2006-07 against $16.64 billion in 2005-06, showing a growth of 26% with diamonds accounting for 64% of the total exports.
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| Budget may see big-ticket tax relief for oil explorers, refiners EXPLORATION COS MAY GET SERVICE TAX |
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| THE oil sector may get substantial tax breaks in the 2008 Budget. While exploration firms are likely to be exempted from service tax, refiners may gain from an excise duty rejig. The government is considering removing the advalorem component and adjusting the specific component in such a way that the effective excise duty on both petrol and diesel would be reduced by Rs 2 per litre.
“The contribution of service tax by exploration & production (E&P) sector is not significant. E&P activities are being encouraged for the country’s oil security. The sector enjoys complete exemption from Customs and excise duties under the new exploration licensing policy (Nelp). Hence there is a strong case for exempting exploration activities from the ambit of service tax,” an official said.
Petroleum sector’s service tax contribution to the Central exchequer is stated to be Rs 666 crore. Mining services (including mining of mineral oil or gas) was brought under the service tax net from June 1, 2007 through the Finance Act 2007. E&P companies like ONGC, Reliance Industries, Cairn India, GSPC and OIL are under pressure due to rising input costs.
On the refining front, the government is considering an excise duty rejig that would cost the central exchequer Rs 13,500 crore. “The decision in this regard could be taken even before the Budget as the government is considering a combination of measures to save oil companies from massive under-recoveries,” an official said. Sources said the petroleum minister has initiated a dialogue with the UPA’s allies to reach a consensus on marginal increase in retail price of auto fuel. The government intends to increase prices of petrol and diesel marginally and compensate oil companies by reducing duties. The estimated under-recoveries by oilcos on account of keeping prices of petrol and diesel artificially low in 2007-08 is Rs 26,777 crore. Total underrecoveries are projected at Rs 54,935 crore.
Finance ministry sources said the government is also considering a proposal to treat the oil & gas sector at par with power sector for availing of the benefits under section 80IB (9) of Income Tax Act. The power sector has been granted an income tax holiday for undertaking generation & distribution activities for a period of any 10 consecutive years out of 15 years beginning with the year in which the company starts generation or distribution of power. Oilcos, however, receive such a benefit only for a period of seven consecutive assessment years including the initial assessment year. These companies are, however, unable to avail of this benefit for the full tenure owing to depreciation claims in the initial years.
IN THE PIPELINE
Government considering removing the advalorem component and adjusting the specific component in such a way that the effective excise duty on both petrol and diesel would be reduced by Rs 2 per litre
Contribution of service tax by exploration & production sector is not significant. Hence, there is a strong case for exempting exploration activities from the ambit of service tax
On the refining front, government considering an excise duty rejig to save oil companies from massive under-recoveries
Government also considering a proposal to treat the oil & gas sector at par with power sector for availing of the benefits under section 80IB (9) of Income Tax Act
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| Plugged into GLOBAL INC SEVEN years into the new millennium, India is more globalised than it was in |
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| THE POWER OF GLOBALISATION, both the upside and the downside, has been apparent to investors in India’s stock markets over the past few weeks. In mid-December, the US Fed’s decision to cut interest rates by just 25 basis points led to a huge selloff in most Asian markets. India was no exception. The chain of causation can be complex to observers unfamiliar with economics.
The market wants interest rates to be cut to prevent the slowdown in the US housing sector from turning into full-blown recession. However, rising inflation, fuelled by a spike in food prices caused principally by the large-scale diversion of land to growing corn for ethanol, has meant the Fed has limited leeway to cut interest rates. This could mean a deeper recession in the US, which in turn would hurt Asia’s export-oriented economies.
Of course, Indian markets have since been recovering. What is clear is that Indian investors had better get used to being intimately impacted by faraway global events. The great global wave of liquidity pulled up most capital markets, including ours. Tightening of money and credit, and greater uncertainty in general can hurt India.
The broader picture is that seven years into the new millennium, India is more globalised than it had been in the first 60 years of its independent existence. That holds for the capital market, trade and foreign investment and the huge Indian diaspora.
India was a highly globalised country once upon a time. At the start of the 19th Century, according to economic historian Angus Maddison, it was among the largest industrial exporters in the world. But those export industries, as is well known, were destroyed by competition from Manchester. As a result, India could not benefit from the great wave of globalisation led by the British Empire, which happened between the 1870s and the eve of First World War. That phase of globalisation is immortalised in Keynes’ famous description of the imaginary British gentlemen, who, sitting in London, could buy stocks and bonds anywhere in the world.
India lagged behind other major economies during that era of economic growth. It was largely a supplier of agricultural commodities and exports of manufactured, principally textiles, were struggling to take off. Between 1870 and 1913, India’s per capita GDP grew only 0.6%, half the UK rate. In contrast, in the current wave of globalisation, India starts off in hyper-growth mode. It is the fifth largest economy and seemingly — at least in the imagination of India’s top businessmen — destined for glory. Net cross-border inflows topped $46 billion (direct and indirect FDI plus long-term debt) in 2006-07, according to the McKinsey Quarterly, compared to $24 billion a year earlier.
There are a number of broad measures of globalisation. One is the physical ratios — trade and inflows/outflows of investment as a percentage of GDP. The second is what might be referred to as the contribution of the Global Indian gene pool, the complex linkages between the global diaspora and the mother country. Another more nebulous measure is the impact of the values of globalisation on the wider Indian society.
Though not of the same magnitude as China, India’s foreign trade (exports plus imports) have grown rapidly since the start of this century. Foreign trade (exports plus imports) is currently 32% of GDP, high by the standards of our recent past. If one adds invisible exports (mainly software) they come to around 11% of GDP. Similarly foreign inflows into India have been growing at a rapid clip. FDI is pushing the $20-25 billion per year mark and exports are around the $160 billion mark.
These numbers will doubtless grow as the Indian economy expands. Software and BPO exports, for instance, are expected to double from the current $30 billion to $60 billion by 2010, according to Nasscom. India already has 50% share of the world outsourcing market, though the total addressable market is estimated to be $1.5 trillion in 2010, according to Nasscom. Exports of skill-intensive manufacturing exports alone could reach $300 billion in 2015, according to McKinsey. Yet these figures pale besides China’s current figures: $1 trillion of exports and FDI of over $100 billion per year. China’s trade surplus exceeds India’s total trade.
Comprehensive globalisation of the external sector would have to mean full convertibility, which means you and I can convert the rupees in our salary account into any currency of our choice. It would mean that Indian citizens can acquire property and shares anywhere in the world, though we would have to grant corresponding rights to foreigners. It would also mean Indian companies being allowed to borrow abroad without any restrictions, and companies listed in India being allowed to offer stock to foreign investors. In other words, shareholders of Corus (say) would be allowed to swap their stock for Tata Steel shares. Similarly, anyone willing to invest in Indian companies would be allowed to open an account with registered Indian broker, subject to due diligence.
India’s favourable demographics may also help increase its presence abroad, in the broad sense of the term. Western Europe may see an increase in the proportion of its population over 18 from the current level of 18.6% to 35% in 2050. For North America, this proportion is likely to be 30% by 2050. By next year, 20% of Japan’s population would be over 65.
India is expected to become the world’s most populous country by 2035. Already, a fifth of the world’s under-24 population lives in this country. The opportunities for Indians to emigrate to the rich economies are obvious. Not inevitable, though. Just 10% of the population in the college-going age group (in absolute terms around 7 million) actually go to college. So most Indian youths lack relevant skills. And immigration laws have to change in Western Europe and Japan.
By 2020, according to the famous Goldman Sachs re |
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| AMD’s mkt share in India increases 4% |
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| COMPETITION in the PC processor market has further intensified with Advanced Micro Devices (AMD) steadily increasing its share in the India. According to the latest market statistics of IDC for the third quarter of 2007, AMD has an overall market share of 21.1% which includes both desktops and laptops. In the desktop segment, it has 24.4% share and in laptops, it has 12.4%. Rival Intel is the dominant player in the PC processor market.
On an year-on-year (YoY) basis, AMD has increased its marketshare by close to 4%. In Q3 of 2006, its overall share stood at 17.3% while in the desktop segment, it was 19.7% and in laptop segment, it stood at 6.2%. On the increasing marketshare, AMD India MD Alok Ohrie said, they have enabled the key OEMs to win commercial deals on its technology platform. Further, it is also getting closely aligned with the IT decision makers to make their technology felt in this audience.
On a sequential basis also, AMD increased its overall market share
from 19% in Q2 of 2007 to 21.1% in Q3 of 2007. However, in the laptop segment, AMD has doubled its marketshare on an year-on-year basis.
Globally also, AMD has increased its marketshare by 0.4% to touch 23.5% for the third quarter of 2007. This increase in marketshare of AMD should also be looked in the context of the buoyancy in the Indian PC market. According to IDC, during 3Q 2007, the overall India client PC market grew 25.1% year-on-year (3Q 2007 over 3Q 2006) in terms of unit shipments to 1.8 million. For the same period (3Q 2007 over 3Q 2006), desktop PC shipments showed a growth of 10.9%, while notebook PC shipments showed a growth of 84.8% (3Q 2007 over 3Q 2006).
However, industry analysts said, the growth of AMD in the Indian market has been driven primarily by the commercial segment and not so much in the retail market. They felt that a pricing-led strategy does not really matter in the marketplace as both the competitive chipmakers - AMD and Intel are almost equal on price points.
Mr Ohrie said, AMD has been experiencing broadbased growth across various verticals and segments. Traditionally, the chipmaker’s strength was in the commercial segment in the verticals of manufacturing and industrial. The AMD official said that it has initiated specific programmes directed towards the BFSI, IT/ITeS and government verticals and has been gaining larger traction.
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| Harley Davidson to drive into India |
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| AMERICAN cult bike brand Harley Davidson may finally hit the Indian roads. In an effort to ease import of all bikes with over 800cc engine capacity, the government has relaxed their testing norms. The director general of foreign trade (DGFT) has now allowed import of all such bikes which have been
tested and approved (read homologated) by any certified agency from the European Union. The earlier policy stated that all these tests needed to be carried only in the ‘country of origin’ of the product. As a result, Harley Davidson’s 800cc and above bikes were required to be homologated in the US. Similarly, Honda, Suzuki and Yamaha bikes had to be homologated in Japan, where they are actually manufactured, in order to b e roadworthy in India.
Many bike makers, including Harley Davidson, had been lobbying with the government to relax these homologation norms. Harley had been facing problems meeting Indian homologation norms, which had been the biggest impediment for imports to India. Now its US-made bikes can tag an EU homologation certificate to be sold in India.
The government’s decision will also encourage other twowheeler majors such as Honda, Yamaha and Suzuki to introduce their full range of high-powered products in India. Yamaha Motor India has already launched its two super bikes — 1,000 cc YZF R1 and 1,680 cc MT01 — in India. These homologated and certified in India before the relaxed import policy was announced in April this year.
However, for other super bike makers such as Suzuki Motorcycle India (SMIL), which plans to launch its legendary 1300 cc Hayabusa and the 1600 cc B King sometime next year, the new policy will now expedite the launch. SMIL vice-president (sales & marketing) Atul Gupta said, “It will help us immensely to introduce our bikes faster in India. As our current homologation certificates from Netherlands will be allowed here, we will get a big boost in this niche market.”
The super bike manufacturers have also asked the government to reduce the current 110% duty on the import of such bikes to m a k e t h e p r i c e competitive. “We cannot compete with high-duty s t r u c t u r e s which make our price very uncompetitive. We will come only if the government moderates its duties to the international level,” Harley’s vice-president, government affairs, Timothy Hoelter, had said during his visit to India a few months ago. However, all such bikes will have to conform to the Euro III emission norms
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| Abhishek Industries likely to pay more for Barnala land |
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| ABHISHEK Industries Limited, the flagship company of the Rs 1,500-crore Trident group, may agree to pay 70% of the amount over and above the award announced earlier by the collector towards the full and final compensation to landowners in Barnala. The Lok Adalat is likely to settle the cases in the first week of January.
A meeting on this was held in Chandigarh headed by Punjab chief minister Parkash Singh Badal. Trident officials, owners of the disputed land, chief secretary Ramesh Inder Singh and principal secretary, industries, AR Talwar were present. The chief minister was briefed about the latest development wherein Punjab’s industry department was drafting an agreement to ensure a settlement of the issue at the latest.
For the past two-and-a-half years, the company has been in the midst of a controversy over land purchased and compensation given to farmers. The Punjab government under the Congress regime had acquired the 376-acre plot for the company in the villages of Dhaula, Sangherra and Fatehgarh Chhanna near Barnala.
The 328 landowners had expressed dissatisfaction with the compensation given to them for setting up a spinning unit and a ready-made garments unit on the acquired land in Sangherra village and setting up of a sugar mill, a paper mill, a power generation unit and a bed sheet plant on the acquired land of Dhaula and Chhanna villages.
According to a government official, “An out-of-court settlement by way of Lok Adalat was the only solution for the company and the farmers to proceed ahead. A tripartite agreement between the Punjab government, Abhishek Industries and the landowners will ensure that there will be no further litigation.”
“Once that agreement comes into effect, another accord between the Punjab government and the company will be drawn up to settle issues of further claims of land owners,” he added.
It is likely that claims, if they arise at a later stage, will be recovered by the company by arrears of land revenue.
Currently, the government and the company are examining the various clauses of the tripartite and joint agreements.
To be a part of the tripartite agreement, 328 landowners had to file their land reference with the additional session judge of Barnala. “Of the 328 land owners, 285 have filed their reference and the rest are expected to file it in the coming days,” said a source.
On June 30 this year, Punjab Chief Minister Parkash Singh Badal had clinched a comprehensive package of understanding with the farmers who had been agitating for compensation for the land acquired by the previous Congress government for the Trident Group of Industries in Barnala.
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| In HP, Industry seeks better infrastructure |
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| Chandigarh: Even as the BJP revels in euphoria generated by a massive victory in Himachal assembly polls, it has its a task cut out in the days ahead.
The state’s industry, though upbeat over the change in guard, wants the new dispensation to take some serious steps to address problems relating to lack of infrastructure in the region. Significantly, there is a resounding acknowledgement of the fact among the state’s industrial circles that it was the BJP government that gave the state the very advantageous economic package.
The package, entailing tax and excise sops, has played an instrumental role in swinging the fortunes of the region. “We welcome the results and are quite hopeful that pace of development will increase substantially. The BJP is emotionally attached to the state’s industrial development as the economic package came in 2003 when the NDA was ruling at the Centre,” said chairman of CII’s Himachal Pradesh State Council Rajinder Guleria. Guleria stressed that the immediate demand of the industry was development of infrastructure, especially in the Baddi-Barotiwala-Nalagarh belt. The belt alone needed funds to the tune of Rs 200 crore to lift its sagging infrastructure.
He asserted that better connectivity was another factor that needed to be looked into urgently. With most of the roads in pitiable condition, it would be appropriate if the National Highway Authority of India took the matter in its own hands.
Guleria also emphasized that it was desirable that the new government should consult industry bodies like CII before drafting policies that impact the industrial and business growth of the region. His views were echoed by AR Singh, a leading industrialist and former chairman of CII’s Himachal Pradesh State Council. Singh said that Prem Kumar Dhumal was quite receptive to their ideas and the industry was really looking forward to some substantial steps by the BJP government.
Coming out with his wish list, Singh said apart from infrastructure, the govt should focus on doing away with entry taxes levied at the state’s border and instead a small cess should be imposed on the industry.
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| Godrej may move out of BPO venture |
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| Mumbai: Will the Godrej group exit the BPO sector in the future? That’s the question which has cropped up after the group sold its holding in US-based Upstream, which specialises in providing contact center solutions to organisations in the travel domain.
Godrej’s exit from Upstream was based on the fact that the call centre formed a low value-added business for the group. The group also has investments in other BPO/IT enabled firms like Compass Connections and CBay Systems, which it plans to individually evaluate.
Godrej group chairman Adi Godrej had recently told TOI that the group is ‘‘not wedded to the call centre business’’. On being further queried, Godrej said: ‘‘We would evaluate our investments in companies such as Compass Connections and CBay Systems on a case by case basis. Further investments in BPO/IT opportunities would again be evaluated on a case by case basis.’’
The Godrej group had marked an entry into the BPO/IT sector by picking up nominal stakes in Compass Connections and CBay some six years back. The investments were made by Godrej Industries and its subsidiaries, with the aim to explore the growth opportunity in this sector. The promoter holding in Godrej Industries is quite high, at 86%.
However, the contribution made by BPO/IT to Godrej Industries’ total income (Rs 783 crore in 2006-07) is not as large as chemicals, real estate and vegetable oils.
As India emerged as a favoured destination for BPO services, given the low cost of operation and high productivity, many Indian companies made investments in the sector. In May 2001, Godrej International, a wholly-owned subsidiary of Godrej Industries, finalised its investment in CBay. The group allied with CBay to create a medical transcription production center in Mumbai, which is now a captive unit of CBay.
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| Domestic banks cosy up to stocks while MNCs play safe With investments in bonds becoming unremunerat |
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| EVEN as foreign institutional investors (FIIs) have made a killing in the stock market in the past two years, multinational banks, on the other hand, have been cautious at their equity desks. In contrast, Indian banks, both private sector and public sector banks, have higher direct exposure to stocks.
Public sector banks — nationalised banks and the State Bank group — have started turning to stocks ever since the interest rate scenario turned southward in the past three years which made bond investment unremunerative.
According to the latest bank-wise figures released by the Reserve Bank of India in its Statistical Tables Relating to Banks in India, total bank investments in stocks by the country’s commercial banks rose by 36% in FY07 from Rs 11,028.64 crore to Rs 15,001.88 crore. While the Sensex rose 18% during the period from 11,279 in end-March ’06 to 13,384 in end-March ’07. But within bank groups, nationalised banks (with the highest direct investments at Rs 9,398 crore as of March ’07) as well as the State Bank group hiked their exposure by more than 50% during the period.
Allahabad Bank (104%) followed by Syndicate Bank (85%) and Canara Bank ( 78%) recorded among the highest growth in their equity investment, though the absolute size of investments for individual banks vary. While private banks, including new generation and old private sector banks, have hiked their investments in stocks by only 1.5%. This is largely because banks with high exposure in equities in this group have either gone slow or recorded a dip in investments. ICICI Bank, which accounts for 65% of stock investment by private sector banks, has reduced its exposure to stocks. Though many small-sized banks, including some older ones, have substantially hiked their investments in stocks during the year. Foreign banks, which are known to have aggressive treasury desks compared with public sector banks, seem to be cautious in equity investments
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| Dollar holds its ground despite another Fed rate cut |
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| THE rate cut by the US Federal Reserve this month has not weakened the dollar as in past rate cuts. On the contrary, the dollar has actually appreciated against major currencies like the sterling pound, the euro apart from the domestic rupee. This is even though the Fed cut rates twice, once in November and again in December.
Usually, a rate cut compels fund managers to shift investments to other markets where the return is higher. According to a recent research report released by Kotak Mahindra Bank, the Term Auction Facility introduced by the Fed is expected to provide support to the greenback, which could have weakened sharply in the wake of the third rate cut. The infusion of $40 billion through this route would help boost the dollar against the Japanese yen and the Swiss franc (used for carry trade purposes).
Treasury officials say that domestic conditions like a wider trade deficit and lower foreign capital inflows could be forcing the rupee to weaken against the dollar. From a global perspective, the fall in the euro levels against the greenback could cause the rupee to follow suit, it is likely that the year 2008 could see rate cuts by most central banks, including the US Fed, the Bank of England, the European Central Bank and the Swiss National Bank.
Given that most central banks have taken a concerted action to infuse liquidity into the markets, the opinion about the depth of the crisis seems to have been altered. It is now felt that following the infusion of these funds, the crisis may not be that deep, as expected earlier.
ICICI Bank’s chief economist Samiran Chakraborty explained, “Movement of the US dollar in the month of December has largely been due to two reasons. One being that inflation figures for this month have been on the higher side. This has prompted market participants to believe that the Fed may not be too aggressive in its attempt to ease market conditions going forward. The other reason is the infusion of liquidity by various central banks.”
It is also being speculated that there has been a lot of dollar demand towards the closing of the year 2007. Typically, investment banks tend to book profits in dollar terms and then convert these funds into other currencies while ploughing profits back into their home countries. This has also been one reason for the dollar to weaken in the month of December in the past.
However, this year, treasury managers point out that the trend seems to have reversed. There have been instances of players booking losses and rather demanding dollars to meet their capital ratios, instead of selling dollars to buy other currencies. This has also caused the dollar to strengthen.
ABN Amro Bank’s senior economist, Gaurav Kapur, said, “There have been excessive bets on the US dollar in the recent past. However, as inflation has begun to rear its head, the case for a further rate cut is becoming less ambiguous. The dollar has been on the rise as market participants generally square up their positions as the year draws to a close.”
He further added that in case of the sterling pound, it had weakened by itself against the dollar. Growth momentum in the UK is showing signs of a slowdown, alongside a current account deficit in the third quarter which is greater than that in the US. As far as the euro and the Japanese yen are concerned, it has been largely due to positions being squared up.
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| PSUs won’t get to bypass CAG |
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| Public sector companies’ dream to avoid the watchful eyes of the top government accountant, the Comptroller and Auditor General of India (CAG), may not come true.
The government has decided to retain CAG’s oversight over how state-run companies manage their finances despite the J J Irani panel on the new company law making a strong case to do away with the dual auditing of public sector companies. The government has rejected this proposal, while accepting most of its suggestions on the proposed new company law. While giving private sector companies more functional freedom and less interference from government, the ministry of corporate affairs has decided not to leave the CAG’s grip over state owned companies.
Public sector companies will have to get CAG’s approval for appointment of auditors. Besides, the CAG will be empowered to do supplementary audits on the audit done by the statutory auditor. However, the entire process will be made time bound in the proposed new company law so that finalisation of the financial statements of government owned companies do not get un-necessarily delayed as it happens now. Besides, the government does not intend to give any special relaxations to PSUs in matters relating to financial disclosure or audit norms. If the CAG does not appoint a statutory auditor within six months, the central or state government, which is the majority shareholder in the company, can appoint its own auditor.
The Irani panel believed that the CAG audit in addition to the normal audit causes avoidable delays and it was a repetition of labour. Experts also believed that if PSUs were to grow and have professional management, they should not have un-necessary hassles in their operations. The government, however, has not bought this argument
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| India ready to join OECD steel panel |
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| • NEW DELHI: India on Thursday made it clear that it is ready to join the OECD's steel committee provided no additional conditions are imposed over and above the obligations under the World Trade Organization. "We have received an invitation to join Organisation for Economic Cooperation and Development (OECD) Steel Committee. We are ready provided no conditions are imposed over and above the obligations under the WTO," steel ministry secretary Raghav Sharan Pandey said. "Once they agree to this we have no problem in joining the committee," he said. With its 30 members and observers including India, China and Russia the committee accounts for around 65% of world steel production and 80% of global steel exports. China, which has also been invited to join the committee is considering the same, while Russia is understood to be willing to join the committee |
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| CII expresses reservations over Statistics Bill |
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| • NEW DELHI: Expressing concern over the Collection of Statistics Bill, 2007, which empowers the government to seek sensitive corporate data, industry chamber CII has said confidentiality of such data should be maintained. CII pointed out that under the provisions of the proposed Act, an informant asked to furnish any information would be bound to furnish such information and the statistics officer or any person authorised by him in writing is permitted to enter any premises for the purposes of collection of statistics, inspecting and taking copies of it. The chamber said that the power to collect information should be amplified through guidelines to include the communication of purpose behind collecting information. “The guidelines should also limit the collection to macro-level information and exclude confidential information, personal identifiable information, sensitive industry or competitive information, third party information and economic value attached information. In cases where corporates are bound under confidentiality agreements with outside parties, or in case of pricesensitive information that cannot be disclosed before making a disclosure to the stock exchange under the Listing Agreement, corporates should be entitled to seek additional time to submit the requisite information,” CII said in its statement. The chamber recommended that a formal request for collection of information should be made in writing since other methods are unreliable and can be misused. It added that sufficient time should be given for submission of such information and an extreme step like entering the premises should be backed by justifiable reasons and resorted to only when information required is not submitted even after lapse of a reasonable time. The government should not outsource the collection of statistical information to any agency without prescribing adequate safeguards and governance process and liability/ responsibilities of such agency in the event of misuse or any breach, CII added |
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| Core industries growth dips to 4.5% in October |
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| A DECLINE in production of crude petroleum and a slowed down in the growth of petroleum refinery hit the combined output growth of six key infrastructure industries to 4.5% in October compared to a 9.9% growth in the corresponding month last year. Production of crude petroleum registered a negative growth of 0.1% against a growth of 9.3% last year. Petroleum refinery grew by a meagre 2.8% against a growth of 18.1% last October.
Growth in electricity generation this October dipped to 4.2% from 9.7% in the same month last year. Coal production saw a growth of 9.2%. Finished steel production rose by 4.8% against 10.6% in October 2006.
For the April-October period of the current fiscal year, the growth of the core infrastructure industries declined to 6.2% from 8.9% in the corresponding period of the last fiscal, according to official data released on Thursday.
The index of six core infrastructure industries, , which has 26.7% weightage in the Index of Industrial Production (IIP), stood at 237.9 in October versus 227.6 in the same month a year ago, the Commerce & Industry ministry release said
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| Auto Expo to hit new milestones |
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| THE 9th Auto Expo will be the largest automotive show in Asia covering a floor size of over 1.2 lakh square metres with 10 hangers and seven state pavilions and over 2000 participants. Around 20 new vehicles are expected to be launched by the 45 domestic and foreign automobile manufacturers during the eight-day event. While there will be a host of participation from all continents in the automotive field, different governments are also putting up their pavilions with the US and Canadian governments participating for the first time at the Indian Auto Expo.
As India turns into one of the hottest manufacturing hubs for small cars and commercial vehicles, it’s new status will be reflected in the expo.
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| Shopping Maul High rental values are impacting the profitability. Brands are exiting malls, experime |
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| WITH rising rentals eating into profit margins, retailers are preparing to fight back with a multi pronged strategy that includes exiting malls, innovating with formats, opting for a revenue sharing model with developers and stepping up focus on smaller towns.
Levi Strauss India, for instance, says it will be pulling out of a substantial number of malls in 2008. Alongside, it will increase its presence in small towns in line with its strategy of establishing presence in every district headquarters. “Profit margins are getting lower and we cannot wait for the next four to five years for things to stabilise. Passing on costs to the customer is also not an option. So we will exit places that are too expensive and increase our distribution network in small towns instead,” Shumone J Chatterjee, MD, Levi’s, said. Real estate accounts for around 35% of Levi’s total costs.
The high cost of real estate in metros is drawing retailers to tier II cities where operating costs are lower. Mall rentals in metros have gone up by 25-45% in the last one year, according to a Cushman & Wakefield estimate. At present, rentals stand between Rs 550 and Rs 1,000 per sq ft, depending on the location and size of the mall.
Some retailers are also looking at innovating with their formats to increase margins. Arvind Brands, the retail arm of Arvind Mills, is increasing productivity of exclusive outlets by converting some of its mono-brand outlets into multibrand outlets and by selling higher-value products. “We had opened our largest Arrow showroom in Bangalore and found it was not profitable. So, we innovated with the product offering and introduced a suits gallery, which has increased our sales. We will also be introducing other brands in some of our mono-brand outlets,” said Suresh J, CEO, Arvind Brands (Brands & Retail).
Also, city high streets will soon be able to sport only those retailers who can afford the high rentals. “Rental values are surely nearing the point where only certain set of retailers can afford prime highstreets or malls. This would slowly reposition the markets and developments. The highest revenue-generating store, in all probability, will be on a high street for a retailer. Prime highstreets have continuously provided better revenues as the focus is purely on shopping here compared to a mall,” said Rajneesh Mahajan, national head, retail services, Cushman & Wakefield (C&W) India.
A revenue-sharing model, where the retailer gives a minimum-assured sum from sales to the mall owner, is also being seen as a fast-moving option. “The mall owner benefits from the market situation. And, the retailer would end up paying a fair rent to the developer. Mall developers are also looking to cross-subsidise rentals, by leasing out entire floor plates to vanilla retailers,” said Mr Saksena.
Mall developers too have their side of the escalating cost story. They are forced to pass on the high costs to tenants as construction and maintenance costs have gone up manifold in the past few years. “Construction costs stood at around Rs 1,800 per sq ft two years ago. Today, it hovers between Rs 2,800 and Rs 3,200 per sq ft. These costs would eventually be passed on to the occupiers. Given the escalating costs, some retailers find it difficult to break-even within five years,” Mayank Saksena, head retail, south India, JLLM, said.
High rental values are impacting the profitability of the retailers across segments. According to him, hypermarkets are most affected because they work on margins of 12%-14%. “In India, we sell at MRP which means FMCG and consumer durables carry a similar price tag irrespective of where the hyper market is located,” he adds.
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| Global fashion brands to increase local sourcing |
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| INTERNATIONAL fashion brands such as Nautica, Puma, Marks & Spencer and Espirit have stepped up their local sourcing as they expand their presence in the domestic market. With advantages of higher profits, lesser lead time and competitive price points, these brands are now shedding their inhibition towards local sourcing. Nautica, the sportswear brand introduced by VF-Arvind Brands in India, plans to source locally the core or standard products that are non-seasonal. Puma too plans to take its local sourcing of apparel to the maximum extent possible for the domestic stores next year.
“We already source 80% of the apparel that we sell in our Indian stores. This gives us several advantages like saving on duties and cutting down transport time and cost. We will increase our local sourcing as much as possible, but it will never go up to 100% as we also have a lot of licensed products,” Puma India’s managing director Rajiv Mehta said. Depending on the category, the import duty could range from 30% to 40%.
Nautica plans to increase its sourcing by 10% next year. At present, it locally sources close to 15% of products and this will go up to 25% next year. “However, we intend to locally source majority of our standard products sold throughout the year. It makes sense to make production of core products in-house as it enables us to offer value to customers for the products,” said brand head of Nautica, Dhruv Bogra. Nautica plans to have 12 exclusive outlets by end of next year, including the existing seven. Similarly, Marks & Spencer plans to source 40% of its products locally.
One of the earlier entrants to the domestic market, United Colors of Benetton sources its entire range locally. While other international brands such as GAS, which entered India early this year through a 50:50 joint venture with Raymond, is also looking at sourcing locally next year. At present, GAS imports its entire apparel range. Long-term plans also include setting up of an independent manufacturing facility in India. GAS could look at either using the manufacturing facilities of its joint venture partner Raymond or it could set up an exclusive facility for the brand.
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| Punjab to have IIT, IIM soon |
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| Prime minister Manmohan Singh has in principle given approval for setting up of an Indian Institute of Technology and an Indian Institute of Management in the state. In a meeting held between Mr Singh and Punjab chief minister Parkash Singh Badal at New Delhi, the former agreed to expedite the process of having both national level varsities.
Speaking to ET, media advisor to CM Harcharan Singh Bains, on behalf of Mr Badal, said, “The PM has agreed in-principle to have an IIM and an IIT set up in Punjab. The PM has already directed the Ministry of Human Resource Development to expedite the setting up of IIT, IIM and Indian Institute of Information Technology (IIIT) in Punjab to impart state-of-the-art education in the field of management, engineering and information technology.”
The Punjab government had been courting the Centre for setting up an IIT, IIM and an IIIT in the state for the past several years.
The Punjab government is pegging Jalandhar or Mohali for having an IIT and Bathinda for an IIM. Bathinda is also in the fray for having another Central University on the lines of Panjab University set up in the district. According to sources, the MHRD is actively considering the Punjab government proposal. “A minimum area of 200-300 acres has been earmarked for the Central University that will come up in Bathinda and the MHRD is already pursuing the matter. The CM is constantly pursuing the case with the ministry,” acting president of the Shiromani Akali Dal Sukhbir Badal told ET.
Punjab has been on the top priority with the Centre as sources also reveal that the Centre is pursuing investments in states that have not been considered so far. Punjab being on the top of the list will be “sympathetically considered. Further, Punjab being economically and strategically important, the state will be given high priority,” a source close to the proceedings revealed.
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| Indian makes world go round... and fast |
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| Toronto: SkyLink Travel, which is part of the Canada-based SkyLink Group owned by Indian-Canadian Surjit Babra, claims to have created the world’s fastest travel search engine, much of which was built in the Indian city of Noida.
Called Skylink Global Booking Engine, it is also North America’s largest provider of airfares to travel agencies, chains and consortiums.
Surjit Babra, chairman and CEO of SkyLink Group of Companies, said, “On our search engine we offer 35 million fares in an instant. When you type out your two travel cities—say from Little Rock to Amsterdam—in an instant this search engine sorts out whether flights are available between these destinations, which airlines operate and what the fares are.”
He said the search engine was part of the group’s expansion into travel and hospitality industry. “Right now this search engine is available to travel agents who pay us to become members. Fourteen people load the data on it everyday, making us the leader in this area.”
Babra said their Noida-based office was handling much of the work related to the search engine, travel portals and web sites, e-fliers and customer calls.
Babra, who has roots in Ludhiana, launched the SkyLink Group of Companies 25 years ago in partnership with Walter Arbib, who is currently the group’s president.
With an annual turnover of $330 million in travel and tourism, the group has various wings. But it is renowned because of its SkyLink Aviation, which is a world leader in carrying food, medicines and peacekeepers to the troubled spots of the world on behalf of the UN.
Not surprisingly, it is profiled in school textbooks in Ontario. IANS
Punjabi ‘Qaida cadet’ gets 11 years for kidnapping
Vancouver: The prison sentence of an Indian-Canadian who kidnapped the daughter of his former employer and demanded $500,000 in ransom by posing as an Al Qaida terrorist has been reduced by two years by the British Columbia Court of Appeal.
Amandeep Singh Randhawa, 26, was sentenced to 13 years in June for kidnapping, but a November 30 appeal reduced this to 11 years. His five-year sentence for robbery remained unchanged.
The father of the girl, who owned the furniture store where Randhawa worked, had sacked him from his job. To settle scores with him, Randhawa and his friend kidnapped the employer’s daughter, Rachna Jaswal, on January 19 while she was travelling alone in her car. IANS
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| PSU banks may miss credit growth target SLUGGISH GROWTH UNLIKELY TO PICK UP IN LAST QUARTER, FEEL BA |
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PUBLIC sector banks are unlikely to meet credit growth targets set by the ministry of finance under the statement of intent (SoI) targets set at the beginning of the fiscal. Bankers feel the sluggish growth this year is unlikely to pick up in the last quarter.
“Though we are well into busy season, the credit offtake has lagged behind compared to last year. No miracles are expected, though corporates have initiated their capex plans. In any case, growth in advances cannot be immediate. A slowdown was anticipated in wake of recession fears in US, but it will have a marginal impact," the chairman of a large PSU bank said.
SoI targets were fixed in the beginning of the year keeping in mind prevailing conditions then. The situation has changed since. Banks are unwilling to meet credit growth targets this year, he added. Every financial, the government spells out a target on 16 parameters for PSU banks referred as Statement of Intent (SoI).
"The situation holds true for most banks with average credit growth for banks in the range of 21%. The busy season between October to the end of the year registers a significant credit offtake. Banks had re-adjusted their lending and deposit rates at the onset of the busy season in order to spur demand, but it has not boosted credit offtake as much as it was expected to," an Indian Banks Association (IBA) source said.
Banks' credit growth in the second half of the current financial year has remained subdued following the series of monetary tightening steps taken by the Reserve Bank of India in the last three years. RBI projected a credit growth of 24-25% in 2007-08 compared with nearly 30% witnessed by banks last year.
The ministry of finance had earlier proposed to scale down credit growth targets for PSU banks to around 20%, after some of the banks had written for a downward revision. However, in its quarterly review of the credit policy in October, RBI did not revise the credit growth targets. "Aggregate credit demand is arrived at by indicators based on the credit needs of the industry, infrastructure requirements among others," an official said.
According to RBI data, banks have been witnessing a substantial slowdown in credit demand in the financial year so far. As on December 7, bank credit stood at Rs 1,45,980 crore, a growth of 7.6% over the previous year against Rs 1,76,180 crore in 2006 with a growth in 11.7% over the previous year
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| M&M eyes safe debut with lifestyle retail Foray To Be Through Subsidiary Mahindra Intertrade |
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| ANOTHER big corporate is entering the retail business, but not in the controversial food and grocery segment as speculated earlier. The $4.5-billion Mahindra & Mahindra Group has zeroed in on urban lifestyle retail. According to sources in the retail industry, the group has appointed key personnel, including the CEO. The retail division will be headquartered in Bangalore.
Sources said it is “a niche segment related to urban lifestyle that is being targeted”. The retail foray will be through Mahindra Intertrade, a subsidiary of M&M that has been selling LEGO and other kids products. M&M is “not looking at a Bharti-Wal-Mart type of tie-up”, said a source in the retail industry.
M&M has already appointed a senior official from the Alfatim Group, a diversified Dubai-based conglomerate, as the CEO. The HR, commercial and finance heads for the retail business have also been appointed.
Sources said the venture may focus on top-end, niche lifestyle products like antiques, high-end apparel, home decor items, toys, jewellery, entertainment and wellness products. Retail analysts said this is a safe entry into a sector that has become a political hot potato.
Urban lifestyle is too niche to ruffle any feathers and the margins are fat enough to make bottom line sense. Some retail debutantes like the Godrej Group have combined the two with the Nature’s Basket line of organic veggies, fruit and herb stores.
However, the crucial pull factor in urban lifestyle retail are top international brands. So, M&M may go in for partnerships or master franchise agreements with some global lifestyle brands, retail analysts said.
M&M isn’t the only large local business group to move away from food and grocery towards a niche lifestyle focus. Earlier, the Munjals of Hero Group decided on this route with the Oma chain of stores after contemplating a fullfledged retail foray. The Burmans of Dabur have also decided to focus on the health and wellness segment to leverage their competence in that area.
Increase in disposable incomes and the real estate boom have also helped spur investment interest in these highend, niche retail segments. Even mass market retailers like Reliance are looking at this option. Reliance is in talks with high-end foreign labels for a partnership.
The Tata Group, already into mass market lifestyle with the Westside chain of stores, recently tied up with the Benetton Group’s Sisley brand for five years. A strategic partnership has been signed between Benetton and Trent, as part of which the latter will manage and operate Sisley stores.
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| Petroleum min seeks Customs duty cut on fuels for industry Demand List Includes Furnace Oil, Naphtha |
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| PRICES of many commonly used consumer products using petrochemical inputs starting from shoe polish to synthetic rubber and textile products as well as various automobile parts using plastics may decline after the upcoming Budget.
The ministry of chemicals and petrochemicals has made a strong case before the finance ministry for a sharp cut in the Customs duty on various building blocks and catalysts used in the chemical and petrochemical industry.
The recommendation is likely to get the concurrence of the finance ministry, for which, keeping inflation under check is a priority as the government is heading for a general election next year.
Although fuel prices are heavily subsidised and fixed by the government, prices of many crude oil derivatives used in the power sector has witnessed a sharp rise recently as oil prices scaled record highs globally. In the last week of September, price of naphtha jumped 9%, aviation turbine fuel by 16% and bitumen by 6%, that saw wholesale price inflation shooting up sharply to 3.75% from 3.01% a week earlier.
The specific proposals now under examination include reducing the Customs duty on furnace oil, naphtha, non-cooking coal and liquefied natural gas and kerosene used for industrial purposes from 10% to 5%. Fuels used at home and sold through the public distribution system already have a low 5% or nil customs duty.
“The department of chemicals & petrochemicals has endorsed a proposal to reduce import duty on fuels required to generate steam and power in chemical plants. The proposal is being considered by the finance ministry,” an official said. Import duty of these fuels is likely to be reduced to the extent that would help Indian industries to retain its competitiveness, the official added. The move is likely to benefit large users such as Reliance Industries, India Glycols and BASF Styrenics.
Naphtha, once converted to ethylene, propylene, butadiene, gasoline and benzene, goes into a wide range of products like polyester fibres, resins, electronic components, perfumes and toothbrushes. Furnace oil is mainly used as a backup fuel for power plants and as the main fuel for small electrical generators.
The other proposals under consideration include slashing the customs duty on all capital power plants and spare parts from 7.5% to 5% in order to encourage low cost capacity expansion, slashing the duty on spare parts of membrane cell plants from 10% to 5% and reducing the duty on naphthalene (used in the dye industry) from 10% to 2.5%. Rationalising the duty on raw materials like platinum, palladium, special grade alumina powder, activated alumina, calcinated alumina, zinc, copper, and cobalt is also under consideration
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| White goods industry to see 12% growth: Ficci |
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| THE consumer durables sector is set to close the current financial year with 12% growth, 0.5 percentage point more than the growth registered last fiscal, according to a Ficci survey. The survey is based on feedback from the consumer durables industry, allied industry organisations and government agencies. Technological improvements, falling prices due to competition, aggressive and innovative marketing and declining import tariffs have contributed to the strong growth.
The survey has projected that the market for non-IT consumer durable goods, estimated at Rs 35,000 crore in 2006-07, is expected to achieve 12% growth in the current year. According to the survey, many high-end products such as LCD TV, MP3, DVD, split air-conditioner, high end washing machine do not find place in the list of items covered by the Central Statistical Organisation (CSO) for calculating official data. These items, however, have seen impressive growth.
The sectors which are projected to achieve ‘excellent’ growth rates of more than 20% in terms of units manufactured are air-conditioner (25%), split air-conditioner (60%), frost-free refrigerator (54%), washing machines (20 %), fully-automatic washing machine (35 %), microwave oven (35 %), high-end flat panel TV (100 %) and DVD (25 %). The sectors which are expected to record high growth rates between 10% and 20 % are refrigerator (11 %) and colour TV (15 %).
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| It’s China calling for Ludhiana cycle cos Hero, Avon, Eastman Industries, TI cycles Planning To Set |
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| LUDHIANA-BASEDcycle industry has managed to douse Dragon fire. Cycle companies like Hero, Avon, Eastman Industries Limited, Deepak International SADEM industries, August Industries, TI cycles are planning to set up manufacturing facilities in China to enhance exports. These companies will be exporting mainly to the South African and Asian countries. Rising input cost is considered to be the main reason for this paradigm shift.
Hero Cycles is evaluating the options for joint venture with some Chinese company. Though the company officials’ last visit to Shanghai in this regard did not bear any fruits, it would be no surprise if the company sets up a manufacturing unit there in the near future.
Availability of inputs at a low cost is the main reason for this. For instance, London Metal Exchange prices for one metric tonne of Aluminium is $2,600 where as one can get the finished product at the same price in China.
Companies like EASTMAN industries are getting only those inputs from China that are not manufactured in India.
At the same time, few entrepreneurs are apprehensive about this. And it is being seen as a stop gap arrangement as most of the entrepreneurs from there are selling in a buyer friendly manner.
On the other hand domestic industry here is suffering because of this.
“Business is suffering due to Chinese goods. It has almost declined by 15-20 per cent in last two years because of imports of cycle inputs.”says Rajan Gupta, CEO, J K cycles. Besides the availability of inputs at a lower cost over there, labour unrest in the cycle industry is also seen as one of the major reason for this.
Though the major groups can afford to open the units but it’s again the SSIs that are facing the music.
“Many companies are opening up offices in China. Numbers can be quite high. Normally people keep this secret.” Says S C Ralhan, regional chairman, Engineering Exports promotion Council
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| UP cane crushing delay to hit output, exports |
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| Sugar exports are likely to be trimmed to 2.5 million tonnes (MT) in the crop year to September 2008, from earlier estimates of 3.5 MT, because of lower than expected output, a senior trade official said on Thursday.
The Indian Sugar Mills Association, an apex body of private sugar producers, said production was expected to reach 30-31 MT, up from last year’s record estimated output of 28.4 MT. But the output will be lower than earlier forecasts of 32-33 MT because of a delay in cane crushing in the northern state of Uttar Pradesh, the country’s secondlargest producer.
“Raw sugar export will form bulk of our total export which is likely to be 2.5 million tonnes,” Indian Sugar Mills Association president P Rama Babu told a news conference.
India, the world’s biggest sugar consumer and the No. 2 producer after Brazil, had exported 1.7 million tonnes last year.
Babu said raw sugar exports would form around 65% of the sugar exports this season as refineries in the Middle East have added capacities and were increasingly buying from India to save on freight costs. Sugar refineries in the Middle East were earlier importing raws from Brazil. Indian Sugar Exim Corp, the trading arm of the Indian Sugar Mills Association, has so far contracted to sell 650,000-700,000 tonnes of raws, trade officials said.
Indian mills, saddled with huge stocks, have also decided to export the sweetener without profit as part of efforts to trim huge domestic stocks.
The country had 11-11.5 MT of sugar on October 1 when the new season began. “We are expecting a closing stock of around 16 MT by the end of the season,” said Indian Sugar Mills Association director general Shanti Lal Jain.
India annually consumes about 20 million tonnes. In September, London-based International Sugar Organization had said India would overtake Brazil as the world’s top producer in 2007/08 with an estimated output of 33.15 MT.
It had then projected Brazilian sugar production in 2007/08 at 32.38 MT.
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| India opens doors to Singapore, slashes duties on 539 products PRODUCTS INCLUDE MACHINERY, CHEMICALS |
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| SINGAPORE will now have wider access to the Indian market under the bilateral comprehensive economic partnership agreement. India has decided to agree to eliminate or reduce tariffs on 539 products as an additional concession. The tariff reduction, mainly on items related to machinery, mechanical appliances, chemicals and textiles, will be spread over a eightyear period, starting January 15, 2008.
The move is not likely to please the Indian industry which is already complaining of disproportionate gains to Singapore from the CECA. According to a study done by Ficci, India’s trade surplus with Singapore has shrunk after the CECA came into force in August 2005. FICCI said India’s had a surplus of over $1.3 billion in 2004-05 before the FTA in goods was implemented. However, in 2006-07 this surplus was narrowed to less than $600 million and this in turned into a deficit of over $300 million in the first four months of the current year.
Of the 539 tariff lines, tariff elimination is to be achieved in 5 equal cuts between 15th January 2008 and 1st December 2011 for 307 items. These 307 items comprise mainly articles of base metal, machinery and mechanical appliances, chemicals and textile and textile articles, an official release said. For another 97 products, tariff elimination is to be achieved in 9 equal cuts between 15 January 2008 and 1st December 2015. These 97 items comprise machinery and mechanical appliances, plastic and rubber articles and textile and textile articles.
For 135 products, tariff reduction to 5% is to be achieved in 9 equal cuts between 15 January 2008 and 1st December 2015. These items comprise mainly chemicals, plastic and rubber articles and machinery and mechanical appliances.
Under the existing trade in goods agreement, about 83% value of India’s imports from Singapore are covered under products for which tariff is being eliminated or reduced. After the proposed additional tariff concessions, the coverage would go up to 93%.
It has also been decided to extend, under India-Singapore CECA, additional concessions that India may offer under ASEANIndia FTA in goods in terms of product coverage, time-line and rules of origin, the release said
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| Punjab Coop Bank to form council of brand ambassadors |
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| PUNJAB State Cooperative Bank on Friday said it would form a council comprising young agriculture entrepreneurs of the state to encourage the peasantry of the state to shed the traditional system of farming.
"We are going to form a council of at least ten young agriculture entrepreneurs who have brought dynamic changes in their system of farming, as brand ambassadors, to encourage other farmers to come out of the traditional system of farming,” newly-appointed chairman of the Punjab State Cooperative Bank Jasjit Singh told reporters here.
Elaborating on the idea behind forming the council of brand ambassa-dors, Singh said it was time the peasantry changed their traditional system of cropping and, through cooperative movements, establish big food processing units to earn for themselves as well as develop the economy of the state.
One of such brand ambassador has already been enrolled, who has in-vested Rs 80 crore to install a plant of French fries in Jalandhar, he said.
Such dynamic entrepreneurs in different fields, including fruit process-ing and horticulture, would be enrolled in the proposed council and the bank would provide farmers a single-window system to extend fi-nances, he said, adding that even amendments in the policies of the cooperative bank would be made as per the guidance and suggestions of such brand ambassadors.
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| Maruti faces foggy mkt,margin paths Co May’ve To Risk Profits For Market Share |
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| VOLUMES or margins? India’s largest carmaker Maruti Suzuki India (MSI) has been up against a catch-22 situation for sometime now. More so with global car makers like Volkswagen, Nissan Renault, Peugeot, Chrysler and Proton firming up their India plans. Result: MSI is gearing up to consolidate its marketshare even at the cost of profitability.
Shinzo Nakanishi, who took over as MSI’s new managing director on Wednesday, told ET: “We have been saying for the past few quarters that the current profit margins are not sustainable and will be under pressure. Given our massive investments, changing product mix and new model launches, these profit margins are not sustainable in the future. We will focus on complete customer satisfaction and overall consolidation, even if it means sacrificing some profits in the short term.”
MSI profit margins have been facing a squeeze for the past few quarters. From 12.71% in the quarter ended June, it slipped to 10.3% in the last quarter ended September this year. The company’s profitability is likely to be hit by massive investments in new products, capacity upgradation and marketing strategies.
Incidentally, all these moves will follow SMC’s international format. MSI plans total investments of Rs 16,000 crore, with Rs 9,000 crore going into capacity expansion and upgradation. The balance Rs 7,000 crore will be spent on a new marketing setup and an R&D facility at Manesar in Haryana. The company is also planning big investments in new engine lines, which will be available in 3-5 years.
“Suzuki engineers are evolving the next-generation engines that will serve India and other global markets. We are investing heavily on these engines that will deliver higher fuel efficiency and conform to all futuristic emission norms. These will be available in all our future models,” Mr Nakanishi said
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| Tata strikes at critics over global takeover, Rs 1L car |
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| Mumbai: On Wednesday, RK Krishna Kumar, vice chairman, Indian Hotels Corporation (IHCL) which owns the Taj group of hotels, shot off a missive to Paul White, CEO, Orient-Express (OEH). He demanded OEH apologise for a December 10 letter White wrote to the Taj group (as reported by TOI in its late edition on Thursday). White’s letter said that his company did not wish to associate with the Taj because if it did, it would erode OEH’s brand value. Krishna Kumar called the contents of the communication from White ‘‘pejorative, inaccurate and libelous’’.
A day later, Ratan Tata, chairman, Tata Group which owns IHCL, joined the war of words and came out into the open in an interview to the Times of London. Responding to critics who have panned the group’s global ambitions, he was quoted as saying, ‘‘More often than not they are people who still look at India as the land of tigers, jungles and cobras and end up making statements about vindaloo.’’
Tata was responding to allegations levelled against the group in the international media that a company which builds low-end cars would find it difficult to manage brands like Jaguar and Land Rover. The group is widely tipped to be the new owners of the brands that have been put up for sale by Ford Motors.
‘‘How a company manages products in different sectors is the key,’’ said Tata. ‘‘Toyota created Lexus, Nissan has Infiniti. No one is saying ‘how can BMW handle the Mini?’ But they’ve made a huge success of it. So why is it impossible?’’ he asked.
He added that when he first spoke of the Rs 1 lakh car, nobody believed him. ‘‘It’s amusing and ironic because nearly everyone said it could not be done,’’ he told the newspaper. ‘‘Some have been derogatory, some dismissive, yet all are entering this area themselves. It vindicates what we set out to do,’’ he added.
On arguments that the small car the group is building could turn out to be an environmental nightmare in a country where infrastructure still has a long way to go, Tata said, it will be one of the greenest vehicles around.
‘‘There are eight million two-wheelers put on the road every year, which pollute more and are more dangerous,’’ he said. ‘‘If you look at the total population, the incremental emissions will be minuscule. Why are we singled out?’’ A prototype of the car will debut at the Delhi motor show to be held in January
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| Tatas to showcase Rs 1-lakh car at Auto Expo |
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| FOR small car freaks, the wait is finally over. The much talked about one- lakh car from the Tata stable, which analysts believe will revolutionise the national passenger car market, will be showcased on January 10, at the upcoming Auto Expo 2008 in Delhi. The prototype is ready and has been test driven at the company’s Pune factory.
In a media release, Tata Motors on Wednesday noted: “In keeping with the company’s tradition of unveiling its new cars at the Auto Expo, the company will present its people’s car, which will be unveiled at a special ceremony on January 10. Although the people’s car will be unveiled at the Auto Expo, the commercial launch will take place later in 2008.”
Tata Motors hopes to roll out the small car from its upcoming plant in Singur in West Bengal by the middle of FY09 for the Indian market.
Besides the ultracheap car, the company will also display several new cars that it proposes to bring to the Indian market in collaboration with Italian automaker Fiat Spa. It will display a range of new passenger vehicles while Fiat will display passenger cars from its international range. From its commercial vehicles business, Tata Motors’ displays will include buses from the joint venture with Marcopolo of Brazil, newly developed multi-axle heavy trucks, pickup vehicles, applications of panel vans, and new mini-trucks.
Tata Motors and Fiat India have jointly taken over 5,200 sq metre of space at the Auto Expo 2008 to set up their pavilion. “The entire automobile world is waiting to see the Rs 1-lakh car. Not too long ago, German auto consulting firm CSM Worldwide felt the “new car could help Tata Motors emerge as the country’s largest manufacturer of cars and light commercial vehicles by 2013,” said an auto industry analyst. At present, the company enjoys more than 16% share in the country’s passenger car market.
Incidentally, India differs from the giant slow-growth and no-growth auto markets like the US and Western Europe, and even from fast-growing markets like China, where emphasis is on small, low-cost cars but with four doors and room for the extended family. While the Indian upper classes are snapping up roomier models and even imports like Mercedes-Benz, first-time buyers will provide a big chunk of growth for years to come. By 2013, CSM predicts, India’s market will expand at an average of 14.5% a year
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| Bajaj Auto set to launch 2-stroke engine bikes |
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| BIKE and scooter major Bajaj Auto is all set to bring the two stroke engine bikes back to the Indian market.
The legendary two strokes engine technology, which was launched in the early 1990s (Bajaj Chetak, Kawasaki Bajaj 100, ) have already been launched in three-wheelers as Gasoline Direct Injection (GDi), which is superior with increased mileage and substantially less emission. The company is likely to customise the GDi technology for its two-wheeler products in the next few months.
Bajaj Auto has introduced direct injection technology (as the GDi name suggest) replacing the carburettor which delivers better fuel efficiency and higher power (torque) than the conventional two-stroke engines. It also meets the stringent emission norms with 50% lower carbon monoxide ((CO) and 25% lower hydrocarbons and nitrous oxides (HC+NOx) than the earlier two stroke engines, which were phased out by two wheeler companies because they failed to meet the required emission norms.
A senior Bajaj Auto executive confirmed that the same engine is likely to be strapped on a two wheeler. “It is a big leap in the two stroke technology and we are working to get it on our bikes and other two wheelers. The Gasoline Direct injection (GDi) engine has substantially lower emissions than even alternate clean fuels like CNG and LPG. Additionally, it has lower operating costs than four stroke technology that currently dominates the bike market.”
According to sources in the automobile industry, Bajaj is working to combine its proven DTSi technology with the GDi technology on bikes with smaller engines. The company wants to put the same technology in the volume generating 125 cc-150 cc segments as an alternative to the existing four stroke engines. Bajaj Auto is also in the process of developing two wheelers that will run on CNG fuel.
The two stroke engine had been a success in the past due to its higher torque (power), faster pickup and better vehicle stability due to the smaller engine. Company officials said that in the GDi technology, the fuel is injected through a common rail fuel line directly into the engine’s combustion chamber where it is completely burnt unlike the conventional carburettor run two-stroke engine which leaves out unburnt fuel and results n higher emission.
After successfully launching the GDi-run three wheeler, the company is working on different variations of the technology which can fit into smaller vehicles like bikes and scooters. Some prototypes of the new technology is expected to be unveiled at the upcoming Auto Expo in January
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| It may soon rain bonus at PSUs Govt Plans To Ask Blue-Chip PSUs To Issue Bonus Shares On Swelling Re |
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| IT’S party time for investors who have remained invested in public sector companies. The government plans to ask bluechip PSUs, including NTPC, Bhel, SAIL, ONGC, IOC, BPCL, HPCL and GAIL, to issue bonus shares, as their reserves and surplus have increased to several times their paid-up capital. The Prime Minister’s Office may issue a directive to PSUs having paid-up capital over Rs 100 crore to consider issuance of bonus shares.
“The department of public enterprises (DPE) has prepared a list of 75 PSUs, including about two dozen listed companies, that are sitting on huge reserves and surplus. Companies are shying away from issuing bonus shares. As the final decision is with the administrative ministries, DPE plans to take the help of PMO to direct PSUs for issuance of bonus shares. PMO would intervene in case of such companies where paid-up capital would be Rs 100 crore or more,” a government official said. According to official guideline in place for public sector enterprises (PSEs), they should issue bonus shares to shareholders if their reserves are in excess of three times their paid-up capital.
While retail shareholders of listed public sector companies stand to gain by this step, the major beneficiary of the move would be the government, the largest shareholder. Oil companies are currently reluctant to issue bonus shares even though IOC’s reserves and surplus are 29 times (Rs 33,365 crore) its paid-up capital (Rs 1168 crore). In case of HPCL, it is 28 times (reserves Rs 9,260 crore, paid-up capital Rs 339 crore), BPCL 27 times (reserves Rs 9,912 crore, paid up Rs 362 crore) and ONGC 28 times (reserves Rs 59,785 crore, paid-up capital Rs 2,139 crore). Oil companies, suffering due to massive under-recoveries, lack confidence in issuing bonus shares. “In the current market scenario, there is no certainty regarding revenue streams and therefore issuance of bonus shares might result in reduction in dividend yield to the shareholders,” IOC chairman S Behuria told DPE.
But officials in the petroleum ministry as well as ministry of heavy industry and public enterprises do not buy this logic. “Most of the companies are sitting on huge reserves and they are not suffering from global oil price hike. The shareholders must be appropriately rewarded,” an official in petroleum ministry said.
PSU officials, especially from blue chip companies consider the bonus share move an encroachment on their autonomy. Government officials do not agree
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| FM asks states to refund taxes to Re-hit exporters |
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| FINANCE minister P Chidambaram on Wednesday asked state governments to help rupee-hit exporters by refunding local taxes, including Vat, octroi and electricity duty, as taxes should not be exported.
“At present, the number of taxes, including Vat, octroi and electricity duty, are borne by exporters. They should be rebated or refunded, and I will urge state governments to look into this issue carefully,” Mr Chidambaram said at the 54th meeting of the National Development Council. “The union government has announced major relief packages, and we are hopeful that these will bring some measure of relief to exporters. However, regardless of the exchange rate or any other external circumstance, it is a universally accepted principle that taxes shall not be exported,” he said. The Central government rebates or refunds every tax that is payable or paid and if attributable to goods and services that are exported, he said.
He said any state which relieves exporters of tax burden will tend to gain as more export oriented industry would come up there. “Hence, it is in the long-term interest of the state to rebate or refund all taxes on exports,” he said.
Meanwhile, expressing concern at the lack of efficiency in the public distribution system, he said: “Many observers have pointed out that the era of cheap food prices is over. In the changed context, the relevance of an efficient public distribution system cannot be over emphasised. We need a PDS for the poor, but unless it is efficient — procures adequate quantities of foodgrains and delivers food to the poor — the PDS could become an albatross around our neck and an opportunity for rent seekers to enrich themselves.
He said the Centre spends Rs 3.65 to transfer Re 1 to the poor. “About 58% of the subsidised grain do not reach the target group, of which a little over 36% is siphoned off the supply chain,” he said.
Pointing out that the first concern is procurement of adequate quantities of wheat and paddy or rice, he said producing states must cooperate with the Central government and its agencies.
“I urge chief ministers to collectively resolve today to help the Central government set right both sides of the PDS – procurement and distribution – because a well functioning PDS is critical to maintaining price stability of food articles,” he said.
He appealed to the wheat and paddy producing states to procure and contribute their fair share of foodgrains to the central pool.
“Some wheat producing and rice producing states have contributed meagre quantities to the central pool, yet they draw from the central poor for their PDS. How is this fair to the states which bear a disproportionate share of the burden of procurement?” he said.
On infrastructure development, he said unless the 11th Plan target of each of infrastructure areas like roads, ports, railway lines and power plants are achieved, it would be difficult to reach the goal of 10% GDP growth in the terminal year of the plan.
“We need to go forward with a greater sense of urgency in building roads, ports, railway lines and, above all, power plants. Virtually every project, we are told, faces difficulties in the matter of land acquisition, environmental clearance, road connectivity and availability of water,” he said
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| Hero Honda drives into used-bike mkt |
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| HERO Honda, the largest two-wheeler manufacturer in the world, has forayed into the used two-wheeler trading business under the ‘Hero Honda SURE!’ brand. Taking a cue from the passenger car market leader, Maruti Suzuki India (MSI), which spearheaded the used-vehicle business through Maruti True Value, Hero Honda has started SURE! at its 40 dealerships across India on a pilot basis. Maruti has sold around 90,000 cars through True Value, which was 16% of its total sales last year.
Hero Honda SURE! is looking at the vast trading potential to generate new vehicle sales from the 7 crore stock of two wheelers on Indian road. Hero Honda, which sells every second two wheeler in the market is the first India company to launch this service in the two wheeler space. A senior Hero Honda executive confirmed that the company had launched the new marketing initiative and said, “It’s a pilot project, which has been started at some dealerships. We are experimenting with various models at present so as to evolve a right structure for this business.”
As part of its strategy to remain India’s top two wheeler company, it has introduced a 110-check point quality parameter to assess the condition of used two-wheelers to develop SURE! as a reliable place to buy, sell and exchange pre-owned twowheelers in India.
Hero Honda engineers recondition these used vehicles with genuine spare parts and the company also offers warranty on different vehicles and free service benefits. Convenient and easy finance options for both new and used two wheelers are also available at its different dealerships.
The company refused to share the actual sales it has generated from Hero Honda SURE!, but sources at the dealership level say that the scheme is generating huge business and has been successful in luring customers to go in for new two wheeler purchases rather than a used one. Hero Honda SURE! dealers are also offering special price deals on buying new bikes and scooters
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| Punjab CM demands relief for cross-border farming |
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| A PART from demanding special incentives to attract industry in the border belt of Punjab, chief minister Parkash Singh Badal has now sought compensation for the farmers cultivating land across the border on a regular basis.
Currently more than 2,000 farmers cultivate 18,500 acres land in the border district of Gurdaspur, Amritsar, Tarn Taran and Ferozepur. The Border Security Force, manning the border areas allow regulated access to the farmers.
“We are demanding a prompt payment of compensation to the farmers who have restricted access on a regular basis at the rate of Rs 5,000 per acre per annum,” said Mr Badal.
The farmers cultivating land across the border fence are given limited access to their fields as they are frisked daily before entering the fields through BSF post and again before sunset. Lack of women BSF personnel had ensured that women cultivators could not go to the fields.
Growing tension between India and Pakistan have curtailed the movements of farmers impacting their livelihood.
Mr Badal demanded personal intervention of Prime Minister Manmohan Singh for the upgrading of rural link roads in the border districts at an estimated cost of Rs 200 crore.
Another Rs 312 crore is required for upgrading and strengthening of rural electrical infrastructure in 18 border blocks under Border Area Development Programme (BADP).”
The Punjab government has also demanded an adequate hike in the present annual allocation under BADP to under take development activities along the 553 km long international border with Pakistan.
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| PSU insurers to regain lost glory, post-free pricing |
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| STATE-OWNED non-life insurance companies are expected to have an upper hand when floor limits on rates for property insurance are removed. Some insurers have already started quoting 60% on the erstwhile fire insurance tariff rates to acquire profitable business from January 2008.
Last week at a meeting with chiefs of general insurance companies, insurance regulator Insurance Regulatory and Development Authority (IRDA) agreed to remove all floor limits on pricing from January 1, 2008. Following the dismantling of tariffs in early 2007, the regulator asked companies to observe a floor limit of 51.5% of discounts on fire insurance. Companies wanted the floor limits removed so that they could offer cheaper rates to very low-risk customers.
“Public sector companies have an upper hand in pricing because of their strong net worth and the relationship they have with treaty reinsurers,” said First Policy Insurance chief operating officer P Sachidanand.
He said while rates for fire insurance and motor ‘own-damage’ would come down, premium for health insurance, marine cargo and liability insurance would go up. A senior official with a state-owned company said stateowned companies would fight back to gain their lost market share. Also, most of the public sector companies are short of their business targets for the current fiscal, and would try to regain market share through aggressive pricing.
Although IRDA has said post-detariffing, prices should be able to generate an underwriting surplus for companies, many are forecasting underwriting losses. Fortunately, for PSU insurers, all of them are generating a good surplus through their investment income and rising asset prices. “Low rates can come back to haunt you. If an insurer becomes too aggressive, reinsurers may decide not to renew their treaties in case of large underwriting losses,” said the chief of a private insurance company. Treaties are annual reinsurance contracts between insurers and reinsurance companies where the reinsurer blindly shares in the profits or losses. Besides fear of losses and non-acceptance by reinsurers, companies would also be restrained by their boards. A wider mandate for boards follows the insurance regulator’s decision to allow non-life companies complete freedom to price all insurance covers from next year.
“We have made out a case for the regulator to approve market wordings. This will drive innovation in their product design and better pricing,” said General Insurance Council secretary general KN Bhandari, an umbrella body for non-life insurers. At their meeting with the regulator last week, non-life companies had recommended pushing ahead the deadline for free pricing to January 1 to ensure a smooth transition of major renewals that would come up in April, next year. “The market will take a few months to stabilise after free pricing is ushered in. But we do not expect rate wars among companies as prices have already bottomed out”, said Bhandari.
According to a senior IRDA official, companies will be given a free hand to design products and fix premiums according to their under-writing policies. The regulator will not set bench-marks for pricing policies and the caps on discounts that insurers can offer will go. IRDA will unveil the file and use guidelines for general insurers under the free pricing regime shortly, said the official. But general insurance companies will have to follow scientific underwriting policies and keep the insurance regulator posted on this
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| CII (NR), YES Bank highlight importance of CSR |
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| CORPORATE Social Responsibility (CSR) is gaining importance in the world of globalisation with increased number of informed citizens and changing social expectations. With a strong linkage and correlation between CSR and business, between social empowerment and commercial sustainability, the Confederation of Indian Industry (Norhtern Region) and the YES Bank have jointly brought out a knowledge report on CSR as a tool for inclusive growth, social equity and affirmative action.
CII Northern Region chairman Deep Kapuria says CSR is an important business strategy because wherever possible consumers want to buy products from companies they trust; suppliers want to form business partnerships with companies, employees want to work for companies they respect and NGOs want to work with companies seeking feasible solutions and innovations in areas of common concern.
He said in conjunction with a development paradigm that ensures sustainable growth, CII works with strategic partners to build on shared synergies, conserve the environment and create sustainable value in sync with its unique theme for the year,’ Building people, building India.’
YES Bank MD and CEO Rana Kapoor claimed that the bank has identified itself in a leadership position in the country’s march to economic and human development. YES Bank remains committed to assisting stakeholders in developing sustainable and commercially viable CSR projects on a public private partnership (PPP) mode incorporating the principles of social equity and community participation.
CSR involves a business identifying its stakeholder groups and incorporating their needs and values within the strategic and day-to-day decision-making process. It, however, goes beyond the occasional community service action as CSR is a corporate philosophy that drives strategic decision-making, partner selection, hiring practices and, ultimately, brand development.
The report points out that CSR is now being looked at as a concept different from pure philanthropy and more in tune with strategic intervention that ultimately benefits industry.
CII has adopted the visionary route of formulating a code of conduct for affirmative action.
The company affirms its recognition that its well being is interlinked to all sections of the society. The company believes in equal opportunity in employment for all sections of society and considers it a component of its growth and competitiveness
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| Italy seeks food processing JV with Punjab |
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| A delegation of Italian embassy led by Antonio Armellini, Ambassador of Italy to India, is on a visit to the Chandigarh region to evaluate the opportunites of bilateral trade between the two countries and especially with Punjab.
Italian embassy is keen to enter into a joint venture with the Punjab government in food processing sector. Two years back, during the Congress government in Punjab, Italian Government had shown keenness to implement a food processing project in Punjab. The project was about enhancing the yield of DUREM wheat in Punjab so that the same can be used for making pasta.
“I see a great potential in this project. DUREM is grown only in Punjab and Mediterranean countries. A mission came here two years back, but could not take off. This time we may revive it. We may go in for joint ventures in some other sectors as well and are looking forward to give a technical push to the physical infrastructure here. Latest technical knowhow can really benefit the two countries. “ said Mr Armellini.
Mr Armellini said that Punjabis had strong bonding with Italy because 80 to 90 per cent Indians settled in Italy was Punjabis. “Punjab could script a golden chapter in the history of international trade with mutual trade and exchange of technology transfer in the field of agriculture, agro-processing, technology and textile.” said Mr Armellini.
At the same time, Italian embassy opened up a local consulate office at Chandigarh. Ranjit Malhotra was appointed as honorary consular correspondent for Punjab who would act as an out sourcing agency for visa.
Punjab Chief Minister Prakash Singh Badal who was present at the occassion, welcomed the visa counter in Chandigarh. “This would save thousands of our aspirants to immigrate Italy from the clutches of illegal travel agents.” said Mr Badal
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| Italy has pasta designs on Punjab |
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| Chandigarh: The launch of Amritsar to Italy direct flight on Sunday could very well be a sign of bigger things to come. It so appears, Italy is not content with a direct airlink alone. It has bigger designs on Punjab — it has pasta designs. If all goes well, the land of Bhangra could well turn into a global hub for pasta industry.
Keen on the prospect of setting up a state-of-the-art pasta-making units in the state, widely acclaimed for its agricultural prowess, Italians are eyeing government authorities, corporate honchos and the humble farmer to turn their fantastic idea into reality.
“Punjab is rich in Durum wheat, the main ingredient used in pasta. This makes the state a natural choice for setting up pasta units here. It will entail huge cost saving for us and also give global leverage to the farmers,” Antonio Armellini, the Italian Ambassador to India, told TOI. Durum is a wheat variety rich in proteins, its yellow pigment and enzyme content make it an ideal component for a variety of food products, including pasta.
The envoy’s assertations assume significance in the backdrop of the fact that a huge portion of the state’s produce is destroyed due to poor storage facilities. The Italian endeavour can change the fortunes of debt-ridden farmers here. Open to the idea of tying up with leading agro universities to frame the broad contours of pasta-making industry in the state, the envoy pointed out that India has already emerged as an outsourcing destination for IT industry and it is high time that another feather is added to its cap. “We want Punjab to be the pasta outsourcing hub in a way Bangalore is for the information technology industry. And transfer of technology will be a vital component of this cooperation,” he said.
Incidentally, the production of pasta in the country is largely confined to the unorganised sectors and has very few organised players in the market. The entire output of the organised sector is estimated to be between 35,000-70,000 tonnes only.
Besides, most of the pasta-processing plants are imported. The main dealers include Pavan (introduced in India in 1989 and is one of the oldest companies supplying machinery here), FEN, Anselmo, LB Italia, Pamex and Monotoni Trafile. Besides, Italy is also mulling the idea of transferring food-processing related technology so that Punjab can protect its produce and use it for export or domestic consumption
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| Gail plans firms for construction, pipelines |
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| PUBLIC sector gas transportation major Gail India plans to set up two new corporate entities—a pipeline manufacturing firm and a construction company. The proposed companies could be two separate JVs with strategic partners where Gail would have minimum 50% equity stake in each. The plan is part of company’s strategy to enhance its turnover from Rs 16,047 crore (2006-07) to 50,000 crore by 2011.
Confirming the move, Gail chairman & managing director UD Choubey told ET: “We are considering to set up two companies with or without strategic partners. In case of JVs, we would join hands with top domestic or international players in the respective fields.”
It is learnt from official sources that the company is in the process of instituting feasibility studies for the two projects and the report would be soon placed before the board for its approval. The proposals are in sync with company’s plan to execute massive projects both within the country and abroad in the next five years. Explaining strategy a gail official said: “Pipeline laying is approximately 35% of the total project cost. Gail is expected to invest about Rs 16,000-Rs 18,000 crore in expanding its pipeline networks within the country in the next five years. Our own projects alone would involve construction works worth Rs 6,500-7,000 crore. Based on this, the proposed construction company would be able to generate a profit of Rs 1,400 crore in the next five years by executive only Gail’s projects.”
Gail’s strategy to set up a separate pipeline firm is driven by two factors; while profit motive is secondary, it is primary concern for the company to make available pipes for massive projects it would undertake in the next five years within the country and abroad.
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| State PSUs’ scrips see rise of 4-7%, defy meltdown |
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| STOCK prices of the state PSUs have risen 4-7% over the last three trading session with the expectation gaining ground amongst the investors and stock brokers that BJP would form the next government. With the exit polls indicating a BJP government, the PSU scrips braved the global meltdown to remain stable with minor corrections.
Despite the sensex crashing 769 points on Monday on fears of foreign investment slowing down in the wake of rising inflation in the US, Gujarat PSU scrips held ground.
Market sources told ET that there is strong sentiment amongst the investors regarding re-election of the Modi government. "Expectations are running high amongst the investing community as they believe that the Modi's government would accelerate the disinvestment process of the state's PSUs once back to power," said an market expert. At present the PSUs are undervalued and a huge value unlocking could be seen in next few months.
Even though in last three trading sessions, Sensex closed in the negative zone, the listed state PSUs scripts recorded a surge. On Friday, one of the strong contender of disinvestment - Gujarat Alkalies stood at Rs 223.25 by gaining 6.44% compared to last close. While, GNFC stood at Rs 198.05 and gained 4.29% compared to its last closing price, other state PSUs such as GIPCL (4.29%), GSFC (4.94%) and Gujarat State Financial Corporation (4.96% ) too witness the jump in its stock prices.
On Monday, Gujarat Alkalies and GIPCL recorded their 52-week highs at Rs 234.35 and Rs 126.75 respectively, before closing at Rs 223.60 and Rs 115.80 respectively. Gujarat State Financial Corporation also registered its 52-week high on Monday at Rs 25.55 before closing at Rs 24.35.
In the past, the Modi's government had initiated the process of disinvestment of GACL which failed to take off. Deven Choksy, managing director of Mumbaibased stock broking firm K R Choksy, believes that with Modi coming back to power at Gandhinagar, the state would expedite the disinvestment process to create a reformist image of the BJP. With the Parliament election due in 2009, the reformist image of the BJP government would be capitalised for its gain in other parts of the country.
Stock market researcher and assistant professor at Chimanbhai Patel Institute of Management Sandeep Shroff says that with the absence of the Leftist party within the state, divestment for the government would be a cakewalk
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| Bawal centre emerging as industrial hub |
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| BAWAL Growth Centre in Harayana is emerging as a hub of industrial growth with the new processing unit of POSS Delhi Steel being inaugurated. This unit has been set up at a cost of Rs 66 crore and it was commissioned within a span of merely six-and-a-half months.
While inaugurating the unit, Haryana State Industrial Infrastructure Development Corporation (HSIIDC) MD Rajeev Arora said that the company had approached HSIIDC for setting up of project for processing of steel plates earlier this year and an industrial plot was alloted to the company at Growth Centre Bawal.
Mr Arora said that the growth centre was emerging as a hub of industries and it was evident from this fact that about 2,000 applications had been received by the HSIIDC for about 100 plots which would be alloted to the entrepreneurs for setting up of their ventures.
He said that new industrial policy had been introduced in the state which had encouraging results and a number of multinational companies were setting up of their industries in the State. He added that Haryana state has catalyzed the investment of Rs 28,000 crore during last 32 months besides the investment of Rs 60,000 crore was in the pipeline.
Earlier the government had announced that USbased Hollister Inc, a leading manufacturer for the medical care (Austomy) products proposes to set up a 100 per cent export oriented unit on 10 acres with the capital investment of Rs 250 crore at Growth Centre Bawal.
LS Cables Ltd, part of the South Korean LG Group, had also announced its plan to set up Rs 210 crore power and telecommunication cables manufacturing project at Bawal. Haryana State Industrial and Infrastructure Development Corporation (HSIIDC) had agreed in principle to allot 40 acres of land to the company. The investment for the project would be in a phased manner with the first phase of the project was likely to go on stream in October 2008
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| Mkt slumps 769 pts on weak global cues |
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| IN HINDSIGHT, there will always be enough explanations as to why a correction was imminent. Unrealistic valuations of many midcap companies, erratic foreign fund flows, and weakness in world markets together had formed a perfect breeding ground for bears. But when the fall finally came, most players were caught offguard by its swiftness and extent.
Sellers targeted overheated secondline shares as the market tumbled 4% on Monday, in line with the bearish mood across the globe. The 30-share Sensex shed 769.48 points to close at 19,261.35 while the 50-share Nifty retreated 270 points to close at 5,777.
While it may be too early to conclude if there is a definite reversal of trend, bulls seem to be treading on eggshells for now. As per provisional data, foreign funds net sold Rs 2,151 crore worth of shares on Monday. Buzz on the Street is that much of the selling by foreign investors over the past month or so has to do with unwinding of participatory note positions, as stipulated by Sebi.
“Basically, global indices are weak. India has dramatically outperformed, particularly the small and midcap indices, and the fall is a somewhat-needed pullback and consolidation,” says Lehman Brothers head of equities Pankaj Vaish. “All the high beta stocks got hit hard, so there was profit taking/liquidation on the high-flying names as well,” he adds.
Among the key markets in Asia, shares in Singapore, Taiwan, South Korea and Hong Kong were down around 3% each while in China and Japan, they fell around 2% each.
High US inflation big concern
Higher-than-expected inflation data in the US have raised concerns that the US Federal Reserve may not go in for further cuts in interest rates, contrary to what most global investors are expecting. This sparked a selloff in equity markets worldwide, as most investors feel interest rate cuts are crucial for the US economy to avoid a full-blown recession.
It remains to be seen to what extent Indian equities will remain insulated if sentiment in world markets worsens. “In the near term, markets are likely to remain choppy as liquidity will be a concern. FIIs have already net sold over $1 billion in November; if the US gets into more trouble, people will take a relook at their portfolios,” said Deutsche AMC CEO Vijay Mantri.
With Goldman Sachs, Bear Stearns and Morgan Stanley set to report quarterly earnings this week, investors fear more subprime loanrelated skeletons to tumble out of the closet. Prices of base metals and commodities also weakened on concerns that the turbulence in the financial markets is likely to crimp demand.
Back home, the BSE Midcap and Smallcap indices were down 4% and 3%, respectively. Market breadth was negative with two shares declining for every one that rose. However, the market’s fascination for secondline stocks seems to be far from over. As many as 437 stocks on BSE hit the upper end of the intra-day circuit filter while 251 crashed to the lower end. In the B2 group, which houses smallcap stocks, 215 stocks hit the upper end, compared to 99 that hit the lower end of the circuit filter.
In sectoral trends, metal shares were the worst affected with the BSE Metal Index falling over 7%. The losers were led by Hindalco and Tata Steel, which fell around 6% each. Realty and oil and gas were the other major underperformers. DLF fell over 7% while ONGC and Reliance were down 6% and 4%, respectively. The BSE Realty index shed close to 6% while the BSE Oil and Gas index fell 5%.
Combined cash market turnover was Rs 31,000 crore, compared with around Rs 29,000 crore on Friday. Turnover in the derivative segment on NSE was over Rs 73,000 crore, up sharply from over Rs 61,000 crore on Friday
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| Sebi to set up bourse for SMEs |
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| Bhubaneswar: Sebi chairman M Damodaran on Sunday said the stock market regulator would very soon identify a party to set up a dedicated bourse for the small and medium enterprises (SME) sector.
“Sebi will help set up a separate stock exchange for the SME sector. Some parties have filed their applications with us. They have the requisite qualification. We would very soon pick one of them to do the job,” Damodaran told TOI. He, however, refused to divulge the names of the applicants and said, “It won’t be right to disclose their names as one will be chosen and the rest rejected. But they are people with expertise.”
The move to establish a separate bourse for the SME sector, according to experts, has gathered momentum considering the difficulties small and medium enterprises face competing in the existing stock exchanges, which are dominated by big players.
Damodaran, however, did not have many encouraging words for regional bourses. “The NSE and BSE have got an all-India presence. Even the Calcutta stock exchange has tied up with the BSE. We cannot have fragmentation of exchanges. It is difficult for others,” he said.. He pointed out that the market regulator cannot do much to help the regional bourses and remarked, “We have demutualised and corporatised them. We cannot generate business for them.”
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| Tribals to get special shield against industries,SEZs NEW POLICY PROPOSES LAND RIGHTS, STRICTER EVIC |
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| SETTING up industrial units, including SEZs, may become more difficult in areas inhabited by tribal population from next year. The new tribal policy being finalised by the government is all set to provide land ownership rights to the tribal population. This would not only make their eviction process stringent but also increase the liability for the acquirer to resettle and rehabilitate the tribal families. The move would impact mining, paper and metal-based industries.
“It would become difficult for a company to acquire tribal land. If the state government is convinced about the public purpose of project, the company would be granted approval after every step has been taken to safeguard interests, traditions and customs of people in the tribal belt,” said an official.
As per the proposals in the draft policy, which would be put before a group of ministers for approval soon, land acquisition in tribal areas would have to be guided by the principle of land for land, market value of land, concept of net present value (NPV) of assets and social impact assessment. Besides, the land acquirer would have to ensure lifelong livelihood of entire tribal community of the area in terms of providing job in the industrial units or imparting training to them for their employability. “Land rights would mean that tribes would also be eligible for R&R grants. They just cannot be resettled by the state without any compensation,” the official said.
While the compensation scheme under the tribal policy is similar to the one contained in the recently-announced rehabilitation and resettlement (R&R) policy, it goes beyond it to make acquirers liable to apply all the provisions for resettlement rather than give them the choice for any one of them.
The most striking feature of the new policy is likely to be land ownership rights for tribes. The over-8.5 crore tribal population of the country have ownership rights over the piece of land they have been living for centuries. The changes proposed include provision of land ownership up to four hectare for each tribal family including forest use rights.
The policy makes it mandatory to conduct a social impact assessment (SIA) in case of displacement of more than 200 people. “A legislative regime would be put in place that ensures least displacement of the tribal population, exploration of all alternatives to displacement and appropriate compensation including land for land, market value of land, concept of NPV of their assets and social impact assessment,” the official said.
The move would mean more problems for industries coming up in areas with tribal population. Most projects, especially in Orissa, North East, Jharkhand, Chhattisgarh, Madhtya Pradesh and Karnataka, would have to follow the new guidelines for tribals as well, besides providing compensation of other villagers and farmers falling in the area.
The new tribal policy also advocates reorienting institutional arrangements for the tribal areas, strengthening and revamping the administrative machinery and developing a quantifiable tribal development index
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| India’s engineering skill triggers JVs in auto industry |
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| THE automobile industry is witnessing the second wave of alliances and joint ventures between global and Indian companies. As many as four tie-ups in the CV space and one in the passenger car segment (Bajaj-Renault) have been announced this year, a repeat of the 1990s when Toyota, Daewoo, Honda, Ford and GM entered into JVs with Indian partners.
But there’s a crucial difference. Those tie ups were done to comply with FDI regulations and to leverage the local partner’s clout and understanding of the environment and market. This time round, however, the foreign companies want to leverage India’s engineering skills for costefficient manufacturing and source components from India for both global and local operations.
Even when there are no JVs in the offing, nearly all MNCs are using India as a component sourcing hub. From there to move to a partnership is just a hop, skip and jump away. Indeed Nissan-Renault’s first foray into India was with a sourcing arrangement. And as India hones its low-cost vehicle development and marketing skills, the two get combined to encourage more global-local marriages. Which explains why despite being significant hubs other top-gear emerging markets like Thailand and Brazil have not attracted the kind of JV interest that India and China have.
Consider some of the names in the JV roster – everyone from Iveco to Nissan-Renault is hooking up with local partners. And some, like Volvo, Daimler (and even perhaps Ford) is adding a partner despite already having a wholly-owned subsidiary in India. As many as four alliances were announced this year starting off with Tata-Iveco earlier on followed by Nissan-Ashok Leyland in October and now Volvo-Eicher and Daimler-Hero in quick succession. The fifth and sixth JVs in commercial vehicles — between MAN and Force Motors and Mahindra and ITEC —have been functional for a couple of years. Although there are differences in their micro focus — the Nissan-ALL JV for instance is only for light commercial vehicles while ITEC has just signed an engine JV with Mahindra—all the alliances broadly have the same focus.
Namely use India’s engineering skills for cost-efficient manufacturing and source components from India for both global and local operations. Auto analysts say this second flush of Jvs is totally different from the auto marriages in the early 90s. Back then, apart from a certain knowledge of the local market and a degree of distribution skill, the Indian partners brought little to the table. Most JVs made way for whollyowned subsidiaries as the foreign partner increased investment levels in India. Some of them, like TVSSuzuki and Premier-Peugeot, also turned ugly. Nearly a decade on, the new rash of marriages are quite different. The MNC partner this time round is looking to tap into India’s engineering and oursourcing skill pool. And in most cases the Indian partner retains both majority and the right to call the shots in the JV. That’s true as much of commercial vehicles as of passenger vehicles.
The recent Renault-Bajaj Auto plans or Renault’s larger tie-up with Mahindra all hinge on the Jvs ability to help develop and market cost effective vehicles. Says a partner with a Delhi-based MNC consultancy: “As margins wear thin in their home markets in Europe and the US, auto companies are looking for cost nirvana in places like India and China.” In China, where a policy mandate still remains, Jvs have been a popular choice. But beyond that, Chinese companies like Chery are attracting interest from OEMs like Chrysler for joint development of small vehicles. In India too the focus is on small and light vehicles.
In passenger cars it’s the $3000 vehicle while in commercial vehicles it’s the sub-1 tonner, Ace-type vehicle. Both products are segment innovations that have attracted global interest. Says Stephen J Rohleder, chief operating officer, Accenture: “The innovation that comes out of India is going to constantly challenge not just the price points but the thinking of the western world. For years most of the automotive industry had competed on a scale basis. So when Tata comes out with a 2000$ car for the emerging market or for the young middle class market, it creates all kinds of opportunities to figure out how to manufacture in scale, how to define quality and how to get a supply chain in space.” No wonder, he says, global OEMs are drooling at the prospect. Indeed at the launch of the Logan, Renault boss Carlos Ghosn had talked about something similar. “The main weakness of today’s global automakers is that they are incapable of delivering an extremely low cost, basic product and still make money out of it,” he said
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| JAI Group to restructure group companies |
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| DELHI-BASED JAI Group, manufactures of multi leaf springs and parabolic leaf springs for major OEMs in India and abroad, is in the process of restructuring its group companies. The group comprises two companies - Jamna Auto Industries Ltd (‘Jamna’) and Jai Parabolic Springs Ltd (‘JPSL’).
The company has also decided to merge MAP Springs into Jamna Auto. MAP Springs is involved in the business of marketing and distributing automotive springs in the replacement market. The merger proposal has been approved by the Bombay Stock Exchange. The merger swap ratio that has been valued by independent valuers is 2 equity shares of Jai Parabolic Springs Ltd for 1 equity share of Jamna Auto Industries limited.
The group has three manufacturing capacities across 3 key locations in Yamunanagar (Haryana), Malanpur (Madhya Pradesh) and Chennai (Tamil Nadu). It has an annual capacity of 125,000 MTPA (slated to double over the next 2 years). Yamunanagar and Malanpur plants are part of Jamna and the Chennai plant was set up in JPSL. Both companies are listed on the BSE.
Bhupinder Singh Jauhar, promoter of the company, said. “With this merger, the group will present a common face to customers with a view to enhance its branding amongst the trade as well as the financial community. In order to build economies of scale, derive the benefits of operating synergies between the two companies and leverage the combined balance sheets for growth, we decided to merge Jamna and JPSL.”
The group supplies suspension springs to all major OEMs in India including Tata Motors, Ashok Leyland, Eicher Motors, Swaraj Mazda, Maruti, Mahindra & Mahindra, Bajaj Tempo and Ford Motors.
The group is promoted by Bhupinder Singh Jauhar and his two sons, Randeep Jauhar and Pradeep Jauhar
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| Industry leaving Punjab: Amarinder Former CM Blames State Govt’s Policies For This |
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| Muktsar: Former chief minister Amarinder Singh on Friday accused the SAD-BJP government of throttling the industry and trade in the state and of allowing the law and order situation here to deteriorate.
He said distressed industrialists had started shifting their units to other states. While speaking to mediapersons on Friday at Muktsar, Amarinder alleged Trident Group of Industries was compelled to shift its Rs 600 crore project to Madhya Pradesh due to the anti-industry policies of the state government.
More worrisome is that the industrialists in the state do not feel secure, said Amarinder.
In just six months of its formation, the SAD-BJP government has registered failures on all fronts and the economic condition of the state is so poor that even government employees are not getting their salaries, alleged Amarinder.
He was in Muktsar to attend the bhog ceremony of a senior Congress party leader Avtar Singh Sidhu, who died of cancer some days back.
The lack of vision and poor economic policies of the government have worsened its financial condition, he said.
The earnings from stamp duty, which reached Rs 1,400 crore per annum during Congress regime have fallen to Rs 400 crore per annum under the SAD-BJP regime, said Amarinder Singh.
He said in the coming days the Congress will move Supreme Court, seeking transfer of investigation of corruption cases against Badal family members from Punjab Vigilance Bureau to a Central government agency.
“Everyone already knows the fate of the corruption case. Can the state vigilance department dare to proceed against its CM and his family members? The answer is obvious to everyone. So there is no logic in allowing vigilance bureau to proceed with the corruption case against Badal,” said Amarinder.
He added, “I am not scared of the vigilance case against me in Ludhiana city centre scam. People will know the truth in the coming days,” he claimed
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| Tata Steel floats JV with Ivory Coast |
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| TATA Steel is likely to invest $1-1.5 billion over the next three years to develop Mount Nimba Iron ore deposit in Ivory Coast. The largest private sector Indian steel company has picked up a 75% stake in a joint venture on Tuesday. Sodemi, a state-owned mining company of Ivory Coast, will hold the remaining 25% stake in the JV company.
The move indicates Tata Steel’s determined bid to secure raw material linkages post acquisition of Corus Group.“We have formed a joint venture company with Sodemi and the government of Ivory Coast. We will have a holding of 75% while Sodemi will have the remaining share in the proposed company. The mining rights will rest with the JV company,” Tata Steel managing director, B Muthuraman said in a conference call from Abidjan shortly after signing the agreement on Tuesday. The investment in West Africa comes close on the heels of Tata Steel’s acquisition of 35% stake in a coal mine in Mozambique in joint venture with Riversdale Mining of Australia. “Tata Steel would continue to look for strategic partnerships and strive to achieve 60-70% raw material security in the next five to six years,” Mr Muthuraman said. Mount Nimba deposit, spread over Liberia, Guinea and Ivory Coast, is one of the biggest iron ore deposits in West Africa
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| Godrej to enter TV market, plans solo show |
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| GODREJ Appliances is getting ready to enter the biggest consumer durable product category in the country, colour televisions (CTVs). The appliances manufacturer is going to start with a pilot project in a few months which would be extended into a full-fledged entry into the segment under its own brand. This puts to rest market expectations of it tying up with a multinational company like Japanese major Panasonic which had evinced an interest in partnering Godrej in the past.
The consumer durable arm of privatelyheld Rs 4,000 crore Godrej & Boyce is eyeing both the mass market as well as the top-end segment such as LCD televisions. While the picture tube-based flat-screen televisions in all categories including entry-level 14’’ and higher end 29’’ screen products would be sourced from third party manufacturers in the country, LCD televisions would be imported and sold under the Godrej brand.
“We want to build scale and one of the ways is to extend the brand presence in other product segments beyond appliances and televisions is a natural choice. We will be designing the products with a differentiating factor at the pilot project time itself and depending on the response we would go for a national launch in the middle of 2009,” said Godrej Appliances vice-president, sales & marketing, Kamal Nandi.
Godrej had earlier diversified into the consumer electronics market by starting the DVD player business. Now its getting into the CTV market which is the biggest consumer durable segment both in volume and value. It is also considering to enter other allied product categories in the future.
Appliances division, which had revenues of around Rs 1,000 crore in FY07, is hoping to close the current financial year with a turnover of Rs 1,400 crore which would be about 35% of Godrej & Boyce.
Initially, Godrej was largely a refrigerator manufacturer but over the last few years it has extended its brand reach into categories like airconditioners, microwave ovens, DVD players and washing machines. Godrej’s medium to long term plans include entry into the small appliances market in the country, which is largely fed by unorganised sector apart from the likes of Bajaj Electricals and Philips among many others
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| Rajesh Exports bags Rs 116-cr order for diamond jewellery |
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| • MUMBAI: Rajesh Exports has bagged a Rs 116-crore branded diamond jewellery export order from the UAE-based Excel Goldsmiths. The company has introduced nine brands of diamond jewellery. The order is for its brands including Eternal, Solitaire, Iteen, Ghazal, Aishwarya and Sushmita |
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| ESPN Star Sports floats tender for overseas rights |
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| • NEW DELHI: ESPN Star Sports, which has the global broadcast rights for all ICC events from 2008 to 2011, on Friday announced tenders for various rights for territories outside India. The broadcast rights include events like ICC Champions’ Trophy in Pakistan (2008), ICC World Twenty20 in England (2009) and the ICC World Cup in the Indian subcontinent scheduled to be held in 2011. Late last year, ESPN Star Sports’ affiliate EML was awarded the exclusive global telecast rights from the International Cricket Council (ICC) for all of its events from 2007 to 2015 |
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| M&M introduces bio-diesel tractor |
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| • PUNE: Mahindra & Mahindra's farm equipment sector on Friday launched the bio-diesel tractor B5 in Pune. The company will initially sell these tractors from Pune and Hyderabad, according to senior vicepresident (marketing and sales) Sanjeev Goyle. B5 tractors use 5% bio diesel and 95% ordinary diesel. "We have entered into a contract with a few producers. Our dealers would ensure supply of biodiesel to out customers," said Mr Goyle. |
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| Intel conference begins |
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| INTEL kicked off its Intel Channel Conference (ICC) in Chandigarh on Friday. Intel announced the launch of a new family of processors manufactured using the 45 nm technology, showcased its new marketing campaign called ‘Chips’ and also launched initiatives for channel partners to enhance their profitability.
Speaking on the occasion, Sandeep Aurora, Director – Sales and Marketing, Intel South Asia said “This event is a bi-annual program for Intel and our partners. The Intel Channel Conferences have always been extremely well – received and are of great value to the partners. They serve as a platform for the channel to get firsthand information on Intel products, meet face-toface with senior Intel executives and allow for a free exchange of ideas, opinion and feedback. “
Intel launched 16 servers and high-end PC processors which are built using an entirely new transistor formula that prevents wasteful electricity leaks.
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| Singapore Tourism Board to focus on Chandigarh, Punjab |
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| SINGAPORE continues to be favourite destintion for people of Chandigarh. Data available indicates that from January to October 2007, 15 per cent more people visited Singapore in comparision with the same period last year.
Kenneth Lim, area director, northern and eastern India, Bangladesh, Pakistan and Nepal, Singapore Tourism Board(STB) said that during January to November 2007 as many as 6,78,914 Indians visited Singapore indicating an increase of 13.66 per cent over the same period of the previous year. “We are hopeful that by the end of 2007 as many as seven lakh visitors from India would have set foot in Singapore,”he said. During 2004, 4,71,181 Indians visited Singapore and in 2005 this number had swelled to 5,83,542.
Talking to ET here today, Mr Lim said STB’s strategy would be to strengthen ties with the travel trade in Chandigarh as they are an important intermediary to reach out to the end consumer. Additionally, he said, the STB would be on the lookout for other opportunities and platforms to increase the awareness of Singapore as a key family destination. STB’s participation in Millionaire Asia, Chandigarh, this Saturday is one such example.
He said India was the fourth largest inbound market for visitor arrivals to Singapore contributing to 7 per cent of the total visitor arrivals in 2006. Of the total tourist arrivals in Singapore in 2006, lesiure visitors make up for 70 per cent while the business travellers comprise about 30 per cent of the total Indian arrivals.
“For us Chandgiarh and Punjab are second engines of growth and especially those with a high per capita income would be our potential customers,” said Mr Lim. “The healthy upward trend in visitor arrivals from Chandigarh puts the city as one of the key emerging tier 2 cities for the STB,” he added
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| Manufacturing has bright future in hinterland Haryana, Punjab and Maharashtra have already shown int |
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| POLICY managers may be having a tough time countering the resistance to some of the norms they have formulated for special economic zones (SEZs) in the country. But they seem to have left those worries behind them and are now focussing on a policy for introducing manufacturing investment regions (MIRs) aimed at the development of the manufacturing industry in the hinterland. The good part about this initiative is that there may not be a cap on the number of MIRs in the country.
Apart from greenfield projects spread across 150-200 sq km, MIRs could also take the form of brownfield expansions of existing state manufacturing units. “While these units will have no fiscal sops, the central government will provide the entire rail, road connectivity and other infrastructure requirements,” said Ashwani Kumar, minister of state in the ministry of commerce and industry. The state government is also expected to chip in by providing land, sewage and other local facilities.
According to the minister, the state governments of Maharashtra, Punjab and Haryana have, already, shown interest in promoting such MIRs. He expects more states keen on developing far flung areas to show interest in the proposal.
The UPA government wants to make India’s manufacturing sector more competitive as it believes that the sector could be a prime driving force for the country’s economic growth. By encouraging SEZs, petrochemical regions and MIRs, the government wants to increase the share of manufacturing in gross domestic product (GDP) from the current level of about 17% to 25% by 2012 and further to 30% by 2020.
The manufacturing sector has been one of the main contributors to the recent stellar growth in industrial production. The latest data on industrial output shows that thanks to a strong performance by the manufacturing sector, industrial growth shot up to 11.8% in October from 4.5% a year ago.
“Liberalisation of foreign direct investment norms is also being considered, especially in the civil aviation — aircraft maintenance and mining sectors,” Mr Kumar told ET.
A high-powered committee headed by the central cabinet secretary is currently monitoring the implementation of the Petroleum, Chemical and Petrochemical Investment Regions (PCPIR) policy. “Bayer, Exon, Dow Chemicals and Shell are some of the companies that have shown interest in these projects,” the minister said.
The National Manufacturing Development Council has already identified certain labour-intensive manufacturing sectors such as textiles, food processing and leather for special government succour. Some of the National Manufacturing Development Council’s proposals had been taken on board in the last two Union budgets. Policy action is also being seen outside the budget. The integrated textile park scheme, for instance, is also expected to show some results after the initial hiccups.
The National Manufacturing Development Council , which is represented in the prime minister’s high-level committee on manufacturing, is now sharpening the focus on skill upgradation. Policy managers have acknowledged the fact that absence of skilled manpower is a major constraint in the efforts to give a fresh momentum to Indian’s manufacturing sector, which had plunged into a torpor, even as the services sector recorded phenomenal growth in recent years
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| Made in Punjab towels penetrate US, Europe |
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| IF YOU happen to shower in an upscale New York hotel, chances are you will dry yourself with a “Made in Punjab” towel.
Punjab-based towel manufacturer Abhishek Industries, with its Trident brand of towels, has not only been able to capture the high- and middle-end markets across the US, Europe and several other parts of the world but is now doing business with some of the best brands and retail chains in these countries. These include top retail chains like Wal-Mart, JC Penny, Target, Sears, Guest Supply, Reebok, United Colours of Benetton and Ikea and brands like Liz Claiborne, Chris Madden and Nautica.
“Of the top 10 retailers in the US, Trident works with nine,” said Tri-dent’s terry towel division president PK Markanday. Guest Supply, a provider for luxury hotels like the Marriott, the Inter-Continental and Holiday Inn in the US, also buys towels from Trident.
High-end towels from Trident — cotton bamboo, Egyptian cotton and Supima cotton — are being lapped up by top brands. Its range includes bath, beach, kitchen, festival and luxury towels.
Trident ventured into the towel market in 1998 and is now one of the top five towel manufacturers in the world. “The idea to launch towels came in 1998. We were into yarn manufac-turing and wanted to do a home textiles brand. We realised towels were a good idea as the market was expanding globally,” Trident’s CEO and managing director Rajinder Gupta said in his sprawling cor-porate office in this industrial city, often called the Manchester of In-dia.
Trident is already manufacturing 10 million towels every month and is targeting to expand by another two million pieces by April 2008. The company’s main manufacturing plant is located in Barnala, 200 km from here. It is setting up another plant near Bhopal in Madhya Pradesh.
Much of the technology for its manufacturing plant has come from Germany, Japan and Italy. “We invest a lot in technology as well as human resource. We have 268 highefficiency looms,” said Mr Mar-kanday.
A $380 million group, now, the company aims at hitting a turnover target of $1 billion by 2010. Much of that business will be from its towel sales alone. Trident’s marketing head Rajneesh Bhatia said ex-ports to the US alone were over Rs 6 billion.
“More than nine of the 10 towels being exported by us go to the best US retail chains,” Mr Bhatia said.
Top hotel chains in India, including the Oberois, the Taj, ITC and the Inter-Continental, and retail chains like Reliance, Big Bazaar and Shoppers Stop, are also clients of Trident in India. The company now plans to launch its own retail brand in home textiles with signature shops by March next year.
The company has interests in yarn, towels, agro-based paper, chemi-cals, and energy. It also plans to venture into sugar manufacturing.
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| Paraguay fertile ground for Indian agri business group Solvent Extractors’ Association To Buy 15,000 |
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| MUMBAI-BASED Solvent Extractors’ Association of India is all set to acquire 15,000 acres in Paraguay to grow sunflower and soybean. The company also plans to set up a crushing unit for sunflower and soybean seeds there and may start exports from Paraguay itself.
The land will be acquired at $2,000-3,000 per hectare.
Genaro Vicente Pappalarado, Paraguay’s ambassador in India, who was in Chandigarh recently, confirmed this to ET. “We are willing to have investors in the farming sector from this very region. Talks with Solvent Extractors’ Association of India are in the final stages. The association will be acquiring 12,000-15,000 acres of land at $2000-3000 per hectare very soon,” he said. The ambassador was part of a Paraguayan delegation that was visiting the city to understand Indian agri business.
The offer for the land has come from the single party/corporate.
“We are working on the possibilities and have formed a three-member team comprising an agronomist, a financial expert and a businessman. This is an outcome of our last annual general meeting held in Goa. If all goes well, we would like to have the crushing facility in Paraguay, after which we may start exports from there,” said Ashok Setia, president, Solvent Extractors Association of India.
On September 21, Paraguay Oilseeds Crushers’ Association (CAPPRO) had signed an agreement with the Confederation of Indian Industry to strengthen trade and investment relations between India and Paraguay, especially in the field of agri business. The agreement is important with soya oil gaining importance in trade with Latin America and Caribbean.
The Solvent Extractors’ Association had visited Paraguay in June this year to evaluate the possibilities. Its looking for support from the Indian government for this deal
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| Punjab National Bank disburses Rs 504.36 crore to Haryana SMEs |
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| Punjab National Bank(PNB) has decided to focus on small and medium sector(SME). R K Gupta, who recently took over as general manager, PNB Haryana zone, Chandigarh, said here today that the SME sector was turning out to be most vibrant and important part of the economy. Thus, the bank has decided to give credit to a large number of industrial units so that they can improve quality and withstand competition.
He said this year so far, 3,429 SME units in Haryana zone had been disbursed Rs 504.36 crore credit. The bank aims to disburse credit to as many as 6,500 units by the end of 2007-2008.The total outstanding from the SME sector till date is Rs 2,744.12 crore. Last fiscal, Rs 452.78 crore was disbursed to 3,338 SME units.
Mr Gupta said the bank as member of empowered committee on SMEs, has also been participating in various discussions to improve competitiveness of the industrial and service enterprises. The bank in Haryana zone comprising Haryana and UT Chandigarh has provided 1,703 collateral free loans under Credit Guarantee Scheme. Around 1,790 Artisan Credit Cards and 3,325 Laghu Udhami Credit cards have also been issued in the zone by the bank.
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| ‘India second most favoured for FDI’ |
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| New York: India ranks second in world’s favoured FDI destination lagging just behind China which is number one, according to a study released by global strategic management consultancy A T Kearney.
The emerging markets have registered the strongest investor optimism, with India, China, Brazil, UAE and Vietnam experiencing the most positive change in investment outlook during the last year, the study, based on a survey of top executives, says.
While China and India lead FDI destinations in the 2007 index, 15 of the most attractive FDI destinations are developing markets. The index provides an overview of the prospects for international investment flows.
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| ‘India to remain outsourcing leader in 2008’ |
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| New Delhi: This should put smile back on the face of the Indian outsourcing industry. Gartner forecasts, “The year 2008 will be a good one for the ITES sector. India will remain the undisputed leader in the outsourcing space. This despite the fact that countries like China, Russia and Brazil are emerging as credible alternatives.” It also predicts offshore spending will go up by 60% in Europe and 40% in the US next year. This, at a time when the industry is supposed to be going through a low phase because of the US sub-prime crisis.
Interestingly, experts now say the US economic downturn could actually give a boost to Indian outsourcing industry, even though it’s being hit by a rupee trading at an all time high. “Whenever the world is facing cost pressures or facing a little lower demand, then US companies will face the need to take out costs. So the contrarian situation is that they could outsource more and that would benefit the software industry,” says Azim Premji, chairman Wipro.
Premji is gung-ho, inspite of the fact that the rupee’s rise has affected operating profits as a percentage of sales of the software industry. The value of Wipro’s shares have fallen by almost a quarter, making it one of the worst performers on India’s stock market this year.
And the next couple of months will be a “wait-andwatch situation” as the magnitude of the US subprime crisis unfolds, Premji feels. ‘‘What is of concern is the uncertainty — when people start sitting on the fence on (business) decisions,” Premji says.
But the ITES industry should not lie back contended. As a joint study by RocSearch and CII reveals, shortage of skilled and employable people and the lack of government and policy support are two of the biggest bugbears facing the outsourcing sector today. The survey showed every third company had a manpower shortage of more than 15%. What’s more, almost half the organisations reported employability at the entry level was less than 10% while there were not enough people to fill the middle level as well.
The study ‘Managing Skills & Knowledge in the Indian Services Outsourcing Sector’, shows that attrition level too was as high as 20% in most companies.
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| PM to decide exporters’ fate |
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| Prime Minister Manmohan Singh will decide on further relief measures for the nation’s exporters, whose earnings have been eroded by the strengthening of the rupee against the dollar.
The government is also considering the refund of some duties as a relief measure, trade minister Kamal Nath said in New Delhi on Tuesday. The cabinet will review norms for overseas investment in India next week, Nath said.
Last month, India cut customs duty on man-made fibers and eased credit terms for leather and textile exporters. The government in October announced subsidized loans and tax breaks to exporters for the second time this year to help industries such as jute, cashew nuts and coffee.
Nath said he expects the measures to help the textile industry and that more steps are being considered. He reiterated there would be no change in the government’s $160 billion export target for the fiscal year to March 31.
India’s exports rose in October at the fastest pace in 15 months as exporters filled old orders and hedged to cope with the impact of a surging rupee against dollar.
Exports rose 35.7% to $13.3 billion, while imports rose 24.3% to $20.8 billion, widening the trade deficit to $7.5 billion from $7 billion a year earlier, the ministry of commerce and industry said.
The local currency has climbed more than 12% against the dollar this year and is the second-best performer in Asia. It is trading at near the highest in almost a decade. BLOOMBERG
‘No change in SEZ area ceiling’
New Delhi: Within a fortnight of commerce secretary G K Pillai talking about a possible relaxation of cap on land size for SEZs, commerce and industry minister Kamal Nath on Tuesday said there was no proposal to change the 5,000 hectare ceiling prescribed by a Group of Ministers.
“The government is not considering any proposal to relax the 5,000 hectare cap on land size for Special Economic Zones,” Nath said
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| Global warming fight a money issue, says UN climate chief Calls On FMs To Help Meet Environment Goal |
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| UN CLIMATE chief Yvo de Boer called on finance ministers meeting here on Tuesday to provide the monetary muscle to tackle Earth's global-warming crisis. Finance ministers or their representatives are holding first-of-a-kind talks on climate change in parallel to a worldwide gathering that aims to deepen action against the peril from greenhouse gases.
“Designing a long-term solution to climate change is mainly a challenge of intelligent financial engineering,” said Yvo de Boer, head of the UN Framework Convention on Climate Change (UNFCCC), which is organising the December 3-14 Bali talks.
“It is the environment ministers who set the goals in this process, but it's the finance and economics ministers who have to get us to those goals,” he told AFP before addressing the finance chiefs. “I think that there's an opportunity here for finance ministers, by coming to grips with this issue, to turn it into an opportunity for clean economic growth rather than a threat,” he said.
The two-day talks among financial representatives from 37 countries began on Monday, preceded by a weekend meeting of trade ministers.
It is the first time that ministers from the trade and finance arenas have attended the annual UNFCCC meeting, a development that reflects how climate change has amplified from being a purely environmental issue.
Environment ministers meet in Bali for three days from Wednesday to climax the overall UNFCCC talks, which aim to set a “roadmap” for action beyond 2012, when the current pledges of the Kyoto Protocol run out.
According to the UN's Nobel-winning Intergovernmental Panel on Climate Change (IPCC), global average surface temperatures could rise by between 1.1 C and 6.4 C (1.98 and 11.52 F) by 2100 compared to 1980-99 levels.
Drought, floods, storms and rising sea levels are among the amplifying risks that the world faces. To limit the overall rise in warming since pre-industrial times to 2.0-2.8 C (3.6-5.0 F) will cost less than 0.12% of annual world GDP growth by 2030, says the IPCC.
Among the tools open to policymakers are tougher energy-efficiency standards, taxes on fossil fuels that are the big drivers of global warming and cap-and-trade systems on greenhouse-gas emissions as well as measures to encourage clean technology.
Such measures run into resistance given their potential financial cost and their challenge to established interests
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| Eicher to ride piggyback on Volvo expertise |
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| FOR A David in a market of Goliaths, Eicher manages to attract a great deal of respect both from its domestic and global rivals. It’s valuation luck held out when Tafe bought its tractor business for Rs 310 crore two years ago. And although the exact valuation of the 8% that Volvo is picking up in Eicher Motors isn’t confirmed, the buzz is that the premium is fairly decent.
Analysts say part of the reason why Eicher attracts good valuations is because of its culture and DNA and its decent fundamentals. “The company is professionally run and has a positive image,” says a senior auto industry source. And, he says, Eicher’s crucial, if niche, position in every market it operates in (tractors before the sale to Tafe, lifestyle motorcycles and commercial vehicles) helps it attract good premia. Eicher Motors shares, which hit a high of Rs 599 ahead of the announcement, fell 17% to close at Rs 477 on the Bombay Stock Exchange. Said an analyst from a Mumbai-based brokerage, “The market was hoping Volvo would buy a majority stake, triggering an open offer.”
The Swedish truck major has been on the look out to expand its base in India, either organically or through an acquisition. “This became even more critical after its acquisition of Japan’s Nissan Diesel early this year. This strategic alliance with Eicher seem the right fit for Volvo’s India strategy,” said an auto analyst with ASK. Volvo will be able to take advantage of the low-cost manufacturing in India.
Eicher CEO Siddhartha Lal is fairly clear about what he wants from the alliance with Volvo. “Eicher is number 3 in the commercial vehicle market and we are strong in light and medium duty vehicles,” he said. But the real moolah lies in the medium and heavy segment which is worth Rs 30,000 crore. That’s where Tata Motors and Ashok Leyland rule and Eicher needed big MNC muscle to counter the local market leaders.
For Eicher, the Volvo tie-up is both about tech opportunity and export exposure. “The Eicher brand will focus on emerging country-specific products,” he said. “We’ve got a good set of products which we can enhance with aggregates and technology from Volvo. And we can use Volvo’s footprint in 180 markets to sell Eicher products,” he explained. Analysts do not expect this latest alliance to immediately impact the CV market. “With so many CV players entering the market, Volvo’s success will depend on its technology, products and pricing,” says a Mumbaibased analyst.
Both Volvo and Eicher currently enjoy 6% marketshare but at different ends of the market. Volvo is a high-end player while Eicher is strong in local-specific light products
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| Eicher, Volvo to set up JV for commercial vehicles Venture To Have An Equity Value Of $768 Million |
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| COMMERCIAL vehicle manufacturer Eicher Motors (EML) and Swedish truck major AB Volvo have agreed to form a joint venture with an equity value of $768 million. The two partners have signed a letter of intent to this effect here on Monday and expect the JV to start operations by July next year. The Indian partner will hold a 54.4% stake in the JV, while Volvo will own 45.6%. It will focus mainly on distribution of commercial vehicles in India as well as abroad, where the partners have interest like R&D and manufacturing. Besides, the two companies are also mulling financial services business through the JV. “The partnership gives us the opportunity to share each other’s strengths. While we can offer our low cost design and engineering capability, sales and service network in India, Volvo can offer Eicher the technology and access to global markets,” Eicher Motors MD and CEO Siddhartha Lal said |
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| Steeling The Show Stewols makes steel fibre that's changing the way highways, tunnels and even auto |
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"OUR HIGHWAYS can get better if steel fibre technology is quickly adopted by the NHAI like most of the tunneling projects, which have made use of this technology," says Shiraz K Doongaji, director, Stewols India, a company, a leading steel fibre manufacturer in India.
Doongaji discovered steel fibre during a visit to the Hanover Fair in Germany in 1995. This technology, which is only 30 years old in the history of civil engineering, is now being used extensively in Europe, the US and other countries. "Initially this technology was used in their defence applications such as construction of protection walls, bunkers and other strategic installations. Steel fibre replaces the rebar completely for ground-based slab systems i.e. for industrial floorings, roads, etc," he says.
Some of the projects completed by Stewol are the SALPG underground storage cavern in Vizag, flooring for the Mathura refinery, and the Military Engineering Service (MES) project. Even the upcoming Rohtang Tunnel in Himachal Pradesh will be designed with steel fibre technology. "It's estimated that the requirement of steel fibre for the current year will be around 4,000 tonnes" says Doongaji. Stewols claims to have done in-house R&D to develop machines that produce around 7,500 tonnes of steel fibre annually.
The technology was introduced by the University of Roorkee and the country's first steel fibre reinforced concrete road was constructed in the year 2000. Steel fibre has also been used in the Mumbai-Pune tunnels during 1999 when nearly 700 tonnes of steel fibres were imported from the UK. Steel fibre applications are also found in hydel projects.
The company now plans to use this technology in pre-fabricated structures, manhole covers and in low-cost housing schemes as well as for industrial storage applications. Stainless steel fibre is also an important ingredient in refractory industries where it's used to minimise cracks and improve the longevity of other refractory materials. Says Doongaji: "The randomly oriented steel fibres assist in controlling the propagation of micro-cracks present in the matrix, first by improving the overall cracking resistance of the matrix and later by bridging across even smaller cracks formed after the application of load on to the member, thereby preventing their widening into major cracks."
Going forward, Doongaji says new applications will fuel demand for steel fibre: "As the scope of steel fibre technology has picked up globally we hope to do major flooring activities in India and also go in for prefabricated products like automobile parts." The company is planning to collaborate with foreign partners to export the material to the European Union countries and to other destinations across the world. "Since India is becoming a hub for automobile components, we expect a very good demand for this material," says Doongaji
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| Edge of the Blade Maker A tractor blade maker is producing its own steel to cut costs and gain globa |
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| SUNRINDER Rajpal is busy ramping up production at his factory located just across GT Road, on the Chandigarh-Delhi highway. He is setting up an oxygen plant to spruce up steel production at the unit. But wait, Rajpal isn't a steel producer. He is one of the biggest producers of disc blades (tractor blades) in the world. However he set up a steel furnace, a rolling mill and an oxygen plant at his unit to produce his own allow steel, instead of sourcing the alloy from the Steel Authority of India Ltd, because he could thereby cut input costs by as much as 15%.
"With one go, I became so competitive in the global market that some of my competitors in Brazil and Spain have been forced to shut shop. Their clients and many farm equipment retailers in the US and South Africa have started coming to me directly," says Rajpal. His company Karnal Agriculture Industries Ltd (KAIL), situated across the GT Road on the Chandigarh-Delhi highway, has recently ramped up production of tractor blades from 2 million pieces to 5 million pieces. He is already making 4 million pieces and is hoping to touch optimum capacity in about three months. KAIL's turnover which was barely Rs 35 crore in 2003-04 would jump to Rs 200 crore next year. "We are revising all our numbers," Rajpal beams,
adding he has already engaged ICICI Bank to find KAIL a private equity investor which could pick up a 15% stake in the company for about Rs 70 crore. "After that, we will go for an IPO."
Much of the company's optimism comes from the fact that there is a growing demand for tractor blades worldwide as more and more civilisations take to organic farming. "In organic farming you require deeper ploughing. So, the need for strong blades is on the rise," he says. What's more, tractor blades have to replaced once every year. In deserts, you have to replace it every 6 months. Which means, the more the number of tractors, the more the demand for the blades. Rajpal also points to the fact that the old tractor blades can also be recycled to produce more steel and hence more blades—cheaper.
The stronger rupee hasn't impacted KAIL's business because the weakening dollar has impacted his global competitors many more times. That is why in the past six months, KAIL has started getting orders that would normally go to Brazilian companies. It is also getting orders from OEMs of tractor companies and also to farm equipment retailers from south east Asia, the US, Africa and Europe. Demand from the US alone has doubled. Demand in the domestic market is also on the rise. His clients in the country include the likes of Mahindra & Mahindra and Punjab Tractors.
So gung ho he is about business prospects, Rajpal is now planning to set up a field plant with different varieties of soil to test the blades. "Different countries have different climatic conditions and hence require different kind of blades. The soil in India will be different from that in Australia. So we plan to make an artificial field plant where we can have different kinds of soil. There, we can till and test the blades and will enable us to deliver more quality products," he adds. The tills are indeed ringing
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| The Invisible Core of Your Business: Brand & Intangible Assets |
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| During the last decade, Indian markets have been integrating with the global economy at an unprecedented rate. The copious flow of capital, deregulation along with new technology and communication platforms has demolished ‘barriers of entry’ which created an undue advantage for Indian companies in the past.
Side by side customers who had little or no option and bargaining power are now being spoilt for choice. With each passing day every Indian company is losing the historical advantage of having a geographically secure customer base, capital and exclusive access to tangible assets like land, building, production plants. These traditional ‘visible’ assets are giving way to 'hidden' assets like intellectual property, brand, customer relationships and talent. The companies that will add value in the future will be the ones who will put these hidden assets to work.
Indian companies have moved from a position where 80% of the competitive advantage was derived from visible assets reported on the balance sheet to where 80% will be driven by hidden assets, which find no mention in the company’s accounts. As access to financial capital becomes a commodity, these ‘hidden’ assets, which cannot be easily imitated or bought, will become the true capital of the firm.
A hidden asset is something that a firm possess whose value, properties or potential is not fully appreciated or realised. It's not that companies ignore their existence rather that they discount by a fair measure their economic utility and their true long-term value.
May be it is not surprising that assets we fail to measure and track are typically undervalued. They are unmined veins of business gold, which were not central to the business strategy of the past, but hold the key to the future.
These tectonic changes in the very fundamentals of value creation capabilities of Indian firms bring with it an unprecedented opportunity to add or destroy value. Indian companies which own scarce intangible capital can generate extraordinary returns on the financial assets they deploy because they get other players needing those intangibles to put up with most of the financial capital and associated risks.
These companies can tap global profit pools through geographic expansion by being asset-light and leveraging arbitrage opportunities. We believe that Indian companies that pursue strategies to grow and deploy their brand and intangible capital will be rewarded with sustained yet extraordinary business and market valuations.
All this is easier said than done. Most Indian companies are not fully aware about the intangible assets they possess. Management and governance processes have not been put in place to measure, manage and develop these precious ‘invisible’ assets that drive value in their businesses today. Consequently, they often find themselves in a world that seems to be filled with confusion, complexity and uncertainty.
Indeed, the ability to synchronise a company’s intangible assets with customer needs through crafting and delivering a superior value proposition has become a key managerial skill. To keep control over their destiny firms will have to develop a holistic and objective strategy to bring accountability of brand & intangibles to the boardroom and capitalise them as assets.
This has been reinforced by recent changes in global accounting standards for business acquisitions — IFRS 3 and the revised IAS 36 & 38. The goal of these new standards is to require companies to be transparent about the nature and scale of intangible assets that they are acquiring. A new era has begun and it carries with it substantial ramifications for CEOs and boards and most importantly for marketing and finance.
The starting place for any business leader is to ask these crucial questions
• Which are the key intangible assets of the business, which could create new strategic options, refine current options, or improve one's ability to execute strategic options?
• How do these intangible assets impinge on business and market value?
• What is the potential upside for the business by fully leveraging these intangibles? What are the key value drivers to focus on in the journey towards the ‘Size of the Prize’?
• How can capital investments and budgeting plans be sensitised to these opportunities?
• Can marketing play a role in the boardroom to articulate the value added by the brand & intangibles so that management time and resources are directed to the issues that matter?
All this is about transformation and renewal of the company's genetic and cultural codes and the single-minded focus to understand and build on the hidden assets of the enterprise.
t is possible that management teams bounce like ping-pong balls from one issue to another, never digging in and understanding their invisible core and what value it holds. Many of the demons are internal and our most difficult foes are often ourselves.
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| Intangible Assets Rule For India Inc: Global No. 3, Asia’s No.1 The country's strong position on int |
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| India Inc holds far more within its folds than what meets the eye. In the knowledge-driven global marketplace, where intangible assets such as intellectual property, brand, customer relationship and talent hold much more value than tangible 'visible' assets such as capital, land, building, factories et al, India emerges at the top of the podium, head and shoulders above all developed countries and blocs, barring the US and Switzerland.
Move over European Union, G8, Organisation of Economic Co-operation & Development countries and yes, even the BRIC grouping. India Inc takes a bow, not just as most 'intangible' amongst Asian economies, but as the number three economy in the world with the highest intangible component as a percentage of the total enterprise value (TEV) —value of disclosed and undisclosed tangible and intangible assets.
With an estimated intangible assets component of 74% (as proportion of TEV), India is just behind US (75%) and Switzerland (74%), according to Global Intangible Tracker 2007 (GIT), the most extensive global study ever on intangibles assets by the Londonbased Brand Finance Institute. GIT 2007, exclusive global break with ET, covered over 5,000 companies in 32 countries. For India, GIT considered the top 50 companies (by market cap) on the Bombay Stock Exchange. Global intangibles to TEV average is around 65%.
This partly reflects the dominance of the software sector in the Indian stock market. And with rapid growth in healthcare, personal care, pharma and biotechnology, the country's intellectual capital is poised for a big leap. It also sets the stage for Indian brands and companies to attain critical mass and pursue global trajectories, says the study.
Today, India's TEV of $365-billion (2006) accounts for a measly 0.8% of the global figure ($ 47.7-trillion), and tangible assets make up a small $96-billion of that. The rest constitute a massive wealth of $269-billion of disclosed and undisclosed intangible assets ($3-billion and $266-billion, respectively). And if the estimates for the first half of current year (HY 2007) are anything to go by, Indian economy with as high an intangible assets of $320.3-billion (up from $269-billion in 2006) could actually topple the top two economies on the intangible to TEV proportion parameter.
At the top of the heap amongst Asian economies, India leads China by far, with the latter's TEV showing 58% of intangible asset component. UAE comes third in Asia with 55% proportion of intangible assets in the economy. Other most intangible Asian economies include Japan (44%), Singapore (45%) and Taiwan (45%). Malaysia (43%) and South Korea (25%) remains at the bottom of the intangibles heap. As Indian economy grows, it is likely to increase the lead.
Interestingly, India Inc has in fact seen the proportion of its intangible assets soar since the beginning of this decade (2001) when it stood at just 56% of $75.1-billion TEV.
The GIT study assumes significance in the wake of changes in the accounting practices, which means that the valuation of intangible assets is now a boardroom issue and cannot be ignored. The ongoing GIT study has so far covered over 11,000 companies quoted in 32 countries over the last six year period. It demonstrates the importance of intangibles and highlights the significant rise in their value over a five-year period. “Even once commoditised sectors that were driven entirely by functional factors are moving rapidly up the ‘intangible value’ curve.” The companies had a TEV of $47.7 trillion at the end of 2006 of which $16.7 trillion represented tangible net assets and $5.9 trillion disclosed intangible assets. The remaining $25.1 trillion represents undisclosed value,” quotes the GIT 2007 study.
GIT 2007 is extensive in the sense it captures dominance of intangible assets across 50 industry sectors. Advertising, internet, software, healthcare services and cosmetics/personal care remain the top five sectors with the proportion of intangible assets to the total assets ranging between 90-97%. Biotechnology, healthcare products, media, computers and pharmaceuticals are the next big sectors rated high on intangibles. Forest products & paper and automobiles are the ones with lowest proportion of intangibles, under 30% of TEV
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| Volvo leads cos seeking truck with Eicher |
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| VOLVO, the world’s no. 2 truckmaker, seems to be the front-runner to buy a majority stake in Eicher Motors, according to people familiar with the situation. Eicher is likely to make the announcement to this effect on Monday.
Truckmaker Eicher has been in talks with ‘several’ companies for a strategic partnership that would help it become a significant player in the heavy commercial vehicles (CV) segment. Its objective is to emerge from a mid-size player to a truly large full-range CV company. Earlier, the company was reportedly in advanced talks with Daimler, though the negotiations fell through.
When contacted, Eicher MD and CEO Siddhartha Lal refused to comment on the strategic partnership. Volvo officials too refused to comment.
Incidentally, late last week, the market was abuzz with speculation that Eicher was striking a deal with Volvo, spiralling its stock up by 8% to close at Rs 545 on the Bombay Stock Exchange. In the last one month, the Eicher stock has risen 27% on the BSE.
Sources said Volvo would acquire the majority stake in the company either from the promoters or through a preferential route
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| Punjab to launch mega irrigation project Government To Pump In Rs 3,243 Crore; Scheme To Include Str |
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| BILLED as the state’s biggest irrigation project, the Punjab government has drawn up plans to pump in Rs 3,243.06 crore for the strengthening of major canal systems in the state. The project will also include flood control and anti water logging schemes.
Work on major canal systems including the Kandi canal, rehabilitation of first Patiala Feeder and Kotla branch, the Bist Doab canal system, the Bathinda branch, the Sidhwan branch, the Abohar branch, a project of conversion of Banur canal from non-perennial to perennial and the lining of Ladhuka distributory system would involve an investment of Rs 1,043.93 crore, said officials.
The government also has plans to spend Rs 308.50 crore on development of new minors/distributaries and widening and strengthening of existing minors/distributaries. Realising the requirement of field channels/khalas, the state government proposes to invest Rs 1,583.41 crore in the construction of the Upper Bari Doab canal system, the Kotla canal system, the eastern canal, the Abohar canal, the Sidhwan canal, the Sirhind feeder and the Bathinda branch, involving construction of 16,282 km of field channels.
Another 9-10 projects have been lined up for flood control and anti water logging schemes for the three affected districts of Muktsar,Ferozepur and Faridkot.This will involve an investmernt of Rs 239.50 crore.The government also proposes to spend Rs 67.72 crore on minor irrigation schemes.
Besides, the government also plans to install 100 deep tubewells in the Kandi area comprising Hoshiarpur,Ropar,Mohali, Gurdaspur and Nawanshahr distrircts. This will involve an investment of Rs 33 crore.
A proposal to construct two low dams in Kandi area is also on cards involving an investment of Rs 35 crore. Punjab chief minister Prakash Singh Badal will launch this massive irrigation project at a function in Bathinda on December 8. This project, when complete, will help rejuvenate Punjab’s economy and lead to economic prosperity in the region
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| COVERING BASES Infosys makes pitch for Aviva’s offshoring centres |
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| INFOSYS, India’s second-largest software and services firm, is learnt to be eyeing UK’s largest insurance provider Aviva’s offshoring centres in Bangalore and Colombo as well as its two Pune facilities that are currently operated by WNS and EXL under the build-operate-transfer (BOT) model. The deal is expected to be in the range of $75-80 million.
The Colombo and Bangalore units are now run by Aviva Global Services (AGS)— the global BPO arm of Aviva. The two Pune facilities were to be transferred to AGS in January 2008. The insurer recently deferred its decision to take back its Pune BOT centres operated by EXL and WNS by a quarter to April 2008.
“We can confirm that we have decided to defer the transfer of Pune by three months and we are taking the opportunity to thoroughly review the options available to us around our offshoring capabilities. Aviva continues to remain fully committed to maintaining its offshore operations and is proud of what has been achieved. Aviva Global Services will continue to play a key role in supporting the UK businesses,” said an Aviva spokesperson. “We would not like to comment on market rumours,” said an Infosys spokesperson.
While WNS, EXL and 24X7 Customer have been touted to be in the race to acquire the centres, Infosys is learnt to be interested as it wants to strengthen its capabilities in the insurance vertical through the acquisition.
In addition to Bangalore and Colombo, AGS operates captive centres in Norwich and York in the UK. Apart from Pune , EXL and 24X7 Customer manage BOT centres for Aviva in Noida and Chennai respectively. “The ability of captives to grow beyond a point is limited. Parent companies are increasingly realising the value creation in selling a captive to a third-party vendor. Apart from earning from the sale proceeds, they get cost-efficient services. Data confidentiality fears have been assuaged to some extent as Indian companies have proved their mettle,” said Ernst & Young India partner (transaction advisory services) Ashish Basil.
In July this year, Infosys signed a $250-million outsourcing contract with consumer electronics firm Royal Phillips that included a $28-million sale of the Dutch company’s outsourcing centres in Poland, India and Thailand.
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| Punjab to spend Rs 3,225 cr on power system overhaul |
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| THE Punjab government on Wednesday approved two projects of Rs 3,225 crore for modernising and upgrading power transmission and distribution (T&D) systems across major cities in the state. The government suffers a loss of Rs 1,000 crore annually on this count, which is much higher than the national figure.
The modernisation and upgrade of T&D systems will be started in Ludhiana, Amritsar, Jalandhar, Bathinda, Mohali and Patiala. There was a need for upgrading the entire power network system in urban and rural sectors in view of the 23.91% of total power loss due to the snags in the prevalent T&D system, according to Punjab State Electricity Board (PSEB) officials.
The government expects to complete the project in two-and-a-half years, before heading to other small towns and cities. “Money saved will be money earned for industry and the common man,” said Confederation of Indian Industry Punjab president Gunbir Singh. The industries are the most affected by the frequent power cuts even during winter.
About Rs 800 crore of seed money for these projects will be raised by the state government, according to Punjab chief minister Parkash Singh Badal while presiding over a meeting of PSEB. “The government has approved Rs 1,990 crore for transmission project and Rs 1,235 crore for distribution project, resulting in reduction of losses by 15%,” said Mr Badal. Currently, the state loses 4% in transmission.Out of the 20% distribution losses, 10% was due to technical reasons and the remaining 10% due to theft and pilferage.
To control the theft of electricity and reduce T&D loses, 35 lakh electric meters will be replaced by electro mechanical meters at a cost of Rs 175 crore in the next two years. “High voltage distribution system for tube wells are being introduced besides ensuring the proper installation of capacitors at all the tube well premises to stabilise voltage. Farmers are being motivated to replace the traditional bulbs with CFLs to save energy,” said PSEB chairman YS Ratra.
The rural belt of Punjab has to suffer power cuts of more than 4 hours every day, according to Chandigarh-based citizen’s awareness group chairman Surinder Verma.
Haryana to disconnect power of 1 lakh defaulters
CHANDIGARH: THE Uttar Haryana Bijli Vitran Nigam (UHBVN) has issued over one lakh power disconnection orders against the nonpayers in a month. These orders have been issued during the special campaign launched for disconnection of electricity supply of nonpaying consumers against the target of 66,668 disconnections in November 2007, said an official release issued here on Thursday. A spokesperson said a sum of Rs 132 crore was pending against 1,00,135 consumers whose disconnection orders have been issued in the first phase. It was observed that 50,398 disconnections had been made by the field staff during the month of November. The disconnections of the re-maining non-payers has been extended up to December 15, he said. The nigam has recovered Rs 27.34 crore from the non-payers during the special campaign period upto November 30. He added that the nigam had also detected 9,718 cases of pilferage of electricity during the current fiscal.
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| Manufacturing sector opposes more cuts in customs duty |
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| CONCERNED over the slow growth rate of the manufacturing sector in the current year, industry in Punjab is against the reduction of customs duty on manufactured goods in the coming budget. The strong rupee has not only affected manufactured goods’ exports but also led to a surge in imports of manufactured goods in the last two years.
The appreciation of the rupee has made imports cheaper and increased the competition for domestic manufacturing sector, which is already suffering due to slow growth in exports and higher interest rates. Manufacturing sector's share in employment has fallen marginally over the period. According to the National Sample Survey, the share of the manufacturing sector declined from 12.1% in 1999-2000 to 11.7% in 2004-05 in terms of employment, whereas that of the service sector continued to increase.
“Any further custom duty reduction
would neutralise the impact of measures implemented for reviving the growth of the manufacturing sector. The decline in the manufacturing sector growth is also attributed to the increase in interest rates in recent months, which has reduced the demand for consumer goods, as a result of which consumer durable sector witnessed a negative growth (-1.28%) in the first half (April–September) of this year,” said VP Chopra, president, Federation of Punjab Small Industries Association.
India has reduced its peak tariff from 25% in 2003-04 to 10% in 2007-08, due to its radical unilateral tariff liberalisation. Further duty reduction could significantly slow down the growth in manufacturing sector by increasing competition for domestic manufacturers.
Imports in the last two year have grown fast in sectors like machinery, machine tools, transport equipment, iron & steel, non-ferrous metals, paper manufactured and manufacture of metals.
In April-July 2007 , import of some of the important manufactured items like iron, steel, paper, machine tools, transport equipment and non-electrical machinery have witnessed high rate of growth compared with the same period last year.
Net sales of manufacturing sector grew 9.2% the in quarter ended September 2007, whereas it witnessed growth of 24% in services and 15% in mining.
It is felt that inadequate growth in manufacturing will have an adverse affect on employment generation. To achieve inclusive growth, the manufacturing sector has to absorb a large number of people, who would move out of agriculture in pursuit of higher incomes. The manufacturing sector will have to carry the major burden of increasing employment opportunities in the Eleventh Plan directly or indirectly. For this, it is important that manufacturing sector grows at a sustainable rate of over 12% per annum.
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| Punjab to form integrated co to market agri produce |
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| THE government has decided to establish an integrated company to explore market potential of agriculture produce both at the national and international levels.
This is done keeping in view the potential of large scale business of agri produce and the products being manufactured in the several cooperative departments, including Markfed, Milkfed and Weavko.
The proposed integrated company would work as a special purpose vehicle (SPV) to extend advisory to the farmers for cultivating a specific crop, which has great demand in the international market too, co-operation minister Captain Kanwaljit Singh told reporters here on Thursday.
The company would adopt a single window system, so that farmers could get suitable advisory from one place only, he said, adding that other objectives of the proposed company would be to channelise export of the state's produce and trap the national and international market of products of several cooperative departments.
Asked whether there was any increase in business for the state due to the opening of Indo-Pak trade through Wagha border, he said, “Since, currently there is not much volume of business through the international border, Punjab is yet to get expected hike in the trade”. The minister, who was here for a meeting with the Potato Growers' Association, said efforts were on to take permission to export the potato seeds to European countries.
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| Punjab rides high on growing ties with Italy |
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| Chandigarh: The growing bonhomie between Italy and Punjab seemed to bode well for the state that was in dire need of foreign direct investment to boost its infrastructure. Wednesday’s meeting between Punjab advocate-general HS Mattewal and Italian embassy officials reportedly took forward the positive note which emerged at the August meeting between Italian Ambassador Antonio Armellini and Punjab chief minister Parkash Singh Badal.
Focusing on Punjab’s potential, Garbriele Annis, first secretary (political and consular) and Nicolo Tassoni Estense di Castelvecchio, counsellor, head of economic and commercial office stressed, ‘‘We want to push for economic, social and political ties.’’ While conveying the CM’s keenness about enhancing bilateral trade and ties with Italy to augment the state’s agrarian, social and educational infrastructure, Mattewal said, ‘‘A curb on illegal immigration is a must.’’
Stressing on the need to beef up laws to check unscrupulous travel, what with 80% of Indian migrants in Italy hailing from Punjab, Mattewal said, ‘‘The state government is in the process of bringing about a legislation to regulate the functioning of travel agents in Punjab.”
Italy was reportedly welcome to opening its doors for skilled Punjabi workers, especially in the field of agriculture, agro-processing, machine tools and horticulture. To which, it was revealed, that Badal had reciprocated and sought Italy’s expertise in the field of education, especially at the primary and high-school levels. While many Italian universities and institutions had Indian affiliates, but none was from Punjab.
Meanwhile, Italian Ambassador, in a letter to CM Parkash Singh Badal, has requested him to inaugurate a seminar on ‘Business opportunities for Italy and Punjab’ on December 17.
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| MSMEs may be part of priority sector lending |
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| MICRO and small enterprises (MSE) may soon get easy access to banking credit with the government planning to fix a 10% sub-sector target for units falling in the category. The sub-sector target will be within the overall stipulated 40% ceiling for priority sector lending targets of banks. To accommodate the proposed new sub-sector, the total ceiling for priority sector lending has to be increased marginally.. The move is aimed at addressing the severe shortage of funds for the MSE sector which has progressively declined as a proportion of net banking credit over the last few years.
With banks total credit standing at about Rs 18 lakh crore last year and growing at a projected 30%, about Rs 10 lakh crore would be available for priority sector lending. A sub-sector target may release about Rs 2,00,000 crore for the MSE sector.
The proposal is part of the recommendations of the Planning Commission made in the Eleventh Plan document that has been cleared by the Cabinet. The document now awaits final clearance by the National Development Council (NDC) headed by Prime Minister Manmohan Singh after which it would be put for implementation by various government departments and ministries.
“The Commission has favoured a subsector target within the priority sector ceiling for MSEs considering their immense importance to the country’s industrialisation. The sector contributes about 39% of country’s gross manufacturing output , 34% of exports and provides employment to nearly 33 million people. However, credit to the sector has declined from 17.1% of net banking credit in 1998 to 8.1% at the end of March, 2006,” an senior official of the Commission said.
As per the recommendations, a separate sub-sector target of 10% of the adjusted net bank credit (ANBC) should be created and it should apply to all scheduled commercial banks. This could be achieved, the commission has recommended, by increasing the priority sector ceiling to 45% or 50% of the ANBC.
At present there is no sub-sector target for MSE sector within the overall priority sector ceiling. Since sub-targets have already been fixed at 18% for agriculture and at 10% for weaker sectors, the MSE sector has to compete with real estate, housing, education , retail etc. for the remaining 12%.
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| Jindal Cotex plans Rs 138-cr plant in Punjab New Facility To Be In Ludhiana; Will Have 50k Spindles, |
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| JINDAL Cotex Limited is gearing up to inject Rs 138 crore in a new venture in Ludhiana. The new facility, which will be for cotton yarn, dyeing and garments, will have 50,400 spindles with a 6-tonnes-per-day dyeing unit and a 3,000-pieces-per-day garments manufacturing unit, will be developed in phases.
The company has approached the Punjab government concessions for the project, which is to be located in Mandiala Kalan in Khanna in Ludhiana.
According to the company’s MD, Sandeep Jindal, by September 2008, 28,000 spindles will be set up in the facility and 22,400 spindles will be added in the next four months. After this, the dyeing and garments manufacturing unit will come up, involving a total investment of Rs 138 crore which is proposed to be funded through internal accruals, an initial public offer (IPO) and debt. He said the new project was being set up over 20 acres and the entire project was expected to be completed by June 2009.
Mr Jindal said the company was planning an IPO in May 2008 to raise Rs 40-50 crore for new investments. The company is seeking to enlarge its export base with 10-15% production projected to be earmarked for exports during the current fiscal. The company already exports to markets in South Korea, Bangladesh, Spain, Italy, Indonesia and Latin America.
Having already achieved a turnover of Rs 50 crore so far in the current fiscal, Mr Jindal said the company would end 2007-08 with a turnover of nearly Rs 100 crore. “We hope to be a Rs 400 crore group by the end of 2009-10,” he indicated. It had a turnover of Rs 75 crore in 2006-07,
He said the company was also contemplating investing another Rs 150 crore in further expansion of its garmenting unit from 3,000 pieces per day to 30,000 pieces per day in the next phase of expansion, which would also involve setting up a knitting, weaving and a processing facility. However, plans for this are yet to be finalised.
Jindal Cotex manager, finance, Ashish Jain said the company currently had export orders worth $1 million and recently, it had exported a consignment to the European Union. “For us, the peak season is December-February. Hence, major sales will be during this period,” he added
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| Punjab’s per capita income contradicts popular notion Behind Chandigarh, Haryana |
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| THE people of Punjab may be known for their lavish lifestyle and high spending power but the state itself lags behind Haryana and Chandi-garh as far as per capita income is concerned.
The per capita income of Punjab for the year 2005-06 stood at Rs 28,605 against Haryana's per capita income of Rs 29,887 and Chandi-garh's Rs 67,910 for the same year.
According to the Central Statistical Organisation’s data, at constant 1999-2000 prices, the per capita income of Punjab was Rs 26,975 in 2003-04 and Rs 27,873 in 2004-05.
On the other hand, Haryana’s per capita income improved from Rs 26,353 in 2003-04 to Rs 28,119 in 2004-05. Similarly, the per capita income of Chandigarh, which is higher than Punjab and Haryana, grew from Rs 56,197 in 2003-04 to Rs 61,723 in 2004-05.
Experts ascribe the slow growth in per capita in Punjab to sluggishness in the agriculture sector, on which 65 per cent of the state's popula-tion depends for earning their livelihood. The growth rate in primary sector of the state, comprising agriculture and allied sectors, stood at 1.86 per cent in 2005-06 against 2.17 per cent in 2004-05.
“The stagnation in the agriculture sector has been the prime reason behind the slow growth in per capita income,” said economist SS Johal. The low investment by the state government in agriculture is another reason for Punjab's poor show.
The state government's expenditure on agriculture and allied sectors has declined from 4.13 per cent of total plan expenditure in 2003-04 to 2.49 per cent in 2006-07.
According to projections of the Planning Commission, Punjab will be the least growing state in the country during the 11th Five-Year Plan, which had also been pointed out by state finance minister Manpreet Singh Badal during the presentation of the state budget this year.
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| Punjab pushing for potato exports to EU |
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| THE Punjab State Co-Operative Supply and Marketing Federation Ltd (Markfed) is working for the removal of potato from the negative list of EU approved import list. More than 50 progressive farmers from the state were considering exporting 10,000 tonnes of 'yellow flesh' ware potatoes to the EU market this season after getting the Eurep-GAP certification.
The potato has been on the negative list of the EU due to concern of the crop being infected with ring rot and brown rot disease.
“The directorate of plant protection, quarantine and storage, has been sent the sanitary and phytosanitary quarantine report prepared by Punjab Agriculture University on the establishment of pestfree area for brown rot to facilitate potato export to the EU. We expect the Centre to notify the report, which will be sent to Brussels (EU headquarters). We are optimistic about getting the clearance and are following the issue on every day,” said Markfed MD GS Grewal.
Across the districts of Jalandhar, Ludhiana, Amritsar, Hoshiarpur, Bathinda, farmers have sown the new breeder seed of Kufri Surya provided by the Central Potato Research Institute (under the ICAR) and also the existing varieties of Kufri Pushkar to cater to the EU market in the season from January to April. The EU market prefers these “yellow flesh” varieties, according to industry analysts.
“It is a window for progressive farmers in the state, who have invested Rs 12,000 annually to be trained in good agriculture practice and the certification. We still have to work out the cost effectiveness and are going to demand freight subsidy from the government,” said Sardar Raghubir Singh, president, Jalandhar Potato Growers’ Association.
Exporting from the landlocked state will also lead to an increase in transportation cost by Rs 10 per kg. Non –tariff barriers by countries like Holland to protect their interest could also hinder the export according to traders. For now, however, farmers seem unperturbed by these obstacles
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| India Inc second only to China in emerging MNCs Home To 20 Cos In List Of 100 BCG’s Soon-To-Be Globa |
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| INDIA has contributed the second-largest number of companies in a new study of emerging market giants by multinational consultancy firm Boston Consulting Group (BCG). As many as 20 Indian companies, including the likes of M&M, Bajaj Auto, Bharat Forge, Cipla, Ranbaxy, Reliance group, TCS, Tata Motors, Tata Steel, Wipro, Infosys and VSNL are part of BCG’s 2008 top global challengers list. Other Indian companies on the roster include Dr Reddy’s, Crompton Greaves, Hindalco, L&T, Satyam, Tata Tea and Videocon. Wind energy company Suzlon is the new entrant to that
list this year.
Although China, with 41 companies tops the challengers list, it also tops the list of companies that have dropped out this year. Brazil with 13 companies, Mexico with seven and Russia with six are the other big contributors to the roster this year. And, said BCG San Francisco senior partner Jim Hemerling, Chinese companies aren’t the most global either. Their international sales contribution is 17% compared to over 45% for Indian companies.Also, he said, despite India’s IT-focus, only four Indian companies in the challengers list are info-tech majors. The rest are all manufacturing companies and their total shareholder return is over 60%, three times that of the IT companies on the list.
Speaking on the occasion, M&M vice-chairman Anand Mahindra said Indian companies have three competitive advantages vis-a-vis others on the challenger list. “The first is strong managerial talent and strategic competence, the second is the ability to work in the chaotic industrial environment of India and the third is to work out the lowest cost per unit of innovation,” he said.
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| Indian paper industry seeks govt support |
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| • NEW DELHI: Expressing concern over the rising cost borne by the paper industry, Indian Recycled Paper Mills Association on Tuesday sought the government’s help for meeting the production target of 15 million tonnes by 2015. “The current production capacity in India is 8 million tonnes. We urge the government to reduce electricity cost, excise duty and increase the availability of raw material to make the paper industry competitive and achieve its target,” association president RC Rastogi said. |
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| Nath wants more life-saving sops for exporters |
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| THE string of sops provided by the finance ministry for exporters has failed to impress the commerce department which has urged the Prime Minister’s Office (PMO) to ensure that a note on export incentives, pending with the Cabinet Committee on Economic Affairs (CCEA), is taken up as soon as possible. The note emphasises the need to provide relief to exporters in the form of ad-hoc increases in tax reimbursement rates under the duty entitlement pass book (DEPB) and duty drawback scheme, full reimbursement of service tax and reimbursement of state taxes and levies. Further delay in implementation of the proposals could lead to more job losses — expected to be as high as two million this year — the department has warned.
The steps taken by the finance
ministry so far includes enhancement of DEPB rates by 3% for nine sectors and 2% for others, reduction of ECGC premia rates and service tax (refund/exemption) for exports in respect of 11 services. The rate of interest on pre- and post-shipment credit was reduced by 2%.
The commerce department, however, feels the move is just not enough to make a substantial difference to exporters facing a steadily-appreciating rupee. “The finance minister has just met a part of the demands made by us. We’ll go ahead with our CCEA note and ensure it is implemented,” an official said.
Commerce & industry minister Kamal Nath has shot off a letter to the PMO asking for quick action on the note. He also discussed in Lok Sabha on Tuesday the job losses in export units which have ceased to be competitive due to the falling value of the dollar.
The official pointed out that service tax exemption for exporters had been notified for just 11 services against 21 services consumed by exporters. Moreover, the demand for an ad hoc increase in DEPB rates and drawback rates to nullify the effect of the rise in the value of the rupee had also not been met.
The additional 2% interest subsidy — 2% subsidy was given earlier — offered by the finance ministry to exporters of leather, handicraft, marine products and textiles was not enough and more needs to be done, the official added.
The commerce department has also made a case for reimbursement of state taxes to exporters. According to Mr Nath, it is estimated that unless remedial measures are taken, the job losses could be as high as two million.
In the past 15 months, the rupee has appreciated against all the major freely-convertible currencies including the US dollar and the euro. The rupee recorded the highest appreciation during the first six months of the financial year against the dollar. The impact has been felt mostly in sectors where inputs are less import-driven, labour-intensive and with low value-addition like leather, textiles, handicraft and marine
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| Yamaha unveils two sports bikes with Rs 10.5-lakh tag |
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| IN A bid to grab bigger marketshare in India, Japanese bike major Yamaha has deviated from its mass market strategy and will now concentrate on niche motorcycle segments. It is also in the process of getting approvals for investment of Rs 1000 crore in the Indian subsidiary from the parent company. Yamaha, on Tuesday, launched two of its premium bikes— MT01 and YZF R1. Both the bikes have been priced at Rs 10.5 lakh (ex-showroom Delhi).
The Japanese bike maker currently enjoys a dismal marketshare of 3% and is betting on its niche products for a transformation. Yamaha Motor India CEO & MD Tomotaka Ishikawa said, “We are looking at re-establishing the Yamaha brand in the country. We are therefore looking at fresh products targeted at the niche segment with better technology.” He added that the company would not concentrate on the commuter or 100 cc segment anymore. “We would look at niche segments and would be launching some fresh products at the Auto Expo in January 2008,” he said.
Talking about the company’s investment plans, he said, “We are in the process of getting approvals for the Rs 1,000 crore investment earmarked to us.” He reiterated Yamaha’s goal to grab 10% marketshare in the bike market by 2010.
The two super bikes that it has launched will be imported from European markets as fully built units. While MTR01 is strapped with a 1,680 cc engine , YZF R1 has a 998 cc engine. The bike maker will initially sell the bikes from five dealerships and expects to increase it to 50 dealerships by 2010.
“Initially we will sell these sport bikes from Ahmedabad, Chennai, New Delhi and Bangalore as we are looking at setting up an after-sales service infrastructure,” said Yamaha Motor India’s marketing-head, P Sam. He added that since only about 400-500 premium bikes are sold in a year, the company expects to sell only about a dozen units annually.
Yamaha India expects to see a massive dip in its fiscal sales tally. “We sold about 2.35 lakh units last year and we expect it to dip to 1.8 lakh units this year. This is also because of the negative growth the industry is witnessing,” he said
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| Five in race for Punjab Infotech stake Contenders To Partner Fund Include Srei Ventures, Subhkam Ven |
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| FIVE parties have responded to Punjab Infotech Venture Fund’s (PIVF’s) invitation for a suitable strategic partner/investor under the public private partnership initiative to improve its operational efficiency and bridge the gap in the existing fund corpus.
Punjab Venture Capital Limited (PVCL), acting as the investment manager for the venture capital fund, had sought expressions of interest-cum-request for qualification(RQF) for associating with the venture capital fund and its two entities as there no funds are forthcoming from the core contributors.
The five parties that have expressed interest include Srei Ventures, Subhkam Ventures, Dr IT Planets Limited and Rahul Sales. The last date for submission of applications was September 17,2007. Ernst & Young is expected to consider the proposals in detail.
PIVF, with a corpus of Rs 20 crore, was set up by the Punjab government through its corporate bodies like Punjab Information & Communication Technology Corporation Limited (Punjab Infotech), Punjab State Industrial Development Corporation Limited and Punjab Financial Corporation in association with the Small Industries Development Bank of India as a 10-year close ended fund for investing in small and medium enterprises (SMEs) primarily in the information technology and software sectors. However, PIVF is in need of a strategic investor to help it bridge the gap of Rs 15.50 crore in the existing fund corpus. The fund, it is understood, will be open to all kinds of transactions and investments in start-up/seed/R & D ventures, growth capital, turnrounds and buyouts.
With the induction of a strategic partner, PIVF will be in a position to enhance the level of operational efficiency through efficient systems and processes in managing the fund, bridging the gap in the existing fund corpus and assist the fund to increase its corpus to Rs 50 crore and further to Rs 100 crore in the next two years.
PVCL will also look at widening the sectoral coverage from existing IT and software sectors to target SMEs in other knowledge based sectors
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| China’s Rio dig may undermine India 90% Of Indian Iron-Ore Exports Go To China |
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| CHINESE steelmakers, the largest buyers of iron ore, and the government are studying a joint bid for Rio Tinto Group to counter a $134-billion offer from BHP Billiton.
“It’s an issue being discussed by top-level officials,” said Chen Hanyu, a director at the resources office of Beijing-based Shougang Corp, the nation’s ninth-largest steelmaker. Members of the China Iron and Steel Association have held talks, said vicechairman Qi Xiangdong.
If successful, the move may hit India’s already-declining iron ore exports, and bring in some drastic changes in the domestic steel industry. A senior analyst tracking the industry said in the international iron ore trade market, Indian iron ore producers are the only ones that deal in the spot market while the Australian and Brazilian firms are mainly in the contract market. “The proposed bid by the Chinese firms for Rio Tinto will hit Indian ore producers as 90% of iron-ore exports from India is going to China and a successful bid for Rio will enable that country to create a strong ore souring base,” he said. The steel mills want to block BHP’s offer because the deal would give the world’s biggest mining company control of almost half the Asian iron ore market. Rio shares closed lower in Sydney trading, reflecting doubt that China will proceed with an acquisition that would dwarf Cnooc Ltd’s failed $18.5-billion bid for Unocal, rejected by US lawmakers in 2005.
“There are clear strategic reasons why they would consider a bid,” Angus Gluskie, who helps manage the equivalent of $500 million at White Funds Management, including Rio and BHP shares, said in Sydney. Australia’s newly-elected Labor Party government may oppose such a transaction, he said. India, the second-largest supplier of iron ore to China for the last two years, has slipped to the third during the last nine months ended September. Brazil has overtaken India as the secondlargest supplier of iron ore to China while Australia retained its top position. India has exported around 60 million tonne (mt) of iron ore during nine months, accounting for 22% of China’s total imports, says China Metallurgical Enterprises Management Association. Baoshan Iron & Steel, the listed unit of China’s largest steelmaker, rose 77 yuan, or 5.2%, to 15.53 yuan at the 3 pm close in Shanghai. Rio, based in London and the world’s third-largest miner, fell 31 pence, or 0.6%, to 5,412 pence as of 9.16 am in London. Rio’s London shares are trading at an 11% premium to BHP’s proposal, indicating investors expect a higher offer. The premium has narrowed from as wide as 15% on November 12.
China has been scouring the world for resources. Aluminum Corp. of China bought Peru Copper for $860 million in August
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| Exports rise 35%, but may not meet target |
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| New Delhi: India’s exports made a strong comeback, rising over 35% to nearly $10 billion in October, despite complaints of a rising rupee.
But government said the growth was mainly on account of petroleum, where prices are ruling at all-time highs, and engineering goods. The labour-intensive sectors saw a steep drop in shipments making it difficult to achieve the $160 billion target for the current financial year.
Commerce secretary Gopal K Pillai told reporters that in October, textiles exports had dropped 22%, while marine goods exports fell around 20%, handicrafts by 66% and leather goods by 9%. He said the impact of the appreciation of the rupee was being felt in sectors with high domestic content.
Exporters are estimated to have slashed around 1.3 lakh jobs so far as they have lost orders due the appreciation of the Indian currency against the dollar which accounted for nearly 70% of the billing. While 30,000 regular employees are estimated to have been rendered jobless for want of orders, another 1 lakh contract labourers have been sacked.
While the government has already announced three packages to control the damage, which is expected to claim another 70,000 jobs by the end of the fiscal, the commerce ministry is expected to seek more sops from the cabinet which could include measures for sectors like plantations, that are facing significant pressure. Along with exports there was good news on imports too which had slumped last month and this might put an end to the debate on a slowdown of sorts building in the Indian economy.
While oil imports rose 14.6% to $6.1 billion during October 2007, compared to $5.3 billion in the same month last year, non-oil imports were up nearly 29% to $14.6 billion. Non-oil imports are a good barometer of economic activity in the months to come since raw materials and inputs form a significant part of the consignments entering India.
Better export growth would also augur well for the industrial sectors, especially manufacturing, which is witnessing a slowdown due to the rise of the rupee as well as higher interest rates. Economic growth slowed down to 8.6% during the second quarter of the current fiscal as industry reported its lowest growth in seven quarters.
Direct tax collection up 45%
New Delhi: Direct tax collections grew 44.86% during April-November this year to Rs 1,45,053 crore, up from Rs 1,00,135 crore in the year-ago period. “Net direct tax collections have continued to grow at over 40% and government has succeeded in achieving over 54% of budgeted direct tax target of Rs 2,67,490 crore in the first eight months,” a finance ministry statement said.
Corporate tax registered a growth of 46.62% at Rs 86,526 crore during the period under review, up from Rs 59,015 crore, while personal income tax (including FBT, STT and BCTT) grew by 42.48% at Rs 58,303 crore, up from Rs 40,920 crore.
Securities Transaction Tax (STT) was up 78.93% at Rs 4,924 crore during April-November period against Rs 2,752 crore during the corresponding period last fiscal.
Fringe Benefit Tax (FBT) grew by 16.76% at Rs 3,064 crore for the first eight months of the fiscal as against Rs 2,624 crore during the year-ago period. Banking Cash Transaction Tax (BCTT) rose 14.34% to Rs 359 crore against Rs 314 crore in the comparable period last year.
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| Exports shrug off Re jitters, rise 35% to $13.3b in Oct Petroleum, Gems & Jewellery & Engineering Go |
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| THE appreciating rupee notwithstanding, exports grew 35% to $13.30 billion in October, compared to $9.8 billion in October 2006. The increase has been mostly in import-intensive sectors, including petroleum, gems & jewellery and engineering products while labour-intensive sectors such as leather, textile and handicraft are witnessing negative growth, government officials said. Imports increased by 24.27% to $20.79 billion during the month.
According to commerce secretary GK Pillai, if the trend continues, it would be possible to achieve exports worth $145 billion during the fiscal against the target of $160 billion.
The secretary clarified that the impressive export figures did not reflect the hardships faced by labour-intensive export sectors that have experienced a sharp drop in shipments due to the appreciating rupee. “It is sectors such as petroleum, gems & jewellery and engineering goods that account for about 42% of exports, which are experiencing an increase,” he said.
Exports during April-October rose 20.89% to $85.58 billion, while imports were up 25.31% at $129.99 billion.
Textile exports fell by 22%, handicraft by 66%, leather by 9% and marine products by almost 20%.
Oil imports during October were valued at $6.26 billion, which was 14.59% higher than oil imports valued at $5.34 billion in the corresponding period last year. Oil imports during April-October were valued at $37.52 billion — 9.25% higher than oil imports of $34.34 billion in the corresponding period last year.
Non-oil imports during October were estimated at $14.65 billion, which was 28.82% higher than nonoil imports worth $11.37 billion in October 2006. Non-oil imports during April-October were valued at $92.46 billion, 33.26% higher than $69.38 billion in April-October 2006.
Trade deficit for April-October was estimated at $44.40 billion.
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| Indo-Pak trade should increase: Lahore business chamber head |
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| THE movement of goods by trucks at the Wagah border has opened the floodgates for increasing trade between India and Pakistan and this should pave the way for moving forward, said Lahore Chamber of Commerce and Industry president Shahid Hassan Sheikh.
Speaking on the sidelines of the ongoing PHD Chamber of Commerce and Industry’s ITEX 2007 international trade expo, Mr Sheikh said there was need to sit together and try to take up the unresolved issues as well. Over three dozen Pakistani companies were exhibiting their wares in the exposition.The first such expo by the chamber was held in Amritsar in 2005 a large number of Pakistani companies had par-ticipated.
He said there was demand of trade and industry on both sides for smoother movement of goods via trucks and this should facilitate increasing the two-way trade.
He said the confidence building measures(CBM) being undertaken had led to better relations between the two countries and such a drive should continue to create the mutual trust.
Pointing out that exports from Pakistan to India were worth $290 mil-lion and India's exports to Pakistan $800 million, he said there was a need to balance the trade.However, the indirect trade was considerably much higher.
The PHD Chamber has been urging Pakistan to have a similar exposition in Pakistan and Mr Sheikh said efforts would be made to work out the details in consultation with the chamber members.However, he did not specify when such an expotition would be held in Pakistan.
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| PSU bank stake won’t be counted as indirect foreign holding |
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| IN A move that comes as a relief for companies in which public sector banks or financial institutions hold stake, the government is planning to exempt investment by PSU banks and FIs with foreign equity holding from calculation of indirect foreign equity holding in an Indian company. State Bank of India, Punjab National Bank, Bank of Baroda, Andhra Bank, IDBI Bank and IFCI are among banks and institutions with FII holding.
The move would keep the route clear for foreign investment in public sector banks and financial institutions. Moreover, Indian companies in which these entities hold stake would have leeway to sell more stake to overseas entities or attract more foreign investment in joint ventures formed by them. Considering that public sector banks and FIs hold significant stake in hundreds of listed companies, officials feel the move would have significant implications for overall foreign investment flow.
Details of the methodology for calculation of indirect foreign holding in Indian companies has been finalised by the commerce department and a policy on this issue is being referred to the Cabinet Committee on Economic Affairs (CCEA). Commerce & industry minister Kamal Nath has proposed that indirect foreign equity holding would be considered beyond the first level of ownership if the stakeholders in subsequent layers are subsidiary companies. If foreign equity is more than 50% or if the subsidiary qualifies to be a subsidiary under the Companies Act, this rule will apply.
The commerce department has proposed that the policy should be finalised after inter-ministerial consultations. “Investment by public sector banks and FIs in the subject company wouldn’t be considered for calculation of indirect foreign equity,” officials said.
Indian companies with less than 10% equity in the Indian company (whose foreign holding is under calculation) would not be taken up for indirect foreign equity consideration. The department of industrial policy and promotion (DIPP) has fixed 10% as the cut-off limit since Companies Act does not confer ownership rights if the holding is less than 10%.
After the debate over indirect foreign equity holding and beneficial ownership in Hutch-Essar, the government has been working on ways to fix indirect equity holding. The DIPP’s proposals would have significant ramifications since the government plans to track indirect equity holding for all sectors, rather than just sensitive areas as was the case in the past.
If there are Indian companies who individually have less than 10%, but have declared that they are acting in concert and together hold more than 10% in the subject company (whose foreign holding is under calculation), the indirect foreign investment would be considered for each of these companies
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| ‘Govt should extend tax sops to SMEs, BPOs’ |
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| New Delhi: Since the dollar meltdown has affected SMEs and BPOs in the IT space, the government should extend tax benefits at par with SEZs to units registered under Software Technology Parks of India (STPI) beyond the stipulated sunset clause of 2009, says Som Mittal, the new president of Nasscom.
‘‘Big IT companies can afford to set up in SEZs, it’s the smaller companies who benefit from STPIs. So the government should extend the STPI scheme and not kill a nascent industry,’’ Mittal says. He takes over from current president, Kiran Karnik this December. ‘‘Extending STPIs beyond the sunset clause will not lead to revenue losses for the government,’’ Mittal assures. Also, to cope with the dollar meltdown and escalating rupee, the Indian IT sector should be better prepared to retain its competitiveness by improving productivity and wage moderation, he says. In fact, after the Nasscom executive council meeting in December, the body is expected to draw up some guidelines for the IT industry to help them cope with the dollar meltdown.
At the helm of Nasscom, Mittal’s main focus will be to build talent and ensure availability of skills for the IT industry. ‘‘The Indian IT sector is projected to become worth $60 billion by 2010. Given our demographics, I feel it’s a conservative estimate,’’ Mittal explains. “But to achieve that, we need to first focus on bridging the talent gap. India needs to move from trainable talent to directly employable, industry-ready talent. University curriculum needs to be changed and people need to be trained through finishing school. Also, there is a need for capacity creation in educational institutes. We will focus on Tier III and Tier IV cities so that the huge output of students from there is industry ready.”
Moreover, the national assessment and certification programme or Nasscom Assessment of Competence (NAC) will be made pan-India soon. As of now, the pilot project has already been tested in a few states like Rajasthan, Gujarat, Kerala and the northeast. ‘‘The NAC will help the BPO industry create an ‘assessed and certified’ talent workforce to cater to their skilled manpower requirements,’’ Mittal says.
Nasscom will also continue its focus on the domestic IT industry. The aim is to create a common framework across the country from citizens to business to government and get it all linked up.
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| Bajaj Auto ups stake in KTM |
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| BAJAJ Auto has increased its stake in KTM Power Sports AG from 14.5% to 18.8%. The company plans to finally hold 25% in KTM, which is Europe’s second largest sport motorcycle maker. Bajaj Auto MD Rajiv Bajaj has been inducted to KTM board.
ET had reported that Bajaj Auto would up its stake to 25% in KTM when the deal was announced earlier this month. Bajaj picked up the 14.5% stake in the euro 566 million (Rs 3,200 crore) KTM from the open market for around Rs 300-350 crore as part of a ‘wide-ranging co-operation’ arrangement. The Pune-based two-wheeler major picked up the stake through its 100% Dutch subsidiary.
The alliance with KTM covers joint development of street bikes for both Indian and overseas markets. It will jointly develop a high-performance, water-cooled engine platform for 125 and 250 cc bikes. The engine platform will spawn several models—KTM will do KTM models and Bajaj will make Bajaj motorcycles.
The two companies will focus on their core markets for this new range of street bikes—Bajaj on India and the South Asian and South East Asian markets and KTM on Europe. But in the second phase, that spread will increase. That’s when the alliance will look at South East Asian markets like Indonesia, Philippines, China, Vietnam etc. The partnership will not only enable Bajaj to take over the distribution of KTM products in India and South East Asia, it will also enable the Indian two wheeler major to access the European market through KTM.
The cooperation will also cover product development, technology, vendor sourcing and distribution.
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| Intelenet buys two firms for $75 m |
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| BARELY a few months after the completion of the management-led buy-out (MBO) of Intelenet Global Services by Blackstone, the BPO firm has finalised two acquisitions, one in the travel domain and the other of a shared-services BPO. Both are global firms with a footprint across continents, sources told ET. The acquisitions, to the tune of $ 75 million, are likely to be financed through a mix of debt of equity. The management could not be contacted for comment.
The acquisitions are in line with the strategy Intelenet had outlined at the time of the Blackstone transaction. The management had said the BPO would pursue inorganic growth opportunities, while growing its existing business lines organically. The names and other details of the target companies could not be ascertained.
Investment banking sources said one of the acquisitions could also be a Blackstone group company. The two buys are learnt to be in transaction-processing as opposed to voicebased processes, which Intelenet is better known for.
“Blackstone is very aggressive, so I won’t be surprised,” said a merchant banker with a firm which advises on such deals. Most BPO firms are trying to move a greater share of their revenues from voice to transaction-based processes. Voice-based work is more capital-intensive and also has a higher attrition compared to non-voice work.
Intelenet has been looking for suitable buys in the US even prior to the Blackstone buyout. The backing of Blackstone has now given it the currency to make big ticket acquisitions. The US is the largest market for the BPO industry and cost cuts, as a result of the sub-prime crisis, and US slowdown are expected to incentivise more American firms to outsource.
In the past, having Barclays as a parent had reportedly made it harder for Intelenet to have a nearshore presence in the US, and the company was working through partners in the US.
The two buys will now give it a direct presence in the US, a key geography. They will also reduce its dependence on Barclays, which is setting up its own captive in India, but continues to be Intelenet’s largest customer.
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| Peugeot gears up for second innings in India |
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| MORE than a decade since its last beleaguered outing in India, the € 56-billion PSA Peugeot Citroen, Europe's second largest car maker, is looking at a possible re-entry into the Indian market with its range of small cars and mid-segment sedans.
According to automobile industry sources, the company is conducting a feasibility study for various products in the 1.4-million Indian passenger vehicle market. A four-member team from PSA Peugeot Citroen is scouting for various options in India and has held negotiations with various automobile bodies like the Society of Indian Automobile Manufactures (SIAM), Automotive Component Manufacturers Association of India (ACMA) and various component makers from southern India.
The team is expected to submit a report to the company board in Paris on its India plans. The group, which has a 5.2% share of the global automobile market and controls 14% marketshare in Europe, has been looking at workable options in India.
Speaking to ET, PSA Peugeot Citroen strategy and innovation head Dominique Rampazzo, who was in India recently, said: ”We have not decided on a formal entry into India. We have not firmed up any plans yet. India is a great market and very vibrant but we cannot commit anything now.”
The company sources components from India in small quantities. It has a small sourcing agreement for automotive components with the Amalgamation group. The company is also planning to participate in the Auto Expo in January 2008, though in a small way. “We will be there and will take a close look at the vibrant Indian automobile industry, though we may not showcase any of our vehicles or products,” Mr Rampazzo added.
PSA Peugoet Citroen is active in various emerging markets. It has committed huge investments to develop its market presence and sales in South Africa, Iran, (through Iran Khodro) and China (Dongfeng Peugeot Citroen Automobile) in recent years.
This isn’t the first time the French major is contemplating a re-entry into India. Around four years ago, group company Citroen had initiated studies for a CBU operation in India but the plans fizzled out.
Peugeot had set up a joint venture with the Doshi family, the makers of Premier Padmini, in 1995 to make the Peugeot 309 range of vehicles in India. However, it exited the market because of differences with the Doshis. Its three-year stint in India was marked by labour trouble, leading to a plant lockout, shortage of completely-knocked down kits (CKD) of its midsegment sedan Peugeot 309 and finally a showdown of the plant after a legal battle with the Indian partner
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| Exporters to go to DGFT |
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| Rajesh Exports chairman Rajesh Mehta says his firm is also facing a problem with regard to dollar loans. Banks don’t have dollars and are increasingly asking borrowers to take rupee loans. “We deal with eight to nine banks. The problem is more acute in smaller banks,” says Mr Mehta.
If at all banks give dollar loans they are demanding a kind of service charge which is over and above the interest ceiling. This is against RBI norms.
Mr Vohra says exporters plan to raise the issue with the Directorate General of Foreign Trade (DGFT). If an exporter is bringing the proceeds in dollar, then credit should be made available in dollars. He feels that nationalised banks should find a way to give foreign currency loans to exporters, who have already taken a huge blow on their margins because of the appreciating rupee. Nonavailability of cheap dollar loans will only add to the exporters’ blues
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| Playwin puts its money on Goa casino Venetian Macau Keen To Enter Indian Gambling Market Punjab alr |
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| GOA will soon have a new addition to its list of attractions. And it could be no bigger than a casino spread over 20,000 sq ft, thanks to the Rs 3,400-crore Playwin, the country’s largest online lottery company and gaming brand of Pan India Infravest. The company believes that this offshore casino will be by far the biggest casino operation in the state.
The venture will not only target Indian consumers who go to casinos in Nepal, Macau and Thailand, but will also attract tourists who come to India. At the same time, the biggest casino player of Macau, Venetian Macau, plans to foray into India. According to sources, by 2009, international casino operators will make their presence felt in India through joint ventures or the franchisee route, regulation notwithstanding.
According to industry estimates, the organised gambling industry in India is worth Rs 25,000 crore. At the same time, there is an equally big illegal gambling industry. Lotteries contribute immensely to the state exchequer in India. But it does tend to get a bit tricky when high betting taxes result in people resorting to illegal betting. “The other deterrent is the state discretion to ban lotteries depending on which political party is in power,” remarks Playwin director & CEO Amar Sinha of.
That, perhaps, explains why Mr Sinha is so keen on the high seas for the roll of the dice — no taxes, no governments, no hassles. And those Macau-bound high net worth Indians, too, can be pouched much closer homes with all the pizzazz thrown in.
Globally, casinos have added value to the overall entertainment experience provided by hotels and resorts. In fact, ET learns that Punjab, Sikkim and Puducherry are already in talks for allowing casinos in collaboration with the hospitality sector. Goa, too, has issued a few licences to promote offshore casinos. “Every state government should understand the fact that casinos will immensely contribute to the exchequer and the funds can be utilised for social as well as infrastructure projects,” opines Mr Sinha.
As for Venetian Macau, the hotel-cum-resort casino chain, is already planning a strategy to enter the India market. The Venetian is well established in Macau with 3,000 suites, 850 gambling tables and 4,100 slot machines. For the record, Macau is the gambling den of the world, having overtaken Las Vegas last year in terms of casino revenue generation. The city has around 11,510 slot machines and 3,992 gaming tables.
dheeraj.tiwari@timesgroup.com
BET ON!
The Playwin offshore casino will be the biggest casino operation in the state
The venture will not only target Indian consumers who go to casinos in Nepal, Macau and Thailand, but will also attract tourists who come to India
The organised gambling industry in India is worth Rs 25,000 crore Macau is the gambling den of the world, having overtaken Las Vegas last year in terms of casino revenue generation
By 2009 , international casino operators will make their presence felt in India through joint ventures or the franchisee route, regulation notwithstanding
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| Global luxury brands grab a slice of Indian wedding mart Chanel, Fendi, Christian Dior, Gucci Promin |
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| CHRISTIAN Dior make-up, Gucci apparel, Jimmy Choo shoes for the bride for the special day, a 50-inch TV screen from Bang and Olufsen part of the trousseau, fresh fruits from Unifrutti imported from Turkey for the guests and a Canadian wedding planner to take care of it all.
The Indian wedding scene is only growing larger. “Its no surprise that so many international brands want to get associated with India, especially, during the wedding season. The market has only grown since there are many more millionaires in India today. So all that new money goes on to include the finer aspects like dicor and entertainment. Weddings, especially, in the north are now flying down entertainment stars from Mumbai and overseas,” says chief executive officer Celebrating Vivaha Tarun Sarda indicating Christian Dior’s first association with any Indian wedding exhibition. The luxury brand it seems has followed the footsteps of Gucci and La Perla to take a slice of the burgeoning Indian wedding mart-pie.
Says chief executive officer Bridal Asia Divya Guraya: “Brands like Chanel and Fendi have got a sudden recognition at wedding marts. Such brands have become prominent ingredients in the trousseau and it works well for the brands as well. Since consumption level during pre-wedding shopping seasons has risen drastically it translates into immense turnovers for brands.
Next year you can see more international brands making way to India,” indicating that brands may follow the Murjani Group model that promoted Gucci, La Perla and Jimmy Choo under its wedding division wing only taking the wedding mart at higher levels.
With the top-segment of the wedding industry growing at a staggering 25%, analysts opine that even the mid-segments are moving up at about 15-20%. Associate director at retail consultants KSA Technopak Pavas Bhatia says: “The Indian wedding mart could be anywhere between Rs 50-60,000 odd crore but it isn’t just the trousseau that is getting all embellishments. Premium gifting market has also gone up. A few years back the choice was limited to gold or jewellery, now one can think of gifting a Bang and Olufsen and it’s a boon for the brands that are in India at this time making the industry boom.”
The embellishments include an elaborate dicor, real estate cost for the venue, an ensemble of cuisines adding to the catering bill, pole dancers from South Africa, belly dancers from Dubai and the likes of SRK making appearances at weddings adding the spice to the grandiose.
While Delhi and Punjab continue to be most lavish spenders at Indian weddings there seems to be no looking back for over the top extravagant gala weddings Bollywood style.
“Perhaps its is the Bollywood effect that even for a decent wedding that spans 4-5 days Rs 1 crore is the new benchmark. Places like Delhi and Punjab, where weddings are more lavish, costs shoot up,” says a market analyst.
Interestingly, for Rs 1.5 crore a wedding party of 100 people has flown to Malaysia for three days and back with all ceremonies and air fare taken car off.
There have been four weddings that have taken place till now this year only taking the benchmark higher
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| SEL becomes partner in Kudu Industries |
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| LUDHIANA-BASED SEL Manufacturing Company Limited has increased its stake to 99% in Kudu Industries to become a partner in the latter.
The firm has a dyeing capacity of 4,500 tonnes/pa in fabric and 3,000 tonnes/pa in yarn. The firm also has flat bed printing, rotary printing and mercerising capacities of 2,400 tonnes/pa. The acquisition of the stake will help the com-pany in value addition through manufacturing of dyed yarn and printing of fabric and ready-made garments.
In August 2007, SEL Manufacturing had floated an initial public offering for Rs 50 crore. The company had floated 54 lakh shares in the market with a price band of Rs 90 per share. Exim Bank has taken a 5 % stake in SEL. This translates to Rs 5 crore (approximately).
“Kudu Industries is one of the largest process house of Lud-hiana. The deal is for Rs 20 crore. Being mainly into exports, our association with Exim Bank had given us an international credibility to our businesses. This has opened new avenues for the company and this is the second such development in the Indian textile industry,” said SEL Manufacturing Co MD Neeraj Saluja.
The company proposes to expand its manufacturing capaci-ties in garmenting, knitting and spinning at a cost of Rs 184.57 crore.
After the expansion, the company will have consolidated garmenting capacities of 6 million pieces per annum, fully backed by facilities for spinning, fabric knitting and process-ing. The financial appraisal of the expansion project has been done by SBI Project Uptech and the debt component of the project cost of Rs 103.79 crore is tied up under TUFS
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| UNIDO consultants meet Punjab industrialists for new policy |
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| PUNJAB is in the process of shaping a new, investor-friendly industrial policy. Consultants appointed by the United Nations Industrial Development Organisation (UNIDO) have been doing the rounds meeting industrialists and representatives of various chambers of commerce and industry in the state.
The industry and commerce department had taken UNIDO’s help to prepare the draft for the new industrial policy. Likewise, national consultants for UNIDO have been meeting industry representatives to take stock of the situation as well as ascertain their views. Dr Isher Judge Ahluwalia, the national consultant for the UNIDO report on Punjab’s industrial sector has, along with two other experts, held a series of meetings with industry representatives in Bathinda, Mansa and Ferozepur districts.
According to Punjab industry and commerce secretary AR Talwar, national consultants have visited Ludhiana, Mohali Chandigarh and Bathinda. Leading industrialists held parleys with the consultants with a view to review the industrial sector, look at ways to promote industry in Punjab and overcome the major bottlenecks. Industry had been demanding that Punjab be accorded special incentives like in neighbouring Himachal Pradesh and Jammu & Kashmir, uninterrupted power supply and hassle-free procedures to increase the production capacities. Industry has also been demanding implementation of the loans promised by the Union government for the small scale industry without any collateral security.
The consultants will soon visit Amritsar and Jalandhar districts to meet industrialists and discuss what needs to be done to promote industry and attract investments to the state. The report by the consultants will form the basis of the proposed new industrial policy to be announced by the Punjab government sometime in the beginning of 2008.
Initially, an interim report will prepared. This is proposed to be discussed at a seminar where all stakeholders, politicians and representatives from industry and banks will air their views. After a comprehensive study, the final report will be prepared and submitted to the Punjab Cabinet. This exercise is expected to be completed by the end of December 2007. The Cabinet will then incorporate its suggestions and approve the new policy.
Punjab has also urged UNIDO to conduct a study of the economy of the state, focus on schemes for Punjab for central funding and then suggest a framework for improving the rate of industrial growth. The state’s manufacturing sectors’ growth has been tardy and is much below the national average. This way, said Mr Talwar, “we will have a strong case to demand for concessions and higher allocations for projects from the government of India”.
The concessions and tax holiday available to the neighbouring hill states till March 31, 2,010 has been bothering Punjab and already there are indications of flight of industry to these states. Punjab’s industrialists have also been looking at setting up their new ventures in central India.
Punjab is also expected to come out with its new agro industrial policy. This policy will give the impetus to marketing channels and value-added agro produce from the state will then get a higher berth on retail shelves.
The proposed new agro industrial policy will be a separate document but may form part of the new industrial policy being prepared with the assistance of UNIDO. Punjab has till now been focusing on marketing basic agricultural commodities. There has been little or no attention on marketing of value-added agro produce. Now, with major players dabbling in the “farm-to-fork” initiative with the aim of marketing value-added farm produce at retail stores, the Badal government is considering a separate agro policy
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| Farmers now ride tailor-made tractors |
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| LARGE land holdings and a relatively irregular labour force has made the country’s farmers look out for tractors tailor-made for their needs. This has prompted players like Mahindra and Mahindra (M&M), Pun-jab Tractors Limited (PTL), Eicher Motors and HMT Limited to roll out tractors looking at the specific needs of the sector.
The tractor business group of HMT Limited has two crop-specific trac-tors currently in the market for orchards and paddy fields.
“Wine consumption is increasing every year and there are more com-panies in Pune now. Bangalore and Punjab are also becoming hot beds for wines. We have introduced a model ‘2522 Orchard Special’ target-ing orchards and vineyards that need tractors that are shorter and can go through the orchards. We had been selling a small number of this 25 HP tractor till now but from January, we will be selling this aggressively. Kinnow farmers from Punjab are also interested in this tractor, which is priced at Rs 2.5 lakh, and we are supplying it to them,” HMT (tractor business group) executive director Prakash Sharan told ET.
The company has also come up with a 35 HP coastal special tractor called 3522CS for rice and paddy cultivation. This model has become very popular in Andhra Pradesh and other southern states like Tamil Nadu and Karnataka and the company sells about 750 units in a year. HMT is also bringing out a new 25 HP tractor targeting cotton farmers soon.
“Very soon, we will be launching a tractor for cotton farmers. Cotton has hard soil and this tractor will cater to that. We had a trail launch in Andhra Pradesh and will be going for an all India-launch in Febru-ary,” Mr Sharan added.
Apart from addressing the needs of farmers for specialised equipment starting from ploughs, harrows, diggers and handling equipment M&M will launch a tractor of 30-35-horse power with a strong hydraulic, specific wheelbase. “The trial launch for this tractor is currently going on in Agra,” sources in the company said.
“A 35 horsepower and 45 horsepower tractor, especially for potato cultivation, is what PTL plans to roll early next year. Better hydraulic speed controls of the various components of harvesting like digging (depth control), adjustable front axle and clear visibility path are the key requirements of the farmers, which will be met,” said PTL MD & CEO Bishwambhar Mishra.
“We have already made tractors with specific requirement for grape farmers and we will now be catering to potato growers,” he said. The cost of the tractor will vary from Rs 3.5 lakh to Rs 5 lakh.
The research and development team of Eicher Motors in Mandideep near Bhopal is working on a tractor primarily for apple and orange growers.
“Farmers and corporates from Nagpur, Jammu and Kashmir and even Punjab were asking us to make compact tractors with 15-25 Hp. Another requirement of the farmers was to have a compressor fitted to the tractor to run a spray machine. We plan to bring out a tractor with small dimensions, small turning radius and low weight for productive normal operations in the year ahead,” said a company source.
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| NTC,Biyani may forge retail JV Cashing In On The Great India Retail Story,The Textile PSU Is Plannin |
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| LOOKING to capitalise on the retail boom in the country, National Textile Corporation (NTC) is planning to float a joint venture with the Kishore Biyani-owned Pantaloon Retail (Future Group). The public sector company, which has been unlocking value by selling surplus land across states, is now planning to hive off its retail business into a separate company.
The proposed JV, which would take over the retail business, would be a standalone venture. Although NTC may have a majority stake in the company with 51% holding, the management control of the JV would be vested with the private sector partner, sources in the know said. NTC has recently joined hands with several private sector players, including Alok Industries, Bhaskar Industries and Pantaloon to leverage its mill land assets.
When contacted about the possibilities of such a tie-up, Pantaloon Retail managing director Kishore Biyani said, “As we are partners now, we are talking about every possibility”.
NTC has 113 retail outlets across the country, including those in the prime locations of Delhi, Mumbai, Kolkata and Chennai. Most of these have been developed on self-owned land. This would work as an added advantage to the JV partner, who would otherwise have to fork out huge sums on rentals alone. Retail space in prime locations have come to cost a significant amount for retail companies hoping to cash in on the boom.
“We have some plans for our retail business also,” NTC chairman K Ramachandran Pillai said. He, however, added that it would be too premature to say anything at this moment as the company is pre-occupied with the five JVs it has formed with the private players for the revival of its Mumbai and Aurangabad mills. “We would start the initiative towards revamping our retail business once all the formalities of the existing JVs are over,” Mr Pillai said.
NTC is presently in the process of formulating a different corporate strategy to position itself strategically in the Indian textile space. The JV initiatives are part of the company’s new gameplans. The Board for Industrial and Financial Reconstruction (BIFR) has already approved the company’s reconstruction plans which includes possible mergers and demergers and joint ventures.
A group of ministers (GoM), constituted to look into the matter, has allowed JV partnership for the mills. It is expected that the JV partnership for the company’s retail plans would be on the lines of the existing one where the private partner would have the management control but NTC would have majority in the board of directors.
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| Sports goods makers on bad wicket The once thriving export-dependent textile and sports goods cluste |
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| INDIA’S recent T20 World Cup win sparked wild celebrations. Yuvraj Singh drove back a Porsche while RP Singh was gifted a Merc by a sports channel eager to cement its connection with the game. Why, even Piyush Chawla, who didn’t throw a ball in South Africa, saw his bank swell by Rs 20 lakh. But some of the workers who made the sweet spot on the triumphant cricketers’ willows sweeter find themselves without a job. “When the country is rejoicing Team India becoming Twenty 20 champions, the sports goods industry has no reason to celebrate. There are no exports to speak of and we have retrenched a fifth of our workforce. And more worryingly, this only seems to be the beginning,” laments RC Kohli, director of the Jallandhar-based Beat All Sports, makers of the famous BAS brand of cricket gear.
The rapid appreciation of the Rupee against the dollar has resulted in the thriving export-dependent textile and sports goods clusters in Ludhiana, Panipat and Jallandhar on the verge of grinding to a halt.
Ram Niwas Gupta, president, Panipat Handloom Exporters Association, says that due to the huge losses, all companies are now cutting down shifts and some of them are even closing down. He estimates that a quarter of the more than 5 lakh people the Punjab and Haryana textile belt employs, have been rendered jobless.
Rajesh Kumar, a 23-year-old migrant labourer from Bihar, is in despair. He had come to Panipat three years ago and was earning just enough to support his family back home. This time around Diwali he planned to get married and bring his wife along. But one fine morning when he turned up for work at a readymade garments unit in Panipat, he was told by his employer to look for another job. Thousands of workers in Panipat like Rajesh have been asked to go back home.
The dollar was Rs 46 against the rupee not too long back, and in the last three to four months it has come down to Rs 39. This is the worst scenario we have ever faced. All the companies are making a 15% loss on every transaction. Companies in Panipat are losing almost Rs 200 crore every month,” adds Mr Gupta.
“Due to the appreciation of rupee we cannot compete with international prices and we have no other option other than cutting shifts and jobs. We were aware of hedging but have never done it,” says Avinash Chander, MD, Paliwal Overseas, a Panipat-based supplier to retail giants such as Wal-Mart.
“Hedging is usually done to protect ourselves and not to make profits. It’s more of a conservative strategy than a profit making one. Usually when hedge, we look at the options available and take advice from the bankers. But none of us expected this kind of an appreciation,” says Vardhaman Group director Sachit Jain.
According to Rakesh Rati, president, Northern India Cotton Association, farmers are not getting a good deal, forcing them to go for alternate crops. “Cotton is exported in two ways, either directly or through the principle buyers like spinning mills and garment exporters. So when these principle buyers cannot assure the farmers of a good price the farmers will produce less,” says Mr Rati.
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| Govt announces more benefits for exporters |
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| New Delhi: The goverment on Thursday announced a fresh set of measures to help exporters beat the currency blues. The package includes additional 2% interest subsidy, tax refunds and reduction in import duty on inputs used by the textiles sector, which has been hit the most due to a 15% appreciation of the rupee agaisnt the dollar between October 2006 and 2007.
Finance minister P Chidambaram told the Lok Sabha that customs duty on polyester staple fibre (PSF) and polyester filament yarn (PFY) was being cut from current from 7.5% to 5%, and on other man-made fibres from 10% to 5%. Besides, intermediaries for PSF and PFY like polyester chips would require a payment of 5% import duty instead of 7.5% at present. Paraxylene, a raw material, can be imported duty free now.
The sops come less than a week after junior finance minister SS Palanimanickam had ruled out further incentives to help ailing exporters. Between Palanimanickam’s statement in Parliament last Friday and Chidambaram’s announcement on Thursday, textiles exporters had petitioned Prime Minister Manmohan Singh. Following the industry delegation’s meeting with Singh on Monday, the finance ministry sprung into action and worked out a package over the next three days.
The rupee appreciation appeared a happy dilemma for thefinance minister as he said that he would bear the criticism “stoically” as he had when the Indian currency depreciated. He said it had “up and down sides” to it while it being a sign of the strength of the economy.
Accepting that exporters faced problems owing to the rupee appreciation, Chidambaram announced fresh concessions to help them cut “job loss” and “adjust to the new situation”. “Leather, handicrafts, marine products and textile sectors are particularly hard hit by the appreciation of the rupee in view of its low import intensity and large value-added features,” Chidambaram said.
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| S Kumars spins global yarn, to acquire UK fashion outfit |
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| TEXTILE firm S Kumars is learnt to be in advanced stage of negotiations to acquire a UKbased fashion outfit. The company, said a source, is controlled by NRIs.
The company supplies a range of clothing and accessories for men, women and kids to high street retailers. It also offers a range of services from design to manufacturing and distribution. S Kumars managing director Nitin Kasliwal told ET that his company is interested in having a presence abroad in the textile distribution and retailing segment, but declined to give out details.
People close to the development, however, said S Kumars planned to acquire the UK company in order to strengthen its back-end operation that would enable it to increase its share in the domestic as well as export market. The UK-headquarted over 26-yearold fashion firm has sourcing offices in China, Hong Kong and Bangladesh.
The UK company’s competency lies in sourcing, designing and warehousing fabrics and ready to made clothes. This, sources say, would fit into the Indian textile company’s plan to enhance focus on the domestic luxury segment.
S Kumars has had long negotiations with the US-based sourcing company American Pacific for a year now but the deal is yet to be concluded, said a source. Meanwhile, S Kumars has decided to de-merge Reid & Taylor division of the company, comprising luxury textiles and ready-to-wear garment. “The aim is to have increased focus on high margin luxury business,” said Mr Kasliwal. The company recorded a margin of 38-40% on Reid & Taylor last year.
S Kumars plans to sell 10-20% of its stake in the subsidiary to raise Rs 600-700 crore, Mr Kasliwal said. The subsidiary may subsequently go for an IPO. The Reid & Taylor division is likely to clock a revenue of Rs 410 crore this year.
The contribution of exports to S Kumars’s revenue was hardly 3% last fiscal, but the company would like to scale this up. An acquisition of a foreign sourcing chain can give S Kumars enough marketing muscle and a foothold in the high-end UK market.
Indian textile makers have, of late, been quite aggressive at acquiring brands, retail, wholesale or manufacturing facilities abroad. Leading terry towel maker Welspun acquired UK premium towel brand Christy for Rs 132.6 crore last year. Another firm, Himatsingka Seide, acquired three companies abroad this year—US-based DWI Holdings, Giuseppe Bellora and Divatex Home Fashions. The acquisition brought Himatsingka large distribution networks in the home textile space. DWI has the licences for the sourcing, marketing and distribution of luxury home textile brands — Calvin Klein, Barbara Barry and Royal Sateen. Similarly, House of Pearl Fashions, which already has warehousing and sourcing facilities in the overseas markets, is looking to acquire a frontend retail chain in the US. Spentex Industries has also acquired yarn making facilities in Czech Republic and Uzbekistan
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| Govt wakes up to Re ruckus,offers Customs & tax sops to exporters MOVE TO BENEFIT LEATHER, HANDICRAF |
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| THE government on Thursday reduced Customs duty on polyester staple fibre and polyester filament yarn from 7.5% to 5% and on other manmade fibres from 10% to 5%. It also gave tax exemption on three more services besides enhancing interest subsidy to give relief to exporters in identified sectors hit by the rupee’s appreciation. Sectors benefitting from the package include leather, handicrafts, marine products and textiles.
“Leather, handicrafts, marine products and textile sectors are particularly hard hit by the appreciation of the rupee in view of its low import intensity and large value added features. Exporters and industry associations met the Prime Minister (on the issue). I also had extensive meetings with them together with banks. Based on these meetings, we are now offering further support to exporters,” finance minister P Chidambaram said.
The rupee has appreciated 15.1% against the dollar since October 2006 ––spelling doom for exporters, especially those in the labour intensive sectors.
The minister asserted that the government was sensitive to the pressures on these sectors and was conscious of the need to offer support to prevent job losses and to give time to these sectors to make a smooth adjustment to the changing economic scenario.
Customs duty on intermediates for PSF and PFY –– polyester chips, DMT, PTA(purified terepthalic acid) & MEG (mono ethylene glycol) would also be reduced from 7.5% to 5% and on paraxylene (a raw material for PTA) from 2% to nil, he said adding that there would be no change in customs duty for nylon chips, nylon yarn, caprolactum, rayon grade wood pulp and acrylonitrile. The government has exempted storage and warehousing services, specialised cleaning services (fumigation and disinfection) and business exhibition from service tax, the minister said.
The government will provide an additional interest subsidy of 2% (2% was already being offered earlier) to exporters of leather, handicrafts, marine products and all categories of textiles excluding manmade fibre for pre-shipment and post-shipment credit. For the carpet sector the term would be 270 days for preshipment instead of 180 days for other sectors and 90 days (like other sectors) for post-shipment
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| Intel India spawns inhouse entrepreneurial ventures |
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| BRINGING a successful global practise to its Indian operations, chip major Intel is planning to spawn entrepreneurial ventures within its India technology centre. The core idea is to create an environment of innovation and business-building apart from pure technology. The added upside is that such an initiative has the power to retain some of its top performers from logging out of the company to jump-start ventures. Intel’s internal business incubator, New Business Initiative (NBI), is currently executing comprehensive pilots in low-cost technology platforms and commercial launches are expected in the middle of 2008 in India. For time, NBI has been extended out of US in 2006 to India.
NBI is conceptualised around building new businesses surrounding new technologies, markets and models. Globally, the group has been incubating new businesses for 10 years with achievements such as WiMax.
Intel Capital, part of the Intel group, invests and supports several startups and ideas outside of the company. So, the internal business incubator backs those ideas that are not in the same space as those supported by the VC arm of the chip maker.
Talking to ET, Intel India President Praveen Vishakantaiah said, “We have got very good responses to the initiative internally.” Successful businesses either stay internal and complement Intel’s offerings or could be spun out as new entities. Currently, NBI is incubating two businesses in India in retail technologies and low-cost rural networks.
Engineer-entrepreneurs in Intel are working on a low-cost technology platform for kiranas and pharmacies by building point-of-sale and marketing devices like digital signage, coupons, and loyalty programs. These devices could be loaded with value-added services like billpay, mobile recharge, tickets, courier on the same platform. It is expected that service providers and consumers would be attracted to online service delivery model with offline cash payments. NBI is partnering with FMCG companies, service providers and Intel’s channel partners to support retailers. At the same time, Intel is also looking at tune these ideas from the employees to demands of the marketplace. Mr Vishakantaiah said it has the “blue buddies” programme where it encourages its engineers to go and interact with the potential customers to understand what technology they would really require.
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| Bayer plans sub-Rs 1,000 blood sugar monitor Eyes Tier II & III Markets, To Launch Product By 2009-1 |
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| IN Abid to strengthen its presence in the diabetes care market, German healthcare major Bayer is planning to roll out a India-specific blood glucose monitor. The company intends to target the tier II and III markets with this device which is likely to be priced at less than Rs 1,000.
Bayer Diabetes Care, part of the € 11.7 billion Bayer HealthCare, has already started the R&D process for this device. The company expects this product will revolutionise the Indian diabetes monitoring market since the current entry-level price is at Rs 1,500. Bayer expects to launch this product in 2009-10. “We are developing a blood glucose monitor to target the masses at sub-Rs 1,000 price. While this device is for the Indian market, we might roll it out in some other emerging Asian markets as well such as China. The project is currently in the planning stage,” Bayer Diabetes Care country head (India) Rakesh Julka told ET. The company is currently working out the finer details about production of this device. “We will manufacture this device in existing manufacturing bases such as Japan, Taiwan or even Europe. There will be no compromise on the features or product standards,” said Mr Julka.
Even as Germany and the US are Bayer HealthCare’s largest markets globally, it has identified India and China as their focus markets for growth. “In line with this, the company is slowly stepping up investments in India to grow the market. The distribution network will be beefed up from 25 to 80 cities by 2009-10,” Mr Julka said.
Bayer has already launched some of its global products in India on a priority basis. For instance, it recently unveiled a global launch of a new blood glucose monitor with ‘no-code’ technology in India, christened ‘ContourT TS’. “We will soon roll out a HbA1c blood glucose monitor and a couple of products to grow our portfolio in India,” said Mr Julka. The company currently has a basket of four products in India. A substantial investment is also happening in marketing activities. Bayer also recently entered into an agreement with Starcom MediaVest group for its advertising and media campaign for the Indian market.
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| Timex strapping on new looks to trawl new mkts |
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| EARLIER this year, Bob Eckert, the big fish at Mattel Inc was asked by an American magazine to name his favourite gadget. It turned out to be the $45 Timex Ironman Triathlon 30-Lap Watch. Why? “It tells time in two different zones, keeps track of my running times and also serves as my alarm clock,” said Eckert.
A ringing endorsement for the brand owned by the Timex Group for sure, but for the 50-something Norwegian, Anette S Olsen, owner of Fred Olsen & Co, a familyowned multi-billion dollar conglomerate based out of Norway, which owns Timex Group, amongst many other things, there are challenging times ahead for the company as it scrambles to remake itself in an environment dominated by cellphones. “You really don’t need to have a watch these days to tell time, which is why we are looking at the more premium, fashion and luxury end of the segment.” This doesn’t mean the watchmaker is giving up on its mass marketer status. Having sold well over a billion watches, it just means looking for newer and more lucrative markets. Read fashion and luxury.
Industry sources, already buzzing with Timex’ aggressive plans for India in the luxe lifestyle space, suggest a fresh infusion of $10 million, and more if it goes for acquisitions of jewellery brands or manufacturers. Though Olsen is loathe to commit to numbers, she does admit that “India could be a good source for jewellery. Your manufacturing and trade here is quite organised.” Here to review the Rs 110 crore Timex Group India Ltd’s performance, and chalk up additions for the future, Olsen hints at bringing in the recently-acquired luxury watchmaker Vincent Bérard SA, in stand-alones. “As the market matures in India, so will our operations,” she says.
Branching out from its original “takes a licking” designs, Timex is strapping on new looks to trawl new markets. It has long gone from being a simple low-cost watchmaker to include high-tech tickers capable of paging or downloading computer data. Its sports watches have gone upscale and gadgety with the Expedition and Ironman lines. And today, it also makes watches for Guess, Versace, Nautica, and will debut the new Ferragamo and Valentino lines in Basel next year.
In many parts of the world, Olsen allows her flamboyant CEO Joe Santana to champion the brand’s cause. Today, on her second visit to India, as the chairperson of the board of the privately-held Timex Group, part of the Norway-based, family-owned Fred Olsen & Co, she is sussing out ground realities for herself. And doing most of the talking. “Timex has three business units -– watches, luxury brands, and jewellery. We are now in the process of setting up similar verticals in India as well. I am sorry, I can’t give out the investments figures as of now; we haven’t finalised it. But, yes, we are likely to increase our investments in India.” Olsen is the fifth generation of the family, which started the business in 1848. She inherited the mantle in 1993 from her father Fredirik, Fred for short, who, incidentally, served as one of the models for the Charles M Burns character in the hit TV series, The Simpsons
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| LVMH to share ramp with Indian designers In Talks With Rohit Bal, Ritu Beri, Ritu Kumar For Equity S |
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| THE fragmented domestic fashion and designerwear sector could soon move into the big league. Global luxury powerhouse Moet Hennessy Louis Vuitton (LVMH) is in talks with the country’s top designers, including Rohit Bal, Ritu Beri and Ritu Kumar among others for taking equity stakes in their companies. The possibilities being discussed include buyouts, people close to the development say.
When contacted, LVMH India group director Vispi Patel said, “There is a possibility of (the company) entering into the Indian designer wear industry.” He did not confirm whether the company had initiated talks with Indian designers.
Mr Patel, however, added that the company is looking at investing in the Indian designerwear industry through a private equity fund which it is expected to launch shortly. “Designerwear is one area we are looking at,” he said. The luxury giant has plans to launch a $500-million private equity (PE) fund in India by March next. The company would then begin its investment across different segments. These would include ready-to-wear apparel, designerwear, watches, jewellery, home furnishing and also leisure. LVMH had launched two similar PE funds in Europe for investments in area of its core competence with a focus on mid-cap companies that offered expertise in those areas.
On the question of a possible buyout or joint venture, Rohit Bal’s spokesperson said, “We have no comments on the matter as of now.”
Indian fashion is increasingly gaining currency the world over, especially in the Middle East. This popularity is not just limited to the widely dispersed Indian diaspora, but also others across the globe. Analysts believe now that LVMH has a presence in India, the luxury giant wants to leverage that and take Indian specialities in design and prints to the world. “The idea would be to take exotic Indian craftsmanship to the level of luxury and they can do that for sure,” said a senior executive in a designerwear firm.
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| Competition eats into PSU banks’ market share |
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| PUBLIC sector banks (PSBs) have seen their market share drop by over two percentage points due to competition from new private banks and foreign banks. However, the Reserve Bank of India (RBI) has cautioned the private sector against expanding their balance sheet using borrowings rather than deposits.
According to the data in the latest Trends and Progress in Banking in FY07, balance sheets of new private sector banks and foreign banks expanded by 38.7% and 39.5%, respectively, against 43.2% and 29.8%, respectively, in the previous year. Together they now corner almost 25% of the total bank assets, up from 22.3% last year. While the combined balance sheet of public sector banks, on the other hand, rose by 21.1% against 13.6% in the previous year. As a result, market share of PSBs dipped from 72.3% to 70.5%. Both the State Bank group as well as the nationalised banks have lost the share in total assets during the year.
Of all the components of the balance sheets — deposits, loans and investments — while public sector banks have lost their share in investments, including investments in government bonds, corporate bonds, mutual funds and equity investments. Though the new private banks and foreign banks may not be all that aggressive in the government bond market in a scenario of hardening interest rates, there have been opportunities in other areas, particularly mutual funds and equity. As bank balance sheets grow, there are challenges to face. The report highlights that the major challenge for Indian banks is to mobilise enough resources to meet demands of a growing economy. One of the indicators of banks not relying on deposits for meeting their loan demand is credit-deposit ratio. Banks have had credit-deposit ratio varying from 60% to almost 100%. The Reserve Bank governor on Tuesday said that high incremental creditdeposit ratio is indicative of banks relying on borrowed funds to fund loan demand and has taken up the matter with the banks individually
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| Global Village: RBI on guard against subprime spillover |
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| THE Reserve Bank of India (RBI) has said that India can’t be immune to the global subprime crisis despite the fact that Indian banks have no exposure to the troubled housing loans market in the US. The central bank said it was keeping an eye on the spillover effect of the subprime crisis from the international markets into the Indian financial sector.
Speaking at the annual Bankers Conference organised by IBA and Bank of Baroda here on Tuesday, Mr Reddy said, “The domestic factors, by and large, are on anticipated lines although global uncertainties would be resolved later rather than sooner.” He said that the central bank was ready to respond to these global uncertainties, and was watching for any spillover of the financial market turmoil into the real economy.
The monetary aggregates that are currently beyond central bank’s comfort zone are being carefully monitored, he said, though credit growth was closer to what the central bank wanted. In his valedictory address at the conference, Mr Reddy said India cannot be immune to global developments but we, in the RBI, are actively monitoring the global developments, articulating our assessments as well as responses in regard to impact on India and are in a state of readiness to act, as appropriate, in a timely manner. “The major reason for extraordinary vigilance by RBI is what I would describe as simultaneous volatilities in several globally significant markets, namely money, credit and currency markets; asset prices; and commodity prices, especially oil and food items,” Mr Reddy added. The current phenomenon of simultaneous volatilities should be viewed in the context of possible repositioning of the world’s dominant reserve currency, involving significant wealth, income and terms of trade effects, he added.
Even Indian banks with overseas presence have confirmed that they have insignificant exposure to the US subprime mortgage market, though some analysts have flagged the prospect of a sort of subprime lending problem within India also, he said. However, there are reports of accelerated emergence of non-performing assets in regard to consumer credit, housing and real estate in a few banks. RBI’s preliminary assessment is that these do not have systemic implications either in terms of solvency or liquidity.
In the context of the current capital flows into the country, Mr Reddy admitted to it having posed challenges to the liquidity management for the central bank which it actively manages on a daily basis. In terms of the evolving global prudential framework, the emphasis has generally been more on capital, as a means of reducing vulnerability to risks than on prudential requirements for liquidity risk
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| Toyota to recall 2,64,000 cars to repair fuel pipes |
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| JAPANESE car giant Toyota Motor Corp said Wednesday it was recalling about 2,64,000 cars in Japan and abroad to repair defective fuel pipes. It will recall 2,15,020 Crown, Mark X and Lexus sedans at home and some 49,000 Lexus GS and IS series cars abroad, mainly in the United States, Britain and Canada. The cars were produced over the two years to December 2005, Toyota said in a statement.
Of the total sold in Japan, 1,39,890 were from the Toyota's Crown series and 70,706 from the Mark X series, while 4,424 were Lexus cars.
The statement said the fuel pipes were improperly bent and could develop minute cracks, causing fuel leaks in the worst case scenario. Some 39 defects have been reported by drivers but no accidents.
It is the latest in a string of recent recalls by Toyota, which has seen its reputation for quality dented as it races to overtake US rival General Motors as the world's top selling automaker.
In mid-October, Toyota recalled more than 4,70,000 cars of eight models in Japan due to problems with the fuel and steering systems.
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| 10% cap for foreign investors in credit info cos |
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| THE government is planning to make it mandatory for foreign investors to report to RBI whenever they acquire more than 1% in a credit information company. Also, no single entity would be allowed to hold (directly or indirectly) more than 10% in such a company. Besides imposing these conditions on credit information companies, the government may also cap FDI limit in the companies at 49%, bringing it down from existing 100%. The policy on investments in credit information companies would not be scrutinised every year as opposed to earlier view of reviewing it annually. The Cabinet is likely to consider the policy as part of the yearly FDI review soon.
The government is adopting a cautious approach with regard to these companies as they would be handling highly-sensitive credit data. Companies wishing to undertake this business will have to take prior approval of RBI.
According to this view these companies were covered under the 19 specified activities in which 100% FDI was allowed on automatic route.
The 19 activities include credit card business and credit reference agencies, and the initial view was that the credit information companies would also get covered under this norm. However, it has now been that this activity could not be clubbed under the 19 activities and a new guideline was needed.
The Credit Information Act, which was passed in May 2005, came into force last year, has defined the legal framework, within which credit information bureaux can collect, process and share credit information on borrowers of banks and FIs. Under the act, consumer data cannot be shared across sectors such as In India, Credit Information Bureau (India) or CIBIL, which was incorporated in 2000, was the first to enter the credit information market.
With growing consumerism, credit information market has grown tremendously and more players, including credit rating agencies, are eyeing the market
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| Imported defence equipment to have 30% Indian parts |
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| • CHENNAI: With India planning to import 45 billion dollars worth defence equipment in the next five years, the Centre has decided that all imported defence equipment should have at least 30% Indian components, a top defence scientist said on Wednesday. Inaugurating an international conference on emerging challenges in design and manufacturing technologies, organised by the Combat Vehicles Research and Development Establishment and Sathyabama University, DRDO chief Dr A Sivathanu Pillai said defence imports in the next five years were likely to be $45 billion, as per CII’s projection |
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| Global peers show interest in United Spirits, says Mallya |
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| UB Group chairman Vijay Mallya said several global liquor giants have shown interest in picking up a small stake in his flagship United Spirits Ltd (USL). While he has “exchanged ideas”, there are no formal talks till now, he added.
“There are interested parties. Multinationals would like to be part of United Spirits given its market leadership in India. They know that I hold treasury stocks in the company. We have exchanged ideas, but there is no concrete talk,” Mr Mallya told ET.
Earlier this month, ET reported the possibility of UK-based drinks giant Diageo Plc showing interest in taking a small exposure in USL, the world’s third largest spirits marketer by volume. Other global peers like Bacardi and Pernod Ricard could also be in fray if India’s liquor czar allows a foothold for strategic investors.
USL’s current mcap is pegged at $4.64 billion, up significantly from $1.94 billion in March this year. USL, which is working on merging Shaw Wallace & Co with itself, is expected to have a treasury stock pool of around 13 million shares, which could be used for de-leveraging its recent acquisitions. At Wednesday’s stock close of Rs 1861 on NSE, the treasury stocks are worth around $600 million (Rs 2400 crore).
USL acquired Whyte & Mackay for $1.18 billion in a fully leveraged transaction in May this year. “We de-leveraged the Shaw Wallace & Co acquisition and paid off debts even before the moratorium period. I intend to do the same with regard to Whyte & Mackay,” Mr Mallya said. Later, he told mediapersons that USL was looking at raising around $300 million for retiring some of the Whyte & Mackay debts.
He added that the company, however, would continue to look out for acquisitions, both big and small, if opportunities came its way.
USL controls around 55% of the domestic branded liquor business, or Indian Made Foreign Liquor as it is called in the excise manuals. India is arguably the hottest growth spot for the global drinks industry with majors like Diageo projecting that it could well be the biggest market for scotch whiskies in future. However, observers said USL was unlikely to offer anything over 10% stake to any investor, which may be a deterrent to a strategic player.
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| Pepsico to run Punjab Agro Juice plant |
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| THE board of directors of Punjab Agro Juices Ltd accepted Pepsico India’s offer for running a plant in Hoshiarpur for processing kinnows, tomatoes and other horticulture products. A formal agreement to this effect was signed on Wednesday by representatives of Pepsico India and PAJL in the presence of Punjab chief minister Parkash Badal.
The state-of-the-art, 400-MTs-per-day plant has been set up by the Punjab government to provide an alternative market channel to kinnow growers and other farmers cultivating horticultural crops so as to cushion them against fluctuating market prices.
The trial production of the plant, undertaken in May 2007, was successful and the state government, in keeping with the sprit of public-private partnership, has awarded the task to a private sector partner on work basis. Trials have already been carried out with kinnow, mosambi, tomatoes, mangoes, melons and strawberries.
Pepsico has had a long association of partnerships with the Punjab government and the Punjab Agricultural University. PepsiCo/Tropicana and Punjab Government Citrus Council Programme has emerged as one of the most successful models of public-private partnerships in the Indian agri-business.
The Citrus Initiative provides farmers with a choice of 16 varieties of rootstock and 32 varieties of citrus, one of the largest collections in a commercial nursery.
Pepsico assured the chief minister that they would finalise the kinnow procurement plans by the first week of December and start procurement of kinnows across Punjab from the third or fourth week of December. Pepsico will also initiate contract farming arrangement for tomatoes and other crops with the farmers of the state soon.
The produce from this facility would be used by Pepsico in their Tropicana juices and juice drinks and will enable them to expand their customer base.
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| Tata, Mittal, Nooyi among world’s top 25 business heads: Fortune |
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| New York: India’s top corporate leader Ratan Tata has been named by global business magazine Fortune as one of the top 25 most powerful business heads, along with steel tycoon L N Mittal and Pepsi-Co’s Indra Nooyi.
The Fortune ranking closely follows a list by another global business publication Forbes, released earlier this month, that named India’s richie-rich led by Mittal and Ambanis, but there was no mention of Ratan Tata.
In the Fortune list released on Tuesday, Tata has been named as the world’s 23rd most powerful person in business, ahead of CEOs of international media and entertainment giant Walt-Disney and French luxury goods major LVMH.
PepsiCo chief Nooyi, who was named at the top of a separate Fortune list of world’s most powerful business women for second year in a row last month, has been ranked at 22nd in the latest list, topped by Apple Computer CEO Steve Jobs.
Mittal, largest shareholder and CEO of the world’s largest steelmaker Arcelor-Mittal, is ranked top among the three people of Indian origin. Ranked at 14th position in the list, Mittal’s name figures ahead of CEOs of international giants like JPMorgan Chase, Hewlett-Packard, Boeing, BHP Billiton, Blackstone and Mexican business tycoon Carlos Slim.
Apple’s Jobs is followed by media baron Rupert Murdoch (2nd), Goldman Sachs CEO Lloyd Blankfein (3rd), Google’s founder-CEO trio Eric Schmidt, Larry Page and Sergei Brin (4th) and legendary investor and Berkshire Hathaway CEO Warren Buffett (5th).
“Some are empire builders. Others are hired guns. But if they truly have world-class oomph, they’re on Fortune’s subjective - yet really quite accurate - list of the most powerful businesspeople in the world,” the magazine said in its cover story of the latest issue.
About Tata — only resident Indian on the list, Fortune said: “As head of one of India’s most venerated family businesses, Tata, 69, has unique stature. The Tata Group, which is one of India’s largest conglomerates, includes India’s largest software house, one of its most prestigious hotel chains (the Taj), and sprawling steelmaking operations, as well as leading players in consulting, wireless, and cable services.”
“Since taking over in 1991, Tata has made numerous bigticket deals. But his heart is set on a project closer to home: creating a $2,500 car that middle-class Indians can buy,” the publication noted.
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| Punjab wins second prize |
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| Chandigarh: Punjab won the second prize in the India International Trade Fair-2007 (IITF-2007) organised by the India Trade Promotion Organisation at Pragati Maidan in New Delhi that concluded on Tuesday.
The first and third prizes in IITF-2007 have gone to Kerala and Assam respectively, said a spokesman of Punjab government.
The theme of IITF-2007 was ‘‘agro-industries and processed food’’ which is close to the hearts of Punjabis, the state being popular as food basket of the country and also having made rapid strides in food processing in the recent past.
The Punjab pavilion’s entry depicted the galloping progress made by the state in agriculture with a panoramic view of vast sprawling fields on one hand and of multifarious achievements of the state in agro-processing on the other. Wheat straw and simulated model of ‘‘milk flowing in Punjab— the land of abundance’’ was depicted. And this graphic depiction blended with exotic landscaping appropriately mirrored the theme this year which perhaps impressed the jury for the second prize to be awarded to the state from among 35 states and union territories participating in the fair.
Punjab also showcased the initiative of Punjab Energy Development Authority (PEDA) in the field of non-conventional sources of energy extensively used in agriculture followed by major initiatives in crop diversification. The council of citrus and agri-juicing displayed a model of Jalllowal nursery which has plants of various varieties and root stocks. The animal husbandry department focused on promoting Sahiwal breed which is more adaptable to Indian climate. Punjab Agriculture University (PAU) displayed advances in biotechnology and a new concept of net-house vegetables grown for healthy, pesticide-free crops and conservation technologies for saving water for paddy fields. The initiative of Punjab government on Bathinda refinery was depicted through a model.
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| Overseas markets to add 15% to box office collection by ’10 |
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WITH several Bollywood movies doing great business in NRI pockets in international markets, revenue contribution from overseas markets is set to grow exponentially.
According to an AT Kearney-CII report, the share of international revenues to domestic box office is expected to become 15% by 2010. According to the study, in 2006, the domestic box office collections stood at $1.8 billion, of which 8% was contributed by international revenue. In 2010, the domestic box office collection is expected to go up to $3.7 billion, with the revenue from foreign market expected to contribute nearly 15%.
AT Kearney partner Saurine Doshi said: “Around 15% would come just from overseas ticket collection. The total international revenue would be much higher and could be nearly 40%.” Mr Doshi said this is largely because several avenues have opened up for Indian production houses. “Besides box office collections (tickets sale), satellite rights and DVD rights have the potential to become big money churners,” he added.
The report also points out that non-box office collection is a “robust basis for hedging the risks of production house”. Mr Doshi added that Indian producers are likely to generate more profits from non-Indian markets. So far, most of the international revenues have come from NRI pockets abroad. “I believe that would change. I believe Indian directors would be able to woo international mainstream audience. But even if the revenues come only from NRI pockets, new avenues would ensure exponential growth in revenues from abroad,” he added
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| Hexaware hit by exotic forex option trading |
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| IN one of the first instances that has come to light of a company being hit by exotic forex option transactions, Hexaware Technologies has made a provision of $20-25 million towards possible losses on these deals. The company also said it was suspending one of its employees in this connection for actively concealing these transactions and exercising unauthorised fiduciary powers.
According to currency market sources, several companies, taking bets that euro and yen will slip against dollar, have struck derivatives deals to cut cost and prop up revenue without assessing the hidden exchange risks. They said more such hits from option deals are feared in the coming days. Some of the companies will, however, find a way to absorb the losses and keep the development out of public domain.
Hexaware did not give the exact nature of the transaction. The software exporter has appointed a committee consisting of independent directors, Shailesh Haribhakti, Preeti Mehra and L S Sharma, to investigate the matter. According to sources, a small private bank, at least two large foreign banks with significant presence in India—were involved in the transactions. The company did not wish to name the banks.
Hexaware chairman Atul Nishar said the company found about the first transaction late on Thursday and subsequently investigated the matter, leading to more such transactions being discovered. “We don’t have any need to get into these structured option deals. The company policy does permit these kind of deals—we only need a simple forward cover,” Mr Nishar told ET. An external forex expert has also been roped in. The options contracts were in Swiss franc, yen and euro.
“An embargo has been placed on all option deals; future forex deals will necessarily have to transacted jointly by two signatories out of the designated four from among the top management,” Mr Haribhakti said in a statement. The company intends to continue with “normal” hedging strategies to protect against the rupee appreciation. It said business and order pipeline were unaffected and as on it September 30, 2007, the order book stood at over $ 300 million. The company has hedged around Rs 400 million at Rs 40.43.
Forex experts said the Hexaware announcement was only the beginning, and more such announcement by corporates could follow in the coming weeks. “There could be cases were the losses are higher than the company’s revenues,” said an expert, who said the biggest hit could be on Target Redemption Notes, one of the exotic options contracts corporates had entered into.
“The market has seen an unprecedented level of volatility. Some things, which were thought to be rare possibilities have become real, leading to such situations,” said Nandlal Bhatkar, CEO of Pyxis Systems, a firm that has derivative trading products.
ET had first reported on November 21 that corporates could end up run up losses on currencies other than the rupee-dollar because of the exotic options contracts many of them had entered into.
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| Portals looking at tie-ups to hit mobile market |
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| GLOBAL search portals are involved in a slugfest to grab a pie of the world’s fastest growing mobile market that is adding over seven million new users every month. Yahoo!, which lost the race for the big two, after Google forged an exclusive tieup with Bharti Airtel and Microsoft’s MSN entered into a similar partnership with Vodafone, has now pulled off a coup by signing ‘strategic’ deals with three telcos simultaneously. Yahoo!, whose India presence was so far limited to a tie-up with Idea Cellular, has snapped up state-owned BSNL, BPL Mobile and Aircel, and now has a target audience of 60 million subscribers.
The race for tapping the cellphone market is best explained if the numbers are considered. “We have about half-a-million subscribers using the search facility daily. The response to the search offering has been particularly good. Most of the searches are centred on information, entertainment, directions and music,” explains Bharti Airtel’s president for mobile services Sanjay Kapoor.
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| ‘Punjab entry tax adjustable on all items except sugar’ |
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| THE Punjab government has clarified that the entry tax being levied on all items, except sugar, is aimed at checking evasion of valueadded tax (VAT). The tax is fully refundable on all items except sugar, he said, adding that the amount taken in the form of entry tax would be deducted from the amount a trader pays as VAT, state finance minister Manpreet Singh Badal told report-ers here.
“Imposition of entry tax on other items, barring sugar, is just shifting of the stage of VAT to evade the alleged large-scale tax evasion and ultimately, it will be adjusted against VAT but in the case of sugar, the new tax is being imposed to stop dumping of the same in Punjab from other states,” he said.
Levying tax at the entry point of the state on iron and steel, chemicals, yarns and sugar at the rate of 4 per cent similar to VAT would definitely stop the tax evasion and benefit the sugar mills, he said.
On generating more sources of revenue for the state, he said a meeting of the co-ordination committee of both the ruling alliance partners Shiromani Akali Dal (SAD) and the Bharatiya Janata Party would be held on November 28 to discuss the issue. He said the committee would review the financial health of the state. Some measures that have been identified to generate more revenue would be presented in the meeting before taking any final decision.
When asked whether the state government had deposited the Rs 292 crore as subsidy on electricity to the PSEB as announced by Chief Minister Parkash Singh Badal following the BJP’s demand to rollback the recent power tariff hike, the finance minister said: “Of course, if the chief minister has announced something, we have to abide by the same and funds will be arranged to compensate the PSEB on power tariff hike.”
Giving details of the economic position of the state, he said according to the report of the auditor general, the collection of VAT has increased by about 7 per cent during the current financial year, which is expected to increase up to 15 per cent at the end of the financial year.
The collection of excise duty has risen by Rs 200 crore in the current finan-cial year, a growth rate of about 15 per cent.
Though the collection from stamp duty decreased by 20 per cent, he said it would be made up by the end of the financial year.
Entry tax causing confusion: Experts
CHANDIGARH: The imposition of entry tax by the Punjab government on certain items, which has been made effective from November 21, has left the industry confused and even forced it to resist its implementation tooth and nail, according to industry experts. Last month, the state government had announced the imposition of 4 per cent entry tax on various items such as sugar, iron and steel, dyes and chemicals yarn in a bid to safeguard the interests of local industry and to check the leakage of tax revenue. The government’s move, which was expected to help garner Rs 30-40 crore per annum, had not only seriously affected the routine functioning of industry but had also led to an increase in prices of sugar, iron and steel in the state, an industry representative said
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| Leather exports in tatters after Re hiding |
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| For the ‘Flat World’ fraternity, a stronger rupee is a great opportunity to import machinery and ramp up capacity. Now, try telling that to apparel, leather or gems & jewellery manufacturers and labourers in Panipat, Kanpur of Surat. As the rupee continues to soar against the US dollar, exporters are losing their shirts; the government estimates that a million people have lost their jobs over the last one year. In this three-part series, ET reporters travel to a few export hubs across the country to gauge how the ‘Super Rupee’ has wrecked the local economies and lives of workers. We
kick off this series with Man Mohan Raireporting from Kanpur& Moradabad on the plight of the $ 3-billion leather export industry.
NEARLY 250 workers at Kanpur’s Inyati’s Footwear were eagerly awaiting the return of managing director Mahmood Alam from a 15-day business trip to Europe, hoping for some good news during an otherwise gloomy Diwali and Eid season.
This year, the last-minute festival shopping and celebrations in the heart of India’s leather trade in and around Kanpur and the neighbouring town of Unnao were replaced by streetcorner discussions on the latest US dollar–rupee exchange rate. In an indication of the tough times ahead, most companies there held back Eid bonuses, new clothes and even stainless steel utensils during Diwali, a break from tradition. The rupee’s 15% rise in one year has almost entirely eaten away the margins leather exporters made by shipping goods to the US.
Many shutdowns
And US exports account for nearly half the region’s leather trade revenue.
As a result, most companies have stopped taking fresh orders from the US and are operating on a single shift daily compared to three when things were rosy.
“Such is the concern among workers that most of them are willing to take a wage cut but pleaded that I do not refuse any orders that manage to come our way,” says Mr Alam.
Already, Inyati, a Rs 16-crore firm, has laid off 50 contract labourers.
The situation is gloomier in bigger export houses. Nearly half a dozen units have already shut shop, wilting under the mounting losses.
Mr Alam says the situation is alarming and the order books for the coming season remain halved.
“The appreciation of the rupee has led to our profits being eaten away. But even if we want to continue manufacturing just to remain afloat and save ourselves from closure, it is difficult as the buyers are finding our goods to be more expensive as compared to China,” he says.
Kanpur’s leather goods makers say they could have absorbed a 5% devaluation of the dollar but a rupee rally like the present one has simply put them out of business. Manufacturers are only fulfilling their earlier export commitments at losses, and new orders for the next spring-summer collections that would be placed by this time of the year have now fallen by as much as 40%.
RK Jalan, CEO, Arvind Footwears, a Rs 24-crore Kanpur-based export house, is doubly distraught.
He has just lost out on a prestigious order from Wal-Mart––something which he’s been working on for the last few years.
“We had managed to bag this export order from Wal-Mart two years back. We supplied 130,000 pairs of shoes worth Rs 3.75 crore to Wal-Mart last year. But the rupee appreciation has led to us losing out this time round. Despite being more than satisfied with our products, Wal-Mart found it better to source shoes from elsewhere,” says Mr Jalan.
Also, has also been forced to pare the workforce from 600 to 450. “In the 32 years that I’ve been in the leather business, there hasn’t been a crisis this bad,” says Mr Jalan.
Many footwear and leather goods makers in Kanpur had been ramping up capacity over the last three years anticipating greater business.
With the multifibre arrangement in place, exporters hoped to cash in on bigger orders coming from the likes of Wal-Mart and JC Penney.
Inyati’s Mr Alam is worried how he’ll service the loan he took to install new machinery and equipment.
His company was working on a joint venture with German and Italian firms but now that too is on hold.
Mukhtarul Amin, the chairman of Council for Leather Exports says India’s loss has been the gain for countries like China, Sri Lanka, Vietnam and Pakistan, and even China.
Mr Amin is aware of at least two leather export units in Kanpur that have been forced to shut down due to the rupee’s rise.
“India’s leather exports would come down this year from $3 billion to less than $2 billion if no immediate steps are taken by the central government,” he says.
Mr Amin suggests the government should allow Foreign Exchange Fluctuation Allowance to the extent of 6.22% of free-on-board (FOB) value to tide over the crisis. Some leather exporters also talk of the government facilitating sales in the domestic market so that they can remain afloat.
Elsewhere in Moradabad, the brassware exports hub in UP, things are just as bad. Handicrafts and brassware exports from the region are estimated to be around Rs 800 crore. According to Suresh Gupta, a handicrafts exporter and the chairman of Indian Industries Association, a representative body of SMEs, the bank accounts of about 100 brassware export companies there have been declared non-performing assets as they are faltering on repayment of loans. “Business is down by as much as 20%. We’re staying afloat largely because of orders we’d signed last year. At the moment, there isn’t even a ray of hope.”
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| 4.5 lakh visit Haryana pavilion at IITF |
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| Chandigarh: Approximately 4.5 lakh visitors have visited the Haryana pavilion and more than 1,100 domestic business enquiries have been recieved including 18 export enquiries involving a business of Rs 21 crore, informed an official spokesman at the India International Trade Fair at New Delhi.
Earlier, a seminar on organic farming was also organised at the pavilion and while addressing the seminar the managing director of HAFED, Sudhir Rajpal said that the organic farming was coming up worldwide for sustainable development of agriculture and value addition of agri-produce.
Enumerating the benefits of the organic farming and highlighting its commercial aspects in seminar, Rajpal said that to maximum benefits of commercial aspects of organic farming certification should be done as per the standards of the country where the product was finally to be sold. Rajpal also suggested to farmers that to do organic farming in a better way by associating themselves to 'Organic Grower Group' then doing it individually.
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| Major development plans for cities in Punjab |
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Jalandhar: Claiming that the Punjab government would usher in a new area of development in the state, CM Parkash Singh Badal revealed that a six-lane Express highway between Chandigarh and Phagwara would be constructed at an estimate cost of Rs 700-800 crore.
Talking the media persons here on Monday, Badal who was accompanied by his son and SAD acting president Sukhbir Singh Badal,said that the proposed highway, which would be built on public-private partnership basis would shorten the distance between Chandigarh and Phagwara up to 25 kms.
The CM also claimed that the government has proposed to built a trade fair centre at Mohali on about 100 acres of land and said that the process for it has also started. He said that the centre would be built on lines of Pragati Maidan in New Delhi and would be used for organising the trade fairs in the state.
“The proposed trade fair will be the biggest in the north India and will hopefully attract big business houses towards the state,” added Badal.
He also claimed that the government has planned to connect all link roads to the national and state highways and the implementation of this scheme would be initiated very soon.
Talking about the education sector of the state Badal said that the state government has decided to improve the standard of education by wellequipping three schools of each district with full infrastructure in addition to the Adarsh School scheme. He said that the government has already released Rs 125 crore from state exchequer for this purpose
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| Syndicate Bank lends Rs 700 cr to industry in north India |
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| WITH business in the northern region having almost doubled to nearly Rs 4,000 crore in the past one year, Syndicate Bank, which has extended term loans to a sizeable number of industrial units, is expected to end 2007-08 with an over twofold increase in its operating profit.
While the operating profit in the first half of 2007-08 stood at Rs 30 crore this, in the northern region, was expected to increase to nearly Rs 75 crore by end of March 2008, said the bank’s deputy general manager, Chandigarh, S K Abrol.
Outlining the bank's achievements, Mr Abrol told ET here on Monday that the bank had, during the current fiscal, extended credit of Rs 600-700 crore out of the total advances of Rs 1,900 crore to the industrial units in the region. While deposits stood at Rs 2,100 crore, the total business in the region with 62 bank branches is expected to increase to over Rs 4,500 by the end of 2007-08.
He said the beneficiaries for advances to the industrial sector included Laxmi Energy Foods of the Laxmi Overseas Group, Khamano, Punjab to the tune of nearly Rs 200 crore, Rama Steels, Baddi, Himachal Pradesh Rs 40 crore the bank being a consortia leader, Chandigarh Iron and Steels Rs 10 crore, Nihal Health Care, Baddi Rs 9 crore for a syringe disposable manufacturing unit, Shaurya Motors, Jammu Rs 25 crore, Gees Industries Jammu Rs 5 crore for manufacture of heavy duty transformers and Raja Forgings and Gears, Baddi Rs 15 crore.
In addition to this, he said, the bank had also loaned Rs 400 crore to the Punjab State Electricity Board (PSEB) for contracting power from out side the state as well as to Dakshin Haryana Bijli Vitran Nigam Rs 80-90 crore and Uttar Haryana Bijli Vitran Nigam Rs 50 crore. The bank had also extended credit to the farm sector of Rs 25 crore under the Synd Jaikisan schemes for meeting any agricultural needs includ-ing farmers consumption requirements. Moreover, recently another Rs 100 crore had also been extended as credit for other agricultural requirements.
Mr Abrol said the bank in the region had also extended Rs 30-35 crore to the housing sector and another Rs 5-6 crore as education loans for those seeking higher studies at home and abroad.
He said the bank had as its customers nearly 100 big corporates in the region and by end of the current fiscal another 10 corporates would be added to the list. While the banks recovery was nearly cent per cent however, an NPA of only Rs 20 crore remained as outstanding as per the old accounts.
“We can say that our recovery rate is very good and leaving an old account only Rs 10 crore would be the NPA from the total business as of now of nearly Rs 4,000 crore,” he said.
Mr Abrol said the bank would add another three branches in the current fiscal at Akbarpur in Sonipat district, Haryana, Nurmahal in district Jalandhar and Ajnala in district Amritsar in Punjab taking the total in the region to 65 branches. While 55 branches in the region are under the core banking solution(CBS) the remaining seven would also be brought under CBS by end of December 2007.
He said of the over Rs 4,500 crore business expected by end of the cur-rent fiscal nearly Rs 2,400 crore would be by way of deposits while advances would be in the vicinity of Rs 2,100 crore. Moreover, the bank is also expecting to increase its customer base from the present 3.43 lakh to nearly 4 lakh. It has 28 branches in Haryana, 25 in Punjab, three in Himachal Pradesh, two in J & K and 4 in UT Chandigarh.
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| India may rope in Kenya & Lanka for tea forum |
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| INDIA’S emergence as a significant voice on global policy issues is also getting reflected in the area of tea. The country, together with Kenya and Sri Lanka, is attempting to create a forum exclusively for tea producing countries, separate from the existing inter-governmental group on tea (IGG) — a United Nations body operating under the Food and Agriculture Organisation (FAO). The idea behind a separate forum is to have a body which will focus on forwarding the agenda of the producing countries. Other countries supporting the forum include China, Bangladesh and Indonesia. Speaking to ET, Tea Board chairman Basudeb Banerjee pointed out that the international market for tea had become heavily distorted in the last two decades. While the margins of tea producers have gone down, that of the retailers have increased significantly. “The idea behind having a separate forum is not to act as a cartel. We just want an arena where tea producing countries can discuss their specific issues of concern,” he said.
According to Kenyan Tea Board chairman Dunstan M Ngumo, the big six countries (India, Kenya, Sri Lanka, Bangladesh, China and Indonesia), were heavily in favour of constituting a producers group and it would be done soon. He said that the issue was discussed in details in the on-going India International Tea Convention and would be taken forward when the IGG meets in China in May next year.
Tea industry sources said that there was an increasing feeling among producing countries, that the IGG, which meets every two years, had become a heavily bureaucratic organisation. Moreover, it was also felt that the IGG was skewed in favour of the retailers rather than the producers. Mr Ngumo said that the new body would also function under the aegis of FAO.
There were a large number of issues such as setting minimum quality standards for tea, collaborating on research & development (R&D) and proper marketing of tea which the producers body would focus on, Mr Banerjee said. For instance, there was a need for a generic promotion of tea world wide as opposed to other beverages. “We could think of campaigns which would promote tea as a preferred drink world wide,” he said. To promote R&D, tea research authorities in producing countries could come together, Mr Banerjee added. India produces 956 million kg of tea annually and accounts for 27% of global production.
India’s exports touched 219 million kg last year.
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| Traders clueless in volatile crude mkt |
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| DURING the week, crude oil skirted $100 on New York Mercantile Exchange (Nymex). However, domestic futures remained subdued in comparison with less participation and huge volatility in the prices. Traders were unable to get a clear direction for further course of action, and there was considerable drop in domestic volumes.
On Multi Commodity Exchange (MCX), the price of crude oil had hit a high of Rs 3,890 on November 21, when crude oil on Nymex touched $99.29 a barrel. The price was consolidated at a lower level of Rs 3,835 on Friday at the end of the week on MCX. The movement was less than Rs 100 per barrel. On Nymex the price moved to $97.64 from the highs. The New York markets are currently closed for the Thanksgiving weekend. The volumes on MCX moved from 44,663 barrels on November 20 to 67,550 barrels on November 21.
At the same time, the open interest moved only marginally lower. On November 20, the open interest was 13,680 and it moved down to 13,320. A rising volume with lower open interest indicates selling. However, the open interest was not significant enough to make an impact, analysts indicated. The volumes also subsequently fell drastically on November 22 to 11,633 barrels.
“The sudden fall in volumes show that traders were sceptical to trade in the market given the current scenario,” says Debjyoti Chatterjee from MAPE Admisi Commodity Research.
Subodh Gupta from Anand Rathi Commodities says, “The price is high internationally due to huge speculation by funds. Fundamentally crude should be lower. There is also high volatility in the market. This has triggered many stop-losses in the market.”
India, however, blindly follows the international market and traders stay away from markets in times of high volatility, he said. He was quick to point out though, that crude is seeing less volatility that bullion. The next direction that crude market will take largely depends on the decision taken by Opec on December 5, about whether to raise output.
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| Infotech majors focus on software solutions with more reusable codes Up To 70% Of Codes Can Be Reuse |
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| IN the first significant wave towards de-linking manpower addition and revenues, a number of large Indian and multinational IT services firms have developed software that can be used to automate a particular business process or aspect of product development and where 30% to 70% of the code can be reused across clients, according to findings documented by a Forrester Research study.
The firms include major Indian vendors such as Tata Consultancy Services (TCS), Infosys Technologies, HCL Technologies and Wipro, and multinational providers such as IBM, Accenture and SAP. IBM, for instance, has committed an investment of $ 300 million towards building such software at its Global Business Solutions Centre in Bangalore. So far, it has developed around 120 such software solutions across 14 industry segments, including financial services, media and entertainment, retail, pharma and utilities.
Similarly, Indian major Infosys Technologies has build around 70 such software solutions and has over 500 people involved in the effort at its Bangalore and Pune centres. For manufacturing and pharma industries, it has built a software that captures reusable components to the tune of 30%-40% and saves at least 30% of the time taken to deploy an application built from scratch.
According to Forrester, these software are more business-issue focussed and different from packaged applications, which can sometimes be long and painful to implement. Terming them “solution accelerators” it says they are more agile and are more agile than software products, and also deliver more than tools or a set of guidelines or frameworks. “A leading Indian service provider analysed P&L accounts of Fortune 500 firms to identify value addition at each step as raw material gets converted to finished goods and then to cash. Then the provider identified the underlying pains as well as the technologies to solve them,” study author Sudin Apte said. The average time savings obtained by using solutions accelerators was 25% - 30%, and savings in project cost around 12%-15%, according to Forrester’s findings.
India’s fifth largest IT exporter, HCL Technologies, which has worked with several car manufacturers to build rear-view electronic displays, has also built a solution accelerator that captures rear images from multiple cameras and stitches them together to get a panoramic view. This helped to show obstacle details and three leading car manufacturers benefitted from it, deploying an advanced rear-view feature in 8-10 less less weeks than it would’ve otherwise taken.
Forrester predicts that as these solution accelerators gains momentum and start to win key client relationships, competition will heat up by 2012-15.
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| RCOM to sell 5% more in tower co, eyes bigger pie |
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| RELIANCE Communications (RCOM) plans to sell another 5% stake in its wireless tower business—Reliance Telecom Infrastructure Ltd (RTIL)—in the second such deal this year. JP Morgan, which advised RCOM in the last transaction announced in July, invited bids from financial investors last week.
Indications are that the new deal will be bigger. July’s deal fetched RCOM $338 million and valued the tower business at $6.75 billion.
The bidders are likely to be financial investors like hedge funds and institutional firms. An RCOM spokesperson declined to comment on the development.
This time, Reliance wants the business to be valued at about $9 billion. It believes that the tower business’ profitability will increase as ‘tenants’ increase. For instance, RCOM’s GSM business’ rollout in 16 circles will be considered another tenant. The introduction of 3G and WiMax next year will give opportunities for further tenancies. The wireless tower business is seeing frenetic activity as companies begin to see immense benefits in spinning of the asset and either listing it separately or selling a small stake to investors at a premium.
A wireless tower enables the smooth passage of signals across a wide expanse of territory and is crucial in helping telecom companies achieve penetration. Big telecom companies own thousands of towers but it need not always be on their books.
The companies can spin off the tower business into separate entities and lease space on them to rival telecom companies. The tower business becomes an independent company with its own revenue stream and a relatively stable business model.
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| ArcelorMittal plans India listing CEO LN Mittal Will Take IDR Route To Raise Capital From Indian Mar |
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| sue of IDRs. ‘‘Much as I would like to right away,’’ Mittal said, ‘‘current government norms for this purpose are not so feasible. So, we will have to wait a little while before going ahead with our plans.’’
The problem, as Mittal and many others see it is that India is yet to see capital account convertibility (CAC). This would mean that the money raised by a foreign company in Indian rupees from the Indian markets cannot be repatriated back to its country of origin freely. Which is also the reason why since the time the rules around IDRs were formulated a few years ago, there has not been a single issue until now.
Taking cognizance of the fact that no foreign company has attempted to tap the IDR Luxembourg: LN Mittal, president and CEO of Arcelor-Mittal, wants to list the world’s largest steel company on the Indian stock exchanges, using the Indian Depository Receipts (IDR). ‘‘We want to give Indian investors an opportunity to be a part of the world’s largest steel company and would like to list ArcelorMittal in India,’’ he told ToI.
While Mittal continues to hold an Indian passport, for the most part he resides in London. As for the company he controls, it is listed on the Luxembourg, Amsterdam, Brussels, Paris and New York stock exchanges among others.
For foreign companies like ArcelorMittal, raising equity capital from the Indian markets is possible through the ismarket, the government relaxed the norms under which IDRs could be issued. For instance, the limit for an overseas firm to raise money from India in a financial year was raised from 15% of its paid-up capital and free reserves to 25% of the post-issue number of equity shares.
Most of the concerns addressed by the government in relaxing the norms on IDRs, however, have no bearing on a company like Arcelor Mittal. In this case, the only thing that matters is CAC.
While full CAC is some way away, a roadmap has been put into place. ‘‘You should ask the government when will the rules on CAC be relaxed,’’ said Mittal. It is expected that once some clarity on CAC, Arcelor Mittal will begin work on listing itself on the Indian market. Arcelor Mittal, which produces about one-tenth of the total steel produced in the world, wants to expand its capacity by 40 metric tonne by 2012.
Out of this, it plans to set up 24 metric tonne plants in Jharkhand and Orissa in India with over $20 billion investment, the largest foreign direct investment (FDI) ever. However, it has met roadblocks in terms of land acquisitions and is taking various initiatives to ensure a fair deal to the people.
As part of its India strategy, Arcelor Mittal also plans to have a research and development centre in the country, which would be the company’s thirteenth centre globally.
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| IT, export remittances set to ease pressure on liquidity Call Rates May Fall In Coming Weeks, But FI |
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| THE spell of tight liquidity in the money market may ease next week, with dealers expecting higher remittances from exporters and software firms.
On Wednesday, the Reserve Bank of India (RBI) lent close to Rs 32,000 crore on Wednesday to banks which were strapped for cash since local mutual funds (MFs) had to cope up with redemption pressures. Treasury managers reckon that the tight conditions are likely to ease in the coming week. A senior treasury manager from a bond house said, “Once the reporting fortnight is over, the liquidity scenario could ease off by next week. Even though RBI might continue to infuse funds through the repo window, call rates could be seen returning to their normal band.”
With inward remittances improving on account of payments received by software companies and exporters, more funds are entering the banking system, said a senior treasury official.
However, there are factors such as pullout of funds by foreign institutional investors (FIIs) from the stock market and advance tax outflows in December, which are likely to maintain some amount of pressure on the liquidity front.
Liquidity in the banking system has been strained after RBI hiked the cash reserve ratio by 50 basis points in its mid-term policy review in October. After the CRR hike, banks had almost stopped parking funds with the central bank through reverse repo.
Prior to the credit policy announcement, banks were seen parking up to Rs 25,000-30,000 crore daily. The three main reasons for tightness in the money market were the hike in CRR, increase in spending during the festive season and the fact that the government typically reduces its spending during October-January as the fiscal draws to a close. Development Credit Bank chief dealer Paresh Nair said, “The general feeling is that the situation will improve in the weeks to come. Also, with November 23 being a reporting Friday, there will be lesser demand from banks since most of them would have positioned themselves by now.” While the seasonal tightness has been done away with, the effect of the CRR hike is seen to be gradually wearing off now.
With steady inflows, the liquidity situation will gradually improve, said HDFC Bank deputy treasurer Ashish Parthasarathy.
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| Godrej raises Rs 600 crore |
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| Godrej Industries Ltd has alloted 27.9 million shares to various entities at Rs 215 each raising about Rs 600 crore, it said in a statement. Of the shares alloted 2.3 million were issued to Deutsche Securities Mauritius Ltd, 3.14 million shares to Sloane Robinson, 5.3 million shares to Quantum and 13.95 million shares to State Bank of India (Equity). REUTERS |
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| Animations all set to storm film industry |
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| There is a cyclone brewing in India’s animation film industry, after Hanuman’ took the Indian film industry by storm. Many animations films are taking shape in studios, with big budgets riding on them and industry insiders claim that close to 10 such films will be ready for release in India in 2008.
Here’s a peek at what viewers can expect.
Yashraj Films Ltd in alliance with The Walt Disney Studios has finished 60 per cent work on its first animation film `Roadside Romeo’, slated for release in June 2008.
Shemaroo has also finished work on `Ghatothkach’, its second animation fim after `Bal Ganesh’.
Govind Nihalani is working on Kamlu’, h is f irst a nimation f ilm, and has lined up three other animation projects after that.
Apart from these big banners, a handful of other studios are also busy designing characters on their story boards.
Yash Chopra, chairman, Yashraj Films, said animation has a huge business potential and India needs some good products.
“We have seen the success of animations films. We have just stepped into this field and hope to give a good product,” he said.
Yashraj’s film will be a full fledged 3D animated feature film, with all the elements of a Bollywood flick. The lead character is a dog and it will have the usual masala expected from that banner.
So, Mr Chopra explained, “We will have everything like songs, romance, fights etc like a Bollywood film. Jugal Hansraj is directing the film.”
While he declined to give investment details, he admitted the amount involved is “huge.” The likes of Kareena Kapoor, Saif Ali Khan, and Javed Jafri will give their voices to these animated characters. Though Mr Chopra was cautious, saying Yashraj’s future animation projects will be decided after the release of `Roadside Romeo’, it is learnt that the tie up between Yashraj and Walt Disney extends to more films in the series.
Goving Nihalani, the director known for critically acclaimed films like `Dev’ and `Thakshak’, has also turned to animation and is currently concentrating on his forthcoming 3-D animation film `Kamlu’. This is the first of four animation films he has lined up. Mr Nihalani said he is investing close to US $ 3 million (about Rs 12 crore) in his maiden animation film, `Kamlu’, with a promise of making it something big and giving something for everyone.
“I am working on the pre production of the film. It will not be just another animation film. It is an area very close to my heart. I want to make something worthwhile. And this is not just one film, I have three more animation films lined up after that. I will start working on them soon after `Kamlu’ is done,” he said.
Indications are that the film will have four songs and will be released in Tamil, Telugu, Hindi and English at the same time. Mr Nihalani expects to release the film by end 2008.
Shemaroo Entertainment’s Ghatothkach’ is set for release soon. Atul Maroo, managing director, Shemaroo, said they have invested Rs 15 crore in this venture.
“We got a good response for our first animation film, `Bal Ganesh’ and our second films is set for release soon. After this, we hope to make two animation films every year,” he said.
Singeetam Srinivasa Rao, who directed the silent film `Pushpak’, starring Kamal Haasan, has directed Ghatothkach’. Sunanimatics, who partnered Shemaroo for `Ghatothkach’ is also working on three other films called ‘Eshan- the legend of Bhairav’,
‘Romeo’s Ronnie & Juliet’s Jennie’ and an untitled movie based on gaming.
Mumbai based Graphiti Multimedia, led by Ram Mohan who is regarded as the father of India’s animation film industry, is developing two animation films that are being produced by Turner, a Time Warner Company and by Anubhav Sinha, the director of the recent Hindi film `Cash’.
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| Market offer norms may be relaxed for power PSUs |
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| POWER sector public offers are all set to hit the markets in a big way in coming months with government considering a proposal to allow all power PSUs to enhance their equity base through initial public offers (IPO) and follow on public offers (FPO) and raise in excess of Rs 60,000 crore over next four years. The move is aimed at meeting the equity shortfall for the power sector that is estimated to be in excess of Rs 1,80,000 crore during the Eleventh Plan (2007-2012).
The proposal to relax market offer norms for power sector PSUs has been favoured by a sub-committee of group of ministers on financial issues. The committee’s recommendations are expected to drive the policy guidelines for power sector during the current Plan. The prime minister’s office has mandated the GoM to suggest measures to bridge the funding gap for the sector.
As per the proposal, which would first have to clear the Left’s scrutiny, profit making PSEs like NTPC, Power Finance Corporation (PFC), Rural Electrification Corporation (REC), Power Grid Corporation (PGCIL), NHPC, North Eastern Electric Power Corporation (Neepco) etc would be encouraged to mobilise funds to the tune of Rs 60,000 during Eleventh Plan through IPOs and FPOs. While doing so, the committee has suggested, PSEs would have to ensure that government of India holding is not brought below 51% mark.
While power sector PSU NTPC has already tapped the market through IPO few years back, PFC and Power Grid Corporation’s (PGCIL) IPO were launched this year. Initial offers of two other PSUs - REC and NHPC - are expected to hit the markets soon. NTPC is also planning a FPO to raise resources for its expansion programme.
If the committee’s proposal is accepted, these PSUs would be permitted to tap the market at regular intervals over next four years to mobilise resources for carrying out ambitious expansion and modernisation programmes. The IPOs of three PSEs - NHPC, REC and Power Grid are targeted to mobilise a mere Rs 6,000 crore. This is considered too low for the requirements of the sector.
The committee is also considering a proposal that would allow transfer of proceeds from sale of government equity in a power sector PSE to a separate power fund. This would then be utilised for funding power sector projects. This would, however, require separate approval from the finance ministry that has set up a National Investment Fund (NIF) to park disinvestment proceeds.
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| Cadbury puts India among top 12 global markets |
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| THERE could be a lot more sweet moments for Indian consumers. The UK-based chocolate, confectionery and beverages major Cadbury Schweppes has identified India among its top 12 focus markets globally, in an announcement made last week.
Under a new management structure which would emerge following the proposed demerger of its beverages arm Americas Beverages into a separate company, the Cadbury Schweppes management announced last week that its commercial strategy would hinge on ‘fewer top markets and brands’.
The Rs 1,058-crore Indian subsidiary, along with the UK, US, Australia, Mexico, Brazil, Russia and Turkey, now represents around 70% of Cadbury Schweppes’ global revenues. This, despite beverages brands such as Schweppes, Snapple and Dr Pepper not having a presence in India. The 12 core markets have been forecast to account for growth in excess of 60% over the next five years.
Cadbury India, growing in double digits the past two years, has forecast a healthy 2007 riding on the back of factors such as sharper focus on core brands, product rationalisation and working closely with trade channels.
The Indian subsidiary, which now operates under five categories –- chocolates, snacks, beverages, candy and gums being the newest, is learnt to be in the process of pushing products in categories other than chocolate where it is a dominant player. Of Cadbury Schweppes’ 13 focus brands clocking above average revenue growth and operating returns, two are in India as of now — Cadbury Dairy Milk and Halls.
But sources say it’s a matter of time before Cadbury India brings brands such as Trident and Dentyne gums, and Flake chocolates into India, Trident being the front-runner. The 13 focus brands make up for over 50% of Cadbury Schweppes’ confectionery revenues.
With Cadbury Dairy Milk, Five Star, Perk and Celebrations in its portfolio, the company leads the Rs 1,500-crore organised chocolate market with a 72% value share as per AC Nielsen data. However, it trails rivals in other categories. In beverages, for example, Cadbury’s Bournvita occupies second slot behind Glaxo Smithkline’s Horlicks. Its other beverage brand, Delite, was pulled off shelves following weak offtake. The company recently re-entered the gums category with Bubbaloo. Its earlier foray in chewing gum through Bilkul did not work and the brand was subsequently discontinued. In snacks, Cadbury has one brand — Bytes — as of now, and its candy basket has two brands — Halls and Eclairs.
At the global level, the demerger process separating the beverages arm from confectionery is expected to be completed by the second quarter of 2008. It will result in the formation of two companies — Cadbury plc holding the Group’s confectionery business, and CSAB Inc which will hold the Americas Beverages business. Elaborating on its decision, Cadbury Schweppes announced: “To help drive further revenue growth under a new category management structure, we are focusing our resources on fewer number of markets, brands and customers.
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| SIDBI signs MoU with Ludhiana Tools World Bank Backs Move To Provide Green Tech To SMEs |
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| SMALL Industries Development Bank of India (SIDBI) on Monday signed a memorandum of understanding (MoU) with Ludhiana Hand Tools and Forging Envirocare Pvt Ltd. The latter is a special purpose vehicle (SPV) floated by SME units in Ludhiana's steel forging cluster. This is a part of SIDBI's vision to enable SMEs embrace green technologies and facilitate environmental protection.
The World Bank has given its backing to this initiative by agreeing to purchase 9,90,000 CER units from the SPV. The bank is also helping the SPV in the development and implementation of the CDM project. Around 300 SMEs are expected to benefit from the project.
The MoU was signed in the presence of R M Malla, Chairman & Managing Director, SIDBI, and Charles Cormier, Team Leader, Energy & Environment, India, World Bank.
As per the MoU, SIDBI will collaborate with the SPV to provide financial assistance to SMEs participating in the clean development mechanism (CDM) project being implemented at the steel forging cluster in Punjab.
SIDBI-Ludhiana SPV combine will encourage SMEs to take up energy saving initiatives. Energy thus saved would reduce carbon dioxide emissions and result in accrual of CER units. This would make SMEs eligible for revenues through sale of CER. The SPV's role would be to bundle the CER accruals and provide other services to the units. Speaking on the occasion, Malla said "With global warming becoming a prime concern area worldwide, we are proud to be facilitators of this "green initiative SIDBI has been trying to provide innovative solutions to SMEs and that we are happy to be their integral partner for the energy saving initiative in the Ludhiana CDM project."
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| Ranbaxy to shed 60% stake in hived-off research company |
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| RANBAXY Laboratories may dilute up to 60% stake in its new research company, which will be formed by hiving off its R&D unit in 2008. “We are looking for an investor willing to pick up either a 40% or a 60% stake in the new research company, according to the valuation we are able to get,” said Ranbaxy R&D president Dr Himadri Sen. This may be a pharma company or a private equity fund, he added.
The shape and strategy of Ranbaxy’s much-talked-about hived-off research entity is also becoming clearer. The company is planning to start a Contract Research Organization (CRO) under the ambit of its new entity. This will include Ranbaxy’s ongoing collaborative research programmes with UK drug giant GlaxoSmithKline (GSK). But it will also seek new ones with other global pharmaceutical companies.
While drug discovery services will be provided by Ranbaxy’ new research company, clinical trials will be conducted by Fortis Healthcare, a Ranbaxy promoter group company, said Dr Sen. The new entity will also conduct bio-equivalence studies for Ranbaxy’s generic drugs pipeline, for which it will receive a fee. “After the hive-off, the second step will be to acquire a CRO in the US or in Europe.” According to the US Food and Drug Administration (FDA), only 30-40% of clinical trials for a new drug can be conducted in India, said Dr Sen. Therefore, to conduct all the trials required for a new drug’s clinical development, Ranbaxy will need to set up operations in the US or Europe.
Ranbaxy is seeking a head for its new-hived off entity. Dr Sen will continue to look after research for the generic pipeline. Along with contract research services, the new research entity will continue to work on its own discovery research programmes. For this, it will seek external funding. Ranbaxy has a new malaria drug, currently in late phase-II trials in Africa, Thailand and India, and 8-10 experimental drugs still in the early stages of development. The company is looking for external funding to develop these molecules. According to industry estimates, it costs $800 million to $1 billion and takes 10-12 years for a drug to hit the market.
Ranbaxy had announced last month the spin-off of its R&D division, in a bid to de-risk its core business. “The move may allow the company to decrease its annual R&D spend by 30%,” said Dr Sen. Ranbaxy spent Rs 386.3 crore (recurring expense) towards development of its generic and new chemical entity (NCE) pipeline in 2006 compared to Rs 486.4 crore in 2005. R&D capital expenditure stood at Rs 97.5 crore and Rs 153 crore in 2006 and 2005, respectively.
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| Punjab to set up export division for farm items, says Kanwaljeet |
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| Jalandhar: Co-operation minister Kanwaljeet Singh said on Sunday that Punjab would set up an export division to promote marketing of farm goods and food items produced in the state.
Singh, who was presiding over a function to mark 54th Co-operative Week celebrations here on Sunday, told newsmen that there was immense potential for export of items produced by various organisations like Markfed. During his recent visit to Europe, he had observed that products of Markfed were in great demand in those countries, giving stiff competition to world class food products.
“That’s why we have decided to explore the world market to realise the potential of our goods for which an export division would be set up,” Kanwaljit Singh said. Talks were on for a tieup with European Union for export of items produced in the state and an announcement in this regard would be made soon, he said.
Blaming the previous government for weakening the co-operative movement in the state, the minister said the department was sleeping over in the past but it has now waken up and would achieve new heights soon. “There’s high scope for profitable ventures in this sector but it needs to be channelised properly,” he said.
Farmers of the state were not aware of how to achieve high profits and the co-operative department was not doing anything in this regard. “But now, we will ensure proper marketing of agricultural produce of the farmers to make them prosperous,” Kanwaljeet Singh said. Earlier, the minister inaugurated Mai Bhaago Istri Shakti Scheme for socio-economic welfare of women of the state.
Addressing the gathering, he said the Akali-BJP government was committed to the welfare of women and and making them self-reliant. The scheme would be reviewed after an year and best-performing co-operative societies would be honoured by the state government.
He also announced that 11-member teams at block, district and state levels would be constituted for successful implementation of the scheme.
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| Implement reforms for textile sector soon: Assocham |
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| • NEW DELHI: Industry body Assocham has said reforms proposed for the Indian textile industry, battling rupee appreciation, should be implemented without further delay. The textile industry, braving various odds, would be able to attract investments of $55 billion, create job opportunities for 65.4 million and grow annually at 22% by 2010 if the reforms proposed for the sector are initiated at a faster pace, the chamber said in a release. In a study on Indian Textile: Weaving a Global Spin, the chamber said if current bottlenecks are not removed, investments in the sector could fall to $16 billion and only 19 million jobs would be created against the projections for 2010. |
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| Walt Disney to target Indian tweens to capture market To Focus On Local Content & Add Regional Langu |
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| IN AN attempt to become the market leader in the Rs 200-crore kids television space, kids channel Walt Disney will focus on strengthening its presence in the 8-12 age group from a vast pool of 4-14 years that watch its channels. The company’s new managing director for India, Antoine Villeneuve, said he will focus on local content and add more regional language feeds to its channels.
“We consider the age group 8-12 years or the tweens as our target group, even though kids between 4-14 years watch our channels. Our various studies show that the target 8-12 age group has an opinion and influence their parents considerably,” said Mr Villeneuve. Talking about the change in the company’ strategy, he said since June, the company is focusing on reality and live action content. “That’s a change. Earlier, we concentrated on animation.”
The company which has English and Hindi feeds for its flagship brand Disney plans to add more regional languages feeds to its three channels. “Our channel Jetix started doing well after we launched it in Telugu and Tamil. Getting local does not mean merely acquiring local content, it also means packaging international content with a local flavour,” he said.
According to the buzz in the market, Walt Disney India, like in international markets, is looking at spinning off its pre-school show Playhouse Disney on Disney channel, into a separate channel. “I foresee segmentation in the kids space. We have Playhouse Disney as a separate channel in other markets. We may consider it in future. But as of now, we are concentrating on our current portfolio,” he said.
Walt Disney India has three channels in its portfolio namely Disney, Jetix and Hungama. While Disney is targeted at the 8-12 age group, Jetix is targeted at boys between 6-11. Hungama, which Walt Disney India acquired from UTV last year, is targeted at the 4-14 age group.
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| Foreign entities dealing in Indian shares liable to pay cap gains tax here |
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| IN A decision that may boost the incometax department’s chances of bringing the $11.1-billion deal between Hutchison International and Vodafone into the tax net, the Authority for Advance Rulings (AAR) has held in a similar case that transaction of Indian shares between two foreign entities is liable for capital gains tax in the country. AAR is a quasijudicial authority deciding on tax disputes.
AAR’s ruling on Friday pertains to dealing of shares in the Hyderabad-based Trinity Corporation. In this case, the buyer and seller of Trinity shares were both US entities. AAR ruled that the buyer of the shares will be taken as an agent’ under Section 163 of the Income-Tax Act. It also ruled that the onus of TDS is also on the buyer under Section 195 of the Act.
In other words, AAR ruled that the buyer of the shares is liable to pay capital gains tax on the transfer of shares of an Indian company even if the transaction is offshore and between two non-residents.
The decision, though binding only on the case that came up before it, however, has persuasive value on similar cases. Non-residents are charged long-term capital gains at the rate of 20% for off-market transactions. AAR has upheld the I-T department’s stand on the ground that since the capital gains are generated in India, they are liable to be taxed here.
In the case of the Hutch-Vodafone deal, a showcause notice has been served on Vodafone Essar, asking why the company should not be treated as an agent of Vodafone under the Income-Tax Act. After this, Vodafone Essar had moved the Bombay High Court for quashing the notice. In the case of Hutchison, the company took a stand that since the transfer of shares had taken place outside India between two non-residents, the Indian tax authorities could not levy capital gains tax.
According to Vodafone Essar, the shares were transferred directly from Hutchison International via CGP Investment (Holdings), which is incorporated in the Cayman Islands, to Vodafone. Besides, the companies that control Hutchison Essar (HEL) are based in Mauritius, which has a double taxation avoidance agreement (DTAA) with India. The Bombay High Court, which was hearing the case of Vodafone International, had made a curious observation on this issue. The division Bench comprising Justice FI Rebello and Justice Deodhar observed that the deal as claimed by Vodafone International is not a simple case of a transfer of shares between two foreign companies.
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| India climbs to 15th spot in global ad rankings |
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| India has moved up six notches — from 21 to 15 — in the list of countries with the highest advertising awards, according to the Gunn Report of 2007. India has moved ahead of China, New Zealand, Mexico and South Africa, among others, to notch up a total of 39 points for award-winning campaigns in print, TV and interactive. In addition, the HappyDent Palace, one of the most awarded commercials from this year, made it to the top 10 most awarded commercials in 2007. The Gunn Report is an annual rating of creative work based on the awards won by advertising agencies in nearly 60 different award shows. The country with the most awarded advertisements is the US, which nudged ahead of the UK in 2007 |
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| IT industry eyes SMEs for expansion |
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| New Delhi: While the domestic market for Indian IT industry is logging into big times with nearly 28% growth per annum, the IT industry is now chalking out plans to expand their base in the SME sector. Since it’s the fastest growing segment in a developing economy and has a critical impact on regional dispersal of industries, promoting entrepreneurship and employment generation. Having realised their potential, the IT industry is now working towards spreading IT adoption through the softwareas-a-service model (SAAS).
‘‘Under this model, IT will become like a utility service just like cable TV or power supply across the SME segment,’’ says Rajdeep Sahrawat, V-P, Nasscom. The model is already successful abroad. There companies pay for IT systems based on usage, just like they pay for utility services. Experts say, this model will be able to take care of the IT needs of the SME sector. It will be affordable and payments can be made on a monthly basis. This will make it simple and hassle free to use.
Nasscom is in the process of identifying SME clusters and plans to take SAAS forward through manufacturing associations and big IT players. ‘‘We plan to create 8-10 reference sites in the next 18-24 months,’’ Sahrawat says. And this will be done with the help of the local state government and big IT players.
The problem is although the Indian SMEs are willing to invest in IT, adoption is still very low. This has emerged from a yet to be released study by Nasscom and ACMA on IT adoption in the Indian automobile component manufacturing sector.
Hence, Nasscom is gearing up to accelerate IT adoptions among SMEs. It has already partnered a pilot project with Satyam Computer Service in Mallapur, an industrial cluster in Hyderabad. The IT company provides the application platform, host and maintain it, and also provide end-user helpdesk support. The SMEs will only need an Internet connection and a browser to plug in and operate the system, says Subu D, Director and Senior VP, Satyam Manufacturing and Automotive Business.
Another similar project has been piloted by Nasscom with Tatas in Adityapur industrial cluster near Jamshedpur.
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| M&M to expand Punjab Tractors, pump in more funds |
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| "IF anyone told us that we were not investing up north, in the last 12 months, we have been investing in Punjab," a delighted Keshub Mahindra, chairman of Rs 3,000-crore Mahindra & Mahindra Group, told his guests at the ground-breaking ceremony of its first SEZ at the Chandigarh IT Park.
That's not the only good news that Keshub Mahindra brought with him. After acquiring a 64.6% stake in Mohali-based Punjab Tractors Limited (PTL), he revealed that M&M is planning to pump in more funds in the company.
"We have already invested Rs 1,500 crore in PTL and we are looking forward to expand it. There will be pockets of investments. There will be expansion in the foundry side, utilization of capacity et al. We will pump in a couple of hundred crore over the next few years," he added.
Not specifying the amount of additional investment, Mahindra added that Rs 35 crore is being invested in the Mohali-based foundry as part of the first leg of expansion and investment. The focus would be on developing new tractors for the export market, overall product development, strengthening sales and marketing, business process reengineering and talent management.
Having another tractor plant in Rudrapur that has a higher production capacity than PTL, M&M is keen on keeping the brand name of PTL intact. "There are no thoughts of changing the brand name at the moment and we would like to keep the brand as such since it already has a sizeable market," he adds.
Considering the group company's inclination towards the IT sector in Chandigarh, Jaipur and Noida-an SEZ with IT components in each- the group is focusing on creating an employable talent pool.
"The nature of the IT industry is that if you look at any good IT company's balance sheet, it is making profits 30-40% on sales. Rupee appreciation and declining revenues from exports may make their margins go down to 20% but they'll survive. It does not need a special economic environment, it needs employable skills. There is tremendous shortage of what I call employable intelligence. There are hundreds of engineers but they are not worth employing. That's why we have our accent on updating education," says Mahindra.He added that the strategy to address the shortage of skilled manpower will be either by setting up new universities or accepting the offer by Governor of Punjab, Gen (retd) SF Rodrigue of partnering with existing educational institutions in Chandigarh.
The governor has proposed M&M to partner with citybased premier educational set ups like Punjab Engineering College and existing 132 private schools on a long-term basis. ET has learnt that the group is planning to launch Mahindra Institute of Technology across five locations in India. According to sources in the company, Mahindra Institute of Technology will be an independent entity, funded by the group. The MITs will be set up in key cities including Chandigarh, Jaipur, Pune, Chennai and Goa.
The group is reportedly in talks with Carnegie Mellon University for an international collaboration. Mahindra says, "We're looking at it. It's an expensive proposition since each university would cost no less than Rs 70 crore."
According to sources, 10-12 acres of land would be given to M&M for the university in the Education City project in Chandigarh. While in Goa, 50 acres of land has been finalized
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| Dragon pales before India’s giants Net Worth Of 4 Richest Indians Tops Total Wealth Of China’s 40 Ri |
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| INDIA Inc’s bulge-bracket bosses are now the richest in Asia as well. The net worth of the four richest Indians—Lakshmi Mittal, Mukesh Ambani, Anil Ambani and KP Singh—now exceeds the combined wealth of China’s 40 richest. According to Forbes, had these four been worth as much in March, when it published its annual list of the world’s billionaires, they would have ranked among the world’s 10 richest.
The big four’s combined net worth stands at $180 billion based on the stock market prices of their companies and exchange rates as on November 2, 2007, according to Forbes. Last month, Forbes had pegged the combined net worth of the 40 richest Chinese at $120 billion as against $628 billion of the 40 richest Americans.
Buoyed by the sky-rocketing stock market valuation of companies and appreciation of the rupee against the US dollar, the aggregate net worth of India’s 40 richest has more than doubled from $170 billion to $351 billion in the past one year.
As many as 29 of the 40 in the Indian rich roster saw an increase in their fortunes last year
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| Steel utensil cos shift production from Maharashtra |
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| THE stainless steel utensil makers in Maharashtra, who contribute to almost 70% of the country's total production, are steadily shifting production out of the state due to steep power and octroi rates.
Almost a third of the small scale units that make utensils for kitchen use have decided to shut their plants in Maharashtra and shift to neighbouring states like Gujarat and Rajasthan to avail of better facilities, said a senior industry executive.
There are over 5,000 such steelmaking units in Mira Road and Bhayandar and an additional 3,000 units in Vasai, Goregaon and Mulund that make utensils and other products.
Bhayandar Stainless Steel Manufacturer and Traders Association president Hiten Gada told ET: “The Mira-Bhayandar Municipal Corporation earns nearly 60% of its revenue from this (stainless steel) industry but they are not willing to give us any incentive. This industry has a revenue totalling about Rs 1,440 crore annually. Nearly all states in India have dismissed octroi tax but in Maharastra all industries are subjected to that,” he said, adding that this was the main reason for the units to shift production.
Since the units are in the unorganized sector, it is difficult to get the exact number.But it is learnt that about 30% units have closed down here and have started manufacturing at Ahmedabad and Sarigam in Gujarat and to Jodhpur in Rajasthan. Since majority of the unit owners belong to the Gujarati, Marwari and Kutchi communities, they also prefer moving to their respective states.
The industry employs over 25,000 people. “If the state government doesn't abolish octroi tax, then all these units will go to Gujarat and Rajasthan as there is no octroi tax and infrastructure such as electricity, water and land for production is better and cheaper compared to Mumbai,” said Subhas Shah, a key member of the association.
He further added that since small units rely on bigger companies for metal scrap, the small-scale units are forced to follow the larger ones, majority of which have already been shifted to Gujarat.
Another manufacturer, on condition of anonymity, said since India is a major exporter of utensils to South Africa, America and to the Middle East, moving production to Gujarat has its benefits as the state has manufacturing and export SEZs such as like Mundra and Kandla.
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| Global revenues push Genpact net up by 27% |
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| GENPACT, the country’s largest BPO, reported a 27% growth in net profit for the quarter ended September 30, driven largely by rise in global client revenue. The company’s net profit for the quarter grew to $16.3 million (Rs 64.26 crore) and revenues rose 32% to $214.6 million (Rs 846 crore).
The company also raised its full-year revenue outlook on strong client demand. It said it anticipates revenue growth between 30% and 32%, up from its prior forecast for growth between 28-30%.
Net profit margin for the third quarter decreased slightly to 7.6% from 7.9% in the third quarter of 2006, primarily due to certain tax charges, Genpact said in a statement.
Global client revenues grew 78.6% in the quarter compared to the third quarter of 2006. Revenue from GE increased 10.6% in the quarter. Global clients represented 43% of total revenues for the quarter.
“Our results reflect the strength of client demand, especially from global clients, driving our delivery centre growth in India where we continue to expand in both tier-I and tier-II cities, and growth in Europe and Asia-Pacific where multi-national clients require support in multiple locations and many languages. Approximately 75% of our revenues for the yearto-date are coming from our India operations,” said Genpact president and CEO Pramod Bhasin.
Genpact had 31,700 employees worldwide as of September 30, an 8% increase from the second quarter of 2007. Year-to-date global attrition has been reduced to 29% from 32% in 2006. Despite the mortgage and credit market turmoil in the United States, there has been no significant adverse impact on Genpact’s overall results. “Genpact’s mortgage services business has seen a small revenue decline as processing volume has diminished from clients but revenues from its mortgage services business do not impact Genpact’s overall performance and has been more than offset by growth in other areas,” the BPO firm said in its statement.
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| Gail eying global pipeline projects |
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| AFTER losing its near monopoly in the domestic gas pipeline business after the new pipeline policy was announced, public sector company Gail India (Gail) is now seeking participation in international gas pipeline projects. Besides the three transnational projects from Iran, Turkmenistan and Mynamar to India, the company is learnt to have been interested in picking up stakes in pipelines in Libya, Algeria and Nigeria.
Confirming the development, Gail chairman and managing director U D Choubey said: “We are seeking equity in trunk gas pipeline projects overseas. The Libyan government has recently called for expressions of interest (EoI) for a pipeline project and we have indicated our interest. We are also keen to be part of the $13-billion gas pipeline from Nigeria, Algeria to European markets.” However, he declined to comment on how much Gail would invest in the ventures.
Algerian company Sonatrach and Nigerian national oil firm Nigeria National Petroleum Corporation are also likely be part of the trans-Sahara pipeline project. Nigeria and Algeria are looking for international partners to fund this project. It is believed these pipelines would be built by the consortium and individual stakes will depend upon the EoI from various players.
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| Govt hopeful of revival in industrial growth |
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| THE government on Wednesday expressed the hope that industrial growth will bounce back with the revival of manufacturing sector in the coming months.
“I am hopeful manufacturing sector will revive in the coming months,” commerce & industry Minister Kamal Nath said.
Growth in the country’s industrial production nosedived to 6.4% in September this year compared to 12% in the year ago period due to a poor showing by the manufacturing sector, especially the consumer durables segment.
“The decline is mainly due to a weak dollar against the rupee and the higher base of last year,” Nath said on the sidelines of the CII Health Summit here.
Finance minister P Chidambaram had earlier stated that it was too early to judge a trend.
“I loathe to draw conclusion from a month’s data but overall services and industry will grow perhaps close to 10% this fiscal,” Chidambaram had said.
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| India, China set to cross $30 billion trade: Envoy |
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| • NEW DELHI: India and China are confident of surpassing $30 billion in bilateral trade this year, Chinese ambassador to India Sun Yuxi said here Wednesday. “Bilateral trade has already crossed $27 billion. We will easily achieve $30 billion trade by 2010,” he told reporters while stressing that the two countries would achieve the 2010 target of $40 billion earlier than that. The Chinese envoy, however, sounded ambivalent about Beijing’s position on the India-US nuclear deal in the 45-nation Nuclear Suppliers Group (NSG). “Let’s see the changes in India first,” he replied, when asked whether there was any change in Beijing’s stance on the nuclear deal. He was referring to domestic problems the landmark nuclear deal has run into in India due to a stand-off between the Indian government and its Left allies. China, an influential member of the NSG, has been noncommittal towards supporting India in the grouping but has indicated that it will not stand in the way of New Delhi’s way when the deal comes to the nuclear cabal for approval. He was equally ambivalent about China’s stand on India’s bid for an expanded Security Council seat. “We want India to play a larger role in the world,” was all that he would say. |
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| Tech Mahindra looks overseas for development centres Rajiv Gandhi Campus To Employ 2,500 Professiona |
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| GOING with the existing trend in the IT industry where companies like IBM and Infosys have chosen locations in South-East Asia to set up development centres, Tech Mahindra is also taking the plunge. Tech Mahindra, continuing its expansion within India and overseas, is looking at East Europe, Latin America and the Philippines for setting up new software development centres.
Tech Mahindra has recently set up its software development centres in the UK at Milton Keynes and at Belfast in Northern Ireland. "If development costs go up here we will naturally look at avenues abroad. However, at this juncture, there is nothing in the offing," said Tech Mahindra VC& MD, Vineet Nayyar.
With Rs 200 crore worth investment slated to come up in the Rajiv Gandhi Chandigarh Technology Park(RGCTP) in the Tech Mahindra campus alone over the next 2-3 years, Tech Mahindra has a reason to smile.
The company has witnessed a phenomenal growth in the past 2-3 years with turnover in the first half of 2007-08 zooming past $431.7 million as against $270 million in the previous corresponding period. During 2006-07, the company had achieved a turnover of $648 million as against $280 million in the previous year. With a defined presence across the globe, Tech Mahindra services customers across the Americas, Europe, West Asia, Africa and the Asia-Pacific region.
Nayyar told ET here today that the company expects software exports to rise substantially during the second half of the current fiscal and the company in the first phase would inject a sizable part of the proposed investment of Rs 200 crore in the RGCTP campus to be spread over 15 acres of land and employ 2,500 IT and engineering professionals.
The entire investment will be funded through internal accruals, he said. Foundation stone of the state-of-the-art campus was laid here today by Punjab Governor and Chandigarh administrator Gen S F Rodrigues. The campus will seat 5,000 professionals.
He said the RGCTP complex would eventually be made into a major hub in the region and this will enable the company to participate in the techno economic development of the region as well.
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| Chill in Europe may heat up India’s carbon credit market Rise In Emission Will Force Countries To Bu |
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| New Delhi: A severe winter in Europe this year will mean business worth millions of dolars for Indian companies. Surprised? Welcome to the global trade in carbon credits.
Here’s how it works. If Europe faces a severe winter, the oil and gas it will consume for heating is bound to rise. If the energy consumption goes up, so will greenhouse gas emissions. And with European countries having fixed targets for emis-sions under the UN-mandated Kyoto Protocol, they would have to buy more carbon credits from developing countries to offset the increased emissions.
For carbon traders in India, the stakes are high. India is the global market leader having already generated 29 million carbon credits and has another 139 million in the pipeline for sale. With each credit currently selling for 10-17 euros, carbon traders in the country are praying for the cold to settle over Europe so that they get a bigger portion of the global carbon pie for their clients. These carbon traders work for myriad projects among steel and cement manufacturers, hostels, hydroelectric stations and even temples. India, along with China, is one of the largest suppliers of carbon credits in the world.
‘‘A chill in Europe will heat up the Indian carbon market. The prices should, see a short-term rise,’’ said Ram Babu, managing director of CantorCO2e India Private Limited, one of the biggest multinational players in India’s carbon market. ‘‘It’s a simple principle of demand and supply. If their demand goes up, there is bound to be a short-term spike in prices,’’ he added.
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| Revenue matters irk industry |
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| Jalandhar: Steps by the ruling coalition government to increase revenue collection in the state have started meeting with resistance from various quarters, including industry. As the SAD-BJP alliance had been promising succour for them during assembly elections, these sections have now started raising their voice against state government attempts to find ways to fill its coffers.
The industry is opposing particularly the hike in basic minimum price for registration of plots in industrial focal points, 4% entry tax on various raw material goods and revision in security deposit for power connections. It has alleged that the price now pegged was almost double than the actual market price.
Raising the issue, general secretary of Jalandhar Chamber of Commerce and Industry, Charanjit Singh Maingi, said that steps being taken by the state government was
pushing the industry to the wall which was already at an disadvantageous position as compared to Himachal Pradesh where various relaxations had been given by the Union government. Decisions now being taken by the state government were in clear contrast to the announcements by the alliance prior to elections, he said.
AK Kohli, senior vice president of Punjab Chamber of Small Exporters, said that 4% entry tax on iron and steel, including scrap dyes, chemicals, yarn and other material, would further increase the input cost for the industry in Punjab which was already facing high cost of production due to locational disadvantage with regard to raw material.
“Iron and steel were already costing high here due to heavy transportation cost and the 4% entry tax would add insult to injury,” he observed.
Maingi also said that, before elections, SAD president Parkash Singh Badal had promised that SAD-BJP government would give interest on securities charged by PSEB.
But now, instead of giving interest, the State Electricity Regulatory Commission has decided to take security equivalent to consumption charges for 2 months from industry and 3 months for residential connections from January 1, 2008. This would put an extra burden on the industry, he said.
Also, while Gadaipur was declared industrial zone, the industrialists have now been told that PSEB did not have capacity to give electric connections as all feeders of Focal Point, Gaushala and Tanda Road were running overloaded, Maingi added.
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| Devising a new tool for power sector Domestic Electrical Equipment Manufacturers Need To Be Equipped |
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| TO MATCH the mega investments in power generation being planned, there should be a boom in power equipment sector. But the Indian transmission and distribution (T&D) electrical equipment industry, which reported a 20% growth in quantity and 35% in value in 2006-07, continues to be entangled in regulatory uncertainties, posing a serious threat to the plans to add a record 78,000mw capacity addition in the 11th Five-Year Plan.
India, which inherited a little more than 1,300 mw at the time of its independence in 1947, today has an installed generating capacity of around 1,14,000 mw. In the last 60 years, the government’s interest in adding power was not consistent. Similarly, the transmission and distribution sectors also pulled back due to the lack of initiatives from the government. The electrical equipment makers were totally in dark as they were not sure about the plan of the major investor in the sector — the central government. Thus they delayed their expansion plans.
“The power sector was not getting consistent support from the government. The transmission projects such as Accelerated Power Development and Reforms Programme (APDRP) and Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) have been delayed as the government has been slow in sanctioning fund. Thus, the companies have lost confidence to invest heavily in the equipment manufacturing,” said Indian Electrical and Electronics Manufacturers Association (IEEMA) secretary general Sunil More.
APDRP and RGGVY are being implemented by the government with a view to improving the transmission and distribution systems in the country. This, along with the restructuring of the distribution sector in the states, has led to an increased demand for downstream products such as meters, power factor correction devices, distribution transformers and switchgear.
Despite the repeated requests from various organisations and institutions in power sector, the government has not yet awarded infrastructure status to the transmission sector. The status will mean lesser tax burden for companies in the sector. Currently, roads, ports and airports, which have the infrastructure status, are enjoying income-tax concession under section 80 1(a) of the I-T Act.
Unfortunately, some of the electrical products for the power industry falls under the Packaged Commodities Act. As these products are not directly used by consumers, the system creates operational problem. Under the Act, it is mandatory that the products should be packaged, weighed and priced. The additional efforts will increase the cost of the products, said an official in a power equipment company.
As India has free trade agreements with countries such as Thailand, Nepal and Sri Lanka, the electrical equipment can be imported from these countries at zero duty. Indian companies, without the benefit of tax waivers, are facing unfair competition from the products imported at zero duty. The government has already noticed re-routing of electrical products through the countries with agreements to claim zero duty.
“Our duty structure is still not streamlined. In addition to the excise duty, we have central and state taxes such as sales tax, octroi and entry tax, which make Indian products expensive and uncompetitive,” said Mr More.
“The well-conceived APDRP programme and passing of Electricity Act 2003 have provided a ray of hope to the industry. Almost all sectors of electrical equipment industry are indicating fast growth now. The Rs 50,000-crore Indian industry is now finding a good response for its products in the international markets. The companies are improving the design and capabilities of Indian products to make them more worldclass,” said IEEMA senior consultant Avinash Barve.
The bulk transmission infrastructure in the country has increased to more than 300,000 km now. For supporting the generation growth plan and the ambitious mission of the government ‘power for all by 2012’, the electrical equipment industry needs to be equipped with the support of policy changes
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| IBM to buy Canada’s software firm Cognos for $5 billion |
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| INTERNATIONAL Business Machines (IBM) said on Monday it would buy Canada’s Cognos for $5 billion, snapping up the last major independent maker of business intelligence software.
Investors had expected the deal after SAP bid $6.8 billion for Cognos rival Business Objects in October and Oracle bought Hyperion Solutions in April for $3.3 billion.
All three targets make software that combs through vast amounts of data to analyse business trends. For example, Harrah’s Entertainment uses one Cognos programme to keep frequent gamblers coming back to its casinos. Automaker BMW runs a package that creates product quality and human resources reports.
IBM said it signed an agreement to buy Cognos for $58 a share, a 9.5% premium to its Friday closing price of $52.98 on the Nasdaq. IBM expects the deal to close in the first quarter of 2008.
Cognos’ US shares rose to $57.15 in Nasdaq trading on Monday and have gained 27% since the SAP deal for Business Objects on October 7. IBM shares rose as much as 3.5% to $104.19 on the New York Stock Exchange before closing at $101.45.
“This is an effort by IBM to stay relevant in the software space,” said Rebecca Wettemann, an analyst with Nucleus Research.
Oracle, SAP and now IBM are investing in business intelligence software to boost the allure of their product portfolios. Such programs interface with databases sold by Oracle and IBM, as well as business management software from SAP and Oracle.
IBM senior vice president and group executive (software group), Steve Mills said he had been looking for several years to add business intelligence programmes to IBM’s products to offer more real-time and higherperformance analyses.
“We started looking at this set of issues a number of years ago,” Mr Mills told Reuters. “Our actions here were not per se triggered by the fact that other purchases have happened.”
Software is the fastest-growing and most profitable division of IBM, the world’s largest technology services company. IBM also uses software products to get customers to buy its consulting services and hardware.
Cognos, based in Ottawa, has about 4,000 employees and more than 25,000 customers. It is IBM’s 23rd acquisition. Investors have long speculated that the most likely buyer for Cognos was IBM, which has worked with Cognos for more than 15 years. They have integrated some of their technology to serve joint customers, such as the New York City Police, MetLife and Bayer UK.
An FBR Research report said IBM’s offer valued Cognos’ enterprise value — which is market capitalisation plus net debt — at 3.9 times forecast 2008 revenue. That compared to Business Objects’ 3.4 times under the SAP deal, and Hyperion’s 2.8 times multiple in the Oracle deal, FBR said.
“IBM is paying a slight premium to past deals, which we think is appropriate, given the higher-quality company it is buying,” FBR Research said, adding that it did not expect other suitors to step forward.
When asked about IBM’s deal for Cognos, SAP chief executive officer Henning Kagermann said at its investor day in Germany, “I would say it proves that SAP’s acquisition of Business Objects was a strategically important one.” IBM said it plans to integrate Cognos as a group within its Information Management Software division to be led by Cognos president and CEO Rob Ashe
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| NTC mills to be weaved into textile commercial complexes |
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| ABOUT 22-acres of NTC mill land in the prime Mumbai locations would soon be developed into textile-related commercial complex by Pantaloon, Alok Industries and Bhaskar Industries. National Textile Corporation (NTC) has signed agreements with the private firms for operating its four units in Mumbai and one in Aurangabad. The agreements allows private investors to utilise the surplus land for commercial purposes.
While Pantaloon would form a JV with NTC for its two properties — Apollo Textile Mills (3.93 acres) and Goldmohur Textile Mills (0.53 acres); Bhaskar Industries would develop India United Mills No 1 which has 10.74 acres of surplus land. Alok Industries has got the New City Bombay Manufacturing Mills with 6.7 acres of surplus land. Alok has also got one mill in Aurangabad with 16 acres of surplus land.
Confirming the move NTC chairman & managing director K Ramachandran Pillai told ET: “We have signed an in-principle agreement with the companies for forming the JV company where NTC would have 51% equity stake.”
“NTC would form a joint venture (JV) company for each of the five properties. The private sector partners would have the management control with 49% equity stake in the each JVs,” he said. Private partners would invest to modernise and develop these mills and would be able to commercially utilise the surplus land. NTC will not invest any money. Its investment is in the form of properties. The JV partners would also give a lump-sum signing amount to NTC. In total, it would get about Rs 100 crore for the five JVs.
According to a decision of the group of ministers on the issue, a JV partner can use the surplus land for commercial development, like malls, textile training institute or anything that is related to textile, garment or accessories. NTC had invited bids for all of its 16 mills across Maharashtra. However, it did not get any bidders for 11 properties. There were as many as 14 bidders, including Nitco and Soom Developers, for the Mumbai-based properties.
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| India represents new global force, says Brown |
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| RAPID emergence of India and China as global powers with legitimate aspirations is among the “new global forces” that are unique to our generation, British Prime Minister Gordon Brown said on Monday.
Delivering his first major foreign police speech at the banquet hosted by the Lord Mayor of London on Monday evening, Mr Brown said the new forces of global change were pressing upon the international community to discover common purpose in a globalised world.
He said: “(Global) flows of capital and global sourcing of goods and services have brought the biggest shift of economic power since the industrial revolution — the rapid emergence of India and China as global powers with legitimate global aspirations. The new frontier is that there is no frontier.”
Mr Brown went on to call upon Pakistan President Pervez Musharraf of Pakistan to restore the constitution and implement the necessary conditions to guarantee free and fair elections on schedule in January. He also wanted Musharraf to release all political prisoners, including members of the judiciary and human rights activists; to pursue “energetically” reconciliation with the political opposition; honour his commitment to step down as chief of army staff and relax restrictions on the media.
Calling for reform of international institutions such as the UN, World Bank and the IMF, Brown said that they were built for 50 sheltered economies in what became a bipolar world, but were no longer “fit for purpose” in an interdependent world of 200 states.
He said: “Long term but now also interim options must be examined to reform a UN Security Council — whose permanent members do not include Japan, India, Brazil, Germany, or any African country — to make the Council more representative, more credible and more effective.
“The G8 has to increasingly broaden to encompass the influential emerging economies now outside but that account for more than a third of the world’s economic output.”
Touching upon Britain’s key foreign policy aspects, Mr Brown sought to dispel the impression that unlike his predecessor, Tony Blair, he was not enamoured of the USA. After taking over as prime minister, there were suggestions that Mr Brown would seek to distance himself from Mr Blair’s overtly pro-USA tilt.
Mr Brown said: “It is no secret that I am a life long admirer of America. I have no truck with anti-Americanism in Britain or elsewhere in Europe and I believe that our ties with America — founded on values we share — constitute our most important bilateral relationship.”
Mr Brown proposed internationally agreed access to an enrichment bond or nuclear fuel bank to help non-nuclear states acquire the new sources of energy they need. But this offer, he said, should be made only as long as the countries renounced nuclear weapons and met internationally enforced non-proliferation standards.
Mr Brown said: “And just as we will continue to be a leading nation in negotiating nuclear arms reductions, so we must be at the forefront of meeting the challenge of preventing nuclear weapons proliferation. And with more sophisticated after-the-fact detection of the source of nuclear materials there must be a determination to hold to account both active providers and potential users.
“My approach is hard-headed internationalism: Internationalist because global challenges need global solutions and nations must cooperate across borders — often with hard-headed intervention — to give expression to our shared interests and shared values; hard-headed because we will not shirk from the difficult long term decisions and because only through reform of our international rules and institutions will we achieve concrete, on-the-ground results.”
Mr Brown said that there was a “gaping hole in our ability” to address the illegitimate threats and use of force against innocent peoples. He said that it was to the shame of the whole world that the international community failed to act to prevent genocide in Rwanda.
“But if we are to honour that responsibility to protect we urgently need a new framework to assist reconstruction. With the systematic use of earlier Security Council action, proper funding of peacekeepers, targeted sanctions — and their ratcheting up to include the real threat of international criminal court actions — we must now set in place the first internationally agreed procedures to prevent breakdowns of states and societies.”
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| Weaving Success! Small sops won’t do; textiles need more |
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| THE recently announced sops — marginal increase in DEPB and drawback rates — can hardly reverse the declining trend in textile and garment exports. Nor would the commerce ministry’s comparatively more useful proposal to neutralise state-level taxes in export content, which the Cabinet is expected to consider shortly. Indian textile industry’s principal handicap is that its synthetic raw material base (prices) is globally uncompetitive. If this problem is squarely addressed, then the exporters would even withstand rupee’s appreciation to a considerable extent.
Traditionally, manmade fibres have been subjected to very high levels of tax in India. The upstream industry — the domestic producers of these industrial inputs — used to be ‘protected’ by abnormally high Customs duties. This had undermined the ability of the downstream users of these goods (textile and garment makers) to compete in the global market. Which is why India’s is a predominantly cotton-based (60:40) textile/garment industry, quite the mirror reflection of the world. This ‘skewed fibre mix’ has reduced India’s playing field in the US and the EU, markets which are synthetics-rich.
Recent years’ rapid increase in cotton output — thanks to the cotton technology mission and Bt cotton — has caused a revolution of sorts, further buttressing India’s global competitiveness in cotton-dominant cloth. (82% of Indian exports are now cotton-based). Last year, India emerged as the second largest producer and exporter of cotton (pipping the US in both cases), with production of 280 lakh bales (of 175 kg each) and exports of 55 lakh bales (lb). The cotton year that has just begun is estimated to be even better with production of 310 lb and export of at least 60 lb. Note that just four years ago, India exported just 1 lb and imported 25 lb of cotton. Now, India needs to import only 5 lb (which is almost entirely extra long staple variety which is not available domestically and used for production of the finest fabrics). Not only traders but also farmers have benefited out of this agricultural advance. But has the textile industry, the second largest employment provider in India? Looks doubtful.
First, the industry’s scope for expanding exports due to cotton advantage has been limited and even that was further circumscribed by rupee’s appreciation. In 60% of the US and EU markets (of synthetics-dominant cloth), recent years’ tax cuts have barely made an impact. And the strong rupee ensured it won’t.
The industry, however, clamours more about the adverse impact of surging raw cotton exports on its top lines and bottom lines than of the manmade fibre drawback. That is just because it is a more immediate problem than the long-lasting deprivation of global markets of synthetic textiles and garments which it is wont to. But the policymakers must mind that a more sensible and lasting solution for the problems of textile industry would be to further slash the import tax rates on synthetic intermediates (PTA, MEG, DMT), manmade fibres and filaments (polyester, viscose and acrylic).
Why should upstream industries get protection when that is afflicting the more employment-intensive downstream sector? If the upstream industry is vulnerable to fair competition, it doesn’t deserve any protection. The government’s obligation is merely to shield the domestic industry from unfair competition (dumping).
Coming back to cotton exports, the DEPB benefit (Customs duty remission) given to such exports is actually cornered by a group of traders. Farmers who have no say on where his buyer will sell the produce don’t get any benefit of this. Of course, the price the farmer gets now is much higher than what he used to get three years ago. This, obviously, is because the cotton produced in the country is substantially globally competitive. No wonder, the Indian industry seriously wants cotton exports regulated, even as it is much less anxious to get the import duty on cotton (10%) cut.
The US has reduced the area under cotton, realising that despite a huge subsidy — $4 billion a year for just over 20,000 farmers — it is losing comparative advantage. Cotton fields are being taken over by cone thanks to the demand for ethanol as fuel. Thanks to the increased output, India is exporting significant quantities of cotton to China which is our main competitor in cotton-dominant textiles. Already, China is miles ahead of us in the global synthetics textiles market. Is it desirable to lend China a helping hand by exporting cheaper cotton when that country is already the largest producer of cotton also? Maybe, if India’s cotton production continues to grow at this rate, that would be inevitable in the coming years, but not now when we have only a very limited surplus.
The commerce ministry’s proposal to offset the local taxes would give textile exporters a 6% benefit on their final product price. That is substantial. However, a more effective policy measure would be tax cuts on imports of manmade fibres and intermediates. At present, the basic Customs duty on polyester (PTA, PSF and PFY) is 7.5% while that on viscose and acrylic fibres is 10%. Then there is the 4% countervailing duty in lieu of state VAT. Since textile products are largely out of the VAT chain, the countervailing duty is largely redundant. The basic duty can also come down to, say, 5%. Since there is no major import of these inputs by the textile industry now, the revenue loss on account of the measure is notional. Even after the duty cut, the downstream industry might continue to buy manmade fibres mostly from domestic manufacturers. Threat of imports would merely serve as a check on prices. The resultant boom of the textile industry would enrich the government coffers, too.
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| Intel rolls out next-gen chips |
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| San Francisco: Intel is rolling out newest generation processors, flexing its manufacturing muscle with a sophisticated new process that crams up to 40% more transistors onto the company’s chips.
World’s largest semiconductor firm expects to start shipping 16 new microprocessors which boast inventive new materials to stanch electricity loss for use in servers and high-end gaming PCs .
The most complex chips being launched on Monday have 820 million transistors, compared with the 582 million transistors on the same chips built using the current standard technology. Intel’s first chips, introduced in the early 1970s, had just 2,300 transistors.
Advances in chip technology occur as smaller and smaller lines are etched onto the chips. Intel’s new chips shrink the width of those lines to an average of 45 nanometers, or 45 billionths of a meter, compared to 65 nanometers on the previous generation of chips .
The smaller circuitry allows Intel to squeeze more transistors the building blocks of computer chips onto the same slice of silicon. That accelerates performance and drives down costs.
The transistors on the new chips are so small that more than 30 million of them can fit onto the head of a pin. Performance zooms ahead with smaller transistors because more of them are available, they twitch faster to process data and less energy is required to power them.
Transistors on new chips are built with new materials that help solve the critical problem of electricity loss as the circuitry gets smaller and smaller. As electricity escapes from the chip, more power is needed to fuel its operations, leading to shorter battery life in laptop computers or higher electricity costs to run the machines.
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| Industrial growth dips to 6.4% in Sept Industrial growth was expected to moderate due to rise in int |
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| New Delhi: In a jolt to the growth story, industrial output rose 6.4% in September, compared to a 12% increase in the corresponding period last year, as high interest rates and the rising rupee pulled down production in the consumer goods and durables segment.
Higher oil prices and turmoil in the US and European markets also added to the woes resulting in the industrial sector clocking its slowest growth in nearly a year.
But government and economists are seeing the low growth as a temporary phenomenon with industry predicted to bounce back in the coming months. The fears of a slowdown have grown stronger after trade data, released at the start of the month, revealed that imports rose just 2% despite an appreciation of the rupee and oil prices inching towards $100 a barrel.
On Sunday, a CII study covering 91 manufacturing segments showed that 17 sectors saw production fall in the first half of 2007-08, while another 37 reported single-digit rise in output. In July, IIP had risen 7.1% though data was revised upwards later.
“I will be loathe to draw conclusions from a month’s data. One has to take a slightly longer term view... Both industry and services as sectors will record growth rates between 9% and 10%, perhaps closer to 10%. That means about 83% of your economy is growing between 9% and 10%,” finance minister P Chidambaram said.
“What’s worrying is the reduction is very sharp. But this is a monthly aberration or a statistical blip. Else what explains the higher order book position and strong investment,” said D K Joshi, principal economist at rating agency Crisil.
Sources in the consumer durables sector, which, according to the index of industrial production data released on Monday, saw output fall 7.6% during September and 3.2% during the first half of the year, believe that the numbers do not provide the actual picture.
While two-wheeler sales have dipped, consumer electronics has seen a strong growth in the first half, industry players said. According to data compiled by market research agency ORG, during January-September, segments such as television sets grew by 12%, while refrigerators rose nearly 15%.
Sale of flat display TV sets — liquid crystal display and plasma — is estimated to have increased nearly 40%, while air-conditioner sales were up 54% during the first nine months of 2007.
Though the IIP data showed a 0.6% drop in consumer goods production in September and a 5.3% rise in the first half of the financial year, consumer goods companies said their sales registered double-digit growth during April-September.
While high interest rates have meant that consumers defer purchase of two-wheelers resulting a 9.5% drop in sales, a 12.5% rise of the rupee against the dollar in the last 12 months seems to have not just hit exports but could have affected domestic production since imports became cheaper.
While Chidambaram said that the global turmoil had hit exports to some markets, high oil prices too seem to be taking a toll on industrial output.
But economists seemed confused with how the various factors were at play. For instance, the appreciation of the rupee could be blamed for slow growth in textiles sectors, but leather, another currency sensitive sector, does not seem to have been affected at least in September.
Similarly, while interest rates have slowed down real estate, wood and wood products production shot up over 70% on account of higher construction activity
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| Taking Up The Global Challenge While bringing bigger challenges, globalisation has opened up newer o |
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| Globalisation brings with itself both economic opportunities as well as potential threats, particularly for developing economies. It is setting free flow of goods/services, resources and knowledge like never before. Gaining access to global markets today serves as a strategic and essential move for not only large corporates but also for Micro Small and Medium Enterprises (MSMEs). Global markets offer MSMEs with multitude opportunities to enhance their business through larger and new niche markets, lowering R&D costs, diversifying risk, enhancing access to finance, etc. While globalisation is opening up many opportunities for MSMEs, it is also bringing with it threats and challenges.
Opportunities
Access to global markets can also offer a host of business opportunities, such as –
• New niche markets
• Possibilities to exploit technological advantages
• Upgrading technological capability
• Ways of spreading risks
• Lowering and sharing
costs, including R&D
• Improved access to
finance.
Threats & Challenges
These include –
• Exposure to heightened international competition
• Issues of standards & compatibility
• Business regulations & intellectual property concerns
• Implications for business and organisation models, managerial and technological capability
• Lack of competitive supply capability
• Inability to handle quick capacity expansion
• Technical problems in accessing international markets.
Emerging Business Models
Competitiveness is not limited by a restricted set of business variables; it is actually the ability to compete at national and international frontier of best practices. It can also be defined as sustained increases in efficiency. With the increasing integration between domestic & global markets, it is essential for firms to be competitive in export markets too. Enhancement of competitiveness through restructuring, upgrading & continuous improvements thus constitutes the foundations for success. MSMEs need to achieve higher productivity through modern management techniques & technologies, and exploit economies of scale or identify targeted niches. Productivity gains are the ultimate gauge of the impact of such interventions. Productivity growth for sustainable economic progress is now based on flexibility & specialisation, with higher inter-firm interaction.
MSME Development In India
It has been studied and revealed that the lack of reliable and stable economic infrastructure, reduced growth of credit inflow and technological obsolescence, together led to inferior quality and low productivity of the MSMEs in India during the closed economy era.
The highly competitive environment that Indian MSMEs had to contend with in the liberalised (post 1991) era did lead to some adverse impacts. The increased and intense competitive pressures led to a decrease of growth in this sector’s contribution to the country’s employment, output and exports. The number of units also came down. However, keeping in view the rapid changes in the economy and by overcoming several challenges in the last decade, Indian MSMEs performed fairly well. Today, they contribute more than 90% of the private sector. The
contribution of over 12 million Indian SMEs in the total industrial production is approximately 40%. Removal of quantitative restrictions in the early 2000s and reduction of import duties in the last 10 years has opened the sector to severe competition in the domestic as well as foreign market. The sector has become more quality and product conscious due to tough competition. The growth of MSMEs in the last eight years has been more than the growth of the industrial sector.
The high growth in this sector contributes a lot to the policies, which were designed for this sector. The Government, along with major developmental and support institutions, has been focusing on the SMEs ever since the economic reforms have taken place and has been working as a facilitator to bring the MSMEs at par with the foreign players. MSMEs today get support from government in terms of credit & finance, technology, business development, infrastructure and other areas.
To create market leaders out of SMEs, Confederation of Indian Industry (CII) and ICICI Bank along with the Indian Institute of Management, Calcutta (IIM-C), are in the process of developing the ‘Visionary SMEs Programme’ (VSME). The programme is targeted at skilldevelopment among SME personnel. The VSME programme is most likely to begin by April next year. It targets SMEs which have the potential of becoming future ‘Sonys’ or ‘Toyotas’ in terms of an excellent R&D base. These SMEs should be able to reach world-class levels with inputs through this programme. They should be then able to create world-class brands in certain products and increase their market share globally.
Following the enactment of MSMED Act 2006 it is easier to cater customised solutions to MSMEs based on their size and sector much more easily than earlier. CII with its vast network of 52 offices across India and having its international linkages with 271 counterpart organisations in 100 countries across the globe, endeavours to make the SMEs self reliant and globally competitive at the forefront of change. It is imperative to create and have centres of excellence with international co-operation for basic research and joint developments for MSMEs to be continually competitive globally.
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| Google eyes 30% in seed-stage fund |
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| MUMBAI: Global IT giant, Google Inc, will be investing up to Rs 22.5 crore (around $5.5-million) in Ventureast TeNet Fund-II, a seedstage fund that will invest in technology companies trying to establish their foothold. The fund is promoted by the Tenet Group of Chennai IIT and Hyderabad-based Ventureast Fund Advisors. “Google has invested Rs 15 crore ($3.75 million) in this fund so far and is expected to put in the remaining amount by March 2008, when the fund is scheduled to close,” said Ventureast managing general partner Sarath Naru
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| Foreign shores beckon Indian apparel brands |
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| INDIAN apparel retailers are increasing their brand presence overseas, particularly in developed markets. While most have identified a gap in countries in West Asia and Africa, some majors are also looking at the US and Europe. Arvind Brands, Madura Garments, Spykar Lifestyle and Royal Classic Polo are busy chalking out foreign expansion plans through the distribution route and standalone stores as well.
Arvind Brands has earmarked its Excalibur and Flying Machine brands for foreign expansion. “While Arrow is already present in West Asia and Africa, Excalibur is present in West Asia and we might take it to Africa,” Arvind Brands CEO (Brands & Retail) of Arvind Mills, Suresh J said. It also plans to launch Flying Machine in the US and Europe in the coming months. “We will be launching the brand in the US and Europe in about six months because we believe this is a brand that will do well everywhere. For Arvind, the trick to tackle these mature markets will be to tie up with a established department chains,” Mr Suresh said.
Another denim wear brand, Spykar, which is now moving towards becoming a casualwear lifestyle brand, has launched its store in Melbourne recently. It plans to open three stores in London by 2008-end. Nepal is also on the radar besides UAE. “Once we exploit the domestic market, we plan to expand overseas from 2009. Standalone stores in these countries help in increasing the brand visibility and distribution via department stores becomes easier,” says Sanjay Vakharia, Director-Marketing, Spykar.
According to consultancy firm Technopak, most domestic retailers are expanding their presence overseas as they have revamped their brands to make them truly international. Also, countries such as Dubai and Africa have space to house more brands. “In the past one year, most of these companies have revamped and expanded their brands and now they want to push them in the global markets,” a Technopak executive said.
Madura, too, is planning to open exclusive stores in East Africa, West Asia, South Asia and south east Asia. The apparel manufacturer and retailer is looking for a partner in these countries for exclusive outlets. Till then, it will continue to sell its brands in West Asia where it already has Planet Fashion stores. “We have global distribution rights for brands Louis Philippe and Peter England so we might take these brands to the foreign countries. But these will be secondary markets for us compared to the Indian market,” Madura Garments’ director Vikram Rao said.
Relatively new player in the retail sector, Royal Classic Polo, too, is eyeing foreign markets.
The Chennai-based company, which owns Classic Polo and Swiss Club brands, is planning to foray into Singapore, Hong Kong, Malaysia and Dubai. The company is looking at the first-mover advantage in these countries. “We want to expand to these countries to protect our business as the Indian retail market may be saturated in the coming years,” says Royal Classic executive director R Sivaram.
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| Tech Mahindra SEZ work to begin tomorrow |
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| TECH Mahindra, the IT arm of Mahindra & Mahindra, will begin construction of its 15-acre sub-anchor site on Wednesday in Phase II of the Rajiv Gandhi Chandigarh Technology Park (RGCTP). The Chandigarh Administration added another 5 acres to the previous 10-acre allotment two months ago.
The site has also been approved under the SEZ rules and Tech Mahindra has also got a separate SEZ unit approval. Thus, this will also be Tech Mahindra’s first SEZ in the north. The project, which will include IT and BPO operations, is expected to finish within 18 months.
Phase II of RGCTP consists of 125 acres for IT companies, comprising about 70 acres of allocable area and large green spaces.
Mahindra & Mahindra vice-chairman and managing director Anand Mahindra has already committed an investment of Rs 100 crore in the initial phase for the first campus of the company in the northern region. The investment figure may go up to Rs 200 crore considering that Tech Mahindra will also bring its software development centre here.
M&M chairman Keshub Mahindra is expected to arrive to inaugurate the project to be titled as Tech Mahindra North Campus. The project will begin after considerable delay, nearly a year. The administration officials attribute the delay to clarification in the SEZ status of the IT Park and subsequent notifications. However, things are looking up now. Director IT Chandigarh Manjit Brar says, say that the delay has been because “A lot of action is coming up in the IT Park, Infosys is nearing its second phase completion, Tech Mahindra is breaking ground and construction at the hotel site in IT Park is also expected to begin soon. This will generate a lot of momentum as other companies will also join in the development process.”
Tech Mahindra had already taken space in DLF and began its domestic BPO in December 2006. The software development also began in February. The 35,000-sq feet area in DLF premises houses close to 600 people for the BPO. The number will increase eventually as the company has plans of recruiting near about 5,000 people from the region.
With Tech Mahindra lying the foundation stone day after, it becomes the second IT biggie in Chandigarh after Infosys. The latter has 30 acres of land in
Phase I of RGCTP where it has erected two state of the art structures to house more than 8,000 people and has committed an investment of more than Rs 500 crore to strengthen its operations here.
ET has also learnt that Infosys also plans to increase its area of operations in Chandigarh, by adding another 100 acres to its existing land corpus. Chief financial officer Infosys MD Pai, in his capacity of human resource director, had told ET in December that they had requested the Governor of Chandigarh that if there is any other large area of land SEZ they would like to expand. On June 30 this year, the company completed its first phase of construction.
The third biggie, Wipro, is also set to come up in Phase II of RGCTP, being the anchor site in Phase II with 30 acres. Taking the base estimate of Infosys, Wipro Technologies had told ET that an investment of Rs 500 crore would entail the company’s foray into Chandigarh. Building plans for the company are being scrutinised and the construction is also slated to begin soon.
Bharti Airtel and eSys Technologies are among the bigger players in Phase II that have 5 and 6 acres of land respectively. The IT Park has also become the global headquarters for eSys, which also plans to increase operations area and bring it up to 11 acres.
In addition to the big IT companies in the country, regional and city-based companies are also among many who would begin construction soon.
Thirteen companies including RT Outsourcing, IDS Infotech, Bebo Technologies, Alchemist Limited, Amadeus, FCS Software Solutions Ltd, Karin Informatics Services Ltd., KMG Infotech, Microtek, Net Smartz, Second Foundation Inc, Net Solutions, which have been waiting for clarification on SEZ guidelines, have now chosen affiliation to STPI however remaining in the RGCTP. This way, the IT Park has a combination of SEZ and non-SEZ area to suit demands of large and smaller IT industry players.
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| Deshmukh reviews Maharashtra IT literacy venture |
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| CHIEF minister Vilasrao Deshmukh on Monday took stock of the progress made on the state government’s tie-up with Microsoft Corporation to spread IT literacy in the state and enable better delivery of e-governance services.
Maharashtra had signed an MoU with Microsoft Corporation in June this year during Mr Deshmukh’s tour of the US to hard-sell the state. At a meeting on Monday also attended by Microsoft Corporation chairman Ravi Venkatesan, Mr Deshmukh took a review of the initial formalities completed so far and the roadmap for the future.
A key component of the Maharashtra-Microsoft tie-up is the objective of making e-governance useful for farmers. Microsoft would serve as technology provider as well as e-governance consultant to the state government under the MoU, sources said.
“Land records and information on government schemes have to be made accessible for farmers. It is in this respect that the state government wants Microsoft to chip in so that e-governance does not remain an urban facility only,” an industry department official said.
The state has sought Microsoft’s expertise and technologically prowess to develop software in Marathi so that lack of knowledge of English does not remain a hurdle for millions of people, sources said. Under Project Bhasha, Microsoft plans to develop Marathi interfaces for Microsoft Windows and Microsoft Office, sources said.
“We are regularly in talks with Microsoft over all aspects of this partnership. Several government departments like industry, school education, agriculture, and of course IT are involved in the programme,” said an official.
Another major component of the partnership towards accelerating e-literacy is the collaboration between Microsoft and schools and universities in the state under the partners-in-learning programme. Microsoft has already set up 2 IT academies in Pune and Nagpur and plans to build a third facility also under this agreement. Each of these academies would train over 20,000 teachers who would pass on the knowledge to two lakh school students, sources said
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| US firm eyes SMEs in India Focal Signs 2 MoUs In Energy Sector |
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| US-based Focal Energy is looking at small and medium projects in the country. The company has already signed two agreements with India-based companies in the energy sector.
Focal Energy MD Noam Ben Ozer said the company was looking at renewable energy projects in the country.
“We are very keen on investing in India as the opportunity in the country is immense. Our aim is to invest in, and manage a portfolio of income- generating assets in the energy and infrastructure sectors. To start of we will be looking into small and medium projects and are looking for partners. Renewable energy is a sector we are looking at mainly, but we will also look for small hydro projects in the country,” Mr Ozer said.
Mr Ozer added that the company has signed MoUs with two companies in the country but refused to divulge any details.
“We have very recently signed two MoUs with leading Indian companies. We had signed it a couple of months ago but I can’t disclose anything more. In each target market, Focal Energy is looking to partner local players who have access or are involved in projects,” he added.
Mr Ozer said that India is one of the most important markets for the company and it will focus on clean energy.
“Our focus is on power generation, particularly distributed and clean energy. We place great emphasis on alternative-energy power generation, such as Hydro, wind, solar and bio-gas plants. We target countries with welcoming environment for distributed and alternative energy investments. Presently, the country of India is a primary target market for Focal Energy. We are also open to investments in other geographies where the market conditions are attractive and where Focal Energy can bring unique expertise and value-addition,” he added.
The company is focused on investments in plants that operate on conventional fuel, including natural gas and coal. Focal Energy will also invest in select income-generating infrastructure projects, such as grid construction, water systems, pipeline, transportation and real estate, if they are synergistic with its activity in the energy sector.
Mr Ozer added that Focal Energy has the support of a credible group of international partners who will provide strong expertise, the ability to assemble the optimal partnerships and knowhow for each project.
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| Industry misfires again in Septemeber Manufacturing Downs IIP Growth To 6.4% |
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| THE Index of Industrial Production (IIP) for September slackened to 6.4%—almost half last year’s growth, pulled down by the manufacturing sector, especially the consumer durables segment. The index for the same month last year stood at 12%.
For the first half of this fiscal (April-September 2007) too, IIP slipped to 9.2% against 11.1% in the same period a year ago, an official release said on Monday.
In September, the manufacturing sector growth decelerated to 6.6% compared to 12.7% in the same month last year. The consumer durables sector took the hardest hit, posting a 7.6% fall in output during the month, under IIP’s used-based classification. The consumer non-durables sector posted a 2.2% growth. “The recent slowdown in the economy is on account of slackening of consumer durables sector. But the capital goods industry retains its vibrancy,” finance minister P Chidambaram said, inaugurating the annual Economic Editors’ Conference here.
The FM also warned that the hardening of fuel, food and commodity prices will have consequences on the economy. “I don’t think we can draw conclusion from one month’s figure, but overall services and industry are likely to grow between 9-10% this fiscal, perhaps close to 10%. This means 83% of the Indian economy will grow between 9-10%,” he said. The capital goods sector justified the FM’s confidence, with a healthy growth of 18.6% in September compared to last year’s 9.5%. Capital goods sector covers factories, machinery and tools used to produce finished goods. The capital goods output during the first half of this fiscal improved to 19.6% from 17.5% a year ago.
Saumitra Chaudhuri, member, Economic Advisory Council to the Prime Minister, who is also ICRA’s economic advisor said, “Consumer durables is one sector, which is pulling down and looks clearly in trouble. This could be because of high sales last year and high interest rates. But it is too early to say that it is (an) indication of a trend. There is no general slowdown. Impact of rupee appreciation is being felt on non-transient sector like garments.”
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| GSK looking for marketing partner |
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| GLAXOSMITHKLINE Pharmaceuticals Ltd, the Indian arm of the UK drug major, is looking for a partner to market products for chronic, lifestyle-related diseases. The company is exploring brand in-licensing opportunities to improve its therapeutic coverage in high-growth segments such as cardiovascular, oncology, diabetes or ailments of the central nervous system (CNS).
“We have a mandate to look for partners and we are in discussion with a couple of companies,” said managing director Hasit B. Joshipura in a recent interview with ET.
This represents a significant shift for the Indian pharma company. This is because Glaxo-SmithKline’s product portfolio has so far been mostly focused on traditional therapeutic segments such as anti-infective or gastro-intestinal drugs. It derives a large share of its revenues from old brands such as antibiotic medicine Augmentin. “Our products portfolio should become more representative of the domestic market,” said Mr Joshipura. Today, chronic disease products contribute to about 5% of total revenues, according to the pharma company.
India remains a small market for global pharma companies and marketing drugs to doctors requires a large field force. As a result, rather than marketing their products themselves, many foreign companies are licensing them out to domestic companies to market in India. In return, the domestic company may pay a royalty on sales, or supply the finished product directly from the innovator.
“We will also introduce products from our parent company’s portfolio to enhance our presence in the chronic segment,” said Mr Joshipura.
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| Ranbaxy, Astellas settle patent row Agreement To Enable Ranbaxy Enter US Market 8 Weeks Prior To Exp |
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| RANBAXYLaboratories has reached an out-ofcourt settlement with Japanese company Astellas and Boehringer Ingelheim to sell Flomax, a drug used in the treatment of benign enlargement of prostate, in the US.
Boehringer Ingelheim has the exclusive marketing rights for the drug in the US. The settlement allows Ranbaxy Laboratories to launch the drug in the US market on March, 2010 - eight weeks prior to the expiry of the six-month additional exclusivity which the patent holder hopes to get.
During the two month period, Ranbaxy Laboratories will be the only generic manufacturer to sell the product in the US.
The company is expected to get an upside of around $250 million during two-month exclusivity.
“We are delighted on the settlement which brings certainty for the launch of the product on an exclusive period before the patent expires,” Ranbaxy Laboratories CEO and MD Malvinder Singh said. The annual sales of Flomax is estimated to be $1.2 billion as per IMS and growing at 15%. Ranbaxy Laboratories received tentative approval from the US Foods and Drugs Administration for Tamsulosin in June. “Ranbaxy Laboratories has reached an agreement with Astellas and Boehringer Ingelheim to stipulate a remand of the pending Federal Circuit appeal and subsequent vacatur of the District Court decision in regards to Flomax. The case between Ranbaxy and Astellas has been dismissed without prejudice,” a Ranbaxy Laboratories release said.
The lawsuit in the US was related to Astellas’ US Patent No. 4,703,063 (‘063 patent), covering Tamsulosin and its use in the treatment for functional symptoms of benign prostatic hyperplasia, it added.
SWEET DEAL
Ranbaxy has resolved a US patent dispute over tamsulosin capsules
Tamsulosin is used to treat benign prostatic hyperplasia
Total annual sales of Flomax is over $1.2 b
During exclusivity period, Ranbaxy will be the only generic co to commercialise the product in US market
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| Asia, the new global hub for advertising campaign India’s ad industry is enjoying the fruits of the |
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| LENOVO is a Chinese company that grew big by purchasing a US rival. Its chairman hails from rural China, and it rotates its headquarters between Beijing and North Carolina.When the time came to choose its global advertising hub, Lenovo opted for Bangalore, the city that has risen to fame as India's own Silicon Valley. While the PC-maker raised eyebrows in an advertising industry more attuned to seeing accounts led out of Western markets, the move can hardly amount to much of a surprise. India's economy is muscling its way out of decades of isolation to become a genuine contender on the world stage - and its advertising industry, for better or for worse, is along for the ride. "I wasn't surprised by the coverage," Deepak Advani, Lenovo's global chief marketing officer, admits of the reams of commentary devoted to finding a deeper meaning behind Lenovo's move. "But I know that, since then, a couple of my CMO colleagues at other companies want to know what lessons are being learned." As Advani points out, Lenovo is hardly alone. The list of multinational companies that have chosen India as the base market for regional or, in some cases, global advertising operations, has grown considerably in recent times. Last year, BT awarded a $1 million contract to Tribal DDB India to manage a global online assignment, while Nissan, McDonald's, Coca-Cola, Motorola and Johnson & Johnson have all begun to create work for other markets out of their Indian agencies. And India is the creative hub for a number of Unilever brands - including Lifebuoy, Clinic Plus and Surf. Arvind Sharma, the chief executive of Leo Burnett India, which developed a regional value programme for McDonald's last year, says that two trends are at play. The first, illustrated by the McDonald's campaign, sees ideas developed in India being exported to other markets; the second - and perhaps more significant - occurs when a multinational company decides to base multi-market activity out of the country, such as another Burnett client, Procter & Gamble's Tide brand. "High-quality talent is available," Sharma says. "If you look at Unilever and P&G ... there are lots of India in their global system. Clients will go wherever the work can be done well and done economically."
From a creative perspective, India can be an attractive destination. Its creatives are comfortable with English, and are also experienced in developing ideas that can run across the dizzying array of languages that are spoken in the country. India's emergence can be traced back to the 1992 decision by the then finance minister, and the current prime minister, Manmohan Singh, to finally open up the country's economy. "For a very long time, it was an unimportant market for everybody from a revenue perspective," D Sriram, the Starcom Asia-Pacific chief executive, says. "Multinationals lost interest for about 15 years. Because of economic policies and because it wasn't a consumer market, there wasn't really a role for agency networks."
The rapid influx of everything international has profoundly altered the country's economic terrain. Advani notes that Lenovo's selection of India stemmed from an earlier decision to launch its first consumer products range in the country. And despite a backlash against globalisation from various segments of Indian society, it is hard to find anyone in the advertising industry who shares these concerns. Even the offshoring debate - which may yet see the US enact legislation to prevent certain services being shipped out of the country - ruffles few feathers in India. "I see nothing wrong with it because it creates opportunities for the market to grow faster and more people to come into the industry," the Lowe India president, Pranesh Misra, says. "There is a lot of value we can bring to the world, and a lot of the emergence of the Indian middle class is from outsourcing. If we stop thinking of it as low-value work, then why not?"
Reviewing India's creative output over the past few years, it is difficult to disagree. Perhaps surprisingly, the country's creative tone has become considerably more "Indian" - a manifestation of the increasing ease with which India struts on the world stage. A good example of this trend is this year's Happydent campaign from McCann Erickson, which wowed local audiences and awards-show juries alike. The flipside of the overall equation, India Inc setting its sights on global pastures, is still in its infancy. Observers agree that, eventually, the dynamic will bring benefits for India's advertising industry, in the same way agencies from more mature markets have piggybacked on the global aspirations of their local corporations. "It will gather momentum, but, initially, it has been the core sectors which are not very advertisingsensitive," Misra says, pointing to the likes of the steel giant Mittal and the IT player Infosys. "But we are seeing the beginnings of the Indian brand going global, through motorcycle companies such as Bajaj and TVS, and Tata's tea and beverages division."
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| Puncom looking to supply to defence sector |
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| PUNJAB Communications Limited (Puncom), a Punjab state government undertaking and a leading manufacturer and supplier of telecommunication and IT equipment and solutions in India, is now aiming to manufacture electronics and communication equipments for the defence sector.
With a telecom equipment order from Bharat Sanchar Nigam Limited of more than Rs 200 crore this year, Puncom is now working to indigenously manufacture tailor-made equipment to meet the latest defence specifications. Puncom managing director Anurag Verma told ET the company was exploring catering to the growing demands of the defence sector.
“We are in touch with international equipment manufacturers and the defence establishment. An MoU on technical know-how will be the first step for the company to address the industry requirement,” he said.
Puncom had, few years ago, manufactured devices for finding avalanche victims in collaboration with Electronics & Radar Development Establishment (LRDE). The company’s decision to once again foray into defence manufacturing comes at a time when the ministry of defence has been encouraging the offset policy. The policy mentions inclusion of an offset clause amounting to a minimum of 30% of the indicative costing in the request for proposal where the indicative cost of the contract is Rs 300 crore or more.
According to Deepinder Singh Dhillon, head, marketing- Puncom, the company was keen on addressing the communication products such as static communication network (to link various army commands to-gether), mobile communication network (to establish communication till the battle line) and various electronic systems like warfare simulators, night vision gadgets etc.
The company is also looking to consolidate its positions in optical fibre communication market comprising synchronous digital hierarchy and dense wave division multiplexing equipment segments. Puncom is also developing core broadband equipment for BSNL and other private service providers.
In 2006-07, Puncom had a turnover of Rs 40 crore and this year, it is targeting to touch Rs 80 crore. The company, which has strategic tie-up with China based telecom products major Huawie and Bangalore-based optical telecom transmission equipment maker Ordyn Technologies, has three assembly lines of 10,000 components manufacturing per hour.
Puncom diverse product range covers voice/data multiplexers, radios, optical/transmission, VSAT, switching equipment, PLCC, power plants, networking, broadband equipment and services. It caters to the growing telecommunications, networking and broadband needs of major organisations and service providers in the country.
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| Industry growth in H1 slower: CII survey |
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| A CONFEDERATION of Indian Industry (CII) survey for April 2007-September 2007 says compared with April 2006–September 2006, performance of various sectors of the industry has slowed down.
More sectors have recorded growth below 10%. Out of 91 sectors, 15 sectors reported excellent growth rate of more than 20% and 22 sectors recorded high growth rate of 10-20%. Thirty seven sectors recorded a moderate growth rate of less than 10 percent and 17 sectors recorded negative growth rate., The percentage of sectors in excellent and high category has declined while the percentages increased for moderate and negative category over the period April 2007 to June 2007.
It is felt that these low growth rates were mainly due to high interest rates, reduced credit availability and rupee appreciation. Another factor that has emerged over the last 6 months is the impact of the FTAs signed with some of the countries in the last two years.
Satish Kaura, Chairman, CII Industry Council, says, “The survey has revealed that automobile industry including motorcycles, three wheelers, are amongst the sectors whether sales growth has slowed down. More than 50% of the manufacturing sectors have recorded either moderate or negative growth.”
The survey has thrown up early indicators of what could trigger a slowdown in the Indian manufacturing sector in the future.
At the same time scooters, mopeds, electric fan, sponge iron, circuit breakers, transformer are in the excellent growth category while asbestos, cement, pig iron, power cables, industrial valves, textile machinery, transmission line towers, air conditioners, microwave ovens were all in the high growth category.
Also machine tools, air conditioners, motorcycles are sectors that have done well on the export front, registering excellent growth. High growth category includes vehicle industry, all three wheelers, industrial valves and cold rolled steel and sectors showing negative growth are cement, ceramics, mopeds and rubber goods
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| Steel output target raised to 80 million tonnes by 2010 |
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| ENTHUSED by a healthy rate of 12 per cent growth in steel sector, the government on Wednesday said the target for steel output had been revised upwards to 80 million tonnes from 60 million tonnes by 2010.
“Earlier, we had set a target to achieve production of 60 million tonnes by 2010 but now we have revised it to 80 million tonne within the stipu-lated time,” Union minister of steel, chemicals and fertilisers Ram Vilas Paswan said while addressing the mediapersons here.
The country’s production capacity was currently 50 million tonnes, he said.
Paswan said the capacity expansion would require an investment of Rs 1.5 lakh crore. “Public sector undertakings such as SAIL and RINL will be investing Rs 60,000 crore for expansion while the rest of the money will be invested by the private sector,” the minister said.
Noting that the country's was facing a shortage of coking coal, Paswan said the government had created a corpus fund of Rs 3,500 crore, in-volving PSUs such as SAIL, Coal India, MMTC, NTPC and RINL. “Under this venture, PSUs would be able to buy mines anywhere in the world where they find any opportunity in order to compensate the short-age of raw material,” said Paswan.
He also said the government had planned to set up a steel processing facility at Nahan in Himachal Pradesh which would have a capacity of 50,000 tonne per annum. “For this, 100 acres has been sought from the state government for setting up this fa-cility,” he said.
On being asked about the shortage of DAP in Punjab, Paswan said that there was enough availability of DAP in the country and Punjab was getting sufficient quantity of DAP.
SAIL warns of possible rise in steel prices soon
CHANDIGARH: Steel Authority of India Ltd (SAIL) on Wednesday said it might increase prices of the alloy in the near future as there are expectations of a rise in input cost. “There are possibilities that the prices of input may rise in the coming time, which will force us to raise steel prices,” SAIL chairman SK Roongta said here on Wednesday. There was a lot of pressure on steel prices due to spiralling cost of raw materials, he added. Pointing out that the demand for steel is rising at 12 per cent, Mr Roongta said the major orders were coming from infrastructure, auto-mobile and manufacturing sectors. Denying reports that steel prices have increased astronomically during the last couple of years, putting a burden on the manufacturing sector, he said the rates have increased only by 15-20 per cent between Octo-ber 2004 and October 2007. The Union government had set up a monitoring committee on steel prices to monitor any large variation in steel prices.
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| Punjab to get Rs 100 cr more |
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| Chandigarh: The Union government is likely to provide an additional Rs 100 crore for antiwater logging measures in Punjab. This would be over and above the Rs 550 crore grant already sanctioned by NABARD for the purpose.
Revealing this here on Wednesday, a press release said Union finance minister P Chidambaram also assured Punjab chief minister Parkash Singh Badal of an immediate release of Rs 75 crore to help the state start its Adarsh School Scheme on schedule from the next academic session. Badal met Chidambaram in New Delhi on Wednesday evening.
The release also quoted Chidambaram as saying that the Centre had agreed to give requisite “advice and recommendations” to the World Bank to enable the state to utilise “technical assistance from the international body to fight the twin menace of falling water table as well as water logging in the state.”
The CM impressed upon the Union government to adopt immediate and effective measures for fighting the falling rate of growth in agricultural production in Punjab which stood at just 2% against the targeted growth of 4% per annum. It was pointed out that contrary to common belief, Punjab does not have adequate surface water and, instead, is heavily dependent on “ground water extraction.” This, he said, had resulted in the problem of declining water table in about 128 out of 141 blocks of the state. On the other hand, large parts of agricultural areas in the south western district of Ferozepur and Muktsar had been adversely affected by water logging. “As a result, not only is farm production declining in this ‘cotton belt,’ but poverty is revisiting a major chunk of population there,” he added.
Enhanced NABARD funding would be used to complete a large number of measures like provision of new surface and sub-surface drains, installation and rejuvenation of lift pumps, construction of minor and small distributaries to divert seepage of water to deficit areas, et al.
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| DPE plans records of PSU directors |
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| THE department of public enterprises (DPE) is planning to formulate a data bank of directors being employed by central public sector enterprises (CPSEs), in order to put pressure on them to have the stipulated number of independent directors on their board. The need for a data bank was felt by the department as many CPSEs have been facing difficulties getting themselves listed on the bourses as they did not have enough independent directors.
“The data bank will help the government in knowing the status of the board of all the 245 CPSEs and equip it to take action against the erring companies,” an official in the DPE said.
Initial Public Offers (IPOs) of many PSUs, including those of Rural Electrification Corporation (REC) and National Hydro Power Corporation (NHPC), are facing hurdles because the companies do not have the required number of independent directors on board. Even PGCIL’s IPO got delayed due to this.
According to clause 46 of the market regulator SEBI, companies desirous of seeking listing on bourses should have at least 50% independent directors on their board. This rule is applicable for both the private and the public companies. Also, according to the norms of corporate governance prescribed by the government, CPSEs are required to have at least 33% or one third of independent directors on their board.
“Having lesser number of independent directors on the board also results in poor corporate governance. The government needs an authentic data bank to tackle this problem,” the official said.
At present, DPE has got information from around 90-100 companies about their board positions and it hopes to finish the exercise of collecting data from the remaining companies by the end of the fiscal, he added.
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| Feedback Ventures to help plan IT Tower in Mohali |
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| BESIDES the upcoming high rise residential apartments in and around Mohali, the city will boast of an information technology (IT) tower soon. The tower is proposed to be set up over 8 acres belonging to Punjab Infotech in Sector 67.
Punjab Infotech has now enrolled Punjab Infrastructure Development Board (PIDB) to prepare a plan for the development of the area with the hope of raising an IT tower as a landmark.
Talking to ET, Punjab Infotech MD Rakesh Kumar Verma said the complex to be developed would boast of builtup-space with an IT tower “ so as to make it a landmark feature in Mohali for everyone to notice it.”
Acting as a facilitator in promoting the growth of the IT industry in the the state, he said,the corporation has urged the Punjab Infrastructure Development Board (PIDB) to prepare a plan for the proposed project with a view to involving a private party for its development.
He said the corporation also plans to set up an incubation centre in Mohali over 2 acres of land, akin to the one in Punjab Engineering College(PEC) in Chandigarh.
The new start ups will have the support of the Software Technology Parks of India(STPI).
PIDB, it is learnt,has requisitioned the services of Feedback Ventures as a consultant to help prepare a feasibility report over the next 2-3 months with a definite structure of the proposed project.This project is proposed to be developed on the public private partnership (PPP) initiative.
Meanwhile,Punjab Infotech also contemplates setting up an information technology (IT) park in the proposed sector specific focal point to be developed by the Punjab Small Industries Export Corporation (PSIEC) around Thekanjla inbetween the Jalandhar-Kapurthala belt.The proposed focal point spread over 250 acres of land will boast of several clusters of industries in different areas with significant export potential. The land belongs to the jails department and this is proposed to be given to the Punjab Small Industries Export Corporation (PSIEC) for its development as an industrial focal point.
Mr Verma said of the proposed 250 acres the IT park may be developed in an area covering between 150-180 acres.
With land cost turning out to be prohibitive between Rs 1-2 crore for an acre in Mohali the new entrants desirous of setting up their industrial ventures in the IT field would have to look for clusters such as the one proposed an IT cluster in the planned focal point near Kapurthala.
PSIEC, it is pointed out,would be in a position to get the 250 acres of land near Kapurthala within the next two months for developing it as a focal point
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| Spice launches Spice Mail service in Punjab |
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| SPICE TELECOM, first to set foot in Punjab, today launched Spice Mail service, a breakthrough service that offers the convenience of email on mobile phones. Now subscribers can send and receive emails using their regular mobile phone.
Irina Brar, India’s top ranked lady professional golfer, launched the Spice Mail service, amidst a select gathering here today. Commenting on the occasion, Irena said: “‘Spice Mail is an extremely innovative and useful service. It will help people like me, who travel quite a lot, to get email instantly on the mobile, anytime and anywhere.”
Mukul Khanna, VP – marketing, Spice Telecom, said “Spice believes in launching cutting edge mobile applications and Spice Mail service is another such service for our customers. Spice Mail enables Spice customers to take full control over their email, whether in the office or on the move and this mail service is fast, secure, simple and cost-efficient, as it is not handset dependent, and works on most GPRS enabled handsets.”
He said Ericsson, one of the leading telecom solution providers, had been roped in by Spice Telecom to provide the back end of Spice Mail solution. Ericsson, has the telecom industry’s most comprehensive offering for managed services, ranging from designing, building, operating and managing day-to-day operations of a customer’s network, to hosting service applications and enablers.However, it is learnt, that this service will be provided by Ericsson on a revenue sharing basis with Spice.
Mr Khanna said a sizable number of subscribers having the GPRS phones would opt for this service and Spice mail would work on push technology that ensures instant delivery of emails to the phone. Moreover, he said, Spice mail would ensure that the data on mobile devices is end-to-end protected with highly secure 128-bit AES encryption. However,this value added service will cost the subscriber a mimimum of Rs 199 per month with 10 MB data usage free and for unlimited usage Rs 599 per month.
He said the company hopes to rope in a large section of the corporates in the region as they would turn out to be a money spinner for the organisation should they opt for this facility
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| Hero Ultra targets 20,000 e-bike sales this fiscal |
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| HERO Ultra, the joint venture between $3-billion Hero group and a UK-based Ultra Motor Company (UMC), is targeting sales of around 20,000 units of its e-bikes — Velociti and Maxi — across the country this fiscal.
The company has so far opened around 65 outlets in the northern region and four outlets in Hyderabad. It plans to offer 150 dealerships across the country. Of this, 40 will be allotted in the south by January 2008. The JV company also has plans to roll out electric three-wheeler light goods vehicle by January 2009.
“We have already sold about 7,000 bikes in the last four months in Punjab, Haryana, Delhi NCR region, Gujarat and Rajasthan. We are targeting selling 20,000 units by the end of this fiscal,” says Hero Exports deputy CEO Gaurav Munjal. The two new electric bikes, Velociti and Optima, are priced at Rs 29,000 and Rs 34,819, respectively. The bikes run at one tenth of the running cost of conventional petrol driven two wheelers with a maintenance cost of 1/3 of a conventional scooter. Users can travel up to 70 kilometers with a single charge of the battery run bike. “There is a lot of potential for the electric vehicles in India. We expect a 200% growth in sales in the next fiscal,” said UMC chairman Ian Woodcock.
Hero Ultra’s next initiative in the electric three wheeler light goods vehicle is in the advanced stages of completion, according to Deba Ghosal, director marketing, Ultra Motors. “The prototype is ready and already under testing in Delhi. It may cost Rs 1.5 lakh per unit and will transport goods up to 70 km per charge. We are trying to enhance its capacity to 100 km per charge,” Mr Ghoshal said.
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| Punjab to receive Rs 100 cr to check water logging |
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| PUNJAB will get an additional Rs 100 crore for anti-water logging measures in the state. This would be over and above Rs 550 crore already sanctioned by NABARD for this purpose. The Centre will also immediately release Rs 75 crore to help the state in starting its much talked about Adarsh School Scheme on schedule from the start of the next academic session. An assurance to this effect was given by the Union Finance Minister P Chidambram during the course of his meeting with the Punjab Chief Minister Parkash Singh Badal in New Delhi Wednesday evening.
The Centre had also agreed to give the requisite ‘advice and recommendation’ to the World Bank to enable the state to utilise “technical assistance from the international body for fighting the twin menace of falling water table as well as water logging in the state,” Media Advisor to CM Harcharan Bains said.
Mr. Badal said that this would help expedite work on both the Adarsh School and the antiwater-logging schemes.
Mr Badal impressed upon the Union Government the need for immediate and effective measures for fighting the falling rate of growth in agricultural production in Punjab which stood at just 2% against the targeted growth of 4% per annum. The CM pointed out that “contrary to common belief, Punjab does not have adequate surface water and, instead, is heavily dependent on ground water extraction” This, he said, had resulted in the problem of declining water table in about 128 out of 141 blocks of the state. On the other hand, he added, a large part of agricultural areas in the south western district of Ferozepur and Mukatsar had been adversely affected by water logging. “As a result, not only is the farm production declining in this ‘cotton belt’ but poverty is revisiting a major chunk of the population there”, he added.
The enhanced NABARD funding will be used to complete the large number of measures like provision of new surface and sub surface drains, installation and rejuvenation of lift pumps.
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| MPSEZ float gets record Rs 2-lakh cr bids Company Is Aiming At Raising Rs 1,771 Crore On The Higher |
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| IN The biggest response to any initial public offering by an Indian company, Adani’s Mundra Port and SEZ (MPSEZ) IPO, the first public issue by a private port, has generated a record Rs 2-lakh crore subscription, surpassing all market expectations.
The issue has been oversubscribed a whopping 115 (114.69) times. The company is aiming to raise Rs 1,771 crore on the higher price band. The number of applications received was 9,50,496.
Earlier, the Power Grid Corporation of India (PGCIL) issue saw a record bid of Rs 1.90 lakh crore. The Adani group company is offering shares to local and overseas investors in a range of Rs 400-440 per share.
“The sentiments in the secondary market are weak and this is very well reflected in the Sensex, which has declined 700 points in the last three trading sessions. Despite this, people have shown such a tremendous response in MPSEZ,” said Saurin Financial Services CEO Saurin Shah.
The proceeds of the issue will be used to part-finance the construction of basic infrastructure in the proposed SEZ at Mundra, besides a terminal for coal and other cargo.
The grey market in Ahmedabad, meanwhile, is quoting at a premium of Rs 450-460 per share and a record Rs 7,000 premium on every form application of Rs 1 lakh, sources said.
Qualified institutional buyers have given strong support to the issue as the reserved portion for them was oversubscribed 159.30 times, followed by HNIs who oversubscribed 156 times. The retail investors’ share was oversubscribed 13.04 times.
The issue comprised a reservation of 24,060,000 shares allocated for QIB, 4,010,000 for non-institutional investors, 12,030,000 for retail individual investors (RIIs) and 150,000 for employees.
MPSEZ is primarily engaged in providing bulk cargo services, container cargo, crude oil cargo and valueadded port services, including railway services between Mundra Port and Adipur.
The company has the exclusive right to develop and operate Mundra Port and related facilities until February 2031, pursuant to the concession agreement entered on February 17, 2001, with the Gujarat Maritime Board and the government of Gujarat.
The equity shares of the company, offered through this IPO, are proposed to be listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
The issue and net issue will constitute 10.05% and 10.01%, respectively, of the fully-diluted post-issue paid-up capital of the company.
The book running lead mangers to the issue are Kotak Mahindra Capital, Enam Securities, ICICI Securities, DSP Merrill Lynch, SBI Capital Markets, SSKI Corporate Finance and JM Financial Consultants.
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| Google launches operating system |
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| THE world’s largest search engine company, Google, on Monday launched an open war against Microsoft by entering into the operating system space. The company launched Android – an operating system for mobile phones — in alliance with T-Mobile, HTC, Qualcomm, Motorola through the Open Handset Alliance. The mobile operating system will also give tough competition to Symbian, Nokia’s operating system for mobile devices. Microsoft has a similar product called Windows Mobile for mobile devices.
The launch of the operating system may also be a precursor to Google’s entry into the mobile devices arena – with an ‘expected’ launch of Gphone. The company said the first phones based on the Android platform to be available in the second half of 2008. Thirty-four companies have formed the Open Handset Alliance which aims to develop technologies that will significantly lower the cost of developing and distributing mobile devices and services. Some of the other companies in the alliance include Broadcom, China Mobile, eBay, Intel, LG, NTT DoCoMo, Samsung, Telefónica and Texas Instruments.
With nearly 3billion users worldwide, mobile has become the most personal and ubiquitous communications device. “However, lack of a collaborative effort has made it a challenge for developers, wireless operators and handset manufacturers to respond as quickly as possible to the ever-changing needs of savvy mobile consumers. Through Android, developers, wireless operators and handset manufacturers will be better positioned to bring to market innovative new products faster and at a much lower cost,” Google said in a statement issued from its Mountain View (California) headquarters. Next week the Alliance will release an early access software development kit to provide developers with the tools necessary to create innovative and compelling applications for the platform.
“This partnership will help unleash the potential of mobile technology for billions of users around the world. A fresh approach to fostering innovation in the mobile industry will help shape a new computing environment that will change the way people access and share information in the future,” said Google chairman and CEO Eric Schmidt.
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| Punjab Infotech to appoint consultant for IT road map |
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| KEEN to give the necessary impetus to bring about growth in the information technology sector in the state, the Punjab Infotech is now on the verge of selecting a consultant to help it evolve a sector specific strategic policy and a road map for sustained growth. Likewise,Punjab Infotech has invited private consultancy groups for appointment as a consultant not only for formulating a strategic plan with a definite road map but to also asssit the corporation in the implementation of the proposed plan so as to enable private sector to consider Punjab as an IT investment destination.
With land prices skyrocketting and availability of land in Mohali at affordable rates becoming a remote possibility at this juncture, the government has realised that it would be inevitable to make industry consider alternate sites in and around major Punjab towns as well as the interiors for new investments so that there is allround growth. While six companies evinced their keenness in being appointed as a consultant,five of the six companies eventually made their presentations to the corporation amongst them being Ernst & Young, Deloitte, TCS, ICRA and IL &FS. While PWC also showed its interest,it could not make it at the time of the presentation,hence moved out of the race, it is pointed out.
Talking to ET here today, Mr Rakesh Kumar Verma, MD, Punjab Infotech said that the consultant would be selected by the end of this month out of the five who had made their presentations. “ We want the IT industry to flourish in Punjab and due to the high cost of land it is but imperative for industry to look at sites in the interiors of the state,” he said. So far efforts to enable industry to set up shop in the IT sector have been focussed in and around Mohali but now efforts would need to be channelised to rope in prospective investors with sound projects to look for alternate sites, he added.
The consultant, it is understood, will take cognisance of the present status of the industry in Punjab, its growth potential and theraby evolve a road map for its development.
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| Bajaj ready for Euro tour, picks 14.5% in KTM |
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| EXACTLY a week after Renault Nissan CEO Carlos Ghosn’s high-profile visit to its Chakan plant, Bajaj Auto has announced another top-gear alliance, this time in the motorcycle market. On Monday, Bajaj picked up 14.5% in KTM from the open market for around Rs 300-350 crore, as part of a “wide-ranging co-operation” with the € 566 million (Rs 3,200 crore) KTM Power Sports, Europe’s second-largest sport motorcycle maker. Bajaj picked up the stake through its 100% Dutch subsidiary and sources said it may look at picking up another 5-10%. Bajaj Auto may also get a seat on the KTM board, say industry sources.
The alliance with KTM covers joint development of street bikes for both Indian and overseas markets and will complement Bajaj Auto’s efforts to hammer out a deal with another European motorcycle brand, Triumph. Sources say talks are on with Triumph, and if they go through, the focus there would be more on cruisers and other higher displacement on-road products. KTM, on the other hand, makes mostly off-road sports bikes. Its jointly-developed street bikes with Bajaj will have smaller 125 cc and 250 cc engines.
The promoters of KTM currently own 50.1% of the company. Asked if Bajaj would increase its shareholding in the company to a more substantial 20-25%, KTM CEO Mr Stefan Pierer told ET: “Our company is listed on the Vienna stock exchange and Bajaj’s current stake comes from the free float shares. If there’s something free on the market, they could do it and end up increasing their participation. We see this as a long-term partnership and will be very positive about it.”
The partnership will jointly develop a high-performance, water-cooled engine platform for 125 cc and 250 cc bikes. “The engine platform will spawn several models,” said Mr Pierer. “KTM will do KTM models and Bajaj will make Bajaj motorcycles.” The two companies, he said, are focusing on their core markets for this new range of street bikes—Bajaj on India and the south Asian and southeast Asian markets and KTM on Europe.
But in the second phase, that spread will increase. “We have a good presence in north America and we can figure out which models will work there,” Mr Pierer said. “Also we have a footprint in Japan but not in the rest of Asia, so the alliance can look at southeast Asian markets like Indonesia, Philippines, China, Vietnam etc,” he added.
The alliance will not only enable Bajaj to take over the distribution of KTM products in India and southeast Asia, it will also enable the Indian two-wheeler major to access the European market through KTM.
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| Bhel to lose edge as govt may remove price preference cover |
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| DOMESTIC equipment manufacturers such as Bhel,which are already facing competition from Chinese and Korean companies, are in for some tough times ahead. The government is considering a proposal to do away with 15% price preference to public sector undertakings (PSUs) in procuring equipment for mega power projects. The proposed move is part of policy changes suggested by the power ministry for executing mega power projects (MPP).
The policy in the current form gives price preference of 15% to domestic bidders (main beneficiary being Bhel) to compensate them against higher interest rates, local taxes and infrastructural inadequacies. The provision gives the PSUs an extra edge vis-a-vis global equipment suppliers, which have made major inroads in the Indian market by winning international competitive bids (ICB) through aggressive price quotes. Ministry of power, however, feels that the provision is discriminative against other equipment players that have to give this preference and at the same time ensure cheap power to consumers. The government has circulated a cabinet note in this regard seeking opinion of various ministries.
As per the note, as ministry of power has been exempted from the purchase preference policy (PPP) of department of public enterprises announced in 2005 (subject to Bhel getting certain orders on negotiated basis), the present system in the mega power policy was no required.
Once implemented, the move could hurt Bhel that is the single largest equipment supplier in the country. The price preference provide the company protection against aggressive pricing strategy of Chinese and Korean companies such as Dongfang and Doosan. In fact, these companies have emerged successful bidders in several private sector power projects. Power generation PSU NTPC, which is also looking at enjoying price advantage by getting supplies overseas companies, is unable to do so on a large scale due to restrictive provisions in the mega policy.
When contacted, a Bhel official denied that the PSU would come under pressure from changes in the price preference policy. “We have never got equipment orders on the basis of the preference policy but have been the lowest bidders for several projects. Moreover, the policy itself has become defunct after the 2005 DPE order and bulk orders on negotiated basis are given only for introducing a new technology.”
A power ministry source, however, said the mega policy preference clause is still active. “This is also a pre-condition for a generation project to get tax incentives under the policy in the form of tax holiday and duty free imports.” the source added. Moreover, the ministry feels that as Bhel’s order books are full for next five years, any effort to give its price preference would be meaningless.
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| Punjab approves mega projects worth Rs 1,345 cr |
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| THE Punjab government on Tuesday cleared mega projects worth Rs 1,345 crore including the Rs 300 crore project of Grasim Industries at Lehra Mohabat. The mega projects were approved by the empowered committee on mega projects under the chairmanship of chief minister, Parkash Singh Badal.
A spokesman of the Punjab government said here on Tuesday that these were the first clearances given after the formulation of new government policy for mega projects. Earlier on August 14, 41 pending projects worth Rs 26,343 crore were approved by the empowered committee.
The projects cleared on Tuesday includes those of Aarti International, Avani Textiles, Oswal Spinning & Weaving Mills, Shiva Fibers, Grospinz Fabz, Vallabh Textiles, Grasim Industries and Mukesh Udyog.
The empowered committee conceded the demand of the mega investors that stamp duty be charged only on the land in question and not on the entire cost of the project. The chief minister ordered that ambiguity in the policy on this issue, if any, should be immediately removed.
Mr Badal urged investors to utilise the services of the security personnel trained by the Punjab Police in their industrial units who had been well equipped with hi-tech gadgets to efficiently combat security hazards.
Mr Badal also asked the investors to tie up with the jail authorities of Ludhiana to impart training to the jail inmates in knitting.
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| Punjab hopes to crush 590 lakh quintals sugarcane in 2007-08 |
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| PUNJAB expects to crush 590 lakh quintals of sugarcane during 2007-08 against 509 lakh quintals during the last season, as crushing by sugar mills in the state starts from Wednesday. The state has also targeted to produce 56.6 lakh quintals of sugar during this year as compared with 48.66 lakh quintals in the last season, Punjab cane commissioner M S Sandhu said here on Tuesday. The availability of sugarcane in the state has improved during this season on account of substantial increase in the area under cultivation. "In 2007-08, the area under sugarcane increased to 1.38 lakh hectares from 1.18 lakh hectares during last year," he said. As a result, Punjab has projected sugarcane production at 842 lakh quintals in the ongoing fiscal as compared to 731 lakh quintals last year. With sufficient availability of sugarcane, mills in the state would run to their full capacity, he said. 16 sugar mills would be crushing cane for 180 days during this season, out of which, nine are co-operative mills while the remainder 7 are private ones, he said. However, the government will not revise the State Advised Prices (SAP) for sugarcane this year.
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| Bajaj buys stake in European bike firm |
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| Pune: Bajaj Auto (BAL) has invested Rs 300 crore in 560 million Euro-KTM Power Sports AG, the second largest European sports motorcycle manufacturer, for picking up 14.5% stake. The investment in the Austrian company was done through BAL’s whollyowned subsidiary in Netherlands Bajaj Auto International Holdings BV.
This is part of the wideranging co-operation the two companies have announced on November 5 to co-develop a range of 125 cc and 250 cc engines which will go into both Bajaj and KTM motorcycles in the street entry segment. These jointly developed products, including vehicle platforms, would be manufactured by Bajaj Auto at its Chakan facility for both Bajaj (existing and new) and new KTM motorcycle brands.
“KTM’s sharp brand positioning, differentiated designs and hyper performance have inspired Bajaj to invest in this participation,” said Rajiv Bajaj, MD, BAL. As per the agreement, Bajaj Auto will also take over the distribution of KTM products in India and other countries in South-East Asia. So, the cooperation will open up the Asian region for KTM where it is not currently present and help create new opportunities for the sales of its entire product-portfolio, while providing Bajaj access to the European market through KTM’s 720 dealerships in the continent.
KTM’s knowhow on highefficient water-cooled 4-stroke engines (125 cc and 250 cc), which provide the basis for its new street entry segment, would also be available as basis for Bajaj products.
“We are moving more and more powerful bikes. So KTM’s technology was complementary to us and does not create any conflicts,” said Amit Nandi, BAL GM (marketing). Water-cooled technology offers a more efficient power-weight ratio allowing smaller bikes to have higher power, compared to the air-cooled and oil-cooled technologies that BAL currently employs.
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| Inclusive growth through more jobs in Bharat National Manufacturing Competitiveness Council Seeks Po |
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| THE National Manufacturing Competitiveness Council (NM-CC) will urge the government to devise policies to ensure that economic growth, especially the high growth in manufacturing, creates substantial new employment in the rural sector.
“We need employment opportunities to be created where the people are. Employment generation programmes should necessarily have a rural connection,” NMCC member secretary V Govindarajan told ET.
The council, whose national strategy for manufacturing is largely being acted upon by various central ministries and departments, is also looking at specific programmes for skill upgradation of the country’s labour force. Compatibility between the market (the kind of labour the industry requires) and the skill development programmes is important, Mr Govindarajan says.
“The entire spectrum of skills, from low-end to the highest level, is in demand. High economic growth has resulted in a surge in demand for skilled labour,” he said. NMCC recognises that competition in the job market will have to be ensured. Absence of adequately experienced hands is forcing many industrial sectors to settle for the second best. This would adversely impact the Indian industry’s competitiveness in the global market, the council reckons.
Currently, a few centrally sponsored programmes for knowledge enhancement are underway. Most of these have been launched recently. The labour ministry’s Rs 550-crore project for upgradation of the teaching staff of ITIs and the HRD ministry’s scheme for quality enhancement of about 1,100 polytechnics are examples. NMCC reckons there is a need for a few more such focused programmes. The country needs more engineering colleges. It is equally important to ensure that quality of engineering education does not deteriorate as a result. At the highest level of skills and knowledge, like frontier R&D, quality enhancement should be a continuous process. NMCC thinks incentives should be in place for knowledge development at that level.
Currently, more than 80% of Indian R&D happens in the private sector. In the most developed countries, the converse is the case. Policy should give an impetus to R&D in the private sector, Mr Govindarajan said. He cited the recent policy change which allowed the scientists of the various institutes under the Council for Scientific & Industrial Research (CSIR) to partner with private sector. These scientists can get the monetary rewards of fruition of such joint ventures even while retaining their government employment. It is noteworthy that knowledge-intensive industries like pharmaceuticals opted to change their outlook and do own R&D when expediency demanded it. Genuine R&D rarely happens unless the heat of competition and threat to survival is felt.
It remains a fact that notwithstanding scores of technology transfer deals between India and technology-rich countries, the country is still to assimilate frontier technologies in many areas. This endorses the opinion that India should invest much more meaningfully in R&D.
These views of NMCC have already been conveyed to the prime minister’s high-level committee on manufacturing in which it is represented. NMCC’s objective is to spur consistent level of investment, both domestic and foreign, in manufacturing and infrastructure. It thinks for Indian manufacturing to grow at a brisk pace demand needs to be created for goods and services through domestic policies as well as foreign trade policies. Policies should increase the employment content of growth without sacrificing competitiveness. It has identified sub sectors such as textiles and garments, leather and leather products, food processing, etc for special focus.
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| Equipment PSUs may lose 15% price preference |
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| DOMESTIC equipment manufacturers like BHEL — facing tough competition from its Chinese and Korean counterparts like Dongfang and Doosan — are in for some more tough times ahead. The government is considering a proposal to do away with 15% price preference to public sector undertakings (PSUs) in procuring equipment for mega power projects. The proposed move is part of policy changes suggested by the power ministry for executing mega power projects (MPP).
The policy in the current form gives price preference of 15% to domestic bidders (main beneficiary is BHEL) to compensate them against higher interest rates, local taxes and infrastructural inadequacies. The provision gives the PSUs an extra edge vis-a vis global equipment suppliers who have made major inroads in the Indian market by winning international competitive bids (ICB) through aggressive price quotes. The ministry of power, however, feels that the provision is discriminative against other equipment players that have to give this preference and at the same time ensure cheap power to consumers.
The government has circulated a Cabinet note in this regard seeking opinion of various ministries. As per the Cabinet note, as ministry of power has been exempted from the purchase preference policy (PPP) of department of public enterprises announced in 2005 (subject to BHEL getting certain orders on negotiated basis), the present system in the mega power policy was not required.
Once implemented, the move could hurt BHEL that is the single largest equipment supplier in the country. The price preference provide the company protection against aggressive pricing strategy of Chinese and Korean companies. Infact, companies like Dongfang and Doosan have emerged successful bidders in several private sector power projects. Power generation PSU NTPC, which is also looking at enjoying price advantage by getting supplies overseas companies, is unable to do so on a large scale due to restrictive provisions in the mega policy.
When contacted, a BHEL official denied that the PSU would come under pressure from changes in the price preference policy. “We have never got equipment orders on the basis of the preference policy but have been the lowest bidders for several projects. Moreover, the policy itself has become defunct after the 2005 DPE order and bulk orders on negotiated basis are given only for introducing a new technology.”
However, a power ministry source said that the mega policy preference clause is still active. “This is also a pre-condition for a generation project to get tax incentives under the policy in the form of tax holiday and duty free imports.” the source added. Moreover, the ministry feels that as BHEL’s order books are full for next five years, any effort to give its price preference would be meaningless.
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| Danish companies eye north for investments: Ambassador |
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| DANISH companies are eyeing the northern region for new investments. Pointing out that prospects for investments by Danish companies looked promising, Danish ambassador in New Delhi Ole Lonsmann Poulsen said that the agriculture sector could see fresh investments especially in the food processing sector. He said that Punjab could be the obvious choice where Danish joint ventures have great potential. Other areas which hold promise for investments include lifesciences, biotechnology and the information technology sector.
Speaking on the sidelines of the opening of the corporate office of Widex India, the Indian arm of Widex A/S, Mr Poulsen said here today that already there had been some 70 joint ventures in India and in the near future this figure would touch 100 with some of the joint ventures likely to come Punjab's way should the Danish companies find suitable partners.
He told ET that Chandigarh with its clean and salubrious environment and its proximity to the hills could prove to be an easy target for investments by Danish companies who were now looking up north for suitable partners." It would be my endeavour to promote Indo-Danish trade and convey to the Danish companies desirous of setting up joint ventures in India about the opportunities and infrastructure developments in the northern region."
He said Denmark ranked 19th largest foreign investor in India and direct investment inflows from Denmark into India from 1991 till December 2006 totalled $161.8 million. "
This will go up in the near future as more companies look for business opportunities here, he said. Recently, Widex pumped in 1 million in the Rs 11 crore equity of the Indian arm Widex India. Among major Danish investors in India include AP Moller Group, Cheminova Agro, F L Smidth & Co, Danfoss, CHR Hansen, Danisco, LM Glasfiber, Lundbeck A/S and Egmont International Holding.
While the two way bilateral trade between India and Denmark has been on the rise, he felt that there was need to expand and widen the trade basket. The balance of trade however, remains in India's favour increasing the Indian trade balance surplus from $83.2 million in 2005 to $197.1 million in 2006. India's major exports include apparels/readymade garments, textile yarns, fabrics and carpets.Danish imports from India now, he said, account for 0.64 % of Denmark's global imports.
He hoped that during 2007, the twoway bilateral trade would get an added fillip and that more companies would come together for joint ventures in several areas of mutual interest.
He also indicated that the Danish prime minister was likely to visit India sometime February 2008.
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| Punjab to auction small digit vehicle number |
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| CHANDIGARH The Punjab government on Sunday notified the new policy to sell the small digit vehicle registration numbers in each series by open auction amending Motor Vehicle Rules 1989. Master Mohan Lal, transport minister, said that some numbers in each series have been reserved and they would be sold to the public by open auction after giving due notice to the public. A transparent procedure has been drawn for the new policy. The 0001 number in each series would have a reserve price of Rs 50,000. Numbers ranging from 0002 to 0009 would have a reserve price of Rs 10,000. Numbers ranging from 10 to 100 in each series would have a reserve price of Rs 3,000 and rest of the reserved numbers would have reserve price of Rs 1,000. Mr Lal said that the open auction would be organised by each District Registration Authority |
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| IFRS to improve comparability, transparency: CII |
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| • NEW DELHI: Industry Chamber CII on Sunday said convergence of International Financial Reporting Standards (IFRS), the global accounting practice followed by 102 countries, would improve comparability, transparency and credibility of financial statements of the India Inc. "Adoption of IFRS, the new global reporting standards, would improve comparability, transparency and credibility of financial statements and in a globalised world, would lead to greater economic efficiencies," CII said in a release. IFRS will be adopted only for the listed entities and other public interest entities such as banks and insurance companies, it said. |
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| Italy to support Indian SMEs, invest € 3 million |
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| • NEW DELHI: Italy will invest over € 3 million for a project aimed at developing India's small and medium enterprises (SMEs) and make them globally competitive. The three-year project, called Consolidated Project for SMEs Development in India, will be overseen by the ministry of micro, small and medium enterprises. The United Nations Industrial Development Organization (Unido) will be the implementation agency. Sectors identified for the project are leather, including tanning, footwear, and leather goods, and auto components. The leather industrial clusters to receive project support are Chennai for tanning and footwear, Agra for footwear and Shantiniketan in West Bengal for leather goods. In the auto component sector, the cluster in Chennai will receive support. Italy is among the world leaders in the SME cluster development model, and is the leading shoe manufacturing country in the EU with a 40% world market share. |
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| Conergy to expand India network Germany’s Renewable Energy Co Has Already Set Up Manufacturing Unit |
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| GERMAN renewable energy major Conergy is negotiating to acquire a number of local companies engaged in the business of distributing solar energy products in the country. It is also evaluating options for its second phase of expansion in India. One of the thrust areas for Conergy in India is rural electrification projects. The company has commissioned a manufacturing unit for solar modules and components in Bangalore.
“Besides our organic expansion plans we are also in a due diligence-stage to acquire some local distributors in India to expand our network. In terms of infrastructure, we have commissioned the Bangalore facility as part of the first phase. Depending on how the business progresses, we should be looking to launch the second phase of expansion by next year,” said Conergy India’s country manager Raveendra Kamat. The company operates through three divisions globally: Conergy which sells solar modules and solar units, Epuron which plans, finances and executes renewable energy projects and SunTechnics which plans, implements and installs solar and bio-energy units.
While SunTechnics has been present in India for the past two years, Conergy has started only this year.
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| CEO Scorecard: Matching goal by goal Cos Are Sharing Their Leadership Targets For Transparency & Emp |
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| COMPANY boards are passe. The CEOs’ obligations now encompass a presence in the employee court too. In order to enhance the management’s credibility and infuse transparency, scores of companies are sharing goals, targets and key results areas (KRAs) of their CEOs and function heads with employees through the intranet or face to face. So, if an employee can a c c e s s Mindtree C E O ’s goals on the company int r a n e t , Google reports its C E O ’s quarterly KRAs there. Pfizer and auto major Mahindra & Mahindra and Perot Systems, to name a few, are the others that have adopted such a practice to bring in a culture of transparency and build goal alignment throughout the organisation.
Take the case of Pfizer’s Indian arm. Pfizer India’s CEO and all functional heads present their draft objectives for the following year, to employees down the line. HR department facilitates the process to evaluate interdependency of departmental goals and align them across the company, says Pfizer India executive director-HR Yugesh Goutam. “Once it is done, we put a scorecard on the intranet in a quantifiable format that everyone can access.” Interestingly, India is the only subsidiary that has conceived and implemented such a practice and insiders say this has interested the pharma major, globally. The pay-off has been encouraging, adds Goutam. “While it has brought openness in employees’ aspirations about moving forward and how to deliver, it has also allowed us to do course correction and gather feedback through a healthy criticism of the top management.” And bare their performance.
While many companies do use balance scorecards, which are cascading in nature, today companies are increasingly getting proactive at communicating on their leadership’s targets to bring in that feeling of belongingness amongst its people. “It is an exercise to build a feeling of inclusion amongst employees,” says Mindtree Consulting vice-president & head-people function Puneet Jetli. The company adopted the practice much before the firm was listed. At Mindtree, it begins with chairman Ashok Soota spelling out his own objectives/goals, how to measure his success and his personal learning objectives on the firms intranet. “He then posts his report card or how did he do, at the end of every quarter apart from what went well and what could have been better,” says Jetli.
While the practice brings a huge amount of transparency across the organisation building credibility, from the company’s viewpoint it is a great way to bring about goal alignment, says Great Place to Work Institute India (GPTWI) CEO Prasenjit Bhattacharya. “Here the process of alignment of goals is spontaneous, which means people would willingly put in their effort to make a maximum impact.” All this has a wider implications for the organisational work culture. Perot Systems India president-application & business process solution group Anurag Jain believes that days of bureaucratic management are gone, where employees were not at the level of the management.
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| More export sops sought |
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| THE commerce & industry ministry has pressed the panic button over job losses in the export sector. In a note for the Cabinet Committee on Economic Affairs (CCEA), it has been pointed out that approximately two lakh workers will be laid off by exporters by the end of the fiscal and the number could rise significantly if the government does not take immediate action. The note, which will be first sent to the finance ministry for its comments, suggests that for sectors like handicrafts, textiles and leather, where exports have plunged up to 50%, there is a need for more sops, which could include an ad-hoc increase in tax reimbursement rates under the DEPB and duty drawback schemes, full reimbursement of service tax for exporters, and reimbursement of state taxes and levies.
Senior officials pointed out that in a survey of 58 companies picked up by the commerce department across sectors, it was found that 10,800 workers had been laid off till September 30. “Several thousands have already lost their jobs and if nothing is done to bail exporters out, the figure will go up significantly during the next season,” the official said.
Not only are exporters reducing their volumes, several units are also shutting shop, especially in the textile and handicraft sectors, leading to huge layoffs.
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| CII’s consumer fair in a new avatar |
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| Chandigarh: If you think CII’s consumer fair is all about swanky cars and luxurious electronic goods, think again. The annual consumer fair, which is organised by Confederation of Indian Industries (CII), has revamped itself this year.
“Keeping customer’s needs in mind, this revamp is necessary,” Krishan Goyal, former chairman, CII Chandigarh state council, said.
There is a blend of big and small entrepreneurs for consumers. The stalls are selling churans, candles, artificial jewellery, apparels and other home decor accessories, along with cars and electronic products. ‘Everything for everybody under one roof ’ is the mantra of the organisers.
“This time we tried to bring more diversity to our fair. Anybody who comes with whatever budget can make purchases in the fair. With festival season on, the aim was to provide consumers everything under one roof,” Major CS Bachhar, director, CII northern region, said. A new segment — States of India — has been introduced. The fair also got bigger and better, as traders from 12 different countries are participating this time. Accompanying two delegates from the UK, Vina Parmar, a marketing assistant of a UK based-company of car toys, said, “We get a chance to understand and estimate the potential demand present here.”
Fair’s facets
Sellers from other nations face language problem. Chavalit Rojjanaprapayon, minister counsellor (commercial) from Royal Thai Embassy, said, “Certainly, we are facing language problem but it can be overcome. After all there is a big market for any kind of product.”
Space utilised, to accommodate 180 participant traders, has increased from last year’s 4,000 sq mt to this year’s 6,500 sq mt.
For the first time traders from 12 countries, including Australia, Pakistan, Thailand, are participating
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| Handloom to get Rs 230-cr revamp |
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| WITH an aim to support over 27 lakh handloom weavers, the government on Thursday approved a Rs 230-crore marketing and export promotion scheme for the sector that will be implemented over the next five years.
“The Cabinet Committee on Economic Affairs gave its approval for implementation of a centrally sponsored scheme on marketing and export promotion during the 11th plan period (2007-12) with an outlay of Rs 230 crore,” finance minister P Chidambaram told reporters after the CCEA meeting.
He said out of approved funds, Rs 205 crore have been earmarked for handloom marketing and the balance would be for export promotion.
The marketing would include organising exhibition, events and craft melas, setting up urban haats, marketing complexes and publicity awareness. There would also be handloom marketing complex at Janpath in New Delhi. The handloom export promotion will include undertaking export projects, fairs and exhibitions, setting up of design studios. It will also assist weavers in product diversification and the development of exportable products.
After rupee appreciation of around 12% this year, the export of handloom products have been badly affected
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| Auto Drive: White goods sales surge in October |
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| THE consumer durables industry has managed to sell more than it expected in October. Significantly, the surge in demand has come at a time when the durable makers, in a departure from the past, stopped all substantial price discounts. This is in contrast to the automobile industry which has so far failed to generate a substantial spike in sales.
More importantly, the period during which sales volumes spike is yet to come. The maximum chunk of Diwali sales, particularly in north India, takes place in the last week running into Diwali, which has just started. Market leader LG has already revised its sales target for the October-November period. “We have achieved the highest ever monthly sales of Rs 1,100 crore in October which was above our estimates. For the two key months of this season we have raised our growth targets by 7-8%, and we are looking to clock about Rs 1,900 crore in sales in these two months combined,” said LG Electronics India Director Sales & Marketing, V Ramachandran. Other companies have also witnessed a spike in sales during the last month despite the fact that Diwali was in October last year and year on year sales growth during the month was expected to be muted.
Samsung for instance has clocked 25% sales growth during October. Given that the market is now headed into the peak sales period, it is confident of achieving the high 40% growth target with revenues of Rs 1,200 crore during the October-November period. “There was a lot of latent demand which was expected to generate sales this festival season as we didn’t have great sales during the cricket world cup early this year. In addition, since the high value premium products are growing faster it also pushes up the overall revenue growth figures,” said Mirc Electronics’ VP(Marketing, Sales & Service) Vivek Sharma. Mirc Electronics, which operates under the Onida and Igo brands, is expecting 25-35% sales growth during the festival period this year.
Appliances major Whirlpool is sticking to its 25% growth target for the two months combined. Says Whirlpool India, VP(Marketing) Shantanu Das Gupta, ”This one week is going to be very critical in overall sales but given the footfalls and consumer interest we are certain that we will meet our growth target.” Among the product categories appliance sales have been particularly noteworthy this year. While, Diwali sales is primarily driven by consumer electronics, this year appliances have been generating good business. Dealers are reporting high demand for products such as washing machines and microwave ovens.
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| CLE, CLRI join hands with J&K body for leather industry revival |
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| IN partnership with Kashmir Chamber of Commerce and Industry (KCCI), the Council of Leather Exports (CLE) and Central Leather Research Institute (CLRI) would prepare a vision document for reviving the leather industry. The abundance of the raw material in a hugely mutton-beef consuming place with a tall order for leather products are the two main factors why the state planners think the initiative could be a hit.
The vision document, said KCCI president Dr Mubin Shah would offer an idea about how many units are viable in given availability of raw material. “There need to be certain restrictions on raw material movement so that local units do not suffer”, he said. Besides, Dr Shah said the document would also identify parties from the local entrepreneurs ready for JVs with non-locals, especially from Chennai, which is India’s
leather capital.
The decisions followed a joint visit of CLE and CLRI executives last month during which they gathered first hand information about the raw material availability, its quality and the upcoming Industrial Growth Centre at Lassipora where a vast stretch is identified as Leather Park . “The team was satisfied with the raw material and its quality as well as the IGC. It said the rising real estate rates in south and expensive skilled labour are the two compelling factors that would get Kashmir its pie in the leather sector”, Irfan Yasin, MD State Industrial Development Corporation (SIDCO) said. The team that also included top executives of the council who are also leading traders also said they would encourage JVs and offer finished leather for product conversion through local artisans on a long term basis.
“Though at a concept stage one idea is to create an SPV between SIDCO, CLE and the central government for promotion of this sector that has growth prospects”, he said.
Certain leather related units have survived in Kashmir against odds. Dar Tannries, perhaps the biggest leather unit that family purchased from the government way back in sixties was taken over by police and other security agencies and converted into a garrison at the Shalteng Crossing. “It was a battle for years together that we were permitted to step in. Our machines are lost and two-third of the premises is still with them”, says Nasir Kawoosa, one of the co-proprietors. “The government wanted the unit to be operational so we made it after infusing over one crore recently. Now we want to start an upper-shoe unit for which banks seek a clearance but it is yet to be issued by the industry ministry”, he added.
In Lassipora - south Kashmir main upcoming industrial hub - Rawanda Tannery with treating capacity of 600 hides a day survived the turmoil. Says Javed Ahmad, manager of the estate: “A modern unit Reem Tanneries is coming up at an investment of over three crore rupees. In the first stage, it wants tanning in the semiprocessing plant and the second stage would manufacture finished goods especially bags for export”, he said. The unit is promoted by Kaisar Mart, Kashmir’s leafing walnut exporter that is talking to Panchkula based Drish Shoes for managing the plant as a JV. If talks succeeded Drish would own around one-third of the unit’s equity on long term basis.
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| Punjab allocates 31 biomass power projects |
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| THE Punjab Energy Development Agency (PEDA) on Friday finalised the allocation of 31 decentralised biomass power projects with aggregate capacity of 338 mw, having capacity ranging from 5 mw to 20 mw in 31 tehsils.
Stating this here, Bikram Singh Majithia, minister, science, technology, environment and NCES, said that these power projects are being set up on build, operate and own (BOO) basis. This has attracted Rs 1,450 crore private investment.
Out of these, 21 such projects with a capacity of 220 mw, have been allocated to the private developers. All these power projects are scheduled to be commissioned by September 2009. He said that in order to encourage cogeneration in the industries, PEDA has also facilitated and commissioned 6 biomass cogeneration projects with a total capacity of 39 mw and 4 such projects of total capacity of 91 mw are under execution. They are likely to be commissioned by December 2007.
Another 8 cogeneration biomass projects with a total capacity of 71 mw are in the pipeline and MOUs for the same will be signed shortly. With the commissioning of all these power projects, direct employment for 1,600 skilled persons and indirect employment for 5,000 persons will be created in the state. He said that these environment friendly power projects would help in abatement of green house gases (GHG) emissions responsible for global warming.
The minister said that since Punjab faces peak power shortage of 3,000 mw, the commissioning of these projects would help in supplementing power requirement of around 26%.
He added that the state government is committed to promote renewable power through private sector by providing attractive tariff and fiscal incentives.
Tejinder Pal Singh Sidhu, chief executive, PEDA, said that in addition to biomass projects, PEDA has also signed MoUs for sale of power from 66 small/micro hydel projects with a total capacity of 258 mw.
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| Market survives bear hug, ends 252 pts up |
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| SHOWING greater resilience, the stock market on Friday bounced from early lows to end 252 points higher in extremely volatile trade amid a global meltdown triggered by fresh credit market jitters.
Reacting negatively to weak global cues, the Bombay Stock Exchange (BSE) 30-share Sensex tumbled by about 469 points to a low of 19,255.77 in the initial five minutes of trading.
The market, however, staged a sharp recovery on the back of hectic short covering at lower levels driving Sensex closer to the psychologically important 20K level.
The BSE barometer touched a high of 20,025.63 before ending the day at 19,976.23, a net rise of 251.88 points or 1.28% over Thursday’s close of 19,724.35.
With this, the market has made four failed attempts to close above the 20K mark in the week, having crossed the crucial level during four trading sessions.
The broader S&P CNX Nifty of the National Stock Exchange (NSE) also gained 65.95 points or 1.12% to close at 5,932.40 from previous close of 5,866.45.
Foreign institutional investors (FIIs) and local players made heavy purchases in last 30 minutes of trading, brokers said, partly attributing the turnaround to low inflation, which dipped to five-year low of 3.02% for the week ended October 20.
The Dow Jones Industrial Average and the Nasdaq Composite Index yesterday plunged by 2.6% and 2.25% due to fresh fears of more credit crisis fallout, sparking off a global meltdown.
Asian Indices were down in a range of 2% to 3.5% at close.
Depicting the rally in banking segment, the sectoral Bankex closed up by a whopping 389.84 points or 3.59% to 11,241.53.
The trading volume on BSE dropped to Rs 8,182.91 crore from Rs 11,469.17 crore on Thursday. RPL remained the top traded share with the highest turnover of Rs 793.93 crore followed by RNRL (Rs 605.13 crore), REL (Rs 391.57 crore), Reliance Capital (Rs 365.56 crore) and RIL (Rs 293.56 crore).
The broad-based BSE-100 index shot up by 136.96 points to 10,447.68 from previous close of 10,310.72.
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| Shreyans Industries H1 turnover up 16 % |
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| SHREYANS Industries Limited, a flagship company of Ludhiana-based Shreyans Group has achieved a sales turnover of Rs 116.78 crore during the first half of 2007-08 as against Rs 92.76 crore achieved in the same period of the previous year.
According to a company release, the profit is Rs 8.40 crore, increased 84% from Rs 4.51 crore during the corresponding previous year.
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| China bars exports from toy factories in south |
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| • BEIJING: More than 700 toy factories in southern China have had their export licences revoked or suspended following inspections triggered by the spate of product recalls overseas, state press said Thursday. Hundreds of other factories in Guangdong province, which is the nation’s biggest toy exporting base, have been ordered to renovate their facilities or improve product quality, the China Daily said, citing local officials. Out of the 1,726 inspected, almost 85% of Guangdong’s total number of toy factories with export licences, 1,454 were found to be at fault in some way. |
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| Karnataka lines up new policy to boost textiles |
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| EVEN as investments in the textile sector are flying out of Karnataka, the state government is giving finishing touches to a new textile and clothing (T&C) policy, and is planning to pump in Rs 500 crore to boost the sector.
These investments will go into capacity building initiatives. Karnataka texile development commissioner Ashok Kumar Manoli said, “we intend to create a talent base of five lakh persons who can be employed by these units. The policy will also focus on dispersing the growth of textile units to other parts of the state with special emphasis on rural areas. Our aim is to stimulate, maintain and prepare the industry for the next phase of growth.”
Speaking at the FICCI-FKCCI round table on ‘Tariff & Non-tariff Barriers in the Textile Industry,’ Mr Manoli said, the Indian T&C sector had to brace itself for greater competition coming in from countries like China and Bangladesh.
Sounding a note of caution, he said, the pace of growth of apparel exports from Bangalore was expected to slow down this fiscal. “In FY07, we recorded a 62% year on year growth but this fiscal, the growth would be muted,” he said.
The rise in the rupee against the dollar has already dented the bottom line for many apparel exporters in India.
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| Exports growth slips to 18.5% Cabinet Meet Soon To Review Re Rise |
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| PULLED down by a rapidly rising rupee, growth in India’s exports — valued at $72.2 billion in the first half of the fiscal — decelerated to 18.52% compared to a sharp 27% rise to $60.8 billion recorded in the comparable period of the previous fiscal.
India’s exports during September were valued at $12.79 billion, up 19.26% over $10.73 billion during September 2006. In rupee terms, exports touched Rs 51,621.52 crore which was 4.31% higher than the value of exports during September 2006.
India’s imports during September were valued at $ 17.21 billion, an increase of 2.31% over imports in September 2006, valued at $16.82 billion. In rupee terms, imports declined by 10.51%.
Oil imports during September were valued at $5.49 billion, up 7.98% over oil imports in the corresponding period last year, valued at $5.09 billion. Oil imports during April-September were valued at $31.39 billion, up 8.26% over oil imports of $29 billion in the corresponding period last year.
Non-oil imports during September were estimated at $ 11.71 billion, down 0.15% lower over non oil imports of $11.73 billion in September 2006. Nonoil imports during April-September were valued at $77.80 billion, up 34.13% over the level of such imports, $58 billion, in April-September 2006.
The trade deficit for April-September 2007 was estimated at $36.92 billion compared to a deficit of $26.02 billion during April-September 2006.
The adverse effect of the falling value of the dollar against the rupee gets reflected more prominently in the export figures valued in rupee terms which recorded a marginal 5.34% rise to Rs 2,95,233 crore in the first half of 2007-08 compared to 34.15% growth (to Rs 2,80,275 crore) recorded in the first half of the previous fiscal.
Responding to the rupee touching a new high on Thursday, commerce minister Kamal Nath said the Cabinet will be meeting in the next two weeks to review further measures. “There won't be sops but remissions and refunds of taxes and levies so that a level playing field is provided to exporters," he said. On an optimistic note, the minister said that India's exports will pick up momentum from October and the government hopes to meet its annual target of $160 billion.
Imports, on the other hand, has been rising steadily, although there has been a slow down in September. Cumulative value of imports for April-September 2007 was $109.2 billion (Rs.4,46,420.86 crore) against $87 billion (Rs 39,9815.04 crore)in the year-ago period, registering a growth of 25.51% in dollar terms and 11.66% in rupee terms, respectively. Last year, the import growth rate in the first half in dollar terms was 23.45%, while in rupee terms it was 29.87%
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| Tata Motors surprises mkt, Q2 net up 19% |
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| TATA Motors surprised the market on Wednesday by reporting a 19% rise in its second quarter net profit, attributing the performance to new product launches, strong sales in certain categories and cost reduction initiatives.
However, the company said its net profit of Rs 527 crore includes a Rs 199 crore gain from noncore business.
Tata Motor’s revenues for the quarter rose marginally by 1.3% to Rs 6,673 crore. For the fiscal half year, it’s net profit stood at Rs 993 crore on revenues of Rs 12,729 crore. On a consolidated basis, the company’s net profit was up 6% to Rs 570 crore.
Tata Motor shares fell marginally by 1% to Rs 757 on the Bombay Stock Exchange, on a day when the broader index was down 0.3%.
It has been a tough year for most automobile companies which saw sales slacken due to steep input costs and higher interest rates across commercial and passenger vehicles impacting operating margins, said the newly-annointed Tata Motors executive director (finance) C Ramakrishnan. “However, we are confident at maintaining operating margins at 10% for the next two quarters,” he said, adding that marginal price increases across the CV category and cost reduction initiatives will help maintain the margin.
Mr Ramakrishnan was recently appointed to his current post after the former ED Praveen Kadle, was moved to the group’s new company, Tata Capital, as managing director.
Automobile companies were hit after RBI raised interest rates to beat inflation making it expensive for retail borrowers, who deferred their purchases. The slowing sales also forced Tata Motors to cut production at its Pune unit and bench some of its workforce to counter the downtrend.
Interest costs for the company has more than doubled to Rs 214 crore in the July-September quarter. The company had early this year announced a Rs 12,000-crore capex plan for expansions in all their product categories mainly to ramp up its presence in the fast growing auto market.Speaking to reporters at a conference in Mumbai, Mr Ramakrishnan said the company improved its marketshare in medium and heavy trucks, but lost its presence in the bus segment, mainly on account of supply chain shortages. In passenger vehicles, there has been a marginal loss of marketshare due to new entrants in a slowing market and delays in certain product introductions, which should see corrections the next year.
Tata Motors, has indicated it is interested in bidding for the high profile Ford Motor’s marquee brands Jaguar and Land Rover and the bids are likely to be finalised by early November. The company is also scheduled to roll out the much-hyped one lakh car in the middle of FY08-09.
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| Mahindra & Mahindra pitches for more SEZs |
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| A FORCEFUL plea for creating more special economic zones (SEZs) to drive India’s economic growth was made at the Fortune Global Forum by industrialist Anand Mahindra here on Tuesday.
“The answer lies in SEZs. That’s the route China took to its development,” Mahindra & Mahindra’s MD contended during a session on ‘India Inc goes global’. “SEZs act like pebbles in a lake. They create wider concentric circles that drive development,” Mahindra said. “We need to create a situation where, in 5 to 10 years, all of India will look like a SEZ,” he added. Focusing on the subject, Mahindra ascribed the increasing mergers and acquisitions by India Inc abroad to a variety of factors. “One is the Charles Atlas syndrome. We were previously seen to be also-rans. Then, we look in the mirror and see a new body and want to go out and kick sand. The other is the syndrome of impatience; that we have a lot of catching up to do. Then, there is the strengthening rupee. The corollary of it is that we don’t know how long the rupee will remain strong, and let’s go out now,” Mahindra explained. He then added a word of caution: “What is your long-term vision? Do you want to create the world’s largest airline or are you focusing on customer comfort?”
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| Bicycle companies eye urban market Bicycle business is flourishing worldwide with the poor and money |
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| If car manufacturers are flooding the market with luxury brands, why should the poor cousin, bicycle, lag behind?
Bicycle companies in India are now focusing on the urban market,and are looking to expand their base in the professional and adventure categories.
The bicycle business is flourishing worldwide with the poor and the moneyed classes alike are interested in using this mode to reach their destinations. It resulted in the global companies experimenting with the change and spreading their wings across the globe.
Leading American bicycle brand TREK recently unveiled two highend bikes — ‘Five Star Intra’ with a price tag of Rs 14,235 and ‘Fuel 30’, which is priced at Rs 33,156. “These bikes will help evolve the adventure sport ‘Mountain Biking’ in a country like India, where very few are interested in such sports,” says Pete St Onge, international territory head, Trek Bicycle Corp.
“Before introducing it to the Indian markets, Trek experimented with such cycles in China three years ago and drew a huge response from the people. Considering this, and looking for new opportunities, we have introduced the product in the growing Indian market,” he said.
Last year, the company had tied up with the Indian bicycle firm Fire-Fox Bikes to sell its products in India. Asked about the pricing of the launched products, Onge said “though prices are high, the market is growing and has the tendency to attract new trends. People too look for changes and the markets should cater to their needs positively.” Shiv Inder Singh, managing director, Firefox Bikes, says “The total bicycle market in India is of 12 million units, out of which, 5-7% is for niche bicycles. Getting a favourable response after a year of trek in India, we expect to double our sales this year,” said Mr Singh, adding, the company expects to increase the sales from the current 12,000 bikes to 60,000 by 2011.“The latest bikes are for the urban kids. This sizable population has the tendency to facsimile the West, especially in their lifestyles. And since the adventure sport is growing rapidly there, we hope a good response in India too. The opening up of amusement parks in Indian cities is a positive sign,” he added.
He further said the sales of hi-end products is expected to grow with the Commonwealth games in 2010. Rajendra Varma, Coordinator, non motorised transport, Initiative for Transportation and Development Programmes (ITDP), a Delhi based NGO, believes that growing awareness among people about the benefits of cycling for body muscles could be one reason for constant hike in the sale.
“As people don’t have much time for physical exercise nowadays, we have instituted an organisation called Delhi Cycling Club with an aim to make people aware about the benefits of cycling in keeping the body fit and also participate in minimising air pollution by not using heavy vehicles,” he adds. He further said that we should promote culture of cycling in India by making stricter laws for cyclist’s safety on roads.
Demanding biking to be given the status of a professional sport like cricket, a biker from Bangalore, Vibhor feels, “Cycling in India should be promoted to make it a professional sport.”A local club owner at Pune, Nilesh says, “Cycling has evolved from being a hobby to a passion for me. With a group of few, we work with local cyclists, who also own biking shops and try to make the people aware about the sport.”
Gary Fisher introduced the adventure sport ‘Mountain biking’ to the west for the first time in 1974. Since then it has grabbed the attention of the youth.
An eco-friendly mode of transportation, bicycles are being revived across the world and the steps are taken, especially by the symbols of modernisation, like the Metro in the capital in encouraging commuters to pedal their way to their destinations
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| Savera Systems to set up Indian arm soon |
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| CALIFORNIA-BASED Savera Systems, a global leader in providing solutions and expertise in the areas of governance risk and compliance (GRC) will be setting up its Indian subsidiary in the coming months. The Indian arm of the company will be called Savera Systems Pvt Ltd.
Savera Systems helps companies worldwide identify, measure, and manage operational and technology-related risks they face within their industries and throughout their systems and processes. The Indian arm will follow and expand the core strengths of the group into the Indian market which is witnessing an economic boom at the moment.
With Accenture, Caterpillar, Exxon Mobile, Sony Pictures, Valeant, Armstrong, Merck, Ericsson and Hydro Quebec among its clientele, the company now plans to take on the Indian market.
Harry Sandhu, president of
Savera Systems told ET in an email that chartered accountants have been engaged to register the company in India. “We will be targeting the IT division in all sectors since our focus will be on building solutions and services in governance risk and compliance,” he says.
The parent company will invest over a period of time $1 million in its setup in India while Mohali is being eyed as the next set up area.
The company plans to open a development centre at later stages while a few engineers will be employed as operations begin. The company also plans to bring in expats from the US and hire from India.
After Virsa Systems, that is now the GRC arm of SAP as it was acquired by the latter last year, Savera would be the second company in the GRC space to begin operations in India and the northern region. Being a SAP systems integrator, in competition with Oracle, the company may also have the same fate as Virsa with either SAP or Oracle acquiring it but Mr Sandhu denies any such happenings in the near future as the company plans to go strong with its Indian expansion plans.
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| Rate cut desirable: Industry bodies |
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| THE midterm review of the annual monetary policy announced by the RBI on Tuesday is on expected lines, according to industry associations. Keeping in mind the international trends in interest rates and particularly the indications coming in from the US, industry associations feel the RBI could have considered an interest rate cut along with the CRR hike of 50 bps.
They observed that the hike in CRR would effectively suck out about Rs 15,500 crore from the system. Any increase in lending rate further would have a serious impact on the corporate profitability. This is already evident from a slowdown of several sectors. These sectors are cotton, textiles, transport equipment, leather products. These are the sectors, which are either having predominance of SMEs or are significantly dependent on the bank credits for consumer loans.
Sunil Bharti Mittal, president, Confederation of Indian Industry, said: “It’s not clear how the RBI would react in the eventuality of the US Federal Reserve cutting interest rates, since another round of interest rate cuts would increase the flow of foreign funds into India through the ECB route, which would obviously add to the concern of the RBI.”
It is felt this challenge of increased foreign exchange inflow would further get accentuated and consequent pressure on the rupee by expanding the interest rate differentials between India and the US.
The RBI announcement has allowed oil companies to hedge foreign exchange exposures by using over-the-counter (OTC) exchange traded derivatives up to a maximum of one year forward. Many see this is as an opportunity, which India could have leveraged by developing currency exchanges to facilitate such hedging, said the release.
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| Punjab agriculture varsity signs MoU with TAFE |
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| PUNJAB Agricultural University has signed an MoU with Tractors and Farm Equipment (TAFE), Chennai, to collaborate on academic and research cooperation. The MoU was signed by Prof V K Sehgal, Dean, College of Agricultural Engineering and G Hari, Chief Operating Officer, TAFE.
This is a part of promoting industry-institute interface so that faculty scholars and professionals interact on specific academic research requirements in various spheres.
TAFE plans to establish training facilities for students and technicians.
Riding high on the provisions made in the budget for year 2006-07, the tractor industry is surging ahead on the road to revival after a lull for many years.
According to experts, the average life of a tractor is 10-12 years and last two years were the replacement times for the tractor industry. To maintain the pace, companies like Sonalika International Tractors, New Holland and Amar tractors are launching new and the latest models of tractors here in Punjab.
New Holland tractors have designed a special model for the potato growers of Jalandhar-Nawanshar-Kapurthale region. This model NH 3600 will be known as potato special. "This model has been designed keeping in consideration the potato growers of Punjab.
This year we plan to sell around 1,250 tractors against the sales of 950 last year," says Rajiv Sharma, senior manager, New Holland Tractors.
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| Punjab agro policy to boost marketing |
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| VALUE-added agro produce from Punjab will now get better display on retail shelves as the new agro industrial policy being formulated will give impetus to marketing channels. The proposed new agro industrial policy will be a separate document but may be a part of the new industrial policy, being prepared with the assistance of the United Nations Industrial Development Organisation (UNIDO). The new policy is expected to be out in December 2007.
So far, Punjab has been focussing on marketing basic agricultural commodities. There has been little or no attention on marketing of value-added agro produce. Now, with major players dabbling in farm-to-fork initiative, the Badal government is coming out with a separate agro industrial policy to remove bottlenecks and attract maximum investments in the agro processing sector.
The proposed new agro policy, said Punjab chief secretary Ramesh Inder Singh, here today would definitely give the necessary fillip to the marketing of agri produce.
The agro industrial policy will lay emphasis on the growth of the agro processing sector, contract farming and on development of requisite agro infrastructure. The proposed policy will take into account the current problems being faced by the industry so that the process of setting up new agro units in the state becomes hassle free. The Punjab Agro Industries Corporation (PAIC) will be the nodal agency for this purpose.
The new policy will lay stress on the development of the border belt in the three districts of Ferozepur, Amritsar and Gurdaspur.
The government feels that there is potential to increase the number of items under the bilateral trade with Pakistan.
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| Centre may consider additional sops for exporters |
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| THE government might consider giving more sops to exporters hit by shrinking margins due to the rupee’s upward spiral against the US dollar.
“We have already give two sets of reliefs, the first one was valued at Rs 1,400 crore and the other was Rs 1,500 crore after which additional benefits valued at about Rs 3,200 crore were provided. We have given them enough, but if it becomes necessary to give them more benefits, we will look into it”, said finance minister P Chidambaram in Chennai on Sunday
The strengthening rupee’s impact is felt in export and employment intensive sectors such as IT, textile and leather. For example, recent reports suggested that the surging rupee has cost 8,000 jobs in Tirupur alone, which is considered as India’s knitwear hub and employs around 4 lakh workers.
However, Mr Chidambaram said, “Some of the reports are exaggerated. Exports are still growing at about 18 or 19% a year; in the long run, exporters have to learn to live with a competitive exchange rate.”
The Indian rupee has been appreciating rapidly, nearly 12% since January this year, touching 39.27 against dollar earlier this month, its highest since March 1998. On Friday, it ended at Rs 39.45 a dollar.
“We are concerned over the rapid appreciation of the rupee. The government has responded and acted very swiftly by giving them relief packages which together amounts to Rs 5,000-5,500 crore”, Mr Chidambaram added.
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| No FIIs on commodity exchange boards Govt Adopts Cautious Stand To Allow 25% Foreign Direct Investme |
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| FOREIGN institutional investors (FII) will not be allowed to get a berth on the boards of commodity exchanges. Treading cautiously, the government has proposed that FIIs can pick up 24% stake in commodity exchanges but they should stay pure financial investors and not take up board representation which entails a say in the management.
The foreign direct investment (FDI) ceiling for commodity exchanges would be 25% — short of the minimum stake required for veto power. Therefore, the overall foreign investment in commodity exchanges would be capped at 49%. A similar structure has been put in place by the government for foreign investment in stock exchanges.
Apart from denying FIIs board slots, the government has also decided to keep another layer of safeguard by stating that no single foreign entity would be allowed to hold more than 10% stake in any commodity exchange. In addition, clearance by the Foreign Investment Promotion Board (FIPB) is being made mandatory for foreign investment in these exchanges. Earlier, there were discussions on putting FDI in commodity exchanges on the automatic route.
The comprehensive FDI review proposed by the government, in the works since the beginning of this year, is finally ready and the draft, apart from laying down guidelines for foreign investment in commodity exchanges, proposes clearance for 100% NRI investment in ground handling, cargo airlines, and chartered air services provided by non-scheduled airlines. FDI up to 100% will be allowed in the case of helicopter services, flight training institutes and MROs.
The caution in the case of commodity bourses is due to political sensitivity — talk about elections has not subsided till now — with officials not wanting to take any chances. Forward trading in wheat and some pulses was banned recently as the government was facing heat over inflation. The move is significant since foreign investors have stake in MCX and NCDEX. Goldman Sachs has 7% in NCDEX while Fidelity holds 9% in MCX.
The FDI review also proposes to scrap the mandatory divestment norms stipulated for allowing 49% FDI in public sector companies in the petroleum sector. The department of industrial policy & promotion (Dipp) has submitted a note which is expected to be considered by the Cabinet Committee on Economic Affairs (CCEA) soon. If necessary, the review would be discussed by the Cabinet too.
The review proposes a major opening up of the civil aviation sector, highly-placed government sources said. While FDI in scheduled airlines would be capped at 49%, charter companies and cargo airlines would be allowed to hold 74% FDI. The Dipp has consulted most government departments on the proposed changes in the FDI policy, the sources added. NRIs will be allowed to hold 100% stake in cargo airlines and charter operators.
FDI up to 74% would be allowed in ground handling services, the sources said. In the case of maintenance, repair and overhaul (MRO), flight training institutes, technical training institutes, helicopter services and sea-plane services, 100% FDI would be allowed. Foreign investment in training institutes would be subject to approval from the directorate general of civil aviation (DGCA). Since pilots and cabin crew are licenced by the DGCA, approval from the organisation is considered a must.
Civil aviation minister Praful Patel is backing the move to allow FDI in more sub-segments of the booming aviation sector.
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| Bringing Global Transformation Entrepreneurs are more than profit seeking professionals; with their |
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| ENTREPRENEURS are the growth engines of economies. They have pioneered most of what matters or have at least provided the world the tools. They are raw, real and revolutionary. They are the ‘e’ in the no differential equation driven world of chaos in which we live and work. They drive the ‘creative destruction’ process of transformation that economist Joseph Schumpeter recognised was key to radical innovation and sustained long-term economic growth.
This is why I've spent 25 years of my life doing one thing: celebrating, educating and hanging out with entrepreneurs – the ‘gazelles’ of our economies. Their vision, energy and perseverance in the face of insurmountable odds never cease to amaze me.
Example? As I contemplated sending this article from my living room in the US to my publisher in India, I thought of entrepreneur Cyrus Field, quite possibly the real inventor of the (global) internet.
This young New York City paper manufacturer endured twelve gruelling years of repeated failures and millions of wasted dollars before he and his team succeeded in laying down the first transatlantic cable.
An endeavour that required producing 2000 miles of cable laid three miles beneath the Atlantic Ocean, it was an engineering feat rivalled only by the financing feat that Field pulled off in bridging two continents.
When it was finally completed on July 27, 1866, communications that took weeks could now happen in seconds. And a testament to his legacy, over 140 years later nothing has broken this vital link – “not storms, earthquakes or world wars” notes the recent documentary on Field’s entrepreneurial adventure.
Speed forward to 2007. Just a few weeks ago I participated as a judge for a nationwide business plan contest in the US. Standing before us was a modern day Field preparing to slay dragons, Jay Mullis. Starting with a formula passed down from his deceased grandfather, Mullis aims to replace the 22 million pounds of toxic pesticides annually pumped into US homes to kill roaches.
It seems the giants of industry, unable to patent the most effective natural insecticide available for decades, developed synthetic insecticides they could patent, even though they are highly toxic to people, pets and the environment.
Using Boric acid, which has the toxicity of common table salt, but is highly lethal to roaches, Mullis has created a patentable formulation and delivery mechanism. More importantly, he has created a business model that actually makes it attractive for the existing distribution channels to switch products.
Called Green Dragon Roach Kill, Mullis is taking on the 100-tonne gorillas of the marketplace. He knows it won’t be easy. But he remains undeterred. Driven more by mission, and the memories of his grandfather, Mullis is doing his part to help the environment and make the planet a better place to live.
What are the critical traits of these two entrepreneurs spanning across three different centuries? Look no further than the epithet on Cyrus West Field’s grave site, “To whose courage, energy, and perseverance, the world owes the Atlantic telegraph.”
Surprisingly, however, entrepreneurs are not risk takers. They tackle initiatives that appear risky to the rest of the world; but the successful entrepreneur is a shrewd planner who works hard at mitigating risk and creating the kind of luck that is necessary to beat the truly unbeatable odds.
And they do this by being sponges of knowledge and seeking out the best resources and people they can attract to their ventures. Notes Bernard Finn with the Smithsonian Institute, Field had no credentials for doing anything like crossing the ocean with a telegraph cable. So what does he do? “He calls on the experts,” remarks Finn.
Field reaches out to Matthew Maury, a pioneer in the emerging field of oceanography, who helps show him the best route for a cable to cross the ocean. Field also convinces the father of telegraphy, Robert Morse, to lend his name to the venture, guaranteeing that Field gains the ‘credibility by association’ he needs to attract investors and believers! Mullis is following a similar path, surrounding himself with experts on patent law, entomology and new product sales.
Nevertheless, in the end the journey of an entrepreneur is a lonely one. Organizations like the Entrepreneurs’ Organization (EO), The Indus Entrepreneurs (TiE), and the Young Presidents’ Organization (YPO) can help. But when cash is running low and prospects for success are looking dim, it’s the passion and perseverance of the entrepreneurs that is their only true friend.
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| Textile export crisis a livelihood issue The crisis in textile industry due to export slump, caused |
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| LAST week, ET reported that the rise of rupee against the US dollar is forcing textile companies to cut jobs. In fact, the fear of likely large-scale loss of jobs comes on the heels of a recent industry estimate which saw a major drop (1.22 lakh) in incremental employment generation due to textile export trade in 2006-07 compared to the previous year. This drop was due to the decline in export growth from 16.6% in 2005-06 to just over 9% in 2006-07. A working group of the Planning Commission had projected that exports would grow during 11th Plan at about 22% a year. If that were the case, the additional jobs in the current fiscal year would have been 5.8 lakh and total jobs, over 32 lakh. Alas, that was not to be. Instead, the export growth has turned negative and even the existing jobs are being cut.
The spinning industry usually makes good profits — operating profits (earnings before interest, taxes, depreciation and amortisation) have been 16-20% by industry’s own admission. Insiders say things were actually much more sanguine, till the strong rupee hit exports. In contrast, low price realisation is not new to the unorganised weaving and processing units. (Even lower gains for actual weavers who are not capitalists, but labourers). But the current crisis has caused even spinning units to be slightly jittery. “Spinning margins are under tremendous pressure. Production is going to decline,” said S P Oswal, chairman of Vardhman Group, a leading integrated textile producer and exporter of yarn. Nominally, the export price (denominated in dollar) is just the same as last year’s. But the over 13.5% appreciation of rupee against the dollar in the last one year has hit profits. The situation is more precarious because India’s major competitors in export markets like China, Pakistan, Vietnam and Cambodia are not hit by exchange rate difficulties as much as India.
The crisis in the textile industry has had serious impact on the allied industries too. The domestic textile machinery is particularly hit. The cotton segment — traders and farmers — is also facing some difficulties, although the high demand for cotton from foreign countries is proving to be a saving grace. “Traders who have promised to buy cotton are facing problems in selling them to Indian mills that have turned cautious. But export of cotton this year (October-September 2007-08) could be a record 7 million bales,” says a cotton industry analyst. He added that despite the last couple of weeks’ upward trend, cotton prices in India are ruling significantly lower than in July-August 07. For Shankar 6 variety, the prices have dipped from July figure of Rs 21,000/candy to Rs 19,500 now. Cotton production this year, in keeping with the upward trend in recent years that saw productivity increasing fast, is estimated to be 31 million bales. Clearly, if the domestic industry continues to be in doldrums throughout the year, cotton prices would become subdued.
It may be noted that area under cotton this year is the highest. The textile industry’s buoyant mode from 2005 onwards had helped cotton prices to increase significantly during the last two years. This encouraged more farmers to shift to this crop to earn more. But with the current decline in the industry, cotton consumption seems headed southwards and so are cotton prices. “The impact (of textile export decline) on cotton prices is not fully evident yet because cotton traders have significant export commitments and have been buying a lot of cotton for exports. It is estimated that over 20 lakh bales have been bought for exports during the last few weeks. Once export purchases are over, the impact of declining consumption is bound to reflect on cotton prices,” says D K Nair, secretary-general, Confederation of Indian Textile Industry. According to Mr Nair, surge in cotton export from India, which has the second largest textile industry in the world, is a cause for concern in itself. “Last cotton year (October-September) saw 20% of India’s cotton production being exported as raw cotton. This year, this is expected to increase to 25%. Export markets are susceptible to fluctuation and, therefore, our cotton farmers can look forward to sustained income only if domestic consumption improves,” he says. Ofcourse, the industry’s eagerness to get required varieties of cotton at reasonable process and not to expose the domestic cotton trade hugely to the export markets might be one reason for this cautionary statement, but it nevertheless holds true. Consider the industry’s huge potential to expand, which is confirmed by many expert groups and consultancy firms and the staggering investments being projected which appeared to be turning real with a marked increase in the use of the Technology Upgradation Fund Scheme till the crisis hit the industry this year — Rs 35,000 crore TUFS-supported investment in 2006-07; double the previous year’s.
The domestic textile machinery industry, which is under-developed and largely a preserve of SMEs, has started feeling the pinch too. As for synthetic machinery, weaving and allied machinery & processing machinery sectors, the growth this year has been negative i.e. - 11%, -34% and -37%, respectively.
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| SEZ developers set to land space at sick industrial units WIN-WIN CASE: PROMOTERS GET ACCESS TO PRIM |
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| WHILE acquisition of farmland has become an uphill task for industrialists following the political storm unleashed by the Nandigram fiasco, a new window of opportunity is opening up for special economic zone (SEZ) developers. State governments and the Centre are looking at utilising the land owned by sick industrial units for developing SEZs. The move is significant since cases pertaining to liquidation of 1,254 private sector industrial units are pending at various high courts. Similar is the case with 31 central public sector units (PSUs) and 41 state PSUs. If the proposal to use land owned by these units is cleared, SEZ developers could get access to prime industrial plots cross the country. Setting the dues of these sick units would also be possible, at least partially, if the value of land –– stuck in litigation –– is unlocked, officials feel. Controversy over rehabilitation of farmers would be avoided since most of the land owned by these units is meant for industrial purposes.
A recommendation to this effect was made to the commerce & indus-try ministry by the Parliamentary Standing Committee on Commerce. In its 83rd report which focuses on functioning of the SEZs, the committee made such recommendations and the ministry has forwarded the suggestion to state governments. The action taken report on the Parliamentary panel’s suggestions says that the recommendations have been ‘noted’ and forwarded to state governments.
The state governments are likely to consider the suggestion favourably as many states have not been able to give their green signals to several SEZ proposals as they are not sure that the land being eyed by the developers would be given up willingly by farmers. The commerce department recently closed the books of about 100 developers who had filed their applications with the Centre but had not received a goahead from the respective state governments.The number of SEZ applications being processed by the Board of Approval (BoA) for SEZs every month has dwindled to just about 15. Officials believe that the availability of land owned by sick industrial units could partly solve the problem of availability of prime land and give a shot in the arm to the SEZ policy.
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| Patel wants end to PSU oilcos’ ATF monopoly |
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| THE aviation turbine fuel (ATF) market, till now the monopoly of public sector oil companies, could soon witness competition as the ministry of civil aviation has urged Airport Authority of India (AAI) to develop common fuel infrastructure at airports and enable private oil retailers such as Reliance and Essar to enter the fray. The ministry has said throughput charge should not be the basis for awarding contract to oil companies for supplying the jet fuel.
The move is intended to stop the trend of public sector oil companies like IOC quoting higher throughput charge to bag the contract and then pass on the extra burden to airlines. AAI awards the contract to supply the fuel at airports to the companies which ensure maximum throughput charge to it.
Airlines feel that competiton in ATF supply would lead to lower prices and have been pushing for oil supply infrastructure to be converted into a common carrier so that more players can enter this business. The civil aviaiton ministry is also supportive of this move as this could lead to some moderation in ATF prices in India which are among the highest in the world.
“In the recent past public sector oil marketing companies which have monopoly in supplying ATF at almost all the major airports have been quoting maximum throughput charge to win the contract. While these companies pass on the throughput to airlines, the move has adverse effect on airlines as well as passengers. In that case airlines levy fuel surcharge to passengers. This is not healthy trend for the domestic aviation industry,” an official in the ministry of civil aviation said.
“We have asked AAI to help us rationalise the fuel price in the country and bring it to international level,” he added.
Earlier this month, oil regulator Petroleum and Natural Gas Regulatory Board (PNGRB) had written to the civil aviation ministry for freeing of aviation fuelling facilities at airports from the public sector stranglehold by allowing use of existing infrastructure by all players including private companies.
“Taking a cue for the awards for new airports by Airport Authority of India at Hyderabad and Bangalore for setting up aviation fuelling infrastructure under common carrier or open access principles, AAI should also be simultaneously directed to pursue extension of similar principles to cover other airports,” PNGRB chairman L Mansingh said in a letter.
Fuelling infrastructure at most of the airports in the country are in the hand of public sector oil companies. At these airports even if a private oil marketing company wins the contract they can’t supply the fuel as they won’t find any space there. Lack of competition in marketing the jet fuel leads to the price of ATF escalating.
A Federation of Indian Airlines (FIA) estimate indicates that a reduction in ATF price by 60% (to bring it closer to international benchmarks) has an impact of lowering airline operational losses by 25%. It believes that rationalisation of ATF price and bringing it to international level may bring an annual savings of $ 624 million for the airline industry.
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| Centre approves 13 SEZs for Punjab, says Badal |
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| PUNJAB chief minister Parkash Singh Badal on Saturday announced that the Centre had approved 13 special economic zones (SEZs) for Punjab and the state government will soon enact the Punjab SEZs Act to facilitate the implementation of these projects.
Speaking on the launch of 'Crop Tiger 60' harvestor combine of Rs 100 crore CLAAS India, a 100% subsidiary of CLAAS Group of Germany near Morinda, Mr Badal said that CLAAS's initiative to invest in Punjab would have a catalytic effect on other German companies.
Mr Badal reiterated that the state government was determined to accelerate the pace of industrial development and a new industrial policy was being finalised in consultation with United Nations Industrial Development Organisation (UNIDO). The core initiative would be to increase growth rate of manufacturing sector to make Punjab a investment destination, attract foreign direct investment.
He pointed out that the new policy would be implemented in consultation with the industry through the Industrial Development Board, to be constituted by the state government.
To facilitate the movement of industrial growth, Mr Badal said that the freight corridor being developed by the Centre from Kolkata to Delhi has been extended upto Ludhiana.
M P Malik, MD, CLAAS India, said that the project would give fillip to the process of mechanisation in the state thereby increasing the yield per acre. He hopped the project would contribute substantially to state's revenues.
Speaking on the occasion, deputy chairperson, CLAAS Germany, Catherine Claas outlined the profile of the company and its operation in Europe, US and Asia along with marketing and service network across the World
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| Leather council seeks sops |
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| A Package of incentives should be prepared to attract investors from within and outside Jammu and Kashmir for setting up units in leather industry, Council of Leather Exports (CLE) has suggested.
CLE chairman Mukhtarul Amin, who led a delegation to explore the possibility of promoting leather industry, also said the state government should formulate a vision document for the sector.
The CLE emphasised the need for forging joint ventures with leather entrepreneurs from outside the state.
The council offered to facilitate purchase of the products to be made by local entrepreneurs, and assured them of all help for tie-ups and marketing of their products, sources said.
State Industrial Development Corporation said it would build a leather park over 50 acre at Industrial Growth Centre, Lassipora, and was in the process of setting up a common effluent treatment plant with Rs 12 crore with Centre's assistance. The plant is expected to be operational in 1-2 years, SIDCO Managing Director Irfan Yasin said.
Leather industry is highly labour-oriented which would provide ample employment opportunities for the people of Jammu and Kashmir, the Council said. The CLE also said it would facilitate training of workers from the state so that they could market their products efficiently.
Commissioner Secretary, Industry and C o m m e r c e , Lokesh Jha said the state government was keen on promoting leather industry as there was sufficient raw material available for this purpose which was presently being exported outside the state. He stressed the need for converting raw material into high v a l u e - a d d e d leather products which have an immense export potential
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| Global asset management cos check into Indian hotels |
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| LARGE scale expansion in the booming hotel industry is making the international hotel asset management companies enter the country. US-based HVS International has firmed up plans to manage assets of hotels on behalf of the owners, charging them 2% of hotels’ revenue as fees, which is in sync with the global trend. Industry players believe other international hotel asset management companies such as Ashford Hospitality Trust and IFA Hotels & Resorts among others are likely to follow suit.
Traditionally, hotel owners have been managing hotels in India but in the last two years many new tieups have taken place in the hotel space with real estate developers tying up with hotel management companies and hoteliers tying up with international brands. “The ownership patterns in the hotel industry are changing. Indian hotel industry has become competitive with so many brands now available. In such a scenario, there is a need for asset management companies to ensure that investors or the owners get best from their operators,” HVS International associate director Siddharth Thaker said. India will have around 40 international hotel brands by 2011.
According to industry sources, at least three international hotel asset management companies are holding investor conferences in the next two to three months. Joan Lang LaSalle is also looking at starting hotel asset management operations in India, added a senior executive of a hotel company.
Says Sarovar Hotels executive director Ajay Bakaya: “The time is just ripe for asset management companies to come in and we believe many of them have zeroed down on India as high growth market.” Agrees Carlson India executive vicepresident KB Kachru: “The landscape of Indian hotel industry is changing fast. I believe more and more asset management companies will manage hotel properties than ever before. This will help institutionalise the industry and will lead to better bottomline for hotel companies.”
Globally, the trend of asset management companies managing hotels is quite rampant, however, in India it has just kicked in. As more private equity capital is being invested in hotels the need for asset management companies will only grow to ensure that the ‘brand’ or the operator is giving best possible returns to the investors, says industry heads.
Some of these PE investments include Warburg Pincus Rs 280 crore investment in Lemon Tree Hotels and $55 million investment by Credit Suisse in the Park Hotels.
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| New Punjab norms for mega projects |
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| THE Punjab government on Thursday issued guidelines to streamline the system for approvals of new mega projects, hotels, agro processing projects and housing projects.
Disclosing this here, Manoranjan Kalia, local government, industries and commerce minister, said the investors can submit their applications on prescribed format for industrial park, multiplex and hotel projects to the department of industries and commerce. For agro processing projects, the application can be submitted to Punjab Agro Industries Corporation and for housing projects, the applications can be submitted to PUDA office.
The minister added that the entire system of approval of the project has been made time bound. After the receipt of application, the nodal office this will send it to the concerned departments within 7 days and they have to give their comments in 15 days.
Thereafter, the case will be placed before the screening committee which will meet every fortnight and recommendations of the screening committee will be placed before the empowered committee headed by the chief minister.
Mr Kalia said that after approval of the empowered committee and signing of agreement by the company with state government, concerned departments will issue orders/notifications in respect of concessions pertaining to their departments in a time-bound manner. The whole process will be monitored by a committee headed by the chief secretary
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| Bajaj to spearhead $3,000 car project |
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| BAJAJ Auto will lead the three-way exclusive global alliance with Renault-Nissan for the $3,000 small car project. Sources said the current agreement is that Bajaj will lead the project and Renault-Nissan will support it. Bajaj will be involved not just in the development and manufacturing of the car but also in its marketing and distribution, using its existing network of two-wheeler dealers. However, the alliance with Bajaj will only focus on light vehicles, both passenger and cargo. Which means, Nissan may be looking for another Indian partner to market and distribute its high-end range of cars.
Renault Nissan boss Carlos Ghosn, who is all set to come to India next week to formally announce Nissan’s commercial vehicle partnership with Ashok Leyland, will be meeting the Bajaj brass on October 29 and will also be visiting its Chakan plant. Mr Ghosn, who will arrive with a Japanese media contingent, will be showcasing Bajaj’s technical capabilities during the visit.
Sources said Bajaj will seek support from both Nissan and Renault on the development of the $3,000 car. “That support may be more in some cases like the chassis and body design and less like engine and transmission,” said an industry source. Currently, a feasibility study is on and a formal decision will be taken in the next two months.
Nissan Renault seems to be following a product/project-specific partnership approach in India. While Renault tied up with Mahindra & Mahindra for the Logan sedan, Nissan has tied up with Ashok Leyland for commercial vehicles.
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| Dutch blight on textiles flares up B’lore Court Orders Arrest Warrants Against Campaigning NGOs |
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| AS GLOBAL NGOs step up their campaign against labour issues in India’s beleaguered garment industry, a Bangalore court has issued arrest warrants against the honchos of the Netherlands-based Clean Clothes Campaign (CCC) for running a malafide campaign against a city-based exporter. The court said organisations led by CCC, known for crusades against global brands like Nike and Donna Karan, were spearheading an international campaign with “an oblique motive to harm and damage the image of the country”. The court order delivered a forthnight ago is fast snowballing into a confrontation between India and international human rights watchdogs. Amnesty International called for dropping the charges against the activists and condemned “the Indian authorities for repeatedly failing to take action against the practice of filing unsubstantiated criminal charges against defenders of workers rights”.
Union commerce minister Kamal Nath, meanwhile, shot off a letter to EU trade commissioner Peter Mandelson and the Dutch foreign minister, stating that the NGOs were effectively building trade barriers for domestic garment exporters. He hinted that it would bring pressure on his government to consider curbs on EU imports.
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| Export floor price of Rs 20,000 may help meet procurement target |
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| THE BROUHAHA over rice export ban is important, at this juncture, primarily since it is threatening to impinge on the central government’s purchases of the grain for its PDS and welfare schemes and affect attempts to beef up the buffer for food security. With apprehensions persisting over whether the procurement target of paddy/rice for the central pool — pegged at 276 lakh tonne (lt)— will actually be met in the face of poor mandi arrivals and, consequently, poor government buys in Punjab and Haryana, the food ministry expects that its purpose will be served to an extent if the minimum export price (MEP) for rice is fixed at Rs 20,000/tonne or over.
“The question is really not to ban exports or not. If the MEP for rice is fixed at Rs 20,000 or so, that will help us meet our procurement target better for the PDS and welfare schemes. The food ministry has no problems over letting high value rice being exported,” government sources asserted. Out of the total of around 4.7-5 million tonne (mt) of high value rice exported, it is projected that pegging the MEP high will ensure that around 20-30 lakh tonnes of rice will be knocked off exports. Secretary Nand Kumar is expected to tour FCI and other state agency mandis in key procurement state Punjab on Wednesday. Some 10.41 lt of basmati rice was exported by India in 2006-07, earning Rs 2,778.31 crore-odd. Non-basmati rice sold 37.05 lt but earned a far higher Rs 4,257.88 crore for exports, indicating why exporters are sore over the export ban on this quality of rice.
That the food ministry’s projections of quantum gains in grain purchase would accrue as a result of the export ban was evident in the immediate aftermath of the announcement on October 9, and since. Non-basmati rice is currently selling at Rs 11/kg, lower that the Rs 13-odd/kg it sold at earlier. In fact, soon after the export ban was announced, the price of one premium non-Basmati variety, Pusa 1121, plunged from a high of Rs 2,040/qtl to as low as Rs 1,900/qtl.
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| 99 multiplex projects get Punjab nod |
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| THE Punjab government on Wednesday approved 99 multiplex projects in the state entailing an investment of Rs 16,000 crore. Manoranjan Kalia, local government, industries and commerce minister of Punjab, said the implementation of these projects would be monitored by a committee headed by the chief secretary. The projects were hanging fire ever since the new government came to power. ET had reported in December that 63 multiplexes will come up in Punjab with an investment in excess of Rs 9,900 crore out of which Rs 522 crore will be the actual immediate investment by the end of the financial year 2006-07. Exhibitors such as PVR, Waves, Adlabs, Inox and DT were some of the players entering the state. However, due to changes in the government the projects were left in the lurch. All projects had been stalled by the Akali-led coalition government and a review was conducted. Mr Kalia added that setting up of these multiplexes will provide employment to thousands of people.
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| General Motors to launch Captiva at Auto Expo |
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| GENERAL Motors India (GMI), fullyowned subsidiary of General Motors, will launch its new sport utility vehicle (SUV) Captiva during the Auto Expo in January 2008. Karl Sylm, who took over as General Motors India’s new president & managing director on Monday, said, “We have big plans for the Indian market. While Captiva will fill the SUV bracket as a completely built unit (CBU) vehicle, we would like to expand our product portfolio much beyond the current small cars we are offering. If volumes support us, we can look beyond the CBU operations for Captiva. New models in other segments will also be introduced subsequently. India is a major market of growth for us and GM has long-term commitments.” GM’s Captiva would be pitted against Honda Siel’s popular SUV CR-V and Maruti Suzuki’s Grand Vitara, which are also sold as CBUs here.
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| Banks provide aid to 88,990 SME units in Punjab |
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| BANKS have been told to double credit to small and medium enterprises (SMEs) in 2005-2010. SMEs manufacture about 8,000 products, accounting for 6% of the GDP, 34 % of national exports. They also 30 million people. According to data available, in Punjab the banks have up to to June 2007 provided assistance to 88,990 SME units amounting to Rs 10,801.33 crore. Out of these, as many as 56,943 units or around 64% of the total units are having initial investment in plant and machinery up to Rs 5 lakh. The amount of financial assistance provided to these units is to the tune of Rs 1,241.94 crore.Similarly, there are 17,869 or around 20% units financed by banks where investment in plant and machinery is in the range of Rs 5 lakh to Rs 25 lakh. The amount of financial assistance provided to these units is to the tune of Rs 1,950.81 crore or 18.06 % of the total credit provided to the SME sector.
Further, there are 10,709 or around 12% units financed by banks where investment in plant and machinery is in the range of Rs 25 to Rs 1 crore. The amount of financial assistance provided to these units is of the order of Rs 4,097.10 crore or around 38 % of the total credit under the SME sector.
Data shows that there are 3,469 units financed by the banks where investment is in the range of Rs 1e crore to Rs 10 crore. The amount of financial assistance provided to these units is to the tune of Rs 3,511.48 crore or 32.5 % of the total credit under the SME sector. During the first quarter of 2007-08, specialised SSI/SME bank branches sanctioned loans to the tune of Rs 110.15 crore in Punjab to 486 SSI units and disbursement has been of the order of Rs 82.37 crore. Up to June 2007, specialised SSI/SME branches of different banks sanctioned loans to the tune of Rs 2,306.66 crore to 19,053 SSI units and disbursement has been of the order of Rs 1,988.92 crore.
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| Punjab Tractors Q2 PBT stands at Rs 15 cr |
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| THE board of directors of Punjab Tractors Ltd (PTL) had met on Tuesday to consider and approve the unaudited financial results for the second quarter and half year ended September 30.
Domestic demand conditions in tractor industry continued to be subdued in Q2. Aggregate domestic billing during April–September 2007 was down 7% compared with same period last year.
Company's continued concerted efforts towards rationalisation of channel stocks and also improving collections have shown good results during this period.
In the above background, PTL tractors billing during Q2 of current fiscal was 5,909 compared with 7,012 tractors during same period last year. Total revenues for Q2 of FY 2007-08 reached Rs 206.9 crore against Rs 227.3 crore recorded same period last year.
Profit before tax (PBT) for the second quarter reached Rs 14.9 crore as against Rs. 27 crore in the same period last year.
after tax (PAT) reached Rs. 9.8 crore against Rs.18.3 crore for the same period last year. However, when compared on quarter to quarter basis, growth in profit before tax for Q2 at Rs. 14.9 crore was more than double compared to PBT of Rs. 4.4 crore of Q1.
For the half year ended September 30, 2007, total revenues reached Rs 380.8 crore compared with Rs 473.6 crore of corresponding period last year. PBT reached Rs. 19.3 crore against Rs 53.0 crore of previous year's first half. PAT for the first half was Rs. 13.1 crore against last year's Rs 36 crore.
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| Kirana shops can learn from global peers: Kumar |
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| INDIAN kirana shops may have come together in their opposition to big retail, but they could do well to learn a few things from their global counterparts. According to Nirmalya Kumar, director, centre for marketing and co-director, Aditya Birla India Centre, London Business School, “Indian traders have come together only because they feel the volumes are dropping drop. But globally, a few mom-and-pop shops have read the writing on the wall and have united under a common banner.”
For instance, Ace Hardware is a chain based in the US, exclusively consisting of mom-and-pop stores, who have come together under a common banner. They then negotiate with manufacturers over prices, margins and distribution, the last of which is centralised exactly like an organised retailer. Prof Kumar says that Indian kiranas will continue to survive because they have one of four attributes of a successful retailer — either to be the cheapest, the biggest, the best, or the nearest. While traders have sensed the threat from big retail, like the Maharashtra Consumer Products Distributors Federation in Akola, an amalgamation of the regional wholesalers, the kirana stores have not yet come together under a concrete banner.
In the debate over big retail and the battle between corporates and small traders, the two principal characters have been completely sidelined — the consumers and the farmers, believes Prof Kumar. More than anyone, consumers and farmers will gain the most from organised retail.
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| Retail chains eye commercial space in industrial area |
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| THE conversion of land use policy that began in 2005 and was extended in September by another six months has become a source of generating commercial space for a city where lack of space is a perennial problem. Ever since the administration allowed industrial land to be converted to commercial land more than 26 applications have been approved making an area of more than 18 acres available for commercial use.
The commercial area is fragmented over phases I and II ranging from 400 sq yards to over 11,400 sq yards across 26 locations. According to information with ET, of the 26 locations nearly 5 shopping malls or multiplexes are due to come up in 41,200 sq yards area, some of them including 5,700 sq yard Uppal's Centra Mall are nearing completion.
Retail chains such as Big Bazaar, Shoppers Stop, Vishal Megamart and many others are in the fray and are looking for commercial space in the industrial area. "Many deals are taking place where retail chains are talking to land owners for individual spaces and to mall owners for floor by floor commercial space," says a source. A furniture mall is also set to come up in 2,000 sq yard area in Phase II. Other than shopping complexes dealerships for Honda, BMW, Volvo have already come up in more than 8,000 sq yard area, Volvo being the latest entrant and also the third dealership in the country after Delhi and Mumbai. The dealership will sell the S80 and XC90 models. A number of hotel chains are also in talks with plot owners while many have finalised deals and are ready to begin. Sarover Hotels mid-scale brand Homotel will come up in 3,857 sq yard plot in Phase I. The budget hotel will have 117 rooms, a banquet, a bar and a restaurant and will be constructed within 12-13 months at an investment of Rs 20 crore. Ajay Bakaya, executive director of Sarover Hotels, said, "It's a lease of 50 years and we will begin construction as soon as the building plans are approved."
Red Fox Hotels, the limited service, economy brand from Gurgaon-based Lemon Tree Hotels is another entrant in this area. Managing director of Lemon Tree Hotels Patu Keswani had earlier told ET, "Beginning from Chandigarh, we have agreed in principle to acquire a plot of land in Industrial area Phase I to construct a 80-room Lemon Tree Hotel and a 150-room Red Fox Hotel on the site in a joint venture with the present owners. Expected date of completion is January 2010."
The US-based hospitality major Accor Group is also in talks with land owners in Phase I for over 11,400 sq yard area to bring in their mid-scale brand Novotel. Sine Accor has a JV with Emaar MGF, the latter's budget hotel brand Formula 1 is likely to be yet another entrant.
The likes of Reliance Inforcom have utilised the commercial space available in the industrial area while m ore than 25,000 sq yard space is still available for commercial activity.
President of Chandigarh Industrial Association, MPS Chawla said: "The increase in commercial space will help the city to grow.”
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| Ban on exports of non-basmati hits farmers of Punjab, Haryana Badal, Hooda To Take Up Issue With The |
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| THE Centre decision to ban exports of non-basmati and the subsequent boycott of paddy purchase from procurement centres and mandis in Punjab and Haryana by the rice exporters have made the farmers the ultimate looser. Both the chief ministers of Punjab and Haryana have assured farmers not to be misled by anyone and the ban would be lifted soon.
Punjab chief minister Prakash Singh Badal has said that as a farmer he understands the plight of the farmers and will take up the issue to lift the ban. Similarly Haryana chief minister Bhupinder Singh Hooda has said, "I have already spoken to Union commerce minister Kamal Nath and urged him to take back the decision keeping in view the interest of the farming community of the country. But, today I will call on the Prime Minister Dr Manmohan Singh in the evening."
The government agencies, agriculture department and rice exporters in the region had assured farmers to get better gain with the sowing of long grain varieties like Sharbati, 1121 and Muchhal. Apart from consuming less water, these varieties had great demand and market in Middle East, Dubai, Iran.
However for now with rate falling down by Rs 200-Rs 250, it's the stranded farmer who is being taken advantage off by arthiyas and small-large rice shellers. " This is a trap by these rice millers and traders," said 75-year-old Balkar Singh who has been sitting with his produce in Kapurthala mandi for the past 5 days. "It was for the first time that I had sown the crop rather then the other Parmal varieties where I get an assured MSP. Its time when farmers should sell their land to companies than be hounded by the traders," he said.
In Karnal Vinod Goel, President of Anaj Mandi said that 1121 was being sold at Rs 1,850 per quintal from Rs 2,050 per quintal a week ago. Sharbati was being sold at Rs 1,300-1,350 per quintal from Rs 1,650 per quintal. Duplicate Basmati (Muchal) was being sold at Rs 2,350 per quintal aweek ago now its rate is Rs 2,100 per quintal. A similar scenario prevailed across Punjab and other mandis in Haryana
"Most of the Mandis in Karnal-Panipat-Terawri –Narela on the GT Road were getting more than 25-30% stock of paddy from Western UP. The majority of the farmers from Shamli, Kairana, Muzzafarnagar, Gangoh area have now stopped coming to this area due to the ban," Mr Goel said.
Taking advantage of the scenario a number of regional rice shellers across Punjab and Haryana have started purchasing the long grain varieties rather than Parmal varieties. "Rather than purchasing the Parmal varieties like PR 47, Pusa 44, PR 13 it is advantageous to invest in the varieties which has been banned and sell it a higher rate later on," said a trader in Pehowa mandi
Though a number of farmers are holding their stock others in dire need of cash are selling at the current rates. Arjan Singh from village Shatirwala, (10 km from Fazilka) said that even though his 40-quintal stock was in the Fazilka mandi since the past few days the family was still holding 150 quintals of 1121 variety at home. " My father has to send my brother to USA and hence we have to sell the paddy at any rate, even though it means loosing Rs 600-Rs 1,000 per quintal " he said.
Not showing any sign to stop the agitation started by All India Rice Exporter Association, its president Vijay Setia said,"Sensex looses 10% and FM is forced to give statements and make policy changes and here we lose 30% in three days and no one notices?" He added that the plight of the farmers was unbearable but the traders had no option but to carry on the strike. The association had earlier demanded that the material on the ports either be loaded on ship, on the port or on transit with orders prior to October 9 should be honoured by the the centre.
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| BJP slams ban on export of non-basmati rice |
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| THE BJP on Monday renewed its attack on the anti-farmer policies of the UPA government, seeking an immediate reversal of the ban on export of non-basmati rice. The move follows the BJP’s demand for a higher minimum support price for paddy to help the farmers in southern states.
The decision to ban the export of non-basmati rice was cleared by the Cabinet Committee for Economic Affairs on October 9. This, together with the decision to categorise rice varieties such as Pusa 1121, RH 10, Muchal, Sarbati, Shabnam and Sugandh as non-basmati, meant that the farmers “will be deprived of a good price and will be forced to go in for distress sale”, says the BJP. These rice varieties were earlier sold as basmati.
During 2006-07, 10.41 lakh tonnes of basmati rice, valued at Rs 2,778.31 crore, were exported, while exports of non-basmati were at 37.05 lakh tonnes, valued at Rs 4,257.88 crore. Interestingly, about 50% of the area under basmati has been sown under Pusa- 1121, another 25% with CSR-30. Just 25% of the area was under officially notified basmati varieties, including Pusa Basmati-1 and traditional tall cultivars.
The BJP contends that this sudden decision to ban exports of non-basmati rice has hurt the farmers. In Haryana, “lakhs of tonnes of rice is lying unsold in mandis of Jind, Narela, Kurushetra, Peohwa, Karnal. Rice worth more than Rs 200 crore is also waiting for exports at various ports, “the BJP said.
Party spokesperson Prakash Javadekar said, “This decision is the latest in the long list of anti-farmer policies of the UPA government.” He referred to the displacement of farmers for procuring land for special economic zones (SEZ), the failure of PM’s relief package to stem the tide of suicide by farmers, allowing foreign investors to buy agriculatural land, and the bias against paddy farmers, who are offered a lower minimum support price than wheat.
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| PSU banks’ credit growth target may be slashed |
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| THE finance ministry may scale down credit growth targets for public sector banks to around 20%, if RBI's projections on credit demand in its monetary policy review (at the end of the month) indicate such a change in trend. The central bank had anticipated credit growth between 24-25% in 2007-08.
“Some banks have written for a downward revision of the credit growth targets. We can only revise them, depending on what RBI anticipates the credit demand to be for the remaining part of the fiscal, to be in sync with the central bank,” a financial ministry official, who did not wish to be named, said.
According to RBI data, banks have witnessed a substantial slowdown in credit demand in the financial year so far. As on October 12, bank credit stood at Rs 96,486 crore, a growth of 5% over the previous year against Rs 1,54,414 crore in 2006 with a growth in 10.2% over the previous year.
Every financial year, the government spells out a target for public sector banks on 16 parameters, referred as statement of intent (SoI). Bankers are expected to flag the issue at their quarterly meeting with finance minister P Chidambaram next month.
Punjab National Bank has written to the government to revise its credit growth target downwards to 17% from 24% year-on-year. "Wholesale credit has not picked. Retail credit is not an issue, because typically borrowers would wait for a rate cut," a PNB official said. Banks have started to cut both deposits and lending rates in a bid to stimulate demand during the festival season which will last for 10 weeks till the end of the calendar year. In the last six months of the current fiscal, PNB has witnessed 7-8% rise in advances compared to 8.5% during the same period last year, he said. By the end of the fiscal year, the bank hopes to achieve 20% deposit growth and 18-19% increase in advances during the fiscal.
Most banks have surplus and are resorting to parking investments in government securities, in the absence of credit offtake. “There is surplus cash, and not enough demand, so g-secs is one of the few options available,” a treasury official said.
The index of industrial production (IIP) registered a growth of 7.2% in July this year compared with 13.2% a year ago, signalling a nine-month low in the index. The manufacturing sector growth slowed down to 7.2% in July compared with a growth of 9.8 % in June and 11.7 % in May this year.
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| PSERC asks PSEB to take 3 months security |
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| The Punjab State Electricity Regulatory Commission is asking PSEB to take security in advance equivalent to consumption charges for three months. This order has to be implemented by PSEB from January 1, 2008. Industry feels that this advance security will hits SMEs hard. Industry has taken up the matter with Punjab Chief Minister Prakash Singh badal
V K Goel, Chief Executive, Vardman Spinning Mills, Ludhiana says, "Government should review it. This can be a real trouble for the cash stripped SME as they are already running into losses."
PSERC says: "The security will be an amount equivalent to consumption charges for three months where bimonthly billing is applicable and two months in case of monthly billing. The consumption charges will be worked out on the basis of average monthly consumption of an existing consumer over a period of 12 months."
P D Sharma, President, Apex Chamber of Commerce & Industry (Punjab), has written to the board to find a solution.
Certain visible solutions coming from various consumers include giving bank guarantee instead of security amount. The other solution is to split the amount into easy instalments.
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| Rising cotton exports shrinking cos’ profits |
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| RISING DEMAND for Indian cotton in countries like China and Taiwan is threatening bottomlines of Indian textile companies. With countries like China and Taiwan, which are fastgrowing markets for cotton exporters offering them better prices, textile companies including Arvind, Raymond and Aarvee are feeling the pinch. Though textile companies claim the prices may remain stable this year owing to good yield, margins have shrunk by nearly 10% in the past two years.
On an average, cotton prices have shot up from Rs 43-45 per kg two years back to Rs 50-52 per kg. Industry sources say, of projected cotton exports of 70 lakh bales, China and Taiwan may account for nearly 60%.
“Earlier, cotton prices were driven by international market and there was a difference between the prices in domestic and international market. The prices in domestic market were 10-15 cents per pound lesser than the prevailing international rates. The scenario has changed in the last two years, and with higher quality production of cotton in India, China and Taiwan are offering higher prices, especially for Shanker-6 variety. This has forced domestic denim and textile manufacturers to pay more,” said Arvee Denim CMD Vinod Arora.
Cotton consumption in China has more than doubled to seven crore bales in the last five years triggering more cotton imports from India.
Taiwan is again an emerging market. “Indian cotton quality has been approved by international market, which has led to increase in demand for Indian cotton and prices,” says Santoshi Exports CEO Prashant Didwaniya. As compared to last year, Indian cotton prices in International market has increased almost 20%. Following the rise in demand, it is estimated that the exports will rise to 70 lakh bales this year, from 55 lakh bales last year. Stiff competition in the market does not allow textile companies to increase prices of final product.
Raymond, which requires around 1.25 lakh bales of cotton per year, has witnessed a price hike of Rs 1,000 per candy in last 6 months, say company officials. Similarly, Arvind Mills has shelled out 15% more for procuring raw material in last one year.
The silverlining this year is the estimated production of 3.25 crore bales as against 2.73 crore bales last year. At least when the arrivals is about 80,000 bales in the beginning, which is expected to reach 2 lakh bales per day within next 15 days.
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| Hero Honda to drive into low-cost mkts with HMC |
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| THE Munjals of Hero Honda, the largest producer of two-wheelers in the world, plan to join hands with their Japanese partner, Honda Motor Company (HMC), to exploit different lowcost markets in Asia, Africa and Latin America. The Munjal family, joint-venture partner with HMC in the flagship, Hero Honda, had asked the Japanese company to develop synergies in different low-cost markets though nothing concrete has come through yet. It had been eyeing different emerging markets where HMC has been operating independently and has not been performing well. The new arrangement is expected to be along the lines of the current spare parts supply arrangement where Hero Honda supplies different low-cost spares to HMC for its worldwide operations.
Pawan Munjal, managing director, Hero Honda, told ET, “We had mooted the proposal with HMC, but nothing concrete has emerged so far. There has been no development or positive indication from HMC on that front, though we want to exploit the potential of various emerging markets together.” Hero Honda also wants to tap the export potential with HMC as the domestic market is shrinking, though the company has managed to remain flat in the past six months. The two-wheeler industry declined by 9% to 34,65,327 units from 38,28,021 units last year. Hero Honda managed to buck the trend on the back of 13 new products launched in the past 18-months and was successful in staying out of the negative growth graph. It sold 15.17 lakh units during April and September.
The real problem being faced by the company is overcapacity. Due to declining demand, its two plants at Gurgaon and Daruhera in Haryana are running under capacity. Hero Honda has postponed its new five-lakh unit annual capacity plant (further expandable a 10-lakh units) at Haridwar in Uttarakhand to avoid any further losses. The Haridwar facility was to manufacture 100 cc bikes like the Splendor and the Passion, which comprise two-thirds of the total motorcycle market in India. The company’s total capacity was to go up from the current 30 lakh units to 44 lakh units by mid-2007 and 54 lakh units by 2010.
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| HSBC Presents ET SME International Trade On Indo-Us Trade Forum Series On Indo-Us Trade Information |
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| OVER the last twenty five years, the India-US bilateral trade has grown ten fold. From $ 3 bn to almost $ 32 bn. Today, the USA is India's largest trading partner. The US exports to India registered a remarkable growth of 32.94 % during Jan-May 2007 while India's exports in the same period registered a growth of 12.21%. How¬ever, considering that US-China trade is over ten times that of Indo-US trade, clearly there is a long way to go. How to get there, is definitely the key question.
Both, India and the USA are keen to strengthen and deepen trade relations. Apart from the nuclear deal, although still in the formative stage, the two nations are also exploring various possi¬bilities of a bilateral agreement that would help trade ties. Efforts are also on to prepare and exe¬cute a free trade agreement between India and the US. It is under this backdrop, that The Economic Times SME International Trade Forum series on Indo-US trade was recently held in association with HSBC.
Eminent members of the industry shared their perspective on the road ahead. Jairaj Purandare,
HSBC
The world's local bank
Executive Director-in-charge, Price Water House Coopers, was the moderator of the event and the speakers were Puneet Chaddha, Head-Commercial Banking-India, HSBC; R K Chopra, Secretary Gen¬eral, Indo American Chamber of Commerce; Rajat Srivastava, Regional Director, Engineering Export Promotion Council; Amit Ruparelia, Vice Chairman, The Cotton Textiles Export Promotion Coun¬cil; Michael New bill, Consul, Political-Economic Affairs, Consulate General of the United States of America; and R P Kalyanpur, Executive Director, Plastic & Linoleum Export Promotion Council.
The discussion focused on the growth in trade, the specific regulations that help or hinder trade, the role of the government and international trade bod¬ies and the kind of changes that need to be effected at the policy level among various other issues.
As one of the fastest growing economies of the world, there exists tremendous potential for bilat¬eral trade between India and the US. "For US companies India is the place to be," said Mr New-bill. "The positive environment that exists today is great and business makes total sense. Though some American companies have had problems, but then that they should be able to find good partners and I think, this is a very exciting time," he added.
The panellists agreed that while the challenges are definitely there in terms of duties and non-trade barriers, the SMBs should focus increasingly on maintaining quality of products to get the com¬petitive edge.
That can be brought about by more information dissemination. "More awareness needs to be cre¬ated. The SMEs need to be informed about of what is available, they should be told of what successful SMEs are doing right by sharing the gene al trends in the industry," said Mr Chaddha.
He elaborated that it is processes like the; which will enable financial services companies 1 partner more with the SMEs and alleviate th risks that the companies are likely to face i expanding their global footprint. According to the panellists, a strong focus also needs to built o encouraging more research activity in India "There is a big opportunity for under taking research in India with the growth in the manufacturing sector, pharmaceuticals and IT. We need to create the infratsructural set up for more R&D centres in India,” said Mr Chopra.
While the overall growth trends are visible, in certain sectors like plastics and textiles, there has been a slowdown. Concern on the same was aired by the speakers. "For the plastic industry the US is the largest trading partner," said Mr Kalyanpur, "However, India's exports of plastic does not account for even 1 % of the total imports of the US." This according to him was on account of the price offered, which tends to be very high, because of higher costs of production. Moreover, the trend in the January-July period has not been very encouraging for the sector, especially with a negative growth with US of about 21 % with the maximum downtrend in the area of polyester.
"If we have a direct presence in the US then the business can be increased much more," added Mr Kalyanpur. A similar problem exists with the tex¬tiles sector. The overall exports to the US, which is the largest consumer market, has declined visibly in the last three to four years. "Everybody is talking about China and the China factor is certainly there," said Mr Ruparelia. "But, I think we should look at our own strengths and competencies," he added.
Cost disadvantages, as it seems obvious, is hold¬ing things back for the SMEs. "We still have banks shying away from lending money for trade advances that adds significantly to cost disadvan¬tages," said Mr Chaddha. The engineering prod¬ucts sector, for instance, has seen a phenomenal growth of 30% over last year.
But, the sector too is facing challenges in the form of non-trade barriers. "When there is growth, there are also constraints and the engi¬neering products sector is witnessing some strains," said Mr Srivastava. "Only recently, almost 400 containers of goods were restricted from entering US on account of contamination issues. There needs to be a redressal system to address such policy problems, which are non existent today," he added.
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| Paper industry wants to use degraded land Industry Wants Access To Degraded Lands In A Radius Of 100 |
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| INDIA’S paper industry is rueing the high cost of existing raw material, its slow depletion and inadequate forest land. For more than 500 units across the country engaged in manufacturing of paper, paperboards and newsprint, the availability of raw material is crucial. The industry is urging that the Parliamentary Standing Committee which is evaluating a multi-stakeholder partnership (MSP) model proposed by the Ministry of Environment & Forests be actively taken up that allows the industry to use degraded land.
“Indian paper industry wants access to degraded lands in a radius of 100-150 km around manufacturing facilities for it to grow pulpable varieties of trees to create sound raw material base,” says Pradeep Dhobale, CEO, ITC Paperboard, who is also general secretary of Indian Paper Manufacturers Association (IPMA). Envisaged as a tripartite agreement between the local community, the state forest departments and the private investor, the multi stakeholder partnership (MSP) model could help provide a green cover over 28 million hectares of degraded land available in India, generate rural employment and act as a source for raw material for wood based industry.
The industry is expecting the paper consumption to double from seven million tonnes per annum by 2015. According to estimates by IPMA, the industry is poised to grow to 13.95 million tonnes by 2015-16.
The industry is a priority sector for foreign collaboration and foreign equity participation up to 100% receives automatic approval by RBI. The industry has actively been promoting agro forestry with private land holders and farmers to meet its needs for raw material. The total acreage under cultivation of pulpable variety of trees has gone up from 25,432 hectares in 2001-02 to 58,281 hectares in 2005-06. However, the gap between supply and demand of paper in India is widening.
“The forest land may not be accessible but the government can allocate degraded land which we can cultivate to fill up the gap in demand and supply. This would also give a chance for the domestic industry to flourish and compete in international markets,” says a spokesperson from Abhishek Industries. The flagship of the Trident Group that is coming up with a 400-tonne-per-day paper plant in Barnala, Punjab says that it is also facing problems due to lack of raw material while the available material is expensive. Currently the total domestic demand for paper is 7.2 million tonne whereas the production is trailing at 6.7 million tonne. It is estimated that the production capacity would rise to 8.5 million tonnes by 2010-11 while the domestic demand would rise to 10 million tonnes.
Industrialists, however, fear that in the absence of a competitive domestic paper industry, large scale imports will follow affecting not only the rural economy but harming small scale industry including local assemblers of note books and paper products. It would directly affect the rural economy and rural unskilled and semi skilled labour. Therefore, the industry is also proposing to establish a permanent green cover on degraded forest lands to ensure constant supply of raw material.
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| Punjab to announce agro-industry policy by early December |
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| THE working president of Shiromani Akali Dal and a Lok Sabha member, Mr Sukhbir Badal has assured industrialists in the region that along with the new industrial policy a separate agro-industrial policy, to bring in investment and remove all the bottlenecks faced by the industry, will be announced by the first week of December .
Mr Badal met representatives from Jain Irrigation, Adanis, Dabur, Tata, ITC, Amrit Banaspati, Premium Farm Fresh, Pure Foods, Nuway Organics, Mrs Bectors, Satnam Agri, Sunstar, LT Overseas, among others, to give a push to the agro-based industry in the state. The industrialists, who are in the process of setting up their projects in the state, raised the problems being faced and the requirements, which would push the investment in the agro-industrial sector in Punjab.
Mr Badal also mentioned that the government would like to act as a catalyst in promoting infrastructure in power, roads, airports etc for the benefit of the industry and also ensure ease of carrying on corporate and contract farming on larger chunks of land to make it a viable and profitable proposition both for the farmers and the industry.
In addition it was also informed that the state would have the land records computerized to bring transparency in the agriculture land deals. The government would also like to remove the problems being faced in getting clearances of various sorts by making them available online. He assured the industrialists of full government support in completing the agro industry projects in the state.
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| M&M to bring auto-component businesses under umbrella co |
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| MAHINDRA and Mahindra (M&M) on Friday said it plans to restructure its six auto-component companies to form an umbrella company, Systech, before going for an initial public offering.
The six companies are Mahindra Engineering, Mahindra Sourcing, Mahindra Forging, Mahindra Gears, Mahindra Composites and Mahindra Steel Products. Under the restructure plan, the six businesses would be brought under a new company, company president (Systems & Technologies Sector) Hemant Luthra said. Presently, Systech manages these six businesses of which three are listed.
“The new company will be called Systech,” Mr Luthra said.
Mahindra Composites, Mahindra Forging and Mahindra Ugine Steel Company are listed.
Promoters in the listed companies hold 45.06%, 47.11% and 55.53% in Mahindra Composites, Mahindra Forging and Mahindra Ugine Steel Company, respectively.
In the unlisted companies, promoters hold virtually the entire stake. “Now, what you have to do is transfer all the holdings of companies managed by Systech. You have to take the holding from Mahindra and create a new company called Systech,” he said. Systech would hit the capital markets at a later date, but “certainly not this year”, Mr Luthra said.
“In order to provide an avenue for interested investors to take advantage of Systech’s portfolio, it might make sense to list Systech,”he added.
By the time restructuring takes place, M&M would have completed its investment of Rs 800 crore in its various auto-component businesses.
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| Punjab industry demands removal of electricity duty |
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| THE industry in Punjab has expressed its unhappiness over the high cost of power which is crippling the it. Although the bulk of the steel demand of local industry is met by induction furnaces, the electric power is the main expenditure in converting iron and steel scrap into steel.
Over and above the high power tariffs, the Punjab government is charging electricity duty of 10%. The present burden of 40 paisa a unit is already beyond the capacity of the manufacturers to bear, laments Induction Furnace Association of North India president Mr KK Garg. He, therefore, urged the Badal-BJP government in Punjab to withdraw this duty. He also urged the government to withdraw the 66 KV scheme imposed by Punjab State Electricity Board (PSEB) mainly on furnaces.
According to Focal Point Industrial Sheds Association of Ludhiana president Mr Rajnish Ahuja, the other area of concern is the appreciation of rupee against the US dollar. Most of Punjab’s small units depend upon exports. He also maintained that the electricity duty is crippling the industry.
For many years, the electricity duty had remained 11 paisa a unit. Now with 10% advalorem, the amount becomes unbearable. In addition to the duty, the octroi of 4 paisa is also unjustified.
Talking on behalf of nearly three dozen associations of industry and trade in Punjab, Apex Chamber of Commerce and Industry (Punjab) president Mr P D Sharma, while referring to the recent address of the Union minister of state for industry in Ludhiana who had asked the industry to close shop if they found the going tough, said that this had disheartened the already discouraged industry. This, he lamented, had drastically led to a decrease in bank credit to small scale industries in Punjab. The credit to small scale industry in Punjab in the year 2005 and 2006 remained almost stagnant, when such a credit jumped by 50% in many states including Haryana.
He said the small scale sector in India may be the only set of borrowers in the world to get bank credit at the highest rate of interest. Large borrowers were getting credit at Sub PLR and as low as about 5% in some cases. All other borrowers are getting bank credit at softer rate. The NDA government, in 2002, had pegged the rate of interest of bank at ± 2% of PLR but banks have raised the level of PLR. Except entry fee into the bank building there is service charge as any thing the bank does, he added.
He said while the previous NDA government had reduced the Custom duty on imported iron and steel scrap to lower the prices, the UPA government has again raised it to 5% along with a countervailing duty of 4%. This was done to benefit the sponge iron manufacturers who are raising the prices unchecked. The secondary producers who supply bulk of steel to small scale industry in Punjab are forced to raise the rates of steel, damaging the industry.
Mr Sharma said the ruling SAD-BJP government in Punjab should also understand that the plight of industry in the state is perhaps the worst in the country. Power tariff has an indirect role in addition to direct burden. Steel and other intermediate which are produced in Punjab are adversely effected by power cost. Therefore,
undue burden on electricity should
be removed.
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| North sees active trading of cotton this season |
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| ACTIVE trading activity is being witnessed in the Punjab, Haryana and Rajasthan cotton this season. Around 34,000 bales have arrived across the region in 13 th/14th October with rates touching at Rs 1,900 to Rs 2,200 per quintal (compared to the minimum support price of Rs 1,960 per quintal announced by the government).
The Northern India Cotton Association Ltd (NICA) has reported that the total cotton crop arrivals across the region reached over 5.50 lakh bales (1 bale equals to 170 kg) till October 15 in the market. In Punjab cotton arrivals were at 18, 500 bales, in Haryana 11,000 bales and in Northern Rajasthan (comprising Sriganganagar and Hanumangarh and Bikaner) at 4,500 bales. Total ‘desi’ arrivals were at 2,000 bales on 13 th/14th Oct. The ‘kapas’ (unginned cotton) rates for desi was Rs 1,900-Rs 2,000 per quintal and for other varieties Rs 2,000-Rs 2,200 per quintal. The cottonseed rate was between Rs 1,120 and Rs 1,160 per quintal.
In Punjab, price of J-34 S/Gd was Rs 1,820 to Rs 1,855 per maund (1 Maund=37.324 KG), in Haryana it was 1,790 to Rs 1,830 per maund and in Rajasthan Rs 1,745-Rs 1,790 per maund. The desi variety was being sold at Rs 1,490-Rs 1,500 per maund in Haryana, Rs 1,470 - Rs 1,490 per maund in Rajasthan and in Punjab it was at Rs 1,450-Rs 1,485 per maund.
Major arrivals are in the mandis of Abohar, Mansa, Malout , Budhalada and Gidderbaha, Malout in Punjab and Sirsa, Ellenabad, Fatehabad in Haryana. In Rajasthan major arrivals are in mandis of Sriganganagar, Hanumangargh and Pilibangan.
According to Rakesh Rathi, President NICA, “Today, the rates have gone by Rs 50 per quintal in kapas and Rs 20 per maund in cotton on account of better demand from local as well as up country mills and nominal purchases by exporters. Raw cotton prices went up on account of short covering by ginners and increase in cottonseed prices.”
Mukul Tayal of Hisar-based Tayal Sons Ltd said millers were not happy buying at this price and it was expected that the rate would come down as arrival picked up. He said, “kapas was being sold at Rs 2,150-Rs 2,200 per quintal whereas last year during this very period rates were at Rs 1,650 per quintal,” More than 400 bales is arriving in the Hisar mandi.
In Bathinda mandi arrival from Talwandi Sabo, Dabwali , Gidderbaha was more than 800 bales with price of kapas touching from Rs 2160 per quintal and cottonseed being at Rs 1150 per quintal. “There is demand of cotton seed cake by Rajasthan farmers which has led to an increase in the cotton seed rate. With arrival pressure likely to pick up in next 10 day then we expect a fall in prices,” said district president of Bathinda Arthiya Association Mr Sukhdev Singh Chahal. According to a leading exporter from the region with the dollar not being supportive the exporter had been hit badly and hence he was adopting a wait and watch policy.
For now even though the farmer has been distraught with the low yield due to the large-scale mealy bug attack the traders say there has been a slight change in the quality. “Fibre length is shorter by 1 mm to 1.55 mm compared to previous year and hence spinning value will come down,” said Mr Rathi.
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| MSME min tweaks cluster fund norms |
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| THE government has made another move to beef up infrastructure of industrial clusters for micro, small and medium enterprises (MSMEs). The ministry of micro, small and medium enterprise development has revised the Small Industries Cluster Development Programme (SICDP) to initiate funding also for infrastructure development of such clusters. The new fund will flow to clusters over and above the ministry’s commitment to provide grants for technology upgradation, capacity building, training, skill and market development for individual units and creation for common facilities within each cluster. MSME ministry development commissioner Jawhar Sicar told ET that henceforth “the Centre will bear 40% of the project cost for infrastructure development of clusters, which will be provided by it as outright grant”. So far, central assistance has been available for technology upgradation, common facility centres, market development and all programmes relating to skill development and capacity building.
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| Baja Auto joins discount war |
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| IT’S muscle-flexing time in the bike market. The more than 7 million units a year motorcycle market is all set to kick in the festive season with a price war. Hero Honda fired the first salvo with a Rs 2000 ( approx 6%) discount on its entry level motorcycle CD Deluxe. Now arch rival Bajaj Auto has hit back with a Rs 4000 (12%) discount on the Platina starting Monday. For now, the third player in the fray, TVS, is holding the price of its Star model. While the big two fight it out, the mood in TVS is a strict wait and watch.
Sources say the Bajaj move is triggered by the fact that the Hero Honda price cut had brought the CD Deluxe almost at par with the Platina. Pre-discount, the CD Deluxe versions cost around Rs 35,000-36,000 while the Platina is currently priced at Rs 34,000. After the discount comes into effect, the Platina will cost Rs 30,000. TVS’ Star range is priced around Rs 36,000-38,000. Hero Honda says the scheme, called 2020, is a celebration of its 20 millionth motorcycle. “On the occasion of 20 million bikes, we are offering an opportunity to non-owners of two wheelers to own an entry level CD Deluxe at a special benefit of Rs 2020,” said a Hero Honda spokesperson. Sources say the Bajaj decision is also powered by the reasoning that Platina currently makes up around 30% of its volumes. So even a big margin hit will not impact the balance 70% of its range. Analysts say the price war could be an indication that the two biggest bike makers have decided to go for broke. Both players are upping the ante at a time that’s traditionally known to be the best season for the auto industry. This year, the motorcycle market has had a torrid run with the segment down more than 15% in the April-September period.
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| Hollister to set up export-oriented unit in Haryana |
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| HOLLISTERWashington will set up a 100% export-oriented unit on 10 acres in Bawal industrial area of Haryana with a capital investment of Rs 250 crore to develop and manufacture its medical care (austomy) products.
A delegation from the company, led by its president George Malickel, director (North America) Mr Robert Crowe and director (services) Guljit Singh, met Haryana chief minister, Mr Bhupender Singh Hooda, currently on visit to Washington, and apprised him of the company’s expansion plan.
The chief minister assured the company of all possible assistance for the timely implementation of the project.
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| GTF plans offices near Chandigarh to fund more SMEs |
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| TO TAP the SME market, Rs 6,250-crore Global Trade Finance, providers of export-import trade finance solutions (mainly to the SMEs) plans to enhance its loan assets to Rs 600-700 crore in the Chandigarh region in one year span by opening satellite offices here. At present, the Mumbai-based company’s loan assets in the region are close to Rs 200 crore. It will be lending the factored loans at a rate of 11-12.5% depending on the credibility of the company.
Loan assets under Factoring normally does not require any collateral which is the main blockade for SMEs for getting loans from banks. Factoring business world wide is close to euro 1,200 billion. In India it is at a nascent stage and is approximately worth euro 3.5 billion. Factoring is a receivable management and financing service designed to improve the seller’s cash flow and cover risk. MD & CEO of Global Trade Finance Mr Arvind Sonmale says, “We offer a viable alternative to bank finance for the SMEs based here. Being a NBFC, GTF enjoys the flexibility of providing adequate, timely and hasslefree finance. We are focused on supporting the trade finance needs of the SMEs, which have flourished in Punjab. GTF has opened its office in Chandigarh in view the enormous business potential in Punjab. We shortly plan to open offices in Ludhiana and Jalandhar.”
As on September 2007, GTF turnover stands at Rs 4,700 crore and factored loans outstanding stands at Rs 2,400 crore. It registered turnover of Rs 6,250 crore in FY 2006-07 against Rs 2,800 crore in FY 2005-06. This had also helped GTF clock over 100% increase in its bottom-line for the third year in a row.
Experts opine that Chandigarh region offers good business opportunities not only for companies like GTF but for SMEs also. Chandigarh region is a home to SME units in segments like paper manufacturing, basic metals and alloys, machinery, food products, sanitaryware, auto parts, machine tools, cycle parts, fasteners, pharmaceuticals, auto components, electrical appliances etc.
GTF commenced its operations in September 2001, as a joint venture promoted by the Export Import Bank of India, WestLB, Germany and IFC, Washington. Currently the stakeholders are: Export Import Bank of India (40%), FIM Bank, Malta (38.5%), IFC, Washington (12.5%) and Bank of Maharashtra (9%).
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| Haryana signs MoU with US college to churn out techies |
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| THE Haryana government and Montgomery College, State of Marryland, USA has signed a memorandum of understanding (MoU) for assistance in workforce creation and development through the provision of professional development, curriculum sharing, strategic planning, budgeting, institutional advancement, faculty and student exchange. Montgomery College shall seek supplemental funding support from US government agencies and Indian and American corporates. Under the MoU, assistance would also be extended to undergraduate and graduate studies with a particular focus on the industries prevalent in Haryana.
The Haryana government and Montgomery college will jointly develop new curricula for the government polytechnic in Manesar or adopt existing Montgomery college undergraduate curricula that are aligned to the Indian students’ career.
Haryana chief minister, Mr Bhupinder Singh Hooda, in whose presence the MoU was signed, said with this MoU, a community college model would be replicated in the Government Polytechnic at Manesar, as a pilot project. It would help creation and development of the technical work force at undergraduate and graduate level. This model will be replicated in Polytechnic collages of the state in due course.
Earlier, the delegation led by Mr Hooda was received by Dr Hercules Pinkney, vice president and provost, Germantown campus, Dr Mary Kay Shartle Galotto, executive vice president, Montgomery College and Dr Pradeep Ganguly, director Montgomery County Department of Economic Development.
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| Navratna PSUs turn out to be gems in govt’s crown |
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| THE moniker of ‘navratnas’ for India’s biggest public sector companies is proving to be a fitting one. For in the last one year, the government has become wealthier by over Rs 3,14,000 crore or $78 billion thanks to the appreciation in the stock prices of public sector undertakings and new listings. And that’s not all, the government earned a cool Rs 16,000 crore as dividend from the 58 listed central PSUs just last year alone. Combined, the sum is nearly equal to central government’s total net tax revenues during FY07. Or to put it differently, every ‘aam aadmi; is now notionally richer by around Rs 2900 as compared to a year ago thanks to listed PSUs.
The total market value of government holdings in PSUs is now almost $210 billion a 60% increase over the previous year. Besides a booming Sensex, new listings such as Power Grid Corporation, Central Bank, Indian Bank and Power Finance Corporation have powered this increase in wealth. Just to put things in perspective, the amount is equal to a fifth of India’s GDP and over half of the country’s public debt. If the government decides divest its entire holdings and distribute the money, a typical Indian family will get a one-time windfall of Rs 38,000.
The appreciation in government net worth would have been even higher if not for their refusal to increase retail fuel prices. The policy of subsidising fuel has significantly depressed the market capitalisation of oil & gas majors such as ONGC, IndianOil, Bharat Petroleum and Hindustan Petroleum.
Which brings us to the question: how do the capital and dividend returns compare with government’s initial investments in these companies? The short answer is: extremely well. At the end of June ‘07, the government contribution to the equity capital of these 58 PSU in our sample works out to be around Rs 31,000 crore. If we consider the fact that in a majority of the cases government subscribed to the equity capital PSUs at par value, the dividend-yield itself works out to be over 50% every year and the capital appreciation is over 26 times. And they say governments don’t make good businessman!
There have been a number of star performers in the Government portfolio. The biggest contributor to GoI wealth has been NTPC. The market value of government holding in the power major is now $23 billion, which is an increase of $13 billion. Next in line is minerals and metals trader MMTC, which has contributed $11 billion to the rise in government’s net worth. The once mired under a mountain of debt and steeped in losses Steel Authority of India (SAIL), is now one of the biggest wealth creators in the business. The market capitalistion of the country’s largest primary steel producer has more than doubled in last one year to nearly Rs 68,000 crore. This has created an additional wealth worth $10 billion for the government. Other big contributors include recently listed Power Grid Corporation, Bharat Heavy Electricals and State Bank of India and Power Finance Corporation.
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| Creating viable export strategies We have to unveil country-specific export strategies along with se |
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| THE annual supplement to the foreign trade policy (FTP) (2004-09) has set new heights for India’s exports to ensure that merchandised export reaches a level of US $160 billion by 2007-08 and $200 billion by 2008-09. Further, the policy reinforces the twin objectives of achieving both higher growth as well as employment generation. It marks a clear shift from the traditional approach to the development of exports, earning more and more foreign exchange, along with employment generation.
It is evident from the accompanying table that India’s merchandise exports have consistently grown at a fast pace of more than 20% since 2002-03. Consequently, India’s share in world exports has increased from 0.7% in 2001 to 1% in 2005. This was made possible because our export growth was higher than the world average during the past few years. Further, it is a result of the sustained and continuous efforts taken in the past which created a favourable environment both at home and internationally.
Similarly, exports of the principal commodities have registered a growth of over 20% in dollar terms during 2006-07 over the previous year. It is indicative of the heavy diversification of export goods — away from the traditional exports. During 2006-07, the export share of the top five commodities, i.e., engineering goods, petroleum products, chemicals and related products, textiles and gems & jewellery was 74.5% while twelve other commodities of exports only have a share of 25.5% in India’s total exports.
Another distinct feature is that engineering goods have had an export share of more than 15% since 2004. This is in line with the India FTP (2004-09) which envisages India as an emerging auto hub, a destination of choice for the manufacture of automobiles and auto components. The region-wise break-up of exports depicts a continuous rise in India’s export share to Asia and Asean countries. This is in accordance with the newly found enthusiasm for the Look East Policy.
Despite the remarkable growth in exports, the merchandise trade balance has been widening. The growth in our imports has out-performed the exports growth. Consequently, there is a huge trade deficit. We are not generating the trade surplus necessary to finance the imports, unlike other countries including China, Japan and Russia. However, the positive side of the rising trade deficit is that India is investing more at home, which will help generate more employment.
Nevertheless, India is in a comfortable position in spite of the growing trade deficit. It is because the trade deficit is partially financed by the current account surplus because of export of services in general and software exports in particular. The other reason for this comfort level is the surging capital inflows, which include foreign portfolio investment, foreign direct investment and external commercial borrowings.
Thanks to the liberalisation and globalisation process, services exports from India contributed 2.7% to the total services exports of the world during 2005. India’s exports of services and software export have increased by 32.4% and 32.6% respectively in dollar terms during 2006-07 over the previous year.
AN IMPRESSIVE growth in the services sector exports has kept the current account deficit on the balance of payment at a sustainable level of less than 1.6%. Exports of the services together with capital inflows to the country have expanded the foreign exchange kitty. As per the latest data from the RBI Bulletin, foreign exchange reserves of India have crossed the landmark of $200 billion . The same stood at $228.85 billion as on August 31, 2007.
As far as the employment problem is concerned, not much benefits have been reaped from the FTP. This is because so many incentives have been extended to promote exports and high value-added products from the agriculture sector, gems & jewellary sector, tiny sector and the handicrafts and handloom sector.
The textile sector is the second largest employment provider, next only to agriculture, for the Indian workforce. The labour intensive textile sector, however, has not been able to leverage the benefits of globalisation, whether in terms of export growth or employment, to a significant extent. Although the rupee appreciation vis-à-vis the US dollar has affected overall exports, textile exports in particular have borne the brunt of the strengthening rupee to a significant extent. This has eroded the competitiveness of textile exports and their profit margin. This will affect employment generation adversely, particularly in the textile sector.
There is a need to revamp the approach to exports, since there is a limit to how far the Reserve Bank of India can intervene in the currency market to prevent the rupee from appreciating vis-àvis the US dollar. Nevertheless, we can adjust to the new situation. An all out effort should be directed towards adopting new strategies for exports.
In the emerging international scenario, the export strategy may, inter alia, include the enhancing of our product basket by adding new and innovative items, targeting new markets, increasing quantity and adding value to the product, acquiring new designs, reducing costs and thereby enhancing the competitiveness of our exports. Increased productivity would ensure competitiveness and a lower cost for our exports. Exporters need to place more emphasis on non-price factors such as product quality, brand image, packaging, delivery and after sales service.
We also need to unveil export strategies which are region and country specific. Further, there should be second generation reforms in trade facilitation which, among other things, include modernisation of customs, the removal of infrastructure bottlenecks as well as the streamlining of documentary requirements. Small and medium enterprises, which constitute a majority of exporters from India, may be used as an effective tool for employment genera |
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| No move to refund state levies to exporters |
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| EXPORTERS looking forward to reimbursement of state-level taxes by the Centre are in for disappointment. The revenue department has shot down the proposal for state tax exemptions made by the commerce department. The commerce department had agreed to replace the popular yet controversial DEPB scheme—an input duty reimbursement scheme for exporters—with the duty drawback scheme regulated by the finance ministry provided the state level taxes were also reimbursed by the Centre.
Sources close to the development said that while the commerce department was looking at the possibility of taking up the issue with the Union Cabinet and also with the Prime Minister’s Office, there was a strong possibility that the DEPB scheme would continue in its present form for the next two years.
After trying for more than two years to come up with an alternative to the DEPB scheme (which has been challenged at the World Trade Organisation a few times by the EU for being non-transparent), the commerce department had come around to a c c e p t i n g the finance ministry’s view that the DEPB scheme should be merged with the duty drawback scheme. However, since the DEPB scheme had some advantages over the duty drawback scheme (reimbursement rates for some items are higher and the scrips are transferable), the commerce department wanted that the finance ministry should shell out something extra in the form of reimbursement for state input taxes like octroi, mandi tax, sales tax on petroleum products, electricity tax and municipal cess.
Neutralisation of state taxes by the central government is a departure from existing policy and practice, according to a letter written by the revenue department to the DGFT earlier this month. States and local bodies would be encouraged to levy more taxes if the principle of neutralisation of such taxes by the Centre is accepted, revenue department officials have argued. The proposal is not in line with 12th Finance Commission recommendations on sharing of revenues and transfer of funds.
Commerce department officials, however, argue that if the government decides to take the state taxes rates as existing before a cut-off date then the problem of states increasing their tax levels could be taken care of.
Sources pointed out that the commerce department had three options of dealing with the situation. One was to fight it out by involving the PMO and the Cabinet. The second was to accept the finance ministry’s demand of unconditionally merging the DEPB scheme with the duty drawback scheme. The third, which was the easiest and the most likely, was to maintain status quo and continue with the DEPB scheme in its present form for the next two years till the goods and services tax (GST) is implemented. Since the GST will merge the Cenvat and the state level VAT, exporters will be automatically reimbursed all input taxes paid.
Revenue foregone under export promotion schemes like DEPB is over Rs 61,000 crore per annum. The only issue to which revenue has agreed is to provide refund of all central taxes like customs and excise to exporters through the duty drawback scheme.
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| CII inks MoU with PCRA for energy efficiency in SMEs |
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| The Confederation of Indian Industry (CII) has signed a memorandum of understanding (MoU) with Petroleum Conservation Research Association (PCRA) for conducting audits in small and medium industrial units to exploit energy saving potential in them.
The three industrial clusters identified for the initiative are handtool units in Jalandhar, ministeel plants in Govindgarh (Himachal Pradesh) and auto component units in Gurgaon .
This is a first of its kind initiative that the ministry of petroleum and natural gas has taken up in the field of energy conservation in association with CII.
The MoU was signed here on Wednesday by Mr Ravi Capoor, executive director, PCRA, and joint secretary, ministry of petroleum and natural gas, and Lt Gen (Retd) S S Mehta, director general, CII.
According to the MoU, four units in each of these clusters would be identified and taken up in the first phase, where detailed energy audit will be carried out to estimate the saving potential.
The project tentatively targets to achieve an adequate saving level by February , 2008. Speaking on the occasion, Mr Capoor said, "We must work towards making these energy intensive small and medium enterprises (SMEs), operating in clusters all over the country, energy-efficient and bring them at par with world standards."
Earlier, ministry of small scale industries, had approved six clusters under Small Industries Cluster Development Programme.
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| Govt may up tax-free investment cap for individuals to Rs 1.5 L Rs 50 K Must Go Into Infrastructure |
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| INDIVIDUAL tax payers may be in for some cheer. The tax-free investment limit for individuals may soon be hiked from the present Rs 1 lakh to Rs 1.5 lakh.
The proposal that the government is deliberating has a condition though: the additional Rs 50,000 will have to be invested in infrastructure bonds. The move is aimed at mobilising funds to bridge the resource gap of about $40 billion in infrastructure during the Eleventh Plan period (2007-2012).
The power ministry has already taken the initiative, under the prime minister’s direction, to launch Vidyut Vikas Patra or power bonds. The move may be announced during next year’s budget.
“The government is considering enhancing the tax-free investment limit with the dual purpose of providing relief to tax payers and mobilising funds for the infrastructure sector, which requires about $500-billion investment during the Eleventh Plan. The move has been favoured by a standing group of power ministers constituted by the prime minister. The group has now constituted a sub-committee headed by Planning Commission deputy chairman Montek Singh Ahluwalia to fine-tune the proposal for inclusion in next year’s budget,” an official source said. The move may also help the government in the event of snap polls, added the source.
Infrastructure bonds are considered a good option for mobilising resources with the expectation that the enhanced limit of Rs 1,50,000 could mobilise about Rs 3,00,000 crore for the infrastructure sector in the remaining four years of the Plan. The instrument has lost its attraction for tax payers as there is no sub-limit for obtaining tax exemption on such investments now.
Till the 2004-05 fiscal, individual tax payer were permitted an exemption on income tax up to an investment limit of Rs 1,00,000 per annum with a sub-limit of a maximum investment of Rs 30,000 in infrastructure bonds. However, this sub-limit was removed from fiscal 2005-06 and investments in infrastructure bonds were made part of overall Rs 1,00,000 limit for availing tax exemption.
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| US NRI to invest Rs 2k cr in Haryana |
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| US-BASED Spectrum International, a company owned by a non-resident Indian, has decided to invest Rs 2,000 crore in Haryana’s food preservation and processing industries.
This was announced at a reception organised for visiting Haryana chief minister Bhupinder Singh Hooda in New Jersey by people from Haryana in the US and prominent local associations. Mr Hooda is leading a high-powered delegation of the state government and the Confederation of Indian Industry, which aims to project Haryana as the most preferred investment destination. They arrived in New York on Tuesday.
Mr Hooda also announced that a nodal officer would be appointed by the state government to co-ordinate with NRIs.
The chief minister welcomed NRIs to invest in the state and announced that all efforts would be made by the state to facilitate their investment. He invited them to the state to compare and evaluate the infrastructure available. The chief minister said power projects of 5,000 mw were being implemented in the state. The meeting was attended by more than 200 NRIs, mainly from Haryana. They lauded the efforts the chief minister was making for Haryana. The other members of the delegation include irrigation minister Captain Ajay Singh Yadav, Twenty Point Programme deputy chairman Phool Chand Mullana and Haryana State Agricultural Marketing Board chairman Shadi Lal Batra.
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| Raise fuel prices to shore up PSU oilcos: Assocham |
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| • NEW DELHI: With global crude oil prices likely to cross $90 a barrel, the losses of oil companies would touch Rs 70,000 crore by March, compared to an estimated Rs 55,000 crore now, according to Assocham. The industry body has suggested that the prices of all petroleum products be raised to help oil companies save their margins from going beyond repairable limits. The price of a litre of diesel should be increased by at least a rupee or two and that of an LPG cylinder by Rs 20 to help oil marketing companies (OMCs) minimise losses. The proposed increase in prices would fetch OMCs revenue of Rs 15,000 crore for the remaining period of the current year, Assocham said. |
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| Textile may soon be part of priority lending list |
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| FUNDING for the textile sector may get easier soon. The government is planning to include the textile and apparel industry in the list of items eligible for priority sector lending. The ministry of textile is preparing a note in this regard which would soon be sent to RBI for its approval. “The move is aimed towards getting easy fund availability for the industry which requires huge funds for technology enhancement and capacity addition,” an official in the textile ministry said adding that it would help the industry tackle the global competition.
The proposal initially mooted by a working group on promotion of textile industry had got a backing of the Prime Minister’s office (PMO) also, the official said. Prime Minister Manmohan Singh, in his recent speech at the textile summit in the city, has asked the sector to increase the export of quality products and had promised that the government would extend all possible helps required for this.
Banks give 40% of their total credit for priority sector lending, in sectors such as agriculture, small and medium enterprises (SME) and exports. It is expected that the inclusion of textile and apparel sector under priority sector lending will unlock over Rs 1 lakh crore for the sector.
“The proposal is expected to be finalised soon after which it would be sent to the Reserve Bank of India for approval,” the official said. Once RBI clears the proposal, banks would be free to include textile and apparel sector funding as part of their exposure to meet priority sector lending target.
The ministry has also finalised a proposal to set up Territorial Textile Investment and Production Complexes (TTIPC) in the country on the lines of the existing special economic zones (SEZs). Units situated in the proposed TTIPC would be eligible for fiscal concessions and relaxed labour laws.
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| Badal wants Aussie consulate in state Australia Keen To Include Punjab In Integrated Marketing Campa |
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| AUSTRALIA is keen to include Punjab in its sustainable integrated marketing campaign especially in the area of agriculture value addition.
An assurance to this effect was given by the Australian high commissioner John McCarthy, who led a six-member delegation to Punjab chief minister Prakash Singh Badal here on Tuesday, official sources said.
Terming Punjab as the leading agrarian state in the country, Mr McCarthy said it could be enormously benefited by Australian expertise and technology in the field of agro-processing, value addition, post harvest logistics, efficient marketing and cold chain network.
The Australian government is also interested in setting up campuses of its universities in the state in collaboration with various universities of Punjab to provide world class education in areas like science and technology, management, information technology and medicine, Mr McCarthy said, adding 15% of the students pursuing higher education in Australia are from Punjab.
The chief minister asked the Australian high commissioner to open a consulate in Punjab to provide visa services and other facilities to the people of the state. He hoped that the consulate would also be instrumental in guiding the people about the prospects of trade, commerce, industry and higher education.
Mr McCarthy assured the chief minister that he would take up the matter with the Australian government for the opening of consulate in the state as two Australian consulates were already functioning at Mumbai and Chennai in India. He also mentioned that the Australian government was considering a proposal to set up a branch office of Australian Trade Commission in Punjab to boost the bilateral trade between Australia and Punjab.
The chief minister also asked the Mr Mc-Carthy to explore the possibilities to reduce the salinity in the ground water in the state, which was a great health hazard. He informed Mr Badal that Australia had a technology in this field but it was too expensive. He invited the state hydro experts to visit Australia to ascertain the viability of this technology.
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| Metro all set to enter Ludhiana, Amritsar Punjab Signs MoU With DMRC For Mass Rapid Transit System I |
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| PUNJAB will be the first state in the region outside the national capital to introduce Mass Rapid Transit System (MRTS). The state government on Tuesday signed a memorandum of understanding (MoU) with the Delhi Metro Rail Corporation (DMRC) to introduce Metro rail services in Ludhiana.
A similar rail system will also be set up at Amritsar and Mohali. Steps for which are being taken on priority. The detailed project report (DPR) of the 25 km Ludhiana Metro Rail Project will be prepared by DMRC within six months after which the project will be bid out for construction at an estimated cost of Rs 3,000 crore.
The MoU was signed here by DMRC chief engineer (consultancy) S D Sharma and Punjab Infrastructure Development Board managing director SS Sandhu.
The project is proposed to be developed through Public Private Partnership ( PPP) or Built Operate Own (BOO) mode. It is aimed to address the highly congested traffic conditions within the city. The system would also provide a variety of other benefits to the city like saving in vehicle operating costs, fuel cost, travel time and pollution.
After the DPR is released, the construction is likely to start within a year and the first phase is likely to be completed within four years, a spokesperson said. Punjab would be the first state in the region outside the National Capital to introduce Mass Rapid Transit System, he added.
Chief minister Parkash Singh Badal has described the MoU as a historic landmark and said this would completely revolutionise the development scenario in the state.
Mr Badal said that the project when completed would revolutionise the development scenario in the state. At the same time, he took the opportunity to clarify that there was no rift between the SAD and the BJP in Punjab and the two together will lead the state to faster development. SAD working president, Sukhbir Singh Badal, who was also present during the signing of MoU said that the step marked Punjab's entry into the age of post-modern technology. This, he said, was a commitment made by the party in its manifesto and it was now fulfilling its promise. After the Ludhian metro, he said, Amritsar metro work would also be taken up and there was also talk of initiating work on the proposed metro in Mohali, Chandigarh and Punchkula.
He said talks with the authorities concerned in Chandigarh and Haryana for the proposed metro in the tricity area were being initiated. The metro in the tricity area, he indicated, could also be extended to cover Dera Bassi as well.
The Municipal Corporation Ludhiana in 1999 had engaged RITES, a government of India undertaking, to conduct a feasibility study for setting up multi-model public transport system for Ludhiana.RITES had submitted their report in December 2000. RITES had recommended for setting up a Light Rail Transport System ( LRTS). The Ludhiana metro project will when completed will address the increasingly congested traffic conditions within the city.
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| Carlyle eyes larger share of realty business |
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| GLOBAL PE major Carlyle is eyeing a larger share of the booming realty business in India. The fund, one the largest private equity funds in the world with more than $75.6 billion of assets under management, is looking to make entity-level investments in real estate companies in India.
While most PE funds are looking to exposure only in specific projects floated by real estate companies, Carlyle is keen on buying stake in the parent company. Since real estate as a sector continues to be largely unorganised in India, funds shy away from taking stake in the parent company and prefer to buy stakes in specific FDI- compliant projects.
Though an exact figure is not known, sources say that Carlyle is keen on having a significant exposure into the real estate sector and is looking at an allocation of about Rs 600-800 crore out of the existing Asia fund. It is not known whether Carlyle will buy stakes only in listed real estate companies or will also have unlisted companies in its portfolio.
In either case, the fund will buy only minority stakes in real estate companies in India. “The buyout fund can invest at enterprise level viz developers. The fund is looking at a sizeable exposure in the sector,” said a source. Carlyle MD Rajeev Gupta declined to comment.
Carlyle, which is investing in India through its $1.8 billion Asia buyout fund and several sectoral funds, has made only one significant investment till now. It has invested $650 million in financial services company HDFC. But according to the Thomson Financial data, Carlyle has been making investments in India since 2000 and till now has struck 21 deals. This year alone, besides HDFC, the fund has bought stake in Allsec Technologies, Elitecore Technologies and Great Offshore. The fund also has stake in SSKI Investor Services where it has invested over $3 million in two rounds of funding, according to the Thomson Financial data.
Compared to its competitor Blackstone, Carlyle has not managed to strike that many big deals. In the past one year, Blackstone has struck five deals totalling $749 million including the buyout of BPO firm Intelenet for $109 million. The fund has also invested $275 million in Eenadu group, $150 million in Nagarjuna Construction, $165 million in Gokaldas Exports and $50 million in Emcure Pharmaceuticals.
Real estate as a sector has never had it so good. In the last few years, most global funds have been looking at huge India exposure. Merrill Lynch forecasts that the Indian realty sector will grow from $12 billion in 2005 to $90 billion by 2015. Some of the global financial institutions that are aggressively looking to invest in India’s real estate space include Blackstone, Morgan Stanley, Trikona, Duestche Bank, Goldman Sachs, Credit Suisse, Wachovia Corporation and Warbus Pincus. Experts say the total corpus with these funds for real estate alone is $12-15 billion.
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| Galileo betting big on e-ticketing mkt |
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| ACCEPTABILITY of e-ticketing concept is propelling the growth of global distribution service provider Galileo in India. The company is piggybacking itself on the growth of the domestic airlines. “Eticketing is comparatively a new phenomenon in India but travellers are waking up to it. With IATA setting a deadline of 2008 to introduce e-ticketing across the globe, Galileo is also evolving its travel solutions to help travel partners save time and money,” Galileo India, a subsidiary of Travelport GDS, president and CEO Bruce Hanna told ET.
IATA’s target of 96.5% e-ticketing will save the airline industry at least $3 billion annually. Observing that e-ticketing is the future for the industry, he said it will help travel agents enhance efficiency and productivity, as it will cut down ticketing requirements and consequently printing of flight coupons. Travel agents can focus on their core competency-travel consultancy and research, rather than issuing and delivering tickets.
“As many as 61 carriers, including many low-cost airlines have taken up e-ticketing. In next two to three years, at least 75% of the tickets booked will be e-tickets. It will also eradicate ticket fraud and revenue leakage through automation checks,” Mr Hanna added. On the leisure market, he said the Indian segment is growing at an average of 24% annually with metros contributing significantly. However, nonmetros account for as much as 64% of the growth. “It is a revenue opportunity for the travel agency to offer more than just tickets. This has made us introduce highly customised products like Galileo Leisure,” he said.
The B2B travel platform will integrate the existing Galileo GDS with enhanced travel content sourced from Travelport’s subsidiary Gulliver Travel Associates, he said. Galileo has also introduced value added services like ViewTrip, which provides travel details online. The traveller-friendly solution will display real-time changes to any itinerary booked with a Galileo connected agent on a 24-hours basis through online access. Galileo has over 11,000 agency terminal with 21 service centres and 10 training centres across India.
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| Exporters to get extra duty drawback sans fresh paperwork |
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| IN A move that will expedite payment of pending drawback amount to exporters, the finance ministry has agreed to provide additional duty drawback announced in June this year without insisting on submission of fresh documents. The drawback rate for several products was enhanced in the first export-promotion package finalised by the government to fight rupee appreciation, but exporters have not been given the extra drawback that they were entitled to due to the enhanced rates since the revenue department insisted on submission of more documents.
Exporters had argued that applying afresh for the enhanced amount would require huge paperwork and submission of several sets of documents. This was completely unnecessary as all requied documents were already filed by exporters while claiming drawback at the old rate. The government just needed to change the rate at which the drawback was to be given to get the new set of figures. The issue was taken up by the Delhi Exporters Association (DEA) with revenue secretary P V Bhide and officials of the Central Board of Customs & Excise (CBEC).
Duty drawback is the refund given to exporters for all input taxed paid by them. It is understood that the revenue department has now agreed it would not insist on supplementary documents in the case of shipments cleared through the electronic data interchange (EDI) system as additional entitlement can be calculated using date stored in the customs EDI database. In the case of non-EDI shipping bills, exporters may still have to submit all papers.
The finance ministry has agreed to clear drawback on an automatic basis, DEA president S P Agarwal said. This means the additional drawback would be calculated on the basis of the documents submitted earlier to obtain drawback at the original rates. The difference between the original drawback and the enhanced entitlement would be credited to the accounts of exporters directly.
The government had announced a relief package to exports to help them manage appreciation of the rupee and hike in drawback rates was one the measures announced. Mr Agarwal said exporters would have to submitted customs attached invoice, export promotion copy of the shipping bill, bank attested invoice, bank realisation certification and copy of airways bill if drawback was not credit automatically. This would have resulted in huge paperwork and delayed disbursal of drawback.
“There will be no need for a supplementary claim. The original claim would be the basis for paying additional drawback, Mr Agarwal said. The DEA welcomes the move since it will help a lot of small and medium-sized exporters throughout the country, he added.
Since there are 10 lakh drawback claim from April to July, insisting on supplementary documents would have meant exporters submitting 50 lakh more documents. Processing such huge volumes of documents would have taken time, Mr Agarwal said. Therefore, DEA suggested that the customs department should fine-tune its computer system to calculate the additional entitlement arising out of the government’s export package.
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| Old guard joins Indian MNC list after global buys |
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| THE spate of acquisition globally by Indian companies has created a breed of Indian MNCs, which is not confined to the IT sector. The list of Indian MNCs now consists of companies not only from emerging economy, but from the old guard as well. The new breed of global Indian leader has old names such as Tatas and Birlas as well as newer once, such as Baba Kalyani or Tulsi Tanti. The list identifies overseas revenues of Indian companies and ranks them based on percentage of revenue coming from global market. The Tata group, which began its global march with the acquisition of Tetley early this decade, has three of group companies in the top 20 list.
To arrive at the list, companies were first short-listed based on minimum consolidated sales of Rs 2,000 crore in FY07. Of these, companies with stand-alone exports, a figure readily available, of about 10% were screened. Annual reports for these companies were then scanned to arrive at the overseas revenues. Companies, for which FY07 annual report is not available, have been excluded. The reason for taking consolidated numbers, the most painful part for the exercise, is that a lot of companies have foreign subsidiaries, which does not get reflected in standalone numbers. However, it may still have been possible to miss out on a company considering the scope of the work.
While there are about 20 companies which derives more than 10% of revenues from global market, there are nine companies, which derive as much as 40% of its revenues from outside India.
While Pharma sector is most globalised, with four companies in the list, sector such as engineering, auto components, metals are also significantly integrated with sizeable number of companies in the list. Pharma sector gets prominence primarily because the business operates on a scale that has to be cross-border and on a global scale. Companies have to look at maximising the reach of its drugs to ensure a healthy return on investments. Ranbaxy and Dr Reddy’s in pharmaceuticals are shining examples as to how low-cost research can weed out MNCs by playing the price card.
The next major sector to figure prominently in the list is the metal sector. Interestingly, the metal sector had a large MNC percentage even before the Tata-Corus and the Hindalco-Novelis deals.
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| TVS seeks Guru’s help in patent row SJM Leader To Mediate With Bajaj Auto |
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| TVS Motor has roped in prominent SJM leader S Gurumurthy to mediate in its ongoing patent tussle with Bajaj Auto. Both companies are keen to settle the issue without litigation, and serious intermediation is underway. Mr Gurumurthy was earlier involved in the 2003 agreement hammered out between the Rahul Bajaj and Shishir Bajaj factions in the Bajaj family dispute. That agreement has now been terminated.
According to sources in the auto industry, both Bajaj Auto and TVS have indicated that they are “willing to talk and settle the issue and not go in for litigation”. When contacted, Bajaj Auto MD Rajiv Bajaj and TVS Motor MD Venu Srinivasan refused to comment.
After the flurry of charges and counter-charges early last month, both sides have now gone quiet as they look to resolve the issue. Bajaj feels that TVS should share the technical drawings of its forthcoming launch, Flame, so that both parties can figure out if there is any patent violation. The Pune-based company feels it has a strong case in the patent revocation issue. TVS feels it can withdraw the revocation action, if Bajaj accepts it is not violating any patent. “If they settle, it’s fine otherwise TVS may press for a defamation case,” says an industry source.
Sources said “people are talking on both sides” and both companies have now adopted a wait-and-see approach. There is a lot of intermediation going on, and litigation is not the first choice for either company. Says an auto industry source: “In TVS, the view seems to be that the matter will get settled. If it does not, all options are there.”
Sources said the two CEOs, who have not really met that often, share healthy, though competitive, regard for each other.
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| Tatas to race Fiat, global majors for Serbian auto co Tata Motors Pitted Against GM, Ford & Chinese |
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| TATA Motors and Italian ally Fiat Motors are among the five global companies vying for Zastava Auto, the Serbian national automobile manufacturer up for sale this December. Others in the list include General Motors, Ford and an unidentified Chinese company.
Zastava Auto—the struggling Serbian government-owned car maker—currently cranks out the Yugo model of cars, besides the Opel Astra and Punto under deals with GM and Fiat respectively. Its group company Zastava Kamioni manufactures small and medium-range trucks.
Tata Motors is the largest Indian automobile company with revenues of over Rs 32,000 crore (2006-07 fiscal). When contacted, a Tata Motors spokesperson refused to comment on the talks or any formal bid for Zastava Auto. “As a policy, Tata Motors does not comment on such matters,” he said.
However, automobile industry sources say Tata Motors is interested in Zastava Auto because it wants to use the Serbian company to expand its base in eastern Europe. The Indian auto major has been looking to tap emerging markets across the world.
“Tata Motors has full-fledged facilities for both commercial vehicles and passenger cars at the international level. It is hunting for new emerging markets and is looking for small and medium level companies to gain a footprint on a global level. Zastava Auto is ideally located for its ambitions in East Europe. Tata Motors is evaluating the company as a potential manufacturing base in the eastern bloc,” said a source. It already has agreements with companies to manufacture and market its products in south America, south and south east Asia, Russia, Africa and the Middle East.
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| AT INDIA’S SILICON VALLEY, CEOs CHIP IN TO RAISE GLOBAL ASPIRATIONS Bulge-bracket businessmen & CEOs |
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| THE ATMOSPHERE: Charged up. The dramatis personae: India Inc’s most distinguished. The Crowd: Power-packed. The Stage: Bangalore, India’s intellectual capital. This cocktail was enough to turn the ET CEO Roundtable, which debuted in Bangalore, into a veritable livewire B-school classroom. Last Wednesday, some of India Inc’s best and brightest minds gathered in Bangalore’s ITC Windsor Manor to debate an issue crucial to their survival: Managing the Risks of Globalisation.
And there couldn’t have been a better speakers’ list. Take Rajiv Bajaj, MD of Bajaj Auto. Several years ago, he pulled the company out of a steep slump and helped it take on and survive competition from Hero Honda. Infosys founder NR Narayana Murthy— he helped found one of India’s best-known companies and made it the envy of the world. Kumar Mangalam Birla, chairman of AV Birla Group, who in 1996 took command of a diversified conglomerate floundering under an old-world philosophy and beset by problems of scale and size. Today, his blue-chip firms are leaders in their respective industries and the envy of MNCs. Wipro chief Azim Premji doesn’t need lessons in globalisation — he has built a record of besting multinationals, be it in cuttingedge software development or consumer goods. Harish Manwani, chairman, Hindustan Unilever, is a Global Indian who has done his country proud by making a successful career in one of the world’s best-known companies. Deepak Parekh, chairman of HDFC, India’s largest mortgage lender, heads a company that is overwhelmingly controlled by foreigners while Praful Patel can boast of something none of his predecessors can. He liberalised India’s aviation sector, helping local companies take on the world’s best. And Sanjay Nayar, CEO of Citigroup India, knows the rules of globalisation as he leads the bank’s robust expansion in the region.
In their collective wisdom, one common thread that emerged was that reforms and globalisation were unilateral and irreversible at a macro level. Also, the real challenge of reforms was to balance urban aspirations and rural needs. At a micro level, corporates need to dig deep into the real motive and strategy before globalising their operations and not get carried away by the glamour quotient alone. And, talent management and diversified leadership that’s representative of the markets the company operates in are the real acid tests for any global enterprise.
Bangalore, the chosen destination, overwhelmingly responded to their words of wisdom. And, why not? It is this city that is India’s zipcode for the knowledge economy. It is the backyard of global businesses and it is here that their mission-critical business community wears watches tuned to world time zones and talks the global language.
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| Relief Redux: More service tax refunds on cards for exporters |
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| HERE is something to cheer up exporters. The finance ministry is ready to include more items in the list of services for which exporters are to be refunded service tax. In addition to just four services notified by the finance ministry last month to provide service tax exemption to exporters, a new notification would be issued to provide exemption on various items including warehouse charges, courier charges, banking charges, inland haulage and registration charges, and commission to foreign agents.
Last month, the finance ministry had notified that exporters would get refund of the service tax they pay for transporting goods in major and minor ports, and from inland container depots to ports through rail and roads.
The notification had upset exporters as they said that the four items listed in the notification accounted for just a portion of the total service tax they paid for carrying out exports. They made a strong case for adding a number of services including commission to foreign agents in the list.
In certain sectors like pharmaceuticals and textiles, service tax on commission to agents could be as much as 1.8% of the total value. The finance ministry took a long time to come up with its notification on service tax refund to exporters last month as the announcement for the exemption was actually made six months back in the foreign trade policy in April this year. The government collects 12% service tax along with 3% education cess on services.
Exporters already get refund of service tax paid by them on input services used for exports. The drawback scheme also factors service tax paid on input services used for exporting goods.
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| Industry sees little relief in fertiliser bonds |
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| THE fertiliser industry is not witnessing any structural change for the better despite the central government mulling a new investment policy and, more importantly, deciding to issue fertiliser bonds on the lines of oil bonds. Sources said the Centre is likely to issue the fertiliser bonds worth Rs 7,500 crore, announced two months ago, only by mid October. The bonds were mooted ostensibly to provide some relief to fertiliser units that are facing acute working capital crunch, and at the same time phasing out the burden on the exchequer of several hundred crores in dues as concessions/subsidy to the individual units.
However, there are doubts within the industry on how much the bonds would really help in resolving their core problems. In fact, the fertiliser ministry has not even been consulted on the key contours of the bonds, including the term of the bonds and the coupon rate. It is also not clear, both to the Department of Fertiliser (DoF) and to the industry, whether the finance ministry is planning to make the bonds tradable across the board or leave the industry will no option but to pledge it with banks.
It is construed that in either case, the fertiliser bonds are likely to help resolve their key problem only peripherally. In a meeting with the DoF officials post August, the industry had demanded that the bonds should meet these crucial conditions: they should be tradable across the board and not just selectively, to specific financial institutions (this could restrict the returns); the coupon rate should not be lower than the PLR for premier public sector bank State Bank of India (around 10-11%); the bonds should be statutory liquidity ratio (SLR)-enabled (this would fetch premium returns compared to non-SLR enabled bonds); there should be no restrictions whatsoever from the government on what quantum can be traded in a specific quarter.
It is generally construed that the bonds may carry a much lower coupon rate of 8% and the industry will then have to foot the difference between the interest rate that banks will charge for the bond amount and the specified coupon rate. “If the coupon rate is on par with the SBI PLR, then the difference would be lower, otherwise the fertiliser bonds will only end up making matters worse for the industry,” said an industry official. “In either case, there are only few buyers for long-term central government security bonds while indications are that the bonds will be for a 20-year tenure. That means that the full worth can only be realised at the time of maturity, two decades later. It is imperative that the coupon rate is at least on par with the PLR for SBI or else the bonds will have to be sold at a significant discount,” he added.
In fact, given the complications, the industry has requested the government to issue the second tranche of supplementaries to the industry in cash, and not in any other form.
In view of the mounting subsidy bill (more than Rs 50,000 crore by industry estimates, including Rs 8,000 crore in dues carried over from last year), the government did some realistic accounting for the first time in the last four years — most dues in subsidies/concessions were being accounted for off-Budget in that period, generally showing up only as carryovers — and allocated Rs 22,000 (BE 2007-08) this year
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| Construction of Fashion Textile Park set to begin soon Pune-Based Vascon In Tie-Up With FTP |
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| FASHION Technology Park (FTP), touted to be the country’s first textile park, is finally set to take off after months of delay. Pune-based real estate and construction major Vascon Engineers Pvt Ltd has tied up with FTP to build the 14-acre textile park in Mohali. Vascon will design, develop and build the 1.6 million sq ft multi-purpose facility at an estimated cost of Rs 250 crore.
“The work has already begun and it will take not more than 18 months to complete the project,” said R Vasudevan, chief managing director of Vascon Engineers.
The project will roll out in three phases, of which the first is already under way. Though Punjab chief minister Captain Amarinder Singh had laid the foundation stone for the park in May last year, the project could not take off due to objections from environment agencies in the state. The central government had decided last year to grant SEZ status to only areas of 25 acres and above. The announcement had caused a flurry of activity to expand the park’s area to help it get SEZ status. “We may take additional land to scale it up to the desired land size. Consequently, the investments would also increase by 50%. If things go well, FTP will be the country’s first textile park,” Jagjit Kochhar, CEO of FTP, had told ET last June. Later, FTP had also urged the Department of Industrial Promotion and Policy (DIPP) to
grant industrial park status to FTP but to no avail. Meanwhile, FTP signed four different agreements with ESMOD International Fashion School, Paris (France), Munch Design Workshop, Bangalore, BODHI Textile Design Studio & Workshop, Vadodra, and The Textile Manufacturers’ Association, Amritsar. Well-known architect Hafeez Contractor had designed FTP in such a way that it would have all functional needs of an industry including design studios, a research centre, testing labs, a convention centre, an auditorium, a residential complex and service apartments. The total area for construction of the park is nearly 17 lakh sq ft, of which the industrial zone will occupy 12 lakh sq ft. The commercial zone will account for 1.5 lakh sq ft while the residential zone is 3.50 lakh sq ft. The project will be by 2009. Vascon also plans to develop a number of projects in the region.
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| Punjab clears projects worth Rs 1,500 crore |
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| THE screening committee under the chairmanship of the Punjab chief secretary RI Singh on Friday approved nine mega manufacturing projects worth Rs 1,500 crore.
Disclosing this, a spokesman of the Punjab government said with the setting up of these mega projects would give a boost to the textile industry in Punjab and create employment opportunities for the youth of the state. Giving details of the projects, he said Aarti International Ltd L u d h i a n a would be installing 60,000 spindles at Chandigarh road, Ludhiana at a cost of Rs 242.06 crore. Avani Textile Ltd, Sangrur would set up a cotton yarn manufacturing unit at Sangrur at a cost of Rs 134.50 crore. A Rs 143.50-crore project by Oswal Spinning and Weaving Mills Ltd and another worth Rs 115.00 crore by Aggarsain Spinners Ltd (ASL) would also be set up at Ludhiana.
Two cotton spinning units by Shiva Fibers Pvt Ltd and Grospinz Fabz Ltd, for Rs 145.21 crore and Rs 66.79 crore, respectively, would be set up at Doraya in Ludhiana district and Muktsar-Jalalabad Road, respectively. Vallabh Textiles Company Ltd would set up integrated cotton yarns spinning and towel unit, costing Rs 124.71 crore, at Ludhiana.
Besides these, expansion of a cement grinding unit and a 20-mw captive thermal plant worth Rs 300 crore would be carried out by Grasim Industries at Lehra Mohabat in Bathinda district.
A rice milling plant by Sunstar Overseas Ltd would be set up at Meherabanpura in Amritsar at a cost of Rs. 51.76 crore. M/s Mukesh Udyog Ltd, Ludhiana would install 55,200 spindles and weaving processing units in nine phases at Ludhiana . This project, worth Rs 225 crore would
generate employment avenues to 1,000 persons, he added.
The meeting was attended by the financial commissioners of revenue, excise and taxation and development departments; principal secretaries of finance, science & technology and labour departments; secretaries of the department of housing and urban development and power along with the chairmen of the Punjab State Electricity Board and the Punjab State Pollution Control Board.
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| Mahindra working on makeover for Scorpio |
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| THE indigenous sports utility vehicle (SUV), Scorpio, is going for a makeover. Utility vehicle major Mahindra and Mahindra (M&M) is currently working on a new set of refinement for its flagship SUV slated for US debut in 2009, the first Indian car to hit the US roads.
M&M is working on a state-of-the-art four-channel anti-lock brake systems (ABS), occupants safety system, new lumber seats and air bags, six-speed automatic transmissions, four wheel drive with electronic shift and a electronic vehicle stability system to be introduced in the Scorpio’s US variant. This version would be launched in India after three years.
M&M’s president (automotive sector) Pawan Goenka told ET, “We are making some fundamental changes in the Scorpio to meet stringent legal requirements of the US market. We are working on a new set of technologies which will be ready by next year for testing in the US.” The company is also developing a new communication and navigation system for the SUV which will be totally customised for the US. M&M’s senior vice-president (R&D) Arun Jaura told ET, “We want to make the Scorpio different for the US customers. There are stringent safety standards there and they are very different from Indian standards. Since Scorpio will be the first Indian vehicle to hit the US market, we are burning midnight oil to develop next-generation automotive safety standards and aesthetics for it.’’
“The new features would be futuristic and expensive for the Indian market. While the US debut is two years away, the domestic market will have to wait for a while for the high-tech Scorpio” Mr Goenka said. Mahindra already exports Scorpio to Malaysia, South Africa, Russia, Italy, France, Spain, Portugal and other countries in Europe where it is known as Mahindra Goa. The company is also working on four new platforms which will roll out 10 new vehicles by 2010. Most of them would be global products for the worldwide market.
“We have plans to launch a few new products for the global market in the next few years. They may not be for the highly developed US and the European markets, but will cater to the demands of the emerging markets,” Mr Goenka added.
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| Rising Re fails to dent exporters’ spirit |
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| THE RECENT11% appreciation (approx.) in the rupee value vis-à-vis the US dollar, has failed to hold back the exports from the Indian micro, small & medium enterprises (MSMEs), that contribute approximately 34% of the national exports. According to a CII survey, for MSMEs, majority i.e. 71% respondents expect a negative impact on their bottomlines, while 29% of respondents expect status quo, as regard the impact of the surging value of the rupee vis-à-vis the US dollar and the volatility being witnessed in the foreign exchange markets.
Despite these developments, the Indian MSME exporter is extremely positive about his export prospects for the next six months, as 71% respondents expect an increase in growth of exports for their company in dollar terms. However, 27% respondents expect export growth to decline while 2% have not responded. Further, 26% of the respondents expect the export growth rate to be between 0-10%, 20% expect the export growth rate to be between 10-20% and 25% expect export growth rate to be more than 20%, in dollar terms, for their companies.
The CII’s detailed report on export trade prospects for the micro, small & medium enterprises was undertaken to analyse the export scenario for these enterprises. The purpose of this survey was to analyse their export performance and the factors that were limiting exports, besides addressing the issues such as the rupee appreciation (volatility in foreign exchange markets), dismantling of quantitative restrictions (QRs), use of intellectual property rights (IPRs) and duty entitlement pass book ( DEPB) for this sector.
Regarding the volume of exports, 51% of the respondents registered an increase in volume of their exports over the past six months, 29% did not see any change in volume of their exports while 20% respondents registered a decline in volume of their exports. In next six months, 59% of the surveyed expect an increase in volume of their exports, 23% expect no change in the volume of their exports, while 18% respondents expect their volume of exports would decline.
Also, around 47% respondents registered an increase in export orders over the past six months, for 30% respondents there was no change in export orders, while 23% reported a decline in their export orders over the past six months. However, the key limiting factors for export growth orders over the next six months of the MSMEs, as revealed by the survey, are exchange rates, international competitions and prices of raw material.
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| Maruti-Futaba JV to make auto parts in Haryana |
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| HARYANA is in full motion to attract investment in the auto sector. After JCB India Limited and Lord Swaraj Paul’s Caparo Group, each announcing investments worth Rs 500 crore, it is time for auto giant Maruti Suzuki’s joint venture with Japan’s Futaba Industrial Co to make auto parts in Haryana. The company will infuse Rs 393.36 crore as foreign direct investment (FDI).
Commenting on the state’s success in drawing investments, Haryana finance minister Mr Birender Singh says, “You will see many such investments coming to Haryana in the coming months.”
Futaba will hold 51% for an initial investment of Rs 45.9 crore ($11.6 million) in the proposed venture with Maruti for making auto exhaust system components.
Maruti’s joint venture was one of the 13 FDI proposals worth Rs 393 crore cleared by the Centre.
Another Japanese firm Mitsubishi Corp’s subsidiary, Metal One Corp, got approval to buy up to 5% in a joint venture where Tata Metaliks will hold 51% and Kubota Corp of Japan will have 44%.
The Caparo Group has already acquired 100 acres in Bawal in Haryana, about 70 km from Gurgaon, for development of six new engineering plants. These plants will support the growth of automotive including Honda Cars, Honda Scooters and Motor Cycles, Hero Honda, Swaraj Mazda and New Holland Tractors. It will also be developing a braking system facility and a suspension system facility which will support OEMs. In India, Caparo Group is focused to manufacture components of automotive that include forgings, tubing and tubular components, pressings, fasteners and aluminium castings. The company had also signed a memorandum of understanding (MoU) with the Tamil Nadu government to invest $68 million in manufacturing parts.
Around 45 days back, it was JCB India Limited, a wholly owned subsidiary of JCB Excavator (UK) — one of the top five construction and earth moving equipment manufacturers in the world — that had announced expansions worth Rs 400-500 crore at its existing manufacturing facility at Ballabgarh in Haryana.
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| Exporters offload dollars in forward market Crunch In Dollar-Denominated Credit Lines To Persist At |
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| FOLLOWING the subprime crisis in the US, Indian firms are feeling the heat of a crunch in dollar-denominated credit lines, at least in the near term.
This has led to a sharp decline in dollar funds in the Indian banking system, although, concidentally, rupee liqudity is high. In this scenario, several exporters have been forced to buy dollars in the spot market, where the rupee is trading at 39.60 levels against the dollar, and then sell the dollars in the forward market.
This had led to a decline in yields on forward contracts. However, it has also resulted in the dollar posting small gains against the pound sterling and the euro in the past few days.
However, the marginal rise of the dollar against such currencies cannot be attributed to economic factors or cannot be perceived to be a longer-term phenomenon, as this is due to the surfeit of dollars being sold in the forward market.
Typically, domestic exporters receive postshipment credit denominated in foreign currency from banks in India, which receive dollar credit from banks abroad. However, the rate of interest on credit lines for a period of one to three months have risen sharply, as compared to credit lines for a tenor exceeding three months.
A senior treasury manager said that “many banks in India have exhausted their dollar borrowing limits, following a cap fixed by the Reserve Bank of India. That is why most of them prefer lending post-shipment credit in rupee terms rather than in dollar terms, as they prefer to retain the latter within their hands, in anticipation of a dollar shortage. Hence, it is seen that funds are borrowed in dollar terms and swapped into rupees, which is then used for lending to clients.”
Standard Chartered Bank MD & corporate sales head (global markets) Hemant Mishr pointed out that “despite the measures undertaken by the US Federal Reserve and the Bank of England, the tightness in monetary conditions continues. This is exemplified by the fact that the the threemonth repo rate is quoting at at 5.25%, a premium of 50 basis points ovber the Fed funds target rate.”
Treasury officials feel that even as overnight rates have been cut, rates in the money market have not fallen. This is only indicative of a dollar squeeze in the near term.
Market sources said that this is also to do with the fact that dollar interest rates are expected to dip further over the longer term. Within India, rupee flows have been abundant, due to two main reasons, one being the excessive intervention by the Reserve Bank of India, to prevent the rupee from rising too much and secondly because of government spending, in the wake of the advance tax outflows in mid-September.
Further, traders in the local forex market expect the liquidity to swell up further, given that there are some coupon payments likely to happen within this week.
With more and more traders selling the greenback on the forward market, the forward premia have dipped sharply in the local market. The premia on near- term contracts have remained below the 1% mark for a while now. In the short-term forward market, the cash-spot, cash-tom and tom-next are all trading at a discount.
Hinduja group group CFO Prabal Banerji said, “Exporters are facing a double-whammy situation. On one hand, the dollar-credits are getting increasingly restricted due to the subprime crisis and on the other hand, the rupee is showing no signs of weakening
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| First industrial waste management plant in North |
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| PUNJAB gets its first industrial waste containment and management plant on Wednesday in Mohali. The project, jointly floated by Nimbua Greenfield (Punjab) Ltd and the Punjab government, will begin in 20 acres of land in Dera Bassi, in Mohali district of Punjab with an investment of nearly Rs 20 crore. The land has been acquired and approved by the Punjab Pollution Control Board and given to NGPL. Of the total investment, a grant of Rs 12.69 crore has come from the commerce ministry.
Hyberabad-based Ramky Enviro Engineers Ltd (REEL), one of the leading companies in waste management in India, has erected the plant which was inaugurated by Punjab chief minister Mr Parkash Singh Badal. REEL has been allotted the project on a build-own-operate (BOO) basis for 15 years and on a lease period of 30 years. Waste from the innumerable industrial houses in Punjab will be treated and processed by the firm. The former will be charged Rs 596 a tonne for direct landfilling of waste and an additional amount ranging up to Rs 1,500 in case of prior treatment. NGPL will get Rs 200 for every tonne of industrial waste processed by the plant.
Since NGPL is a special purpose vehicle promoted by major industrial houses including Vardhman Textiles, Nahar Spinning Mills, Ranbaxy Labs, Avon Cycles, Hero Cycles, Aarti Steel Ltd, Indswift Labs, Abhishek Industries (flagship of the Trident Group) and Steel Strips Ltd, the industries will have a strong incentive in providing industrial waste to the project at the direction of Punjab Pollution Control Board.
Emphasising on the need of having such a project, Mr Badal said that a classic example of the gross negligence of the industry was the polluted Bhuda Nallaha. He further said that the estimated waste generated by the industry in Punjab was about 36,000 tonnes per annum (TPA) out of which Ludhiana alone contributes 40%.
The plant will come as a boon for the industries concentrated in Ludhiana, Amritsar, Patiala and Mohali. The facility will have its own fleet of special containerised vehicles that will be used to transport waste from industries to the plant.
For a state that generates more than 36,000 tonnes of hazardous industrial waste in a year, perhaps it is too late for setting up of an industrial waste management project. REEL managing director, Mr Ravi Kant, however, disagrees. “In the northern region, Punjab is the first state to begin a waste management project while Himachal Pradesh and Haryana are yet to begin with anything on waste management. The scale of this project is small but we have asked for another 100 acres of land for expansion in the second phase as and when we feel the need to increase capacity or add an incinerator,” he says while adding that the company is open to setting up waste management centers in HP and Haryana. “We will be opening a 50 acre waste management project in Chennai within a fortnight and an incinerator in West Bengal by the end of October. Another 60-acre project in Bangalore will be operational by end of December. Yet another 70-acre project in Orissa is also on its way to completion,” adds Mr Kant.
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| Coal linkages okayed for power generation • Assurance For 3,000 MW In Punjab & 1,320 MW In Haryana |
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| THE coal ministry on Wednesday sanctioned coal linkages to public and private companies for generation of 17,910 mw electricity, taking the total approval to more than the capacity addition target in power sector during the 11th Five-Year Plan.
The latest allocations will see Punjab getting supplies for 3,000 mw of power while Haryana will get supplies for 1,320 mw. The other major gainers from the coal ministry’s move include Uttar Pradesh (5,610 mw), Chhattisgarh (2,220 mw), Orissa (2,010 mw), Andhra Pradesh (1,370 mw) and West Bengal (2,240 mw). Karnataka has been granted 500 mw while Himachal Pradesh will get 300 mw. Talwandi Sabo TPS (1,800 mw) and Nabha Power Extension (1,200 mw) in Punjab and Jhajjhar TPS Expansion (1,320 mw) has got the letters of assurance (LoA) from the ministry on Wednesday.
“My ministry has taken advance action so that public and private power companies can endeavour to meet the generation targets during the current plan,” Minister of State for Coal Mr Dasari Narayana Rao said.
The government aims at adding fresh thermal power generation capacity of 52,909 mw during 2007-12. With the issuing of LoA, a total of 62,282 mw capacity has been assured fuel provision.
“Besides ensuring supply through linkages to coal PSUs, a large number of coal blocks have also been allotted to power plants for captive mining. Coal PSUs are committed to supply about 275 million tons of their produce under linkages to various power utilities,” he said.
Those thermal projects given LoA include Uttar Pradesh-based Bara Thermal Power Station (TPS) of 1,980 mw, 1,320 mw-Karchana TPS, Anpara D TPS and Kobra TPS of 500 mw each and Rihand Super TPS of 500 mw of NTPC. Others include Rayalaseema TPS Unit-5 (1800 mw) and Unit-VI of APGENCO besides Simhadri Super TPS Stage-III in Andhra Pradesh, Mr Rao said. LoA has also been sanctioned for Marwah TPS (1,000 mw) in Chhattisgarh.
Besides, coal linkage through LoA has also been okayed for Raghunathpur TPS (500 mw) of Damodar Valley Corporation, Durgapur TPS (300 mw) of Durgapur Projects Limited in West Bengal. Moreover, LoA has also been sanctioned for Bellary TPS Unit-II 500 mw in Karnataka. In addition, the ministry also approved coal supply for 13 independent power producers having total capacity of 5,120 mw in Orissa, Chhattisgarh, Maharashtra, West Bengal, Jharkhand and Madhya Pradesh, the minister said.
“As far as securing coal linkage for growing capacities is concerned, we are doing our best and it is important to ensure that these projects fructify. We are committed to do the best in ensuring coal supply for helping in more power generation,” Mr Rao added.
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| Another first for Rs 1-lakh car To Run On World’s First 800cc, Turbo-Charged, CRDi Diesel Engine |
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| PRICE isn’t the only ‘first ever’ aspect of Tata Motors’ Rs 1-lakh car. According to sources in the auto industry, the car will sport the world’s first 800cc, turbo-charged, CRDi diesel engine. The company is working on two engine options for the car. The petrol version with a 600cc engine will debut in 2008. The diesel version will follow later, probably in 2009.
While Bosch is working on the CRDi system for the Rs 1-lakh car, Honeywell Turbo India is understood to be working on the turbo charger. When contacted, a Tata Motors spokesperson refused to comment.
Sources said the 800cc, turbocharged, CRDi diesel engine will have two cylinders and crank out at least 30% more mileage compared to 800cc petrol cars. Given that the smallest diesel engine in India right now is the 1.3-litre Fiat multijet CRDi engine that Suzuki has strapped onto the Swift, and both Tata Motors and Fiat will use in its future models, the Rs 1-lakh car will offer at least 40% better fuel efficiency than any small diesel car currently available.
The ultra-small car has made India into a hub for both small-sized turbo chargers as well as CRDi systems. Honeywell Turbo, for instance, has set up an R&D hub in France, where its Indian team is working with European engineers to crank out turbo chargers for small diesel engines. Speaking to ET, Honeywell Turbo India MD Sanjay Sondhi said: “India will be the hub for small-sized turbos both in terms of manufacturing as well as design.” As for Bosch, India will be the sourcing hub for CRDi components, sources said.
The turbo-charged CRDi diesel engine on the Rs 1-lakh car would mean that it won’t be an unsophisticated ‘naturally aspirated’ engine like earlier cheaper diesels in India. In technology and sophistication terms, it will be no less than the Swift or Getz diesel or even the Fiesta, Fusion, Verna, Logan and other new generation diesel models currently available. Though popular earlier, naturally aspirated diesels are now virtually extinct in India. Because they are not Euro 4 compatible, which will be the mandated emission norm by 2010, companies have been replacing them with turbo-charged CRDi diesel engines
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| 520-item list to get shield from India-EU trade pact in works INDUSTRIAL GOODS TO CORNER MORE SPACE |
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| THE commerce department is on a drive to identify 520 items that would be shielded from tariff cuts planned through the proposed India-EU bilateral trade and investment agreement. Tariffs on all other items will have to be reduced to zero in 10 years from the date of implementation of the agreement.
Speaking to ET, sources said as per the mandate of the agreement, India can protect just 520 lines from tariff cuts out of more than 5,000 product lines covered under the agreement. The import value of the protected products cannot be more than $2.6 billion. “Whatever protection is extended to our industry and agriculture has to fall within this range,” an official said.
Unlike India’s sensitive list with the Asean countries (of about 490 items), which includes as many farm products as industrial products, the sensitive list with the EU is likely to have lesser number of agricultural goods. Since EU is not perceived as a threat for many of India’s sensitive agro products like rubber, there would be more scope to protect a larger number of industrial products.
Officials said since the number of items which could be included in the protected goods list is limited, one has to exercise discretion. Although agriculture is a sensitive area, there are a large number of commodities which are not produced in the EU and, therefore, doesn’t pose a threat. “While rubber is a sensitive item and has to be protected against competition from Asean countries, there is no apparent threat from the EU countries. It might not affect the industry if it is excluded from the sensitive list. We, therefore, want the industry to work closely with the government to help identify the potential threats and opportunities,” the official said.
According to Ficci senior director Manab Majumdar, who has conducted workshops in some parts of the country to get inputs from various sectors, industries like automobiles, both completely-built units (CBU) and components, plastic items and equipment & machinery were most concerned about tariff cuts. “We have suggested that the sectors should be included in the sensitive list,” he said.
Unctad is the nodal agency helping the commerce department in finalising the list of sensitive items by holding consultations with stakeholders.
Officials from the EU and India are engaged in a meeting to take ahead the bilateral trade and investment agreement. Negotiations on the agreement envisaging liberalisation of trade in goods, investment and services, began in June this year. The two sides are hopeful of concluding talks by 2008 end following which implementation of the agreement would begin.
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| National WiMax group soon for global reach |
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| THE government is planning to set up a national working group on WiMax consisting of all stakeholders — government, service providers, equipment manufacturers and test equipment suppliers. The group will formulate strategy for active participation in the global WiMax forum proceedings.
“It would be set up on the lines of existing nine international representative groups on WiMax. It would enable the Indian WiMax industry to position itself in the global arena,” a senior official in the department of telecommunication (DoT) said.
The move is aimed towards getting greater mileage from India’s participation in the forum. WiMax is expected to help India in achieving its ambitious target of 20 million broadband connections by 2010, the official said.
India is clamouring for the inclusion of 700 megahertz (mhz) spectrum in the WiMax profiles and had made a presentation in this case at the WiMax conference held in Madrid recently. The proposed study group would take the case further, he said adding that the 700 mhz band has a reach of 30 km and it makes an ideal candidate for rural broadband access.
DoT had also pressed upon the need for having a certification and proof of concept application lab for WiMax equipment and is in talks with a couple of member companies for the lab including AT 4 of Spain.
WiMax is expected to play a key role in boosting broadband penetration and providing services such as e-governance, ehealth and e-education in India. The technology would also help mobile voice and video services increase their penetration as these services are mostly dependent on broadband wireless technologies such as WiMax.
India had announced its broadband policy in 2004 under which data connection with minimum download speed of up to 2 mega bytes per second has been defined as broadband.
The government had set a target of nine million broadband connection by the end of 2007 and 20 million by the end of 2010. But the country seems to miss the targets by big margins mainly due to shortfall in new additions in the rural areas wherein it had put a target of broadband coverage for all the secondary and higher secondary schools and also for all the public health care centres by the end of the year. Technologies like WiMax could come in handy for the achievement of the set targets, the official added.
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| All that glitter is tech Use of Technology In Jewellery Design Has Opened Up The World To Indian Man |
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| MEHUL Choksi, chairman of the Mumbai-based Gitanjali group, recently procured a new machine ,which has changed the way gold jewellery is retailed. “It uses a computer programme, which assists our customers to design jewellery for themselves or make changes in the existing designs that can be replicated by us,” Choksi says. As India’s top jeweller, he can’t take a chance. The demand for gems and jewellery is growing at a fast pace and anyone who is technologically-challenged is likely to lose out.
With the increase in demand for designed jewellery abroad, Indian jewellers have seen a huge image makeover — from an old shop owner in Zaveri Bazaar in Mumbai to an industrialist in the SEEPZ industrial area of the city, most cater not only to the domestic market, but also export to several countries.
The Rs 3,500-crore Gitanjali group, which owns several leading jewellery brands like D’damas, Nakshatra and Asmi and is one of the biggest groups in the organised gems and jewellery industry in the country, has already reaped the benefits of usage of technology in the jewellery industry. “We have been using all the technologies in the jewellery industry, which are on par with international standards,” says Choksi.
These changes can be traced back when CADCAM machines entered Indian markets about a decade ago, say exporters. “With the help of a CADCAM software, one can design the jewellery with geometrical perfection. And once the design is finished the exact cost of the jewellery and the weight of the jewellery can also be determined through the software,” explains KD Desai, director of technical services at the Livingstone group. The firm provides consultancy services to local jewellery manufacturers and is also into manufacturing of jewellery.
The gems and jewellery industry has come a long way from the time it forayed into the world market in the 1980s. Now more businessmen are trooping in with innovation in existing technology, with an aim to improve quality and reduce cost of production. According to industrial experts, a 3 kg batch (which can generate around 350 pieces of a jewellery item like a gold ring or a gold pendent of approximately 5 to 10 gm each) of gold jewellery can be produced using mass production methods at one go. Says Uday Nanavati, director, Ace Jewels, “At Ace Jewels, we have a two-pronged strategy; using the same technology for new applications and improving the existing technology.” Ace Jewels produces a range of high-end diamond studded gold jewellery with titanium as an additional alloy. “We use titanium in our jewellery as it is better than using silver or steel. Though platinum can be used, it would be very expensive,” adds Nanavati.
Laser machines, which are now used at every gems and jewellery factory, have been put to an “innovative” use at Ace Jewels. Says Nanavati, “Normally there is one laser machine or laser head and one workstation. But with the help of the machine manufacturer we have worked out a system where there is one laser head but three work stations at Ace Jewels, resulting in the increased capacity at marginally higher cost.” This arrangement also helps save electricity. Manufacturers have also started using lost wax investment casting, which allows them to make designs of jewellery with more details but is cheaper as it is lighter (hollow jewellery).
There are around 400 factories in Mumbai alone (most of them in SEEPZ) which manufacture gems and jewellery. According to manufacturers about 90% of the total production is exported. “The growth rate in the gems and jewellery segment has been 15% for the past couple of years, though this year it was around 3%. The Indian gems and jewellery has a 10% marketshare in the total international gems and jewellery market, and we are working towards increasing it,” says Sanjay Kothari of the Gems and Jewellery Export Promotion Council (GJEPC). Currently, the US, Hong Kong and UAE are the top export markets, apart from the UK, Switzerland and Australia. And technology is said to be a key reason for the success of Indian manufacturers globally: “We were the first to purchase assaying machine, which checks the purity of jewellery. There are certain purity standards that are required if one intends to export gold jewellery,” adds Desai.
But not all small manufacturers are eyeing foreign markets. Says Anand Shah of Ansaa Jewellers, “We have been using local machines and are targeting local customers at Zaveri Bazaar. We manufacture standardised screws and clips used in jewellery.”
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| Vertex eyeing India buys to push growth |
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| UK-HEADQUARTERED business process outsourcing (BPO) firm Vertex is looking at acquisitions in India. The company, which got acquired by a consortium led by private equity player Oak Hill Capital earlier this year, is looking at rapid organic growth.
“With private equity as an owner, there is always a need to grow rapidly. We are looking at doubling our business in the next five years and also at acquisition opportunities in India,” Vertex CEO Richard Graham told ET. Mr Graham added that Vertex will look at small- and medium-sized companies as acquisition targets.
Oak Hill Capital Partners, GenNx360 Capital Partners and Knox Lawrence International acquired Vertex for £217.5 million comprising cash, the repayment of intra-group debt and the retention by the purchaser of certain liabilities of Vertex from UK-based United Utilities.
US-based Oak Hill Capital Partners, which currently has $4.6 billion as assets under management, also has significant business interests in Indian BPO majors Genpact and EXL Services.
With both Genpact and EXL Services listing on the US bourses, Vertex may also look at a public floatation at a later stage. “If you are owned by a private equity player, then you know one day you will get sold. It is yet to be decided by when will that happen,” added Mr Graham.
Vertex is also looking to move finance and accounting (F&A) and HR functions to its India back-office in Gurgaon. The company is exploring segments high-end work like engineering support services and IT infrastructure management. New capabilities like security services, data centre management, service desk provision and application maintenance are expected to contribute about 30% of its revenues in the next 12 months. Recently, it transferred the work it was doing for British telecom major Orange to ExlService.
“We don’t want to do plain voicebased, low-end BPO work. We want to do transformational kind of work. The Orange business was voice-based work and we arrived at an agreement with EXL and Orange to transfer that work to EXL. I don’t think we have more of such low-end work on our hands now,” said Mr Graham.
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| Chandigarh in top 10 outsourcing destinations for global companies |
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| Chandigarh is one of 15 emerging outsourcing destinations for global companies, according to a new industry report.
A study by industry publication Global Services and investment advisory firm Tholons put Chandigarh at number nine, apart from putting Chennai, Hyderabad ,Kolkata and Pune at the top of a list of 15 emerging outsourcing destinations for global companies.
The list is based on criteria such as scale and quality of workforce, financial infrastructure, risk environment and quality of life. But it does not include established outsourcing locations such as Bangalore, the New Delhi capital region, Manila, Mumbai and Dublin that have had a decade’s headstart.
The Rajiv Gandhi Chandigarh Technology Park (RGCTP) is the first IT sector special economic zone (SEZ) in the country. It is projected that within the next three years, approximately $500 million revenue would be generated from the companies working at RGCTP. In addition, 25,000 jobs for youths would be available during the same period.
The Chandigarh Administration has been working in the development of human resources and has set up bodies like the Chandigarh Training On Soft Skills (CTOSS) Programme and Society for promotion of IT in Chandigarh (SPIC).
Already a home to a number of IT and BPO companies like Tech Mahindra, Infosys (India’s second largest software company and was among the first firms to step into the city and start its operations from a complex spread over 30 acres in the RGCTP), Chandigarh is being seen as potential place to treat a broader spectrum of corporate clients than Delhi, Bangalore, Hyderabad, according to industry analyst.
“With the demand-supply gap widening, newer tier II cities will play a critical role in re-engineered globalisation models,” said Tholons chairman Avinash Vashistha.
“Destinations will need to provide greater level of cost effectiveness and operational efficiency. India’s outsourcing companies have thrived by winning work from companies in the US and Europe that sought to tap the country’s low costs and large employee pool by handing over jobs ranging from answering customers’ calls to risk management and financial analysis,” he added.
Pure-play outsourcing firms account for about 10% of the $50 billion in revenue logged in the year ended March by the entire information technology industry, which also includes software giants such as Tata Consultancy and Infosys.
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| Auto cos offer discounts to push sales during festivals |
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| CAR makers are offering huge discounts and incentives while banks are offering lower interest rate packages to lure customers back to the showrooms for the next two months, the peak of the festive season.
Leading the pack is market leader Maruti-Suzuki which plans to offer a discount of as much as 12% on its prices. Maruti-Suzuki’s Chief General Manager (marketing) Mayank Parekh told ET, “Specific models like Zen Estilo and WagonR will carry high rebate offers, while our best selling model Alto will also have attractive price discounting schemes. We are also working with our banks and dealers to offer single digit interest rates during the Diwali season.”
Led by several marketing schemes like Wheels of India for state government employees, First Class Offer for railway employees, Power Deal for NTPC staff, Steel Wheel for SAIL, Hum Sath-Sath Hai for panchayats and rural consumers and Talker - an employee referral scheme, Maruti sales increased by 19% to 2,73,672 units till August this year. Many of these schemes will continue though the festive period. Korean car major, Hyundai Motor India has lauched its diesel car, Getz Prime while Ford India had launched a limited edition of its flagship Fiesta sedan for the festive season. “We have already sold over 55,000 Fiestas in India. The limited edition Fiesta 1.6L Fida comes at a value bargain for the customers during this Diwali. While other models - Fusion, Endeavour and Ikon - which have been recently relaunched will have price discounts and free accessories offers from next month,” said Scott McCormack, Vice-president (marketing & sales) Ford India.
Tata Motors, India’s largest automobile company plans to offer more cash discounts to counter a four-month sales slump. “We would like to see sales improve, but that would depend a lot on external factors and are looking at providing more incentives to get customers.” Ravi Kant Managing Director Tata Motor said.
With interest rates in India at a five-year high, banks will be rolling out lower rate packages and floating rates on automobile deals. The largest public sector bank, State Bank of India will reduce interest rates across the board by 50 basis percentage points (BPP) for the two months festive period. SBI Chief General Manager Sangeet Shukla told ET, “We are giving this discount till November 29. As higher auto loan rates have hit sales a 50 BPP cut will allow us to offer finance packages at a highly competitive rate of 12% and help the industry to bounce back.”
While ICICI Bank has started ‘floating interest rate’ options for cars and commercial vehicles. ICICI Bank’s auto loans head N R Narayanan said, “The floating interest rates are targeted at the festive season. As the interest rates are expected to head southwards, customers will benefit with changes in the fiscal policy and opt for fresh purchases. For the two-wheeler market where the interest rate burden is around 20-22% we are negotiating with the manufacturers to roll out special schemes for the Diwali season.” HDFC Bank is also contemplating interest rate discounting for the festive seasons. The customers are expected to benefit from super saver offers like a Rs 45,000 discount on Zen Estilo and WagonR models and Rs 61,000 savings on the Indigo Marina sedan for the next two months.
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| Metal, power cos may lose coal mine allotment |
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| METAL and power companies including Hindalco, Nalco, Jindal Steel & Power (JSPL), JSW Stainless and Hindustan Zinc face the prospect of losing their allotment of captive coal mines. Ministry of coal is planning to issue showcause notices to all companies that have failed to meet the milestones finalised for the development of captive coal mines. The move is aimed ensuring timely production from captive mines that is expected to generate over 20% of total produced in the country by 2011-12.
“It has been observed that companies take coal blocks and sit on it for months before staring work on it. This would not be tolerable. If milestones are not met, we may go ahead and even cancel their allocation,” a senior official in the coal ministry said.
Already a meeting has been organised between coal allocatee companies and senior officials of the coal ministry to assess the situation. The ministry, however, is also considering to issue show cause notices to companies that have consistently failed to meet the milestones.
The coal ministry is expecting production from captive coal blocks to go up from present 25 million tonne (mt) to over 100 mt by 2011-12. This would require that all of the 165 captive coal blocks allocated so far are brought under production. So far only about 20 of these blocks are under production. The prime minister’s office (PMO) has also asked the ministry to take strict action against delays.
“Companies give us excuse that sluggish progress on captive mines is due to delays in getting clearances from the state government. This is not acceptable and the allocatee’s should take the responsibility of bringing the blocks under production on time,” said the official.
As per rules for captive mining, an opencast mine and underground mine has to be brought under production within 36 to 54 months. Different milestone has also been set for getting geological report (GR) and forest clearance (FC).
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| Global Indians are returning home |
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| GLOBAL Indians are wooing and are being wooed by top Indian corporates to return home to India. It is not just techies but Indians working in different sectors of industry are homeward bound to be part of a booming Indian economy. The number of returning non-resident Indians (NRIs) has swelled in the past one year as expatriates find better job offers in India.
‘Moving back’ has always been a muchdebated topic of conversation at NRI gatherings, but it has now taken on an added piquancy with the buzz about the kind of jobs and opportunities being offered in India. Indian expatriates are in demand because of the huge growth in some sectors that has led to a shortage of skilled and trained professionals. The demand extends to entry-level jobs as well. A few about-to-graduate youngsters travelling to India to visit their families this summer were surprised at the ease with which they could line up job interviews at a couple of leading newspapers, market research agencies and NGOs.
Placement agencies and Web sites that specialise in finding jobs for NRIs have sprung up in recent months. One such site proudly claims to have located about 200 senior and top management jobs for NRIs. Job fairs in American towns for jobs in India have proved highly successful and evoked great interest in the NRI community. Prime salaries, company accommodation, comfortable lifestyle in familiar surroundings and an all expenses paid relocation for the family are some of the attractions bringing home the expatriate Indians.
New sectors or those that have opened up in recent times such as retail and realty have been looking at the global Indian community for recruiting experienced professionals. If it was IT professionals who were returning to India to work or set up on their own earlier, it is now managerial and white collar jobs that are on offer in India.
Indian expatriates as well as people of Indian origin have found or been headhunted for jobs in the middle and senior echelons of a wide variety of companies in India in sectors as varying as construction, shipping and the newspaper industry. In healthcare, specialised marketing, biotechnology, aerospace and defence-related areas, companies are looking for people with experience in specific fields of operation.
The expatriates are valued for their international exposure and knowledge of work practices abroad by companies competing in the world market. Business enterprises looking to set up shop in India have also turned to the global Indian community as a rich source of professionals familiar with the conditions in India. Multinational companies such as Motorola, which have development centres in cities around the world including India and China, have set up ‘Return to India’ programmes for their development centres. Indians who have lived abroad for several years have for some time been returning home. Delays in obtaining a work visa or green card have also contributed to this process. According to an estimate by the Returned Non-Residents Association, over 30,000 IT professionals returned to Bangalore in 2005
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| A new definition of marketing replaces brevity with verbosity |
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| THE Chartered Institute of Marketing’s new definition of marketing swaps brevity for verbosity; not everyone is convinced. What is marketing? Not what it used to be, according to the CIM, which has unveiled a new definition of the business function to replace one that has served for more than 30 years.
Marketing, it seems, needs a little more explaining than in the past. The CIM wants to replace the current definition, created in 1976, with the lengthier version it unveiled last week. The current CIM definition of marketing is: ‘The management process responsible for identifying, anticipating and satisfying customer requirements profitably.’
The new one is: ‘The strategic business function that creates value by stimulating, facilitating and fulfilling customer demand. It does this by building brands, nurturing innovation, developing relationships, creating good customer service and communicating benefits. By operating customer-centrically, marketing brings positive return on investment, satisfies shareholders and stake-holders from business and the community, and contributes to positive behavioural change and a sustainable business future.’
The proposed fresh wording was put together by the CIM’s research and information team with contributions from marketing luminaries. ‘We want the definition to reflect the reality of
marketing today,’ says David Thorp, the body’s director of research and information.
In support of the change, the CIM has put together ‘Tomorrow’s Word: Re-evaluating the Role of Marketing’, a 3000-word treatise outlining the problems of the current definition and solutions. The study involves some serious soul-searching; not only are the definitions examined, but the aim of the paper is to encourage debate into what the role of marketing should be and how it can move forward as a profession. It certainly pulls no punches; on the first page it claims that although marketing has become more sophisticated, ‘its status with the customer and the rest of the business has never been lower’.
The paper acknowledges that the world has changed significantly since the drafting of that single sentence back in the 70s. In the pre-internet, pre—globalisation age, marketing was much easier as there were fewer channels to market and less of a focus on relationships or service marketing.
There were also fewer professionals who saw themselves as marketers. According to the CIM, over the past 10 years, the marketing profession has grown by about 80% and there are now more than half a million Britons working within the broad function.
Disaffection with rampant commercialisation and capitalism is highlighted as a challenge, as consumers increasingly consider marketing as a pejorative term associated with the process of making people buy things that they neither need nor want. The present definition, with its mention of the word ‘profitably’, feeds into this belief, as does ‘management’, which alludes to a one-way process whereby a passive malleable consumer is manipulated by marketing e x e c u -
tives.
These aspects also sit uncomfortably with the growing band of so-called ‘social marketers’. A CIM survey of marketing practitioners revealed that while the majority of those polled felt the existing definition still covers the complexity of modern marketing, 37% felt it was insufficient when it came to the activities of the public sector and not-for-profit organisations. The new nod to sustainability confirms that being touchy-feely is the order of the day.
All these factors, argues the CIM, mean the current definition is an anachronism no longer ‘fit for purpose’. But the new wording has received a lukewarm response from marketing gurus. Its length has come in for particular criticism. Hugh Burkitt, chief executive of The Marketing Society, says: ‘The new definition is absurdly long and has clearly been written by a committee. A definition that long is unworkable.’
Although Mark Ritson, associate professor at Melbourne Business School, says the proposed wording is superior to the current version, he also wonders why the CIM did not err on the side of brevity. ‘In the age of clutter and demising attention spans it is questionable whether progress is really made by going from 12 words to 60
words,’ he says.
Commentators also question how the wording deals with marketing as both a function and a process. While Burkitt favours the current wording as he argues that it refers to the whole process, Emeritus professor of management and marketing Patrick Barwise criticises both versions for failing to make the distinction between marketing as a function and its role as the voice of the customer through the organisation. ‘I think they are about as good as each other,’ is his downbeat conclusion.
Burkett offers the Marketing Society’s definition, ‘The creation of customer demand, which is the only sustainable form of growth in business’, as an alternative, while Ritson calls for the CIM to draw inspiration from the US, reasoning that whether the British like it or not, the Americans invented marketing.
The definition from the American Marketing Association (AMA), the US equivalent to the CIM, reads: ‘Marketing is an organisational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organisation and its stakeholders.’ ‘The idea that the CIM can do a better job at defining the field of marketing is laughable,’ says Ritson.
The CIM now plans to tour the UK to canvass opinion on the proposed change among its membership before unveiling the final definition in a year’s time. If the initial reactions are anything to go by, the Institute will need to use all its marketing skills to win over its members.
Marketing(C)Brandrepublic
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| Punjab seeks pvt partnerships for ethanol plant |
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| TO BOOST maize cultivation in the state, Punjab State Farmer’s Commission, an advisory body on agricultural issues, is in talks with private players to set up an integrated ethanol plant based on maize crop in Punjab.
“We are holding talks with 2-3 private companies for setting up a plant for producing ethanol out of maize with an intention of giving an impetus to the cultivation of this crop in the state,” Punjab State Farmer’s Commission marketing economist P S Rangi said.
Based on the feasibility study conducted on the issue of diversification from rice to maize for producing ethanol by Delhi-based Techno Economic Research Institute, the commission has proposed for establishing ethanol plant with an annual capacity of 30 million liters involving an investment of Rs 80 crore.
The commission has also made it clear that if the talks between companies and commission remained inconclusive, then it would advise the state government to involve Markfed for setting up the unit.
As per the study conduced by TERI, the state is required to reduce area under rice cultivation from 2.6 million hectares to 1.8 million hectares to conserve its underground water resources. The study has emphasised on replacing rice with maize which would result in saving of 200 cm of water per hectare and Rs 6,000 per hectare as government subsidies.
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| Unido plans to make training pack for autoparts SMEs |
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| THE United Nations Industrial Development Organisation (Unido) plans to develop a new training package for the auto component manufacturers mainly among the small and medium enterprises (SMEs). Under the new programme of co-operation, to be implemented in partnership with the Automotive Component Manufacturers Association of India (ACMA), the UN body would develop a programme cleaner and energy efficient production of the components. The programme of co-operation would be spread across a period of five years from 2007 to 2012 and is currently under review by the government of India.
The turnkey training packages for manufacturing enterprises would be built on the core expertise in quality and productivity management,
according to an statement.
The Unido partnership programme would provide firms with inputs specific to enable them to further enhance performance to hasten their inclusion in the global supply chain. The moves could include supporting firms to achieve the ISO/TS 16949 standard since it is essential to securing global automotive business.
The programme could also work towards sensitising manufacturers to disciplines relevant to international business activities such as the impact on industry of the WTO, international trade operations, export documentation, financial risk management etc. The UN body is planning to take the initiative after seeing the enhanced production and quality standards of the Indian auto component industry mainly in the SME sector.
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| Help’s on way: Oil PSUs set to get Rs 12k cr bonds in Oct |
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| THE government may issue oil bonds worth Rs 12,000 crore to public sector oil marketing companies (OMCs) by mid-October to set off part of the losses incurred on the sale of retail fuel.
Oilcos such as IOC, BPCL and HPCL have been incurring huge losses on the sale of fuel as retail prices have remained unchanged even though global crude prices have breached the $80-a-barrel mark.
Speaking on the sidelines of a seminar, petroleum secretary MS Srinivasan said the government is assessing under-recovery of OMCs and would issue oil bonds by October 15. “We are expecting Rs 24,000 crore worth of oil bonds this fiscal. In the first tranche, we are expecting Rs 12,000 crore of oil bonds,” he said.
Even as the prices of petrol, diesel, kerosene and domestic LPG skyrocketed, public sector OMCs were prevented from raising fuel prices with the assurance that they would be compensated partially through oil bonds. Mr Srinivasan expressed concern over rising global crude prices, which are hovering at around $84 per barrel. “We are keeping a close watch and constantly monitoring the situation,” he said. India is dependent on imported crude, which meets 70% of the country’s total requirement. The government, however, ruled out any immediate price hike. OMCs are currently losing Rs 3.35 per litre on petrol, Rs 5.75 per litre on petrol, Rs 14.19 per litre on kerosene and Rs 185 per cylinder on domestic LPG. The country’s largest retailer IndianOil is losing about Rs 81 crore a day from selling fuels below cost. Petrol in Delhi is currently priced at Rs 43.52 per litre, diesel at Rs 30.48 per litre, kerosene at Rs 9.09 per litre and LPG at Rs 294.75 a cylinder.
RECOVERY TIME
Companies like IOC, BPCL & HPCL have been incurring huge losses on sale of fuel as retail prices have remained unchanged
Petroleum secretary said govt is assessing under-recovery of OMCs
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| Tata group looking for iron ore assets abroad |
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| THE Tata group would be looking at acquiring iron ore asset overseas. According to group chairman Ratan Tata, ore acquisitions are part of a larger strategy to make both Corus and Tata Steel sustainable in terms of raw materials.
“Having security of raw materials and supply is an essential part of the well-being of this enterprise (Tata Corus),” Mr Tata said. “There are very large consuming countries such as China because of which there’s a raw materials scarcity which has to be met for companies to be sustainable. So, yes, we are looking at that.”
Mr Tata was in IJmuiden (Netherlands) to open a new technology centre for Corus. The Anglo-Dutch company which the Tata group bought earlier this year derives 16% of its businesses from the automotive sector.
But its expertise may not be used in the Tata Motors Rs 1 lakh car project. Asked if the Tata group would use Corus auto expertise for the Rs 1 lakh car, Mr Tata said: “One should separate the Rs 1 lakh car out...we are looking at sophistication of steel which for lower end products may not be a given.”
When asked about the Jaguar-Land Rover deal, Mr Tata refused to comment. “The process that is underway is now reasonably private,” he said. It’s often believed that England has no auto industry left. But that is not true. The UK has tremendous automotive technology and we are building a technology centre for the auto industry in the Coventry area. We want a greater automotive presence in the UK.”
The Tata group will use the Coventry centre as a pan group technology centre, Mr Tata added. This will be apart from it’s current automotive centre which is in partnership with Warwick University and is a Corus-specific centre.
Speaking about his group’s acquisition appetite, he said: “Because of the size and scale of the Corus deal, we seem to be cast as a group on an acquisition spree, which is not the case. We would be interested in an acquisition only if there is a product gap that it can fill, there is a strategic fit, or a particular geographical presence that it offers.”
When compared with LN Mittal, Mr Tata said he had tremendous respect for Mr Mittal, but “I don’t think scale or size is what we are aspiring for. We would just like to be a respectable-size player in the global market.”
He said in India, Tata Steel was looking more at organic rather than acquisition-led growth. “We have been looking at three greenfield sites in India and these are the same states that Laxmi Mittal and Posco are also interested in because they are rich in iron ore,”Mr Tata said. For Corus, he said: “In an integrated sense, this organic growth would mean access to iron ore and hopefully lower cost intermediates.” As for the Corus deal, Mr Tata said, his view had not changed. “In the last few days we were bidding up against a competitor though we had our own internal limits which we did not cross. I believe we can generate synergies—these can be putting practices together, could be access to lower cost raw materials and intermediates, could be access to markets and a broader product mix.” The deal, he said, helped make Tata Steel a global player from being just a 5 million-tonne company limited to India.
As for the current credit concerns, they will not affect financing the deal. “There are some issues because of the interest rates being what they are but we are well on our way to financing the deal,” Tata Steel MD B Muthuraman said.
The Corus acquisition, he said, will generate $400 million in synergy savings in three years. “We have identified particular items and onethird of them will be on stream every year so that at the end of three years we will have $400 million,” he said
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| Doing Business: India climbs 12 steps on index |
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| INDIA has become a better place to do business with easier crossborder trade and greater credit access. The country has moved up 12 notches to 120 in the index of 178 nations listed in World Bank’s 2008 edition of Doing Business.
Singapore, for the second year running, tops the aggregate rankings on the ease of doing business. China has moved up 9 places to the 83rd rank.
The survey notes that India provides better access to credit by expanding credit bureau coverage to individuals as well as businesses. It also introduced an electronic registry for security rights granted by companies. The country has adopted better cargo management, it has been acknowledged.
Traders can now submit customs declarations and pay customs fees online before the cargo arrives at the port. This reduces time lag by 7 days. It takes 18 days to meet all administrative requirements to export, down from 27.
Overall, south Asia picked up the pace of regulatory reform over the past year to become the second-fastest reforming region in the world, on par with the speed of reform in the countries of the OECD. The report is the fifth in an annual report series issued by the World Bank and IFC.
The rankings are based on 10 indicators of business regulation that track the time and cost to meet government requirements in business start-up, operation, trade, taxation, and closure. The rankings do not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates.
Emerging markets across the board have registered an absolute increase in ranking because of fast track reforms. These countries have made reform of business regulation a policy objective, giving an impetus for new business start-ups.
“The report finds that equity returns are highest in countries that are reforming the most,” IFC vice-president (financial & private sector development) Michael Klein said. “Investors are looking for upside potential, and they find it in economies that are reforming — regardless of their starting point,” he added.
To close a business in the country is woefully slow, taking 6-10 years against the OECD average of less than 2 years. On taxation, the country slipped 7 places. On an average, there are 60 tax-related payments a business has to undertake per year here against OECD’s average of 15.
While India’s position on labour reforms are understandably low at 86th, its worst performance comes in the wake of enforcing contracts where it is ranked 177th. What this means that it takes four years for a district court to intervene in a dispute between two commercial establishments.
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| Panchkula to be next IT hub in North • IT Park To Employ 40,000 People; EoIs Invited |
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| HARYANA has taken a major stride towards revolutionising the IT industry in the state with the opening of the Panchkula Technology Park. The park is expected to provide employment to 40,000 persons. Haryana chief minister Bhupinder Singh Hooda, while inaugurating the Park on Wednesday, in fact projected Panchkula as the next hot spot for IT in North India.
According to the latest e-readiness assessment report released by the Centre recently, Haryana has jumped from 15th rank to 9th in the last two years in the field of information technology. The state has also recorded total software exports worth Rs 14,000 crore this year.
For the development of the Panchkula Technology Park, situated between the hills adjoining Gurudwara Nada Sahib along NH 73 and Ghaggar river, the Haryana Urban Development Authority (HUDA) had allotted 97 acres land. After demarcation of outer boundary of the area, possession of 74.62 acres of land was taken over by HSIIDC from HUDA, after excluding the area of Ghaggar river near the bridge.
Talking to ET, sources in the IT department said many companies had shown interest in investing in the region and HSIIDC has invited expression of interests for the same. “The state has exported software worth more than Rs 14,000 this time. Most of the companies are from Gurgaon and Faridabad. After these two places, our main focus will be on Panchkula. We have already been allotted a 70 acre plot for this and we have invited companies to come here. Some of the big companies have already evinced interest. We have invited EoIs for the IT park which will be closed on November 31,” an official said.
Recently, the state government had formulated its e-governance roadmap and capacity building roadmap. According to the latest report, Haryana comes under the category of level one states in the country in implementation of the core infrastructure project of state wide area network (SWAN).
The state will also be spending Rs 102.62 crore, to make all the offices of the state up to block level to be connected with SWAN by October 31, 2007. The government had also formulated the IT policy for promoting the IT and business process outsourcing industries in the state. The official said that various facilities like preferential allotment of land for IT industries, priority in time bound loans, relaxation in pollution control, rebate in stamp duty, exemption from electricity duty for five year to new IT units were being provided to the entrepreneurs.
ON IT EXPRESSWAY
The park is projected as the next major IT hub in North after Gurgaon and Faridabad
Last date for submitting EoIs is November 31
Haryana has jumped from 15th rank to 9th in the last two years in IT sector, according to a latest report
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| Rising Re adds to woes of Coimbatore exporters |
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| THE Coimbatore region, known for its entrepreneurial spirit and which proved its mettle on the global front by exporting quality goods, has come to grief thanks to the continuously appreciating rupee against the US dollar.
As the rupee edges closer to a fresh nine-year high vis-a-vis the dollar, exporters in the region are keeping their fingers crossed over the fallout.
Known for its business vibrancy and billed as the Manchester of South India, Coimbatore is involved in producing and exporting wide range of produce, such as textiles, engineering goods (mainly pumps and motors), tea and jewellery. The combined value of exports is pegged at more than Rs 20,000 crore (including Rs 11,000-crore knitwear exports from Tirupur).
But this year, the rising rupee is likely to take a toll on exports from the region. Textiles, being the prime activity in the area, seem to head for a recession this year owing to higher rupee appreciation and sluggish orders.
Exports slumped by 17% (in value terms) during the first three months of 2007-08 compared to the same period last year. Exports were 36% lower than the expected $7.5 billion target during the same period. The textile ministry is seriously considering revising its export targets.
In Tirupur, the knitwear hub of India, export enquiries have almost come to a standstill. Exporters are struggling to meet the existing orders and are hesitant to place new orders, which, in turn, have the production.
A spokesperson of Tirupur Exporters’ Association said the units here are posting around Rs 2-crore loss per day due to the strengthening of rupee. “The present rupee rate has adversely affected Tirupur exporters. We apprehend the importers will move to China for low prices soon,” sources told ET.
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| Merits of adopting global accounting system in core sector Cos, Retail & Institutional Investors, Fi |
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| EARLIER, in most countries, while public sector operators were responsible for construction, operation and maintenance of infrastructure, including toll highways, toll bridges, power plants, water supply plants, airports, sea ports, etc, such infrastructure was financed through public budget appropriation. Of late, in today’s expanding global economy, governments of several countries use a build-operate-transfer (BOT) model for the purpose. The BOT model allows private, foreign and national investors to finance, design, construct, upgrade and operate large-scale infrastructure and development projects. In return, the operator (a private sector company) is granted the right to generate revenues from the infrastructure facilities for a specified term or concession period. These revenues enable the company to recover its invested capital and also earn a fair return on investment during the concession period, which may range typically from 10 years to 40 years. At the end of this period, assets of the BOT project are transferred, in good condition, to the government or to the local authority which granted the concession (i.e., grantor). This arrangement is articulated in a contract which delineates performance standards, mechanisms for adjusting prices and provisions for arbitrating disputes.
In India, successful public-private participation arrangements are emerging and it is estimated that to sustain economic growth, investments of $350-500 billion would be required in the next five years. While these service arrangements may assume any variety of forms, participation by both the grantor and operator, accompanied by an initial large investment, raises questions over the assets and liabilities to be recognised by the operator. To facilitate this scenario, a reasonable framework of concessionaire agreements and specialised considerations for accounting and preparation of financial statements of these private sector entities should be prescribed.
Currently, from an Indian perspective, BOT assets are recognised as fixed assets and depreciated over the course of the BOT contract. This treatment does not fully exhibit the risks and rewards associated with the arrangement and also does not reflect the substance of the underlying arrangement rather than in form. For example, the operator neither holds a leasehold right to nor owns the asset; he constructs the asset in accordance to the grantor’s specifications and he also complies with the grantor’s operation and maintenance requirements for the asset. In addition, he should also comply with the terms for transfer of the assets at the end of the concessionaire period as specified by the grantor. In such a situation, how would the operator be justified in recognising these assets as his own?
Further, in most of the cases, the initial development takes place over a time frame of 3-7 years. At this stage, the operator continues to provide services by building the infrastructure; therefore what is the justification for not recognising the revenues during this period? One can observe that there are more risks and efforts involved during the development phase rather than the operations phase. But the present Indian Accounting Standards permit revenue recognition only during the operation phase, but not during the development phase.
Infrastructure, within this context, is not recognised as property, plant and equipment of the operator because the contractual service arrangement does not convey the right to control the use of the public service infrastructure to the operator. The operator has the right to operate the infrastructure to provide service to the public, on behalf of the grantor, in accordance with the terms specified in the contract.
Internationally, the context for accounting for BOT projects has changed to one where the asset is recognised as a financial or intangible asset.
On November 30, 2006, the International Financial Reporting Interpretations Committee (IFRIC) issued IFRIC Interpretation 12-Service Concession Arrangements. This Interpretation provides guidance on accounting by private sector operators involved in the provision of public sector infrastructure assets and services. With effect from January 1, 2008, the standard is to internationally recognise the BOT asset as a financial asset or an intangible asset.
Various factors, including globalisation, encourage the migration of accounting to a more singular and common platform in terms of rules and standards. In this context, it would be prudent for infrastructure companies based in India to recognise BOT assets as intangibles, on par with their international peers.
To do this, Indian companies need to be educated about the benefits of recognising the service concession as a financial or intangible asset, which include greater synthesis and congruence with international standards. A more accurate and insightful view into how the BOT asset is recognised on the books.
Accounting for service concession arrangements commences from the time of bidding for a service concession. Research indicates that accounting issues are present across each stage of the value chain; these issues include, and are not limited to
• Prior costs — bid costs, security deposits, consultant fees, etc.
• Construction and procurement of assets — recognition of intangible assets, recognition of financial assets, borrowing costs, special purpose entities, etc.
• Operations and maintenance — revenue recognition, exchange fluctuations, taxation, current and deferred income taxes, impact on credit rating by bank creditors, etc.
It is not only Indian companies who will have to be educated on the benefits of recognising service concessions as financial or intangible assets. Retail and institutional investors, financial services providers and the market as a whole must become aware of this new practice. Accounting firms will need t |
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| Punjab govt earmarks Rs 100 cr for horticulture |
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| PUNJAB’S agricultural growth rate will be increased from two per cent to four per cent and the state government has allocated Rs 100 crore for development of horticulture. This was announced here on Tuesday by the state finance minister S Manpreet Singh Badal. He was inaugurating a one-day Kisan Mela organised by Punjab Agricultural University (PAU). He cautioned the farmers against the use of agricultural loans for unproductive purposes.
Thousands of farmers from Punjab, Haryana and Rajasthan thronged the mela at Bathinda. The theme of the Kisan Mela was “Save Environment – Save Punjab”.
PAU vice-chancellor Dr M S Kang exhorted the farmers to increase area under horticultural crops and to take marketing of produce in their own hands in order to boost income. He emphasised on developing a holistic approach to tackle the problem of the mealy bug. He also called for adopting of drip irrigation and sprinkler irrigation techniques in the area in order to save water. “Preservation of natural resources is imperative for the development of sustainable agriculture in the state,” he added. The vice-chancellor also emphasised on increasing the participation of women in agricultural operations. The director of extension education in PAU, Dr N S Malhi, while highlighting the extension activities of the university emphasised on adoption of the university’s recommendations in letter and spirit.
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| Foreign investors paring exposure to Indian realty |
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| WALL Street banks and leading international investors, who have relentlessly poured money in India’s red-hot property market, have now turned sellers. Today, they are looking at ways to unwind offshore structures created to side-step regulations that bar foreign loans in real estate.
Close to $1-billion investments have been sold off in the early days of the subprime crunch, and $600-700 million are being hawked around. But there just aren’t enough buyers. Most of these were leveraged transactions, where large banks and funds borrowed money to buy securities issued by local real estate firms. These securities, masquerading as equity, were debt instruments promising a high fixed return. Global investors borrowed at a low rate abroad to buy these paper.
Thanks to the subprime fiasco and credit woes that followed, there is a deleveraging of books taking place across markets, where investors are keen to pull out of investments made with borrowed funds. Banks like Lehman Brothers and Deutsche Bank, which had prefunded investors, are trying to sell the loans. Ideally, they would have preferred to do it over a longer period and at better rates. When contacted, the banks refused to comment. Besides the subprime crisis, the softening of rates in some real estate markets (other than Mumbai) may have also driven investors to pare their exposure.
Significantly, such selloffs can happen without violating the three-year lock-in norm applicable to foreign direct investment (FDI) in real estate. The lock-in simply means that money cannot move out of India, but it does not stop a foreign investor selling the exposure to another foreign investor in an overseas transaction. Since investors route the money through special purpose vehicles (SPV) in Mauritius, they sell investments from such SPVs or sell the SPV itself. Interestingly, domestic real estate firms are also tapping Indian MFs and NBFCs to raise money locally since RBI has made it difficult for banks to lend to builders.
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| Regulatory challenges in a globalising world Problems Get Compounded When Markets Go Global But Juri |
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AS SUBPRIME crisis erupts in markets across the world in the clearest sign as yet of how globalised financial markets have become, regulators face one of their toughest challenges to date. The crux of the problem is that the jurisdiction of regulators remains largely national even as players and markets have become international. Yet if investors are not to lose their faith in markets (with disastrous consequences for the world at large), national regulators will have to come up with a more effective answer to the question, how can we ensure better regulation across markets, globally.
In a report dated April 2007, the International Organisation of Securities Commissions (IOSCO) points to three ways in which internationalisation of the marketplace takes place:
• Investors (or their agents) buy and sell foreign securities and derivatives using intermediaries in the country of the market where the financial instruments have their primary listing and/or are predominantly traded.
• Markets offer direct (electronic) access to participants in other countries.
• The same and/or closelyrelated financial instruments are listed and/or traded in parallel in different countries.
In the first case, the home market regulator is the sole market regulator with responsibility for the regulation of the market though it may still need to share information with foreign regulatory authorities from time to time, e.g., in respect of foreign investors using the market. The second and third scenarios, on the other hand, raise a wide range of issues concerning multijurisdictional oversight.
Most commonly, securities traded mainly in their home jurisdiction may also be traded (either in the form of shares or depositary receipts) on markets in one or more other countries. Normally, this occurs when the issuer applies to one or more foreign markets to have its shares (or depository receipts) listed and traded on those markets. Issuers do this mainly when the secondary listing is likely to increase their access to a new pool of investors (or provide other corporate benefits such as raising the company’s profile).
Additionally, some issuers’ securities are traded on a foreign market without the issuers having sought a listing or even being aware that the securities are traded in that foreign market. This generally occurs when local intermediaries believe that there is sufficient local trading interest in an issuer and when local law, as well as exchange or market rules, permit such trading.
Parallel listing and trading can also involve derivatives. In some cases, the listing and/or trading of a derivative instrument in one jurisdiction is based on an underlying cash market product (e.g., a share) that is traded principally in another jurisdiction. It also occurs when a derivative contract traded in one jurisdiction is based on the same (or an almost identical) underlying asset (or measure) as a derivative contract traded in another. This can occur with derivative contracts based on a commodity (e.g., gold, oil, sugar), as well as on a financial instrument (including an index).
The trading of the same financial instrument, or related instruments, in different jurisdictions provides investors with opportunities to trade those instruments in their domestic, rather than a foreign, environment. It can also provide market users who have the ability to trade in more than one jurisdiction with greater choice of instruments, as well as more options for using trading venues that best suit their trading needs.
There are two main types of risks from parallel listing or trading. One possibility is that information in one jurisdiction is not readily available in another. Most commonly, this will be information about the issuer or about regulatory action in respect of an issuer’s securities (e.g., a suspension of listing or trading).
The second risk is that listing or parallel trading may present opportunities for market users to use parallel trading to engage in conduct that is illegal in one or both jurisdictions. They might, for instance, use a less liquid trading venue if the intention is to move the price relatively easily in order to create a false or misleading view of the price; or they might use parallel trading to avoid, illicitly, a disclosure requirement when building up a position (long or short), or to disguise the opening or closing out of illegal trading.
Depending upon the specific nature of the pricing relationship between the derivative instruments (e.g., one might derive its settlement price from the other) and the potential opportunity for market users to create an adverse effect, such trading could raise a market oversight concern that information sharing could help to mitigate.
Today most IOSCO members share non-public (confidential) information on a routine basis. But this may not be enough. IOSCO report identifies the kind of information that may be useful for different regulatory concerns. It must be made compulsory reading for all regulators.
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| Clothing The Threadbare Areas Quota-free market has created bright prospects for the textile sector. |
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| PHASE-OUT of quota system has created opportunities for the Indian textile sector to expand in international & domestic markets with updated capacities. The sector now has comparative advantage over its competitors on availability of relatively low-cost and skilled workforce, design expertise and raw materials base. However, unlike expectations the sector has only been able to partially exploit the opportunities provided by the market. The weaknesses have continued to deteriorate the standards of the sector. "Quota-free market could not be exploited because of limited market penetration and mixed product basket, value realisation gap, fragmented product base, and uncompetitive cost of Indian textiles & clothing sector," says Ashok G Rajani, Chairman, Export Promotion Committee (AEPC). The highly fragmented units have production capacities, which are low in international standards. "The industry operates at low economies of scale, totally depending on outsourcing back material. This results in inconsistent incoming raw material quality & poor product quality. However, this has lead to a separate back process industry in weaving," says AN Desai, Director, Bombay Textile Research Association.
In addition, the sector lacks in international business practices and industrial engineering concepts. "The level of weaving technology is of lower order and knitting units do not possess capacity to perform dyeing, processing and finishing to international standards," states Dr Vaijayanti Pandit, Director, Federation of Indian Chambers of Commerce & Industries, Western Regional Council.
What restricts product development and synthetic base is the high emphasis on cotton. "While elsewhere fashion preferences are dictating 60% usage of man-made fibres compared with 40% of cotton, in India the reverse is true. Therefore, in the export sector, India misses on many opportunities where man-made fabric is preferred," adds Dr Pandit. Also, the additional costs in terms of power, transaction and cross subsidy are higher. "The sector faces high manufacturing cost due to lower efficiency, higher power & utilities costs and weaker infrastructure," says GV Aras, President, Textile Engineering Group, ATE Marketing Pvt Ltd, Mumbai. Additional costs have proved to be the major crisis. "Increasing market aggression by China, increasing power costs, lack of proper infrastructure causing delays & appreciating rupee are some of the threats," adds Mr Aras.
Other threats include pricing & quality competitiveness determined by raw materials & efficient logistics. "For example, yarn is produced at Coimbatore, fabric at Tirupur, chemical processing done at Surat, garment manufacturing at Bangalore; this cannot help in long run," says Arindam Basu, Director, The South India Textile Research Association. Despite weaknesses, there are strengths that would help the sector to efficiently play the 'volume game'. "The industry has ability to produce small lots to meet frequent change in market requirements. This is possible due to small size of operations & flexibility in production," says Dr Desai.
The sector can handle value addition, adequate labour supply at comparatively low wages and expanding domestic & international market. "The major strengths of Indian textile sector are availability of raw material, comparatively cheaper workforce, skilled manpower, technically qualified persons & ability to produce high quality small lot products," says Mr Basu. The market provides many opportunities for the SMEs in terms of understanding buyers' needs and preferences, R&D models and improvements in infrastructure and regulations. "With the opening of world markets, Govt. policies to support textile industry, policy to put up textile parks, US & EU buying houses looking at India as an alternative to China to cut down dependence and TUF (Technology Upgradation Fund) with interest subsidy to give impetus to investments; opportunities seem endless for our sector," says Mr Aras. The situation has also pushed Indian brand overseas, increasing the scale of exports and market share. "The free quota market has endowed the sector with availability of free markets, increased exports, enhanced quality, brand recognition abroad, more investments in the different sectors of the value chain for upgradation & large scale state-of-the-art manufacturing over fragmented outdated batch manufacturing," he adds.
While the current scenario provides greater market access for SMEs, there is a need for capacity building. This can only be aided through clusters, which develop linkages between SMEs. "The advantage comes from a much greater bargaining power, better prices from machinery & accessory suppliers and short lead times," says Hitesh Mittal, Sr. Consultant, Technopak. Cluster development activities support technology upgradation, enhance quality & offer product diversification. "This approach helps in analysis & intervention. Interventions focussing on restructuring the chains in terms of developing distribution channels, forward & backward linkages, design inputs and policy factors have been instrumental in consolidating the position of textile SMEs in the global value chain," says DP Jadeja, Director & Coordinator (CDP), Textiles Committee, Mumbai.
"Establishment of textile venture fund, of Indian brand through financial support & of industry standards are some of the actions need to be taken by the Govt. and exporters for exploiting post-MFA market," says Mr Rajani. The policy makers should replace archaic labour laws with welfare regimes. "SMEs need to invest in fresh operators. The need is to open more training schools at grass root level," says Mr Mittal. The approach should generate demand through trade promotions creating a global position for the Indian textile sector.
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| Ford starts production at new China factory |
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| FORD Motor Co. said its newest joint-venture factory in China began operations Monday and will produce small cars under the Ford and Mazda brands for the fastgrowing Chinese market. The $510 million ( € 360 million) factory in the eastern city of Nanjing will have an initial production capacity of 160,000 vehicles per year, Ford said. It said that would increase Ford’s annual production capacity in China to 410,000 vehicles.
China is the world’s second-biggest and fastestgrowing vehicle market. Global automakers have invested billions of dollars in hopes of capturing a share of the surging growth.
“This new state-of-the-art facility will significantly increase our capacity in China, and allow us to continue our rapid growth in the market,’’ Ford President and CEO Alan Mulally said in a statement. The unusually flexible new factory can produce eight models on different chassis, the company said. Ford, based in Dearborn, Michigan, says its sales in China rose 29% in the first eight months of this year to 114,702 vehicles.
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| ESPN hits jackpot with Twenty20 Rakes In Rs 200 Crore From Championship |
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| ESPN-Star Sports (ESS), which gambled with an astonishing $1.1-billion bid last year to win the ICC rights for the next eight years, has earned Rs 200 crore from the inaugural Twenty20 World Cup championship alone, which India won on Monday.
ESS has received close to Rs 110-115 crore only through advertising sales, which went through the roof for the India-Pakistan final. Ten-second spots for the finals were sold for more than Rs 7.5-10 lakh, making it the highest ever spot rate in the history of Indian cricket. Last time around, when India played Pakistan in the finals in 2003, hosted by Ten Sports, the going rate was Rs 4.5-5.5 lakh for 10 seconds.
The rest has come in as distribution monies, with ESS bringing in about Rs 140 crore from July 2007 to March 2008, which include revenues from the NatWest series, ICC Twenty20 championship as well as the upcoming India tour of Australia in December.
Considering the three-hour format, restricted spot availability and 50-60 spots, as compared to about 150 spots in a 50-over match, the broadcaster has managed to charge almost double the amount for this series.
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| Textile cos want TUFS back immediately |
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| CONCERNED about the sharp deceleration in the growth of cotton textiles and textile products in July 2007, the textile industry seeks immediate restoration of the Technology Upgradation Scheme (TUFS) for the textile sector. TUFS, which was started in 1999, was extended beyond March 2007 subject to necessary modifications. The government has decided to keep TUFS in abeyance for sanction of any fresh loans with effect to 1st April 2007 till the finalisation of modifications and issuance of instructions in this regard.
It is felt that the allocation of Rs 911 crore under TUFS for 2007-08 is insufficient for meeting the requirement of the textile sector. This allocation has to be minimum of Rs 2,000 crore for the current year.
It is noted that in July 2007-08, cotton textiles grew by only 5.1% compared to 14.3% in July 2006-07. Textile products witnessed a growth rate of meager 3.6% in July ‘07-08 vis-à-vis 28% in ‘06-07. Average growth rate of cotton textiles for the first 4 months (April-July) of 2007-08 was 6.9% vis-à-vis 12% in 2006-07. In the coming months, it is felt that the impact of a rising rupee and absence of benefits under TUFS could further decelerate the growth of the sector.
“The government should release the pending subsidies. Proposed investment by the government under TUFS was close to Rs 25,000,” says Mr Dinesh Lakra, Chairman, All India Laghu Udyog Bharti Textile.
During the period April-February 2006-07, 3,539 applications were sanctioned under TUFS having a project cost of Rs 35,651 crore, whereas in April-February 2005-06 there were 688 applications sanctioned having a project cost of Rs 10,719 crore. Under TUFS, it is observed that from April-February 2006-07, total number of applications sanctioned increased by 414% i.e. from 688 to 3,539 applications.
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| Do we need an exchange for SMEs? DEENA MEHTA Managing Director ACMIIL* Not an economically beneficia |
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| A NEW exchange for small and medium sized companies? No way. Size does not dilute the discipline required in the use of public money. We have already seen how creating multiple touchlines — by setting up so many exchanges — is counter-productive. No doubt, SMEs need to have access to funds at an economic and competitive cost. The risks associated with such enterprises are high. In developed markets, wealthy private investors don the mantle of angel investors or venture capitalists. They often sell their stake to private equity (PE) investors once the idea and the business has fructified and achieved a size. PE investors then take the operations to the next level and exit to public investors. It is envisaged, somewhere in between this evolution cycle, that these may be funded by public investors and their holdings should be tradable on the small and mid-cap exchange. Issuance of shares by SMEs to public at large will short-circuit the evolution cycle. Neither investors nor the companies are adequately mature for the relationship. Experience of the OTC exchange is a case in point.
The question of creating a stock exchange for SMEs listings presupposes public equity funding is the best financing alternative. But the question is how to fund these and who should fund these? Only after this issue is answered should the question of how the investors may “exit” be explored.
Providing of risk equity from aforesaid expert private sources and debt from existing institutions is the most appropriate way to fund SMEs. Securitisation of such debt would make the debt instruments more liquid and also bring own cost of lending. Qualified institutional investors may be asked to invest in IPOs of these SMEs.
Creating a separate trading platform for these few investors is not an economically beneficial proposal. The existing exchanges must assume this responsibility. They already have invested large sums in creating and maintaining the infrastructure and now have even demutualised. They should be the first choice. To sum up, no direct public funds for SMEs please. Rather, review and revise the current institutional lending methods and enforce good legal framework for private investment.
(* Asit C Mehta Investment Interrmediates Ltd)
ANIL BHARDWAJ
Secretary General FISME*
Will pave the way for raising risk capital
WHY do 85% of small enterprises in India not have access to any form of institutional funds? Whom should they turn to for fresh or additional capital, once their personal resources of friends and relatives are exhausted? Why have the waves of venture funds and private equity almost completely bypassed Indian SME sector, the vibrancy of which nobody disputes?
Some of the key constraints of the SME sector include its singular reliance on banks for finance, the near complete absence of institutional mechanisms for raising risk capital and strangulation of even alternative financing options such as NBFCs and factoring (without recourse). When it comes to SME financing options, the Indian financial architecture is agonisingly anachronistic — lagging behind the global financial markets by at least 20 years.
Throughout the world, it has been realised that bankers are remarkably unimpressed by pro-forma financial statements showing anticipated cash and profit potential of an enterprise and so it is futile to expect risk capital support from them. There is a world-wide trend towards expansion of capital markets and investment listings specially designed to serve the risk capital needs of SMEs. More than 50 SME alternate markets, stock exchanges, boards of trade, lower tier exchanges are thriving across the world. These include AltX of South Africa to Mercato Expandi in Italy. The AltX, for example, has outperformed the major exchange by over four times in an year.
An exchange designed for the needs of the Indian SMEs will pave the path for raising risk capital. It will also build the bridge between SMEs and the private equity and venture capital by providing an exit route. Further, public scrutiny of SMEs will improve governance processes and practices.
Most of the fears expressed in some quarters about investor interests with reference to an exchange for SMEs are exaggerated. Although the need for suitable regulatory mechanism cannot be overemphasised, yet we should not lose sight of the fact that the investors today are more mature and better informed than their counterparts of 1980s.
(* Federation of Indian Micro Small and Medium Enterprises)
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| Haryana Lords over auto sector I with Rs 500 cr from Caparo JCB India Has Already Announced Rs 500-C |
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| HARYANA is all set to draw huge investments in the auto sector. In the last 45 days, the Haryana government has attracted investments close to Rs 1,000 crore in the sector, giving tough competition to its arch rival Punjab. ET had reported on August 14 about JCB India Limited’s plan to invest Rs 500 crore in the state. This time it is NRI tycoon Lord Swaraj Paul of Caparo Group, who is ready to invest Rs 500 crore in Haryana.
Punjab, however, is in no mood to give up. The fact that Mr Swaraj Paul is also keen to invest in his home state (Mr paul is Jalandhar-born), has given it hope. Punjab chief minister Mr Prakash Singh Badal’s was to meet Mr Paul in Delhi on Sunday evening and it may yield some results on the state’s behalf.
Hinting at the fact that Punjab does not have any major automobile company for his company to supply auto components, Lord Paul says, “I am ready to invest in Punjab provided some major automobile company comes here. The reasons for choosing Haryana are obvious. The total investment will be over Rs 500 crore and will hire over 2,000 people to run two stamping plants.”
The Caparo Group has acquired 100 acres of land at Bawal in Haryana, about 70 kms from Gurgaon, for the development of six new engineering plants. These plants will support the growth of auto companies including Honda Cars, Honda Scooters and Motor Cycles, Hero Honda, Swaraj Mazda and New Holland Tractors. It will also be developing facilities for supply braking and suspension systems which would support OEMs. In India, Caparo Group is plans to manufacture components of automotive that include forgings, tubing and tubular components, pressings, fasteners and aluminium castings. The company had also signed a memorandum of understanding (MoU) with Tamil Nadu government to invest $68 million in manufacturing auto parts.
A month back it was JCB India Limited, a wholly owned subsidiary of JCB Excavator (UK) — one of the top five construction and earth-moving equipment manufacturers in the world — that had announced expansions worth Rs 500 crore at its existing manufacturing facility at Ballabgarh in Haryana
JCB Worldwide’s group COO Mr Matthew Taylor had told ET, “We would like to have largest manufacturing facility in Haryana (Ballabgarh) only.”
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| Tea board signs MoU with Russia to promote tea exports |
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| THE Tea Board of India has signed a Memorandum of Understanding (MoU) with Russia’s ‘Roschaikofe’ association to promote export of premium quality tea to this country in an effort to restore the flagging image of the Indian beverage in the local market.
The MoU signed last night by the chairman of the Tea Board Basudev Banerjee and Ramaz Chanturiya, the general director of ‘Roschaikofe’ association of Russian tea and coffee traders and packers, provides for creating favourable conditions for activities of tea organisations to boost trade-turnover.
In a major drive to recapture dominant position lost over last five years to Sri Lanka, the Tea Board chairman had brought with him over 20-member strong delegation of the Indian industry involved in growing, processing and exporting premium quality traditional tea from Assam, Darjeeling and Nilgiris.
In the Soviet days, India was the largest supplier of black tea to the Russia market. However, since the break up of the USSR the local consumers have shifted their preferences to premium quality orthodox (leaf) tea from CTC (granulated) earlier imported from India in large volumes.
Addressing the Indo-Russian tea traders business meet, the Tea Board chairman underscored that quality has to be priority in exporting tea to Russia. “Quality is the priority and not quantity and volumes,” Banerjee said.
Russia imports 167 million kilos of tea of which 39% is supplied by Sri Lanka and India’s share has shrunk to 20% since
2001. Setting up joint ventures for the packaging of high quality bulk tea in Russia and Russia investments in tea plantations were identified as the areas which could boost the tea trade along with brand promotion, India’s weakest point in the current Russian market dominated by multi-national brands.
Banerjee told the Russian business about the opportunities available in India, including 100 per cent FDI in tea plantations for three years. A senior official of the Russian Agriculture Ministry, N Seriogin, told the Indian tea exporters that they should avail the benefit of ‘zero duty’ on import of bulk tea in Russia for setting up joint ventures in the country.
Addressing the tea meet after tasting session, where for the Russian tea importers could for the first time taste the unique ‘white Darjeeling’ tea, Seriogin said in the Soviet times Indian tea was a benchmark of quality among the Russians, who in reality drink more tea than vodka.
“In the changed scenario only with the export of best quality tea India can restore its image and regain the just place in the market,” Seriogin underscored.
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| Nabard approves Rs 119.24 crore for Haryana & Punjab |
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| THE National Bank for Agriculture and Rural Development (Nabard) has sanctioned Rs 119.24 crore to Haryana and Punjab under Rural Infrastructure Development Fund.
Out of this, Rs 110.10 crore is for 34 Irrigation Schemes in Haryana and Rs 9.14 crore for artificial recharge of ground water to the government of Punjab under the Rural Infrastructure Development Fund a Nabard release said.
For the Rs 135.56 crore projects for irrigation Nabard will give RIDF assistance of Rs 110.10 crore. This will ensure water management and increase intensity of Irrigation and drainage works involving 30 minor, three medium and one major Irrigation Schemes in 13 districts Hisar, Fatehabad, Kaithal, Jind, Karnal, Rohtak, Yamunanagar, Bhiwani, Jhajjar, Panipat, Sonepat, Mahendergarh and Rewari in Haryana.
The project will be implemented by the Haryana Irrigation Department and will be completed by March 2010. Once completed the project would irrigate about 46,886 hectare area generate about 43 lakh mandays non-recurring employment and recurring employmsent is expected to be about 2,807 mandays/year.
The artificial recharge of ground water project would be implemented by the Water Resources & Environment Directorate under Department of Irrigation, Punjab and would be completed by March 2010. The total cost of the project is Rs. 9.61 crore of which Nabard’s RIDF assistance would be Rs 9.14 crore. The project once completed would benefit about 4,621-hectare area of land
With the sanctioning of these projects, the total RIDF assistance sanctioned for various purposes under different tranches of RIDF till date, has reached the level of Rs 1673.53 crore and Rs 2,527.56 crore to the Haryana and Punjab state governments respectively.
Nabard is also in the process for release of loan amount of Rs 1,270.55 lakh in respect of Rural Drinking Water Supply Schemes under RIDF-XII in the districts of Haryana.
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| Indian auto rickshaws on London streets soon |
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| MADE-in-India auto rickshaws, better known in the west as tuk-tuks, could soon be plying on the streets of London if an application by a company to run a fleet in the West End is successful.
Tuc Tuc Ltd, the brainchild of entrepreneur Dominic Ponniah, has been running a fleet of auto rickshaws in the seaside town of Brighton since July 2006. The fleet, imported from Pune, runs on compressed natural gas (CNG). Now the company is all set to introduce the vehicle in London.
Transport for London, the organisation responsible for transport matters, is considering an application for a fleet of autorickshaws to operate in the West End. The company has applied for a permit to run three and six-seater taxis from a base in London Bridge.
The company has applied to run a London service between 8 am and 4 am daily. The fares are yet to be decided. The autorickshaws would not be allowed to pick up passengers in the street, but only permitted to transport people who had booked in advance.
The autorickshaws imported by the company from India have a stronger chassis, cushioned headrests, reinforced exits and seat belts to improve safety. They also have TV screens showing news and adverts.
Each autorickshaw allowed to operate in Brighton was tested to satisfy the requirements of the Vehicle and Operator Services Agency. The service has been welcomed by most people in the town, but invited some criticism after a few accidents.
The service was opposed by local taxi drivers who saw a threat due to cheaper fares offered by the threewheelers. The service was also opposed on the grounds of safety. Now black cab drivers in London have objected to introducing the service in the capital.
A spokesperson for the Licensed Taxi Drivers Association said: “There have been a number of accidents calling tuk-tuks’ safety in question. They upend very easily and don’t offer protection in a crash. We’ve already called for licensing of the cycle rickshaws that block up the roads, especially around Soho. Tuk-tuks are also going to make it harder for cars and they don’t contribute to London’s transport, they’re a novelty item.”
Transport for London is expected to consult local councils and the Metropolitan Police before granting permission.
Ponniah’s company has plans to expand its service across the rest of Britain and Europe in 2008-09. The company says that the service provides tourists, shoppers and visitors with a safe, economical and environmentally friendly means of getting around the city.
The super-low emission vehicles have been specially imported from India and run on CNG, making it a virtually zero-emission mode of transport. The vehicles are also very compact, helping to ease congestion and addressing the demand for new and innovative forms of public transport, the company claims. In Brighton, the autorickshaws have become a tourist attraction, each individually painted with one of 12 distinctive designs. Drivers sport a custom-made uniform, designed by Brighton celebrity tailor, Gresham Blake.
Ponniah had said while launching the service in Brighton: “We want to encourage everyone to go green. The new TucTuc service supports local government transport and sustainability strategies to make Brighton & Hove a vibrant and healthy, people-friendly city in which to travel.
“We’re convinced that the service will provide a fun-factor to getting around the city, which will appeal to locals and visitors alike.”
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| Global warming may melt Indian economy Country’s GDP To Drop By A Whopping 5% For Every 2 o Rise In |
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| INDIA may be a long way from melting polar ice caps, but its economy will be among the worst affect on account of climate change. According to a report by Lehman Brothers India’s GDP would dip by 5% for every two degree temperature rise.
Speaking to ET, John Llewellyn Lehman Brothers global economist, said, climate changes are likely to effect India in a host of ways. Both India and Bangladesh would face problems because of rising sea levels. Agricultural productivity would also be affected as monoons will be short with intense bursts. Water suplly would also suffer because of lesser snowfall in the Himalayas, which provide water for 40% of the world’s population.
The effect on GDP will be non-linear. Initially, every 2 degree rise in temperature would result in a 3% dip in global GDP. The next 2 degrees would do even more damage to the economy. However for India the effects are likely to be much more harmful. For every 2 degree rise in temeperature the effect on GDP is 5% and for the next 6 degrees it would be 15-16%. He feels that India may lag China and be amongst the last of the major emitters to enact policy that seriously bears down on greenhouse gas emissions. According to Mr Llewellyn, there is both a direct and indirect effect due to climate changes and this differs from sector to sector and country to country.
Incidentally the largest developers of clean development mechanism (CDM) projects are in China, while India hosts the largest number of these projects. According to Mr Llewellyn these projects represents revenue transfers for countries like India. India will continue to reap the benefit for the next 5-10 years. At present, the carbon emitters in Europe pay upto 20 euros a tonne for their emissions.
As per the Kyoto Protocol on global warming, countries will have to pay for high carbon emissions and can also trade with deficient countries. While, the developed world, led by USA and Europe are among the high polluters, India, China, along with most developing countries are among the defcient countries who can earn revenues from trading in these emisssions. However, the US is stilll not signed the portocol which means it has still not started paying for its emissions. In its latest report “The Business of Climate Change II’, a sequel to its earlier report on climate change, Lehman Brothers has said the the US, the European Union, Japan and Russia are estimated to have accounted jointly for nearly 70% of the build-up of fossil-fuel CO2 between 1850 and 2004.
The report points that there are arguments on who should foot the climate change bill. India and other developing countries argue that developed countries grew rich through a fossil-fuelburning economic model of growth, and that it would be inequitable to seek to prevent them from following a similar path. However, many developed countries (particularly US) are unlikely to agree to be the only ones to pay for future abatement. They argue that future emissions, and thereby the future stock of atmospheric greenhouse gases, stand increasingly to be the result of today’s developing countries, especially China and India, and that these countries’ industrial production is growing fast not only for export but also to serve their domestic demand.
But Mr Mr Llewellyn, said that some sort of a system could be in place for the US 20009-10, which will have some indications on the US stand on the issue, largely on account of competitive pressures.
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| Indian Plastic Processing Industry: Looking forward to Good Times Polymer demand in India @ 14-15% p |
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| The Indian plastics processing industry is highly fragmented and small and tiny players constitute majority of the units. Injection moulders dominate the Indian plastics processing sector. Polyethylene bag and sheet producers dominate the extrusion segment, highlights the Organisation of Plastics Processors of India.
India ranks 8th in the world in total plastic consumption. However, Indian per capita consumption is 4kg, against the world average of around 20kg. The consumption of recycled plastic constitutes approx. 30% of total consumption. India is expected to be the 3rd largest consumer of plastics after US and China by 2010 (expected polymer consumptions then - USA 38.9 MMT; China 31.3 MMT and India 12.5 MMT).
Demand for plastic polymers in the next 5 years is expected to grow at CAGR of 15%. Polythene and Polypropylene will continue to dominate polymer demand in India. Demand of all polymers in India is expected to reach 12 million tonnes by 2011.
Indian Petrochemical Industry is facing intense competition from the Middle East countries where price of feedstock ranges between one-fifth to one-tenth the prices prevailing in international markets.
Market Moves
Capacity Addition
• Reliance Industries Ltd.
• Indian Petrochemicals
Corporation Ltd.
• Gas Authority of India Ltd.
• Haldia Petrochemicals Ltd.
• Chemplast Sanmar Ltd.
• DSCL
New Projects
• Indian Oil Corporation Ltd.
• Gas Authority of India Ltd.
• Oil & Natural Gas Corporation/Mangalore Refinery and Petrochemicals Ltd
Current Issues
The key issues impacting the growth of the Indian Plastics Processing Industry are:
• High level of excise duty and VAT compared to similar products manufactured from other raw materials like aluminium, steel etc.
• Presence of a large grey market.
• Lack of an organised and proper solid waste management leading to ban on usage of many plastic products.
• Lack of quality infrastructure like power, roads, ports etc
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| List of exempted services for exporters may be extended |
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| THERE is more relief in store for harried exporters. The list of services on which exporters have been granted exemption from payment of service tax may be expanded. Commission paid to foreign agents — which forms a sizeable chunk of the service tax paid by exporters in sectors such as pharmaceuticals and textiles — could be one of the services added to the list. The government is also examining the exporters’ demand to exempt service tax on movement of goods from factories to inland container depots (ICDs). The finance ministry announced service tax exemption only on transportation of goods from ICDs to ports.
It is, however, unlikely that the government would provide down-right exemption (known as zero-rating) instead of refunds. Exporters had argued that service tax should be zero-rated as giving refunds would just add to the paperwork and result in delayed payments. Sources said the finance ministry is working on a mechanism to check misuse of the exemptions.
The finance ministry, on Tuesday, notified refund of service tax for exporters for transporting goods in major and minor ports and from ICDs to ports through rail and roads.
Government sources told ET the finance ministry was favourably considering inclusion of commission paid to foreign agents in the list of exempted services for exporters. “Although it can’t be said when it would happen, there is a fair chance that commission to foreign agents will be included in the exemption list,” the source said.
According to Fieo director-general Ajay Sahai, the government should not exclude commission to foreign agents as it forms a sizeable component of service tax paid by exporters. In the pharmaceutical sector, foreign agents charge 15% commission while in the textiles sector, commission is as high as 10%. A 12.5% service tax on these services results in a burden of about 1.8% of the export value, Mr Sahai explained.
Officials from the commerce and industry minister pointed out that the government was also looking at the demand to exempt movement of goods from factories to ICDs. Exporters have argued that giving exemptions only for transportation from ICDs to ports is unfair to land-locked states. Exporters in states such as Punjab and Jammu & Kashmir end up spending much more on transportation from factories to ICDs than from ICDs to ports. “This demand is also being taken into account,” the official said.
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| India new launch pad for auto giants Hyundai To Debut Premium Hatchback Pa In November |
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| INDIA is turning out to be the new launch pad for global car models as major car makers prefer India over Europe and the American markets.
Korean car major Hyundai Motor will debut its latest premium hatchback — code named Pa — in India in November ahead of its global launch in January 2008. Hyundai Motor India VP (marketing & sales) Arvind Saxena said, “India is now a global hub for small cars and no manufacturer can afford to ignore that. It’s a big competitive market for the best cars to compete. Our new premium compact car Pa will hit India two months earlier than Europe and other world markets.”
Other car makers have also realised the growing might of the Indian market and has followed the similar practice. Maruti-Suzuki’s latest mid-size sedan SX4 made its debut in India in May this year before its launch in Europe (August) and in Japan (July). Its small car Swift was launched in India, Europe and Japan simultaneouly. Similarly Ford Motor made India the integral part of its global launch for its hugely successful Fiesta sedan.
“It was an important launch for us as India is a high growth market for passenger cars. We brought the global car Fiesta to India and we are satisfied with the market response. It is our flagship model and accounts for around 70% of our total sales,” said a Ford Motor India spokesperson.
Many such global cars are expected to debut in India. Europe’s largest car maker Volkswagen plans to bring its compact car UP! in India while Renault, which is partnering Bajaj Auto, is making a $3000 car specially for India. Honda Motor Company is finalising the launch of the new Accord 2008 in India simultaneously with its world debut. It is also developing a special compact car for the Indian market likely to debut in 2009.
Angle Broking’s automobile analyst Vaishali Jajoo said, “With all major car makers entering India, only the best of products can compete in the domestic market. India is a major destination now and offers huge potential. The passenger car market is expected to grow at 15% compounded annual growth rate (CAGR) for the next 3-4 years and more global cars will be launched. We will see global cars from Italian major Fiat, Germany’s Volkswagen Group and the French car maker Renault to debut in India.”
India is the second fastest growing auto market in the world after China. While the China is growing at over 30% for the last five fiscal years, the Society of Indian Automobile Manufacturers’ reports that the Indian market grew at 16% CAGR in the same period and reached 13.79 lakh passenger vehicles market in 2007-08.
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| Haryana targets Rs 30,000-cr exports |
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| HARYANA chief minister Bhupinder Singh Hooda on Wednesday said the total exports from Haryana which had increased to Rs 25,000 crore in 2005-06 would likely cross Rs30,000 crore in 2006-07.
Hooda while addressing media persons in the State Legislative Assembly said that his state has experienced the most striking change in its investment scenario with per capita investment of Rs.78,500 under implementation and ranked number one state in the country by Capex Database Centre for Monitoring of Indian Economy (CMIE),an independent body.
According to this analysis, 10 years ago Haryana was ranked at number 14 and five years ago it was ranked at number 13. Now in 2007, Haryana has ranked at number one with per capita investment of Rs.78,500 showing 856 per cent change over 2002-2007, the CM said. According to this analysis, the total investment figure under implementation is s.1,86,045 crores, as in June 2007.
“We examined data on projects under implementation in various states in the CMIE Capex date base . We compared date for June 2007 with June 2002 to assess how a State has fared on investment compared to its previous performance. For proper comparison we rank states according to projects under implementation on a per capita basis,” the CMIE study said.
Mr.Hooda said that he had set a target to invite investment of Rs. Two lakh crore and targeted employment for 20 lakh persons. Mr.Hooda said that projects involving an investment of Rs.28,000 crores have come on stream within last two years and industrial projects worth Rs.60,000 crores were under implementation. This was in addition to investment in SEZs being set up in the State where more than Rs.2 ,00,000 crores investment would likely come up.
The CM said that this achievement had been made possible due to excellent investors’ friendly environment created in the State, new industrial policy, investment in building infrastructure, trained man power, law and order and high productivity level. He said that his Government has succeeded in creating an industrial-friendly environment in the State which resulted in the huge investment.
Parliamentary Affairs Minister, Randeep Singh Surjewala said that earlier there was a Government which used to extract money from entrepreneurs on the basis of their turnover and they were reluctant in setting up their ventures in the state.
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| Punjab hikes power tariff by 8.4% for domestic use • For Agriculture Sector Hike Is 12% And For Othe |
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| ELECTRICITY consumers in Punjab would have to shell out more for power as the Punjab State Electricity Regulatory Commission (PSERC) on Wednesday passed an order increasing the power tariff by 7-12% for various categories of consumers, including the agricultural sector, from 1st September. PSERC will be able to generate an additional revenue of Rs 423 crore due to the revised tariff in the current financial year. For the domestic sector, the increase will be 8.4%, for the agriculture sector it is 12% and for all other categories the hike is 7%, according to PSERC chairman Jai Singh Gill.
Giving further detail Mr Gill said for the domestic consumers, the tariff had been hiked from the existing 221 paise per kilowatt-hour to 240 paise while for agricultural pumpsets, the rate has been raised from the existing 214 paise per kilowatt-hour in a month to 240 paise. Similarly, for the small-scale industries the tariff will now be 361 paise per kilowatt-hour from 337 paise per kilowatt-hour. Tariff for both medium and large-scale industry have been increased from 372 paise per kilowatthour to 398 paise per kilowatt-hour.
The annual revenue requirement (ARR) of Punjab State Electricity Board (PSEB) for the year 2007-08 has been determined at Rs 9,616.89 crore as against Rs 11, 861.05 crore proposed by the board. The revenue gap for the year 2007-08 has been worked out at Rs 87.21 crore as against Rs 2,423.11 crore proposed by the board, according to data available.
“There is an overall revenue deficit of Rs 423.78 crore after combining the effects of true up exercise for the year 2005-06, review of ARR for the year 2006-07 and the revenue gap of Rs 87.21 crore for the year 2007-08, which is proposed to be covered by the increase in the tariff,” said Mr Gill. He said that the combined average cost of supply for the year 2007-08 works out to 343.99 paise per unit as against 329.94 paise per unit last year. “For 2007-08, as per the amended regulations the surcharge would be nil,” he added.
Gill said the total amount of government subsidy for free power supply to farmers in the current year worked out to be Rs 1,988.15 crore. Besides, the state government had committed to pay Rs 130.95 crore for free supply of 200 units per month to domestic consumers hailing from s c h e d u l e d castes (SC) and non-SC BPL category with a connected load up to 1,000 watts.
He said that the state government had also committed to pay the balance subsidy amounting to Rs 421.99 crore for the year 2006-07.
Gill, however, said the captive power plants have been exempted from the payment of Parallel Operation Charges, which were payable every month at the rate of Rs 200 per kilo vatt ampere (KVA) on five per cent of the plant capacity.
Listing the hiked rates, Gill said that the big general industries have to pay a tariff of Rs 398 paise per kilowatt hour, against the existing 372 paise per kilowatt hour. The tariff for medium industries has been hiked from existing 372 paise per kilowatt hour to 398 paise.
He said that religious places like Golden Temple at Amritsar will get free power supply for the first 2,000 units, but for usage beyond the prescribed limit, the tariff has been hiked from 301 paise per kilowatt hour to 322 paise.
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| Few shocks worldwide Global Economy’s Vigour Should Protect It From A US Slowdown |
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| IS THE US housing blowout going to hurt the rest of the world? Certainly, a major slowdown in the planet’s biggest economy would cause some countries pain. But much of the globe will likely shrug off the worst effects of any American slump. “The global economy is no longer US-centric,” says Ed Yardeni, an economist who heads Yardeni Research in New York. “We may find that the global economic boom continues, notwithstanding the slowdown in the US.”
One big reason is that emerging markets are stronger than during past crises. From China to the Persian Gulf, countries have taken advantage of their recent vigour to gird themselves for tougher times, paying down foreign debt and building up huge piles of cash reserves. “They are much better prepared to face external shocks,” says Maria-Laura Lanzeni, head of emerging markets at Deutsche Bank in Frankfurt.
What’s more, these economies are now firing on all cylinders. As consumers stock up on everything from cell phones to cars, the so-called BRIC countries are contributing more to growth in global consumption than the US, says Goldman Sachs economist Jim O’Neill. And businesses there are bulking up. That’s good news for Japan and South Korea, which are supplying steel, heavy equipment, and construction services to their fast-growing Asian neighbours. “With China building steel mills and petrochemical plants, we are inundated with orders,” says Kim Jung Gwee, vice-president for marketing at Hyundai Heavy Industries in Seoul.
Europe, too, has benefited as buyers in Asia and the Middle East snap up the Old World’s snazzy cars and sophisticated machine tools. This should help buffer European countries from the effects of tighter credit and flagging US sales. “I don’t see any indication that the economic dynamics of Europe will be hampered by the US,” says DaimlerChrysler chief executive Dieter Zetsche.
Of course, a lot hinges on how long and deep any US downturn proves to be. It’s hard to imagine that the global economy could sustain growth of 5%-plus if the US were to enter a prolonged swoon. “India may not be as exportdependent (as China), but it depends on the smooth running of the global economy,” says Anand G Mahindra, chief executive of Mahindra & Mahindra, a $4.5 billion Indian manufacturer of cars and tractors. ”For that, the US needs to be stable.”
Robust growth in the rest of the world may prove to be a boon for America, too. Some of the negative impact from the housing recession is being offset by surging US exports and strong growth in overseas earnings for American companies. (A record 29% of US corporate profits come from abroad, compared with around 20% at the beginning of the decade, Yardeni figures.) This could be one instance where America’s diminishing role in the world may not prove to be such a bad thing after all.
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| All eyes, hopes on Fed rate cut Some Sections Of Market Anticipate Cut By 25 Basis Points,Others 50 |
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| ALL EYES are on Ben Bernanke. The local markets are now awaiting the decision of the US Federal Reserve on Tuesday, night which could well have a major impact on the rupee and bond prices.
While there is a broad expectation that the Fed could snip away at the rates by 25 basis points, some treasury managers are betting on the US monetary policy authority cutting rates by 50 bps, which could then boost the rupee. In such a scene, the Indian currency may open at 40.35 levels on Wednesday, a trader in a private bank said.
If the Fed decides to slash interest rates, it is widely expected that funds may flow away from the US to emerging markets, specially China and India. This means that while the dollar would weaken globally, the rupee would gain strength.
Says Axis Bank treasury head Partha Mukherjee: “Even if the Fed leaves rates unchanged, the rupee will eventually strengthen on the back of huge inflows. In the near term, the rupee could hover between 40.30 and 40.40 levels, while in the longer run, even a breach of 40 levels cannot be ruled out.”
On Tuesday, the rupee was quite volatile against the dollar. The local currency ended the day at 40.48/49 levels versus the greenback, after having opened the day at 40.5850/5950 levels. During the day, the rupee was seen fluctuating between 40.46 levels and 40.62 levels against the dollar. On Monday, the rupee had closed at 40.56/57 levels.
According to a senior treasury manager with a private sector bank, the underlying sentiment in the market was extremely bullish, while both large-sized state-owned banks and even multinational players were seen selling dollars.
With the stock market also on the upswing, there was a sustained sale of dollars, said forex market traders
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| Service tax refund for Re-hit exporters Services Covered Include Port-Based & Transport; Announcemen |
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| THE finance ministry has approved a list of services, including port-based and transport services, for which exporters will be refunded service tax. While the notification has come at a time when exporters are looking forward to all possible relief to help them cope with the rising rupee, the announcement of the exemption was actually made five months ago in the foreign trade policy in April this year.
The exporting community, however, is not too impressed with the delayed sop. They argue that a host of other services they avail have not been included in the list. Moreover, the fact that the service tax would be refunded and not zero-rated or exempted would only add to the running around that exporters have to do, they contend.
According to a finance ministry statement, exporters will get a refund of the service tax they pay for transporting goods in major and minor ports, and from inland container depots to ports through rail and roads. The government collects 12% service tax along with 3% education cess on services.
Exporters already get refund of the service tax paid by them on input services used for exports under existing schemes. The drawback scheme also factors in service tax paid on input services used for exporting goods, the release added.
Expressing dissatisfaction with the notification, Federation of Indian Export Organisations (FIEO) president Ganesh Gupta said that it did not meet what he called the “bonafide” demand of trade and industry for zero tax rate on exports.
Fieo added that important services like commission to foreign agents, professional fee, foreign travelling expenses, bank charges on loans, courier services and participation in trade fares have not been included in the notification.
Besides providing exemption from payment of tax on all services, the notification should be made applicable from the date on which such services were brought under the service tax net, Mr Gupta added.
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| Following the global best Indian SMEs have just started realising the importance of having the right |
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| A competent workforce is perhaps the most important asset for any organisation. Thus, it is in the interest of any company irrespective of its size to positively focus on human resource (HR) development & management. However, it is rather sad that the HR activities are often neglected by many Indian SMEs. As per a survey conducted by the Confederation of Indian Industries (CII), around 80% from the small enterprises and about 20% of the medium enterprises respondents indicated having no formal HR department.
According to Sarita Nagpal, Deputy Director General, CII, the problem arises because "most of the SMEs are not aware of the strategic dimensions and associated benefits of HRD". Indian SMEs can turn the tables around by learning from the big players as well as from their global counterparts and address the challenges that they face on their HR front.
SMEs are driven by manpower hence recruiting the right people is singularly important. "People acquisition is the greater focus than people retention," says Vivek Subramanian, General Partner, Avigo Capital Partners. He believes that "a professional" attitude is vital for growth. Thus, it is essential to recognise the talent first. Keeping this in mind, Hermes Softlab, a Sloveniabased SME came up with its programme of sponsorship with schools and universities to create tomorrow's workforce. As a result, the company managed to attract a large number of youngsters who could be groomed as per the job requirements.
Retaining the best talent is as important as hiring it because happy employees make happy clients. Dhananjay Kulkarni, SVP- Engineering, Aftek Ltd, points out that the talented people "can be retained only by putting in place best HR practices". He rightly identifies that "opportunities to grow, freedom in decision making, etc." are the chief considerations that determine an employee's job satisfaction.
To combat attrition, Canada-based Celestica International Inc has put in place the best HR practices. Its introduction of innovative programs such as stress management & weight watchers along with the team approach to adapt to night shift workings are commendable. Employee participation assumes a new meaning at TNT UK where employees constantly suggest changes for improvement. This form of participation should be encouraged in India as well. On a different track is the 'Advantage! for SMEs' scheme implemented in Singapore. It proposes to facilitate the reemployment and retention of older workers.
Ideally, an organisation should let the employee to grow and prepare for future challenges. Shoba Chetty, Director HR, Impetus Technologies emphasises the importance of strategies in influencing the success of the employees. She says, "Strategies should be carefully planned and directed in order to yield effective organizational development, performance and success."
Fedex Corporation, a big name in logistics, gave its employees a unique opportunity to identify and assess their respective roles. The program – Leadership Evaluation and Awareness Process (LEAP) – met with instant success thereby benefiting both the company and the employees. At Grupo Texto Editores, a Portuguese SME, a young employee working in the packing department rose to become the MD of the Angolan Division. Following this, the company has been constantly motivating its employees by placing challenging yet rewarding projects before them.
Similarly in China, 'The T&D (training & development) program' has been aimed at training the competent skilled workers to add value to the organisation. This gives clarity to the employees about the role they are expected to play.
Indeed, the company benefits when an employee is made to feel like its owner. The SMEs should therefore do away with the hierarchical orders that create gaps between the employees and the employer. Atul Jalan, MD & CEO, Manthan systems feels that "strong frameworks, ethics and business practices" determine the success of an SME. He further points out that at his company any form of hierarchy is discouraged. A sense of informal yet disciplined approach to work indeed helps in building a strong rapport between the employee and the employer.
In fact the focus has to be on fostering entrepreneurship. The employees should inculcate entrepreneurial skills to grow in the industry. "Training is no longer skill upgradation. Today's employees need to learn more," says Arun Rao, VP-HR, Applabs. 'The Countryside Entrepreneurship Development Program' implemented in Philippines has been successful in upgrading the management capabilities of existing entrepreneurs. Through workshops, job training sessions and conferences, the program has tried to identify and address the challenges faced by the SMEs.
Technology is yet another aspect that can no longer be ignored. However, merely implementing a software solution is not enough. Technology delivers only when it is aligned with the right processes driven by the right people. As Krishna Reddy, Head-HR, Valuelabs says, "Setting up proper systems and management processes in place are some of the areas of concern." The use of new and advanced technology can take the Indian SMEs one step further but it has to be user friendly, efficient and uncomplicated. According to Kishor Bhalerao, VPHR, Persistent Systems Pvt Ltd, the SMEs "need to have their process designed in such a way that it will support the development of the team growth."
Caring for the safety of the employees is another aspect that needs to be highlighted. An organisation that ensures that its employees are working in a safe environment is bound to see good results. For example, Bridgestone gives top priority to the safety of the employee. It believes in the 'Today is also one day of safety' policy. And this works in the favour of the employees as well as of the company. Sound and systematic HR practices ensure the success of SMEs. As U Vishwanathan, Head-HR, Speck System |
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| Conversion of land use policy for industrial use extended |
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THE Chandigarh Administration extended the conversion of land use policy in industrial area till March 18, 2008. The decision has been taken following an appeal by the Joint Forum of the Association of Chandigarh, Federation of Small Scale Industries and Chamber of Chandigarh Industries, which expressed demands of the city’s industry for extension of the policy by two years more. The administration says the extension will help them clear pending applications of conversion. Within this year, 31 applications have been received, taking the total number up to 60 and with the extension, more are expected.
The policy had faced criticism from industrialists in the city as the administration was having trouble implementing it initially. The scheme, called ‘Chandigarh Conversion of Land Use of Industrial Sites into Commercial Activity/Services in Industrial Area Phase I & II Chandigarh,’ was launched in 2005. It was also learnt that amalgamation and fragmentation of plots under one-acre may be allowed from next week. The matter is under the consideration of the administration and a decision would be achieved within a week, according to a government official.
The terms and conditions of the policy, which was suppose to expire on September 18, have been kept the same. The administration allowed payment of conversion fee in installments for a period that extends more than five year. An Empowered Committee was also created for implementing changes. This relaxation, however, came with an amendment in 2006, during which an increased rate of interest of 8.25% was applied (as compared to the earlier 7%). The administration increased the ground coverage up to 50% for plots being developed as multiplex. More than Rs 61 crore has been received as revenue from the scheme.
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| Global Pressures Build Up |
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| THE MARKET ended higher again last week, but only just. The Sensex finished a modest 0.09% (13 points) higher, while the Nifty ended up 0.19%. The CNX Midcap index did a little better with a 1.15% gain. HDFC was the top performer among Sensex stocks with a 4% gain. It was followed by Reliance Energy, Reliance Industries and Ambuja Cements — all gaining around 3% each. Wipro was the largest loser, followed by TCS, Cipla, Satyam Computer, Infosys and Dr Reddy’s Labs. Their losses were between 3% and 6%.
A couple of stocks which have been listed during the past four months posted the largest gains among the more heavily traded mid-cap stocks. The stocks — Time Technoplast and MIC Electronics — along with India Infoline, surged between 24% and 27% last week. The heaviest losers were SEL Manufacturing, Rolta India, HCL Technologies, Dish TV India and NIIT Tech — with losses between 7% and 15%.
INTERMEDIATE TREND:
The market remains in the intermediate uptrend, which started on August 17, when the Sensex bottomed out at 13780. Most global markets also began their intermediate uptrend around the same time. The uptrend is now about four weeks old. The levels below which the intermediate uptrend will end currently stand at 15364 for the Sensex, 4453 for the Nifty and 6156 for the CNX Midcap.
This intermediate uptrend has seen the Sensex retrace 2,045 points of the 2,089 points it had lost during the last intermediate downtrend. This is a 98% retracement and suggests that the bull market cannot be written off yet, and new index highs are a possibility. In fact, the Sensex was within 43 points of its alltime high before it reversed on Friday, and the CNX Midcap index cleared its previous top.
LONG-TERM TREND:
The market had come close to entering a bear phase when the Sensex retraced 90% during the last downtrend. The bear market threat has been all but removed with this intermediate uptrend. However, that possibility will crop up again if the indices fail to clear their previous tops (also their all-time highs) by a clear margin. These tops are 15869 for the Sensex, 4648 for the Nifty and 6366 for the NSE Midcap index. The bull market will end if the indices close below their last intermediate bottoms. Hence, a closing below 13780 will signal a bear market for the Sensex. The equivalent for the Nifty is 4000 and 5420 for the CNX Midcap index. These ‘danger’ levels are independent of whether the indices reach new highs or not during this intermediate uptrend.
SHORT-TERM OUTLOOK:
Global markets started falling again since Friday morning. This may lead to a decline at the start of the week and there’s a possibility that volatility may increase. A strong global decline will endanger the intermediate uptrend, but it should be kept in mind that the market was able to shake off two such sell-offs since this uptrend began.
STRATEGY:
The intermediate uptrend is already four weeks old, besides which, global markets are under pressure once more. Hence, this is not a good time to make fresh long or medium-term purchases. Long-term investors should switch out of stocks which lagged or declined during the intermediate uptrend. Popular stocks which have lagged the others during this uptrend include Cipla, HCL Technologies, TCS, Dish TV India, Wipro, Satyam Computer, Infosys, Punjab National Bank, Tech Mahindra, GMR Infra, Bajaj Auto, Yes Bank, Divi’s Lab, ONGC, Tata Motors, Bank of India and Petronet LNG. The new global sell-off may increase the overnight risk for swing traders, as we may see a rise in twoway volatility once again. At the same time, large intra-day swings will benefit day-traders — but only those who have a proper risk and money management strategy in place.
GLOBAL PERSPECTIVE:
A global intermediate uptrend has been on since mid-August. However, not many markets have come close to their July peaks. The notable exceptions are Shanghai — which never went into a downtrend — and the Hang Seng — which has rallied to a new bull market high. The Sensex has done well to come within a few points of its all-time high.
The Nikkei had closed at a one-year low and London’s FTSE-100 at an 11-month low in the last downtrend, and the two are almost certainly in bear phases. A closing below 12000 for the Dow Jones Industrial Average can be the trigger for a global bear market. The Dow will go into an intermediate downtrend if it dips below 13000. The Sensex’s gain for ’07 (until Thursday) remains at 13.3%, and is now somewhere between the top third and top half performers among global markets. Shanghai continues to head the list with a massive 97% gain.
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| Globalisation Makes Decoupling Impossible |
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| DECOUPLING, THE notion that the rest of the world can weather the effects of a slowing US economy, had all the attributes of a successful advertising campaign. The message was simple and clear. One problem: It doesn’t fly. It may even be argued that globalisation makes decoupling impossible. “Global growth will decouple from US growth to a greater extent than in the past,” Goldman Sachs said in a report. The US is a less important destination for world exports, the firm said. “Domestic demand is on solid footing in Europe, Japan and key emerging markets,” Goldman said. “The underlying shock driving the US slowdown is not global in nature, but is linked to a slowing US housing market.”
“A sharp slowdown in the US economy in ’07 is unlikely to drag the rest of the global economy down with it,” Merrill Lynch said last year. “The good news is there are strong sources of growth outside the US that should prove resilient to a consumer-led US slowdown.” Both Goldman Sachs and Merrill Lynch were bullish on Japan. As for the euro area, Merrill said, “The region has a good chance of avoiding the worst effects of a US slowdown.” Now for the reality check. Japan’s GDP contracted an annualised 1.2% in Q2, down from 3% in Q1 and 5.6% in Q4 of ’06. Euro-area GDP growth was 0.3% in Q2, down from an average of 0.8% for each of the preceding two quarters and the lowest since the last three months of ’04. German GDP slowed to 0.3% in April-June, down from 0.5% in Q1. French GDP was also 0.3%, while Italy grew a measly 0.1%. Central bankers have been no more accurate than their private-sector brethren in reading economic tea leaves.
“Strong money supply, driven by buoyant credit demand, adds to concerns that consumer-price increases in the euro area will stay above 2% in coming years,” Germany’s Bundesbank said. Duh! That was after central banks had pumped $350 billion into global money markets. For months, the return of inflation and the need for central banks to resist it with higher interest rates were a concern. The real risk, though, is deflation, compliments of the US subprime mortgage mess and tightening credit standards. “Amid all the fear generated by the US subprime meltdown, one argument against the ‘sky-is-falling’ camp rested with the assumption that while the US economy may be vulnerable to a credit shock, the rest of the world was doing fine,” says Joseph Quinlan, chief market strategist at Bank-Am Capital Management. Concerns that the market turmoil may spread persuaded central banks in Europe, UK, Australia, Canada and S Korea to hold off raising rates. Decoupling proponents back their claims with data. Yet, markets were overcome by banks’ hesitancy to extend credit to those they didn’t trust. Not all decoupling advocates are giving up. Asian countries’ dependence on the US consumer has fallen since the tech bubble burst. Goldman Sachs economists recently reiterated their confidence in decoupling, saying BRIC countries remain “key to global decoupling.” The day will come when the rest of the world can escape the pull of the US economy. For the time being, it’s too soon to count the Americans out
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| Honda recalls 1.8 lakh Civic globally, may do so in India |
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| JAPANESE auto giant Honda, which is recalling over 1.8 lakh units of its luxury sedan Civic globally, today said it was studying whether the model in India too had defective wheel-bearing seal before deciding on the same strategy here.
“We have received a notice for a global recall. As far as we are concerned in India, we are not sure if this would affect here. However, when we get more details we will be able to take a call on it,” Honda Siel Car India senior general manager (marketing) Jnaneswar Sen told PTI.
Honda had issued a recall notice of 1,82,756 Civics made between March 24, 2005, and February 8, 2007, because of a faulty wheel bearing seal that may leak and cause malfunctioning of brake switch thereby preventing illumination of lights on braking.
Sen said the Civic model recalled in the US were left hand drives and the company was checking if similar problems could be found in the Indian right hand drive models.
“If we find there are issues, then we will be definitely contacting our customers,” he added.
If the company does recall its Civic, it will be the second instance in three months. In July, HSCI had recalled 2,310 Accords manufactured between 2005 and 2006 as part of a global recall.
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| LSE likely to get Sebi nod in a week |
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| MARKET regulator Securities and Exchange Board Of India (Sebi) is likely to give permission to the demutualisation process of Ludhiana Stock Exchange (LSE) within a week’s time. According to sources, the exchange has to complete the process of disinvestments by September 14. As per the Securities Contracts (Regulation) Act, 1956, every recognised stock exchange in the country had to sell 51% of its stake to non-brokers, a move called demutualisation, within a stipulated time after such a scheme has been approved by Sebi. LSE has got application for issuing more than 65% stake to non-brokers, according to sources.
Once the exchange is demutualised, LSE would also get converted into an organisation ‘for profit’ from a ‘non-profit organisation’. Apart from that the name of the Ludhiana Stock Exchange Association would be changed to Ludhiana Stock Exchange Limited.
A 15- member disinvestments committee, headed by Mr D P Gandhi, has been meeting frequently to explore various options before the exchange for successfully implementing the demutualisation scheme. The exchange has appointed Deloitte Touche Tohmatsu as its valuer. The valuation of the exchange is likely to be completed soon.
A few months back, National Stock Exchange tied up with six regional stock exchanges in the country. LSE happens to be one of them. Right now, LSE is trading through its subsidiary LSE Securities Ltd (100 % owned by the exchange).
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| De Beers eyes Rajesh Exports |
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| ANOTHER big-ticket buyout could be on the cards. A US-based buyout fund and diamond giant De Beers are learnt to be interested in picking up 51% stake in jewellery maker and retailer Rajesh Exports. According to industry sources, while any formal bid is yet to be made, both parties will make separate offers to acquire majority control at a premium to the current market price of the company.
The market cap of Rajesh Exports is currently Rs 2,650 crore. The share price of the company went up 12.4% last week to close at Rs 729.50 on BSE on Friday. An acquisition of 51% stake, if it goes through, will also trigger a mandatory open offer for an additional 20% of the company. It remains to be seen whether the promoters, who hold 61.5% in the company, agree to sell. When contacted by ET, Rajesh Exports chairman Rajesh Mehta said: “I have no comments to make on any such offers. I can only say we recently attended an investors’ conference in the US and there is a lot of interest in the company from FIIs.”
Despite repeated attempts, De Beers India country head Rajiv Bhandari could not be contacted for comments and an email query sent to him failed to elicit any response. The media contact person for De Beers Diamond Jewellery was unavailable for comments. An industry source said the De Beers move is linked to its interests in jewellery retailing in India. While De Beers is primarily known for its diamond business, Rajesh Exports is predominantly into gold jewellery and is just about entering the diamond space. “The fact is India is more of a gold market and any serious jewellery player cannot expect to be big concentrating only on diamond,” a source said.
The Bangalore-based Rajesh Exports shot into limelight in 2004, when its revenues jumped more than 13 times in a single year to close at about Rs 3,000 crore. This was due to the commissioning of its new Bangalore-based manufacturing unit, the world’s largest jewellery-making unit. The market capitalisation of the company too has shot up from just around Rs 43 crore in FY03 to Rs 2,650 crore now.
A reason for rising valuations of the company is the forward integration in the jewellery business. Traditionally, the company has been a wholesale gold jewellery maker and exporter, which is a low margin business
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| Tata Motors to drive in 12 new vehicles |
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| IT’S NOT just the Rs-1lakh car Tata Motors is banking on in 2008. It has lined up a spate of new launches, including the debut of its secondgeneration vehicles. For India’s largest automobile company, the launch hooter will start buzzing from the Auto Expo in January when it will unveil its next-generation global pick-up truck, Xenon. The company will also launch new platform for passenger vehicles like Indica, Indico and Sumo. The auto major will unveil a range of luxury buses in collaboration with Brazilian Marco Polo. The company will also announce the launch of its world truck from the Tata Daewoo Motor’s stable.
The company will launch more than a dozen new products in the Indian market. A new Winger, its luxury light commercial vehicle. Fiat Motors’ Linea sedan and Grande Punto premium hatchback which will also be marketed by Tata Motors. Tata Motors spokesperson refused to comment on these launches. “As per our policy, we cannot disclose information on future product launches,” the spokesperson said.
These products will form the largest range of launches by any Indian company in a single year. According to sources in the automobile industry, Tata Motors is banking on these vehicles to check its declining sales. Its ageing passenger vehicles and absence in the multi-axle heavy commercial vehicle segment have led to decline in sales. Tata Motors’ sales of both passenger and commercial vehicles decreased by 1.10% over last year to 1,91,306 units from 1,93,306 units in the April-August period. “Its going to be a year of Tata Motors. They will have a full plate with products in all segments. These are not mere launches, but will show a new mindset of high technology vehicles developed inhouse by Tata Motors. The company has also kept the export potential of these products in mind to offset any slump in the domestic market, which is highly cyclical in nature,” said an Mumbai based auto analyst.
Besides the domestic market, Tata Motors plans to launch these vehicles in different overseas market of Southeast Asia, South Africa, Turkey, Saudi Arabia, Latin America, and into the developed markets like Europe and the USA. The serial launches are likely to begin in January, while the last one to roll out in the market will be the ‘world truck’ late 2008
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| Canola, olive, rice bran oils hot up market |
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| CANOLAoil, olive oil and rice bran oil are set to replace other refine oil in the region as companies like Dalmia Continental and A P Solvex Ltd producing and marketing these products are gearing up to market them in a major way. Beginning from tying up with regional hotels and holding seminars in clubs, hospitals and health groups, the companies are dedicating a sizeable proportion of their investments towards marketing.
“We will spend Rs 10 crore over 3 years on Hudson canola oil to build awareness and acceptance in India,” said V N Dalmia, Chairman Dalmia Continental Pvt Ltd (DCPL), which is a key player in the retail business of olive oil in the country during the launch of Hudson Canola Oil in Punjab.
To sell edible oil that is good for the heart companies are targeting both retail and institutional segments. According to A R Sharma, chairman and managing director of Rs 200 crore A P Solvex Ltd, the country’s largest rice bran oil (RBO) refiner based out of Sangrur, northern Indians prefer the mono-unsaturated fatty oils.
“The awareness among doctors, consumer is increasing and we are seeing a number of health group actively looking to tie up with us for promotion,” he said. The company is in the process launching its product in the form of bottle (instead of pouch), which will have nitrogen in the headspace of the bottle so that oxidation of the food item does not take place.
DCPL products-Leonardo Olive Oil and Leonardo Hazelnuts are currently sold through 50 distributors and more than 1,000 retailers across the country. The company is going to invest RS 15 crore on marketing the products.
Simialrly, A P Solvex Ltd, which is currently available across Punjab, Haryana, Himachal Pradesh , Jammu and Kashmir, Delhi, Calcutta and Mumbai, has gone ahead with a joint marketing tie-up with Gujrat base N K Protein Ltd.
Both Canola Oil and Rice bran Oil were perfect for Indian cooking since they were standard edible vegetable grade oil with neutral taste and flavour and can be used for frying unlike olive oil according to Mr Sharma.
“ With nutritional labeling to become compulsory from 20th Feb’2008, a number of regional and national players, recognising the health benefit of rice bran oil, have started tieing up with us,” said Mr Sharma .The company is currently providing rice bran oil of Pepsi for manufacturing Kurkure and chips.
The rice bran oil market is slated at 2 lakh tonnes annually and India is expected to import about 2,300 tonnes of olive oil in the current year. According to Mr Dalmia, the company expects a sale worth Rs 3.75 crore by selling 150 tonnes of Hudson Canola Oil this year. DCPL would roll out Olive oil based sauces, dressing, coconut water, non-alcoholic beer, table olive and Leonardo Gold oil to diversify its product portfolio in the near future.
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| PTL opposes Sumitomo’s freedom to use Swaraj |
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| THE ongoing boardroom battle in Swaraj Mazda is all set to escalate. Auto industry sources said Swaraj Mazda has received notices from the Mahindra & Mahindra (M&M)-controlled Punjab Tractors (PTL) over the use of the Swaraj brand name in its products as well as the proposed rights issue. Private equity player Actis too has joined PTL to protest the rights issue.
Sources also said Swaraj Mazda was issued a notice before the board meeting over the rights issue, asking it not to proceed till the pending cases are sorted out. “Unless both of these issues are clarified, it could lead to further litigation,” said an industry source.
M&M claimed that PTL has contractual rights over the Swaraj brand name, which was granted to sister company Swaraj Mazda more than 20 years ago. When contacted on the probability of litigation over the brand name’s use in Swaraj Mazda’s products, M&M executive director Bharat Doshi told ET: “PTL has certain contractual and legal rights and Swaraj Mazda has been put on notice to desist using that name on its products.”
As for further litigation over the rights issue, he said: “The details (of the rights issue) have not yet come. However, PTL will take steps to protect against stake dilution.”
Swaraj Mazda is already locked in a litigation with PTL over the latter’s right to appoint directors as well as the chairman and the vice-chairman in the company. The rights go back to the time when PTL had a 29% stake in Swaraj, which continued after the ‘inter se promoter transfer’ of 15% to Sumitomo.
Till PTL was controlled by Yash Mahajan, there was no problem. But since PTL’s control shifting to Actis and the Burman family (and later to M&M after its acquisition) and Sumitomo’s stake in Swaraj Mazda rising to 40%, the two companies have been at loggerheads. And there are no indications that those won’t continue. “The litigation which was commenced by PTL long before the acquisition by M&M, will continue as PTL’s contractual and legal rights are involved,” said Mr Doshi.
At present, Sumitomo owns 40% of Swaraj Mazda, followed by Actis with 17% and PTL with 14%.
But sources said M&M may not be interested in hiking its Swaraj Mazda stake due to conflicting partnership obligations. Swaraj Mazda has a technical tie-up with Isuzu while M&M has an alliance with ITL, part of American truck major Navistar, for its commercial vehicles.
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| Now, they will fight marketing battle online |
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| THE internet is set to gain ground as a marketing battleground. Marketing executives around the globe believe that in another three years, a majority of customers would use the Web to discover new products and services online and a third would use it to purchase goods.
In a McKinsey poll of over 410 executives from across the world and across sectors, over 50% of respondents said they expect their companies to get 10% or more of their sales from online channels by 2010.
About 11% said they would spend a majority of their advertising budget online by 2010. Already, a third of those advertising online spend over 10% of their ad budgets on the medium. Over 60% would spend at least 10% of their ad budget online in another three years.
Apart from traditional tools like e-mails and video ads, collaborative technologies, known as Web 2.0, like podcasts, online social networks and blogs, are also gaining popularity as marketing tools. E-mail was the preferred online marketing tool with 83% of the survey respondents saying they use it, followed by paid keyword search (63%) and video ads (33%). Among new technologies used for marketing were blogs (32%), podcasts (25%), online social networks (22%) and virtual worlds (13%).
“While online shopping is increasingly becoming popular, the growing popularity of social networking sites and blogs is another reason for marketers to tap the online segment. These sites are powerful tools to help consumers understand products and aid in their purchases,” says marketing consultant Harish Bijoor.
Whether it’s Intel establishing a presence in virtual world, Second Life, or Sunsilk’s Gang of Girls community site, the online turf is attracting greater attention from companies. Marketing execs say the Web will make a major difference in the first two stages of a consumer’s decision-making— product awareness and information gathering, and less in executing transactions or accessing services.
Experts say integrated offline and online marketing efforts are the way to go. “Most companies and their marketing divisions are now looking for a coherent web strategy and not just the Internet as an add-on advertising medium,“ says Future Brands chief Santosh Desai.
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| Punjab invites EoI to set up three flying institutes |
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| THE Punjab government has invited expression of interest to develop three flying training institutions (FTIs) at Patiala , Ludhiana and Jalandhar. The setting up of these FTIs will be through international competitive bidding and will be developed under public private partnership (PPP) mode.
Stating this here on Thursday, Punjab civil aviation minister Dr Upinderjeet Kaur said the state civil aviation department has worked out a plan to impart initial flying training of international standards to the youth desirous of becoming pilots. To execute these developmental projects the Feedback Ventures Private Limited is assisting Punjab Infrastructure Development Board (PIDB) and the civil aviation department under PPP format, she added.
She further added the selected bidders would develop and maintain the flying clubs into world class FTIs and would operate at least seven single engine and one twin engine flying aircraft as per the standards and guidelines of the Directorate General of Civil Aviation (DGCA) and the state civil aviation department For efficient operation of FTIs, the successful bidders would have to install state of the art simulators, hangers, navigational and communication system, flight management computers and other required equipment, labs, libraries, furnishings and other ancillary infrastructure, she said.
She added that besides deploying adequate trained staff for training services, the bidders could develop and operate recreational activities like skydiving, aero-modeling, ballooning, joy rides etc at these institutes. The project briefing meeting to address the queries of the prospective bidders would be held on 3rd October.
Elaborating the project details, she said the Patiala Aviation Complex established in 1962, has operational FTI and Aircraft Maintenance Engineering College and comprises runway of 3,800 ft and the flying club at Sahnewal airtport, established in 1968, has runway length of 4800 ft, whereas Amritsar Flying Club which was established in 1962 possesses runway length of 10,000 ft. These clubs have hangers, institute buildings and other related facilities.
The Punjab chief minister Mr Parkash Singh Badal had unveiled the vision of aviation training centres keeping in view the demand of trained aviation personnel through out the world. The Punjab government in May had cleared the proposal to set up three flying training schools at Amritsar, Ludhiana and Bathinda in public private partnership (PPP) mode besides upgrading the infrastructure at Patiala Flying training academy
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| SMEs may get exclusive bourse BSE, DSE In The Fray For Setting Up Exchange |
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| SMALL and medium enterprises (SMEs) may soon have their own dedicated stock exchange. Sidbi, National Stock Exchange, IDBI and IL&FS have submitted a proposal to market regulator Sebi in this regard.
The Bombay Stock Exchange (BSE), Delhi Stock Exchange (DSE) and some others are also understood to be in the fray for setting up a trading platform for SMEs. Since there are a number of proposals, Sebi may call for expressions of interest (EoI), though there is no final decision on the process of selecting a promoter for the proposed exchange.
The exchange will enable SMEs, whose capital requirement is very small, to raise money at lower cost. At present, the total cost of raising money from the capital markets in case of a large issue (about Rs 200 crore) comes close to 5-6% of the issue and goes up by 1% if the amount is very small.
If the proposal goes through, the new exchange will not only bring down the cost of raising money but also costs associated with listing and compliance such as fees to be paid to the exchanges, a government source said. The market regulator may also look at tweaking the initial public offer process for companies that list on exchanges dedicated to small companies.
According to the proposal being examined, such companies may only be allowed to sell shares to qualified institutional buyers (QIBs) and high net worth individuals (HNIs). At present, 35% of shares are reserved for retail investors, 15% for high net worth individuals or corporates and 50% for QIBs. Within the QIB quota, 5% is reserved for mutual funds. However, a final view on this aspect is yet to emerge.
Sebi recently invited institutions to make presentations on the proposed exchange and some of the presentations have supported this view.
The market regulator is treading on the issue cautiously and rightly so. The OTC Exchange of India (OTCEI), launched in the 90s for listing small and medium sized companies, had not been very successful. Though experts say the reason for its failure was more related to technology and launch of rolling settlements at a time when the concept was not understood by the market.
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| China turns to India for soyameal after freight of US cargo increases |
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| CHINA, which has drastically cut down soyameal imports from India in the early part of the current year, has again turned to India for the animal feed. During the period, it was largely dependent on the US for getting soyameal. But with the freight of soyameal cargo from the US on the rise, it has booked 70,000-80,000 tonnes of soyameal from India for shipment between October and November this year.
During the first five months of the current fiscal (April-August), China totally bypassed India while sourcing soyameal and purchased only some 65,175 tonnes of rapeseed meal from India. This was too a small buy from India because during the corresponding period last year, its import of rapeseed meal recorded at 262,465 tonnes.
Industry sources said China booked soyameal for October-November delivery at $310-330 a tonne, which was $100 less than the freight cost for bringing it from the US and other south American countries. If this price differential continues, China is expected to purchase another 100,000 tonnes of soyameal from India in the last quarter of the current fiscal. Piggeries in China are mainly driving up demand for animal feed in China.
Apart from the higher freight rate, Chinese soyameal importers are worried about quarantine authorities who have stepped up inspection of soyameal cargoes from the US and Argentina in a possible trade backlash following a massive recall of Mattel toys made in China, they say.
Vietnam nonetheless continues to remain India’s largest market for all types of oilmeal. Its import of oilmeal from India increased 11% to 382,600 tonne in April-August 2007. According to the Solvent Extractors’ Association of India (SEA), it purchased from India 277,950 tonnes of soyameal, 24,975 tonnes of rapeseed meal and entire quantity of 79,200 tonnes of ricebran extraction in that period.
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| Punjab demands central aid for struggling cotton farmers |
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| IN AN attempt to quell the growing unrest among cotton farmers in Punjab, the state government has demanded the Centre’s assistance in the form of a special subsidy or a bonus over and above the minimum support price (MSP) of Rs 1,950 per quintal of cotton.
Punjab agriculture minister Sucha Singh Langah said the state would send a written communiqué to the prime minister in the interest of the cotton farmers. “Punjab farmers are facing discrimination from the Centre compared to farmers in Gujarat and Maharashtra. Cotton farmer across the state has been suffering and they should be given a relief measure in the form of a bonus above the current MSP of Rs 1,950 per quintal,” Mr Langah said.
According to senior government officials, the cotton grown in Punjab was able to produce cotton yarn of length 27.50 mm and also have Mico power of 3.8 to 4.9 %. “Compared to this, the Gujarat variety- Shankar yarn length is 28 mm and Mico power varies between 3.6 and 4.8 % and farmer is getting an MSP of Rs 2,055 per quintal (which is Rs 95 more than Punjab MSP), “he said.
With BT Cotton being grown in more than 86% of 6.48-lakh hectare under cotton scientist in Punjab Agriculture University and Agriculture Deaprtment officials informed that yarn from it was more than 28 mm, hence it was necessary to give a fair deal across the country.
In a letter-drafted to the rime minster, the Bhariya Kisan Union has demanded to link the MSP to the wholesale price index (WPI) from this year itself. Punjab Mandi Board chairman and Bharatiya Kisan Union (Lakhowal) president Ajmer Singh Lakhowal said, “The MSP fixed every year by the Commission for Agricultural Costs and Prices (CACP) is inadequate and nonremunerative. The costs of production of wheat, rice and cotton are much higher than those considered by the CACP for determination of the MSP,” he said.
However, East India Cotton Association president KF Jhunjhunwala contended that the farmers were getting a better price and a good yield this season. “I am not in favour of any subsidy or bonus to farmers. Quality should make a difference,” he said.
The state agriculture department’s report on cotton performance this year has stated that cost of production is at least Rs 1,500 –2,000 higher per acre due to increased pesticide use to control Mealy Bug, Whiefly and Tobacco caterpillar. Apart form the increase in input cost of crop production cotton had been damaged in the southwestern districts of the state due to water lodging.
“More than 11,417 hectare across the districts of Muktsar, Faridkot, Ferozepur and Sangrur has been affected. The maximum damage of 10,000 hectare cotton crop has been reported in Muktsar followed by 636 hectare in Faridkot,” said a government official.
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| Industrial Growth slumps to 7.1% in July |
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| INDUSTRIAL output growth for July 2007 has seen a sharp decline to 7.1% from 13.2% in July last year. The annual growth is at its lowest since last October, when it had dipped to 4.4%. Growth figures have been consistently at sub-10% levels since the last three months with credit squeeze slowing down manufacturing and consumer spend.
Poor performance in July also pushed down the cumulative growth in industrial production during April-July 2007 to 9.6% as compared to 11.1% in the corresponding period last fiscal.
The trend may continue, say economists who have forecast industrial growth to be in single digits this year. Though the government appears optimistic with Prime Minister’s Economic Advisory Council chairman C Rangarajan saying he expects the economy to remain on track for another year.
As per the quick estimates of Index of Industrial Production (IIP) released by the government on Wednesday, growth in the manufacturing sector was down to 7.2% in July this year compared to 14.3% in July 2006.
Manufacturing contributes about 15% to gross domestic product and nearly 80% to industrial output.
Besides the high base effect, it is the strong rupee impact and high interest rate that have led to the steep decline in output. To some extent, this could also be the reason behind the slowdown experienced by export-oriented companies in IT, textiles and pharma sectors, said Research and Information System (RIS) director-general Nagesh Kumar. JNU professor Manoj Pant said since the housing sector had witnessed a decline in demand due to high interest rates, construction, steel and cement sectors have slowed down.
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| Satyam to expand global reach |
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| N A S D A Q - L I S T E D Satyam Computer Services is expanding its global footprint, eyeing development centres in Russia, Vietnam and the Philippines. The company reckons it can tap the local talent pool for these centres. Besides, it would also help mitigate business risks through a global delivery model. As part of this strategy, Satyam has opened a global solutions centre in Malaysia, which can accommodate 500 people. The fourth largest software exporter from India will open another centre there by the middle of next year to house about 2,000 associates. The company already employs about 300 people in Malaysia. “Malaysia will be one of our largest software hubs outside India. We will hire about 500 people at the new facility in a year. The new centre compliments our near-shore hub here for our Asean customers,” Satyam chairman B Ramalinga Raju told ET.
Currently, the company has a development centre in China and Egypt in the Asia-Pacific region. “We have four facilities in China, where we have about 500 people, while our centre in Egypt has about 100 employees. We have plans to ramp up our operations at Nanjing in China to 2,500 in future,” he said. Asia-Pacific, Middle-East, India and African regions contributed to 18% of Satyam’s revenues at the end of the first quarter this fiscal.
The company expects business in this region to grow even faster than the US in the future. In the Middle-East, Satyam has facilities in several countries, including Saudi Arabia, UAE and Oman. It is also looking at South Africa as a growing domestic market for new deals particularly in government, banking, oil & gas and telecom sectors.
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| Cotton prices exceed MSP |
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| COTTON prices are currently ruling at Rs 2,450 per quintal (compared to the minimum support price of Rs 1,960 per quintal announced by the government) across the 28 cotton mandis in Punjab whereas cotton seed is being sold at Rs 1,250 per quintal.
Arrivals have picked up in the districts of Abohar, Bathinda, Mansa and Muktsar in Punjab and Sirsa, Ellenabad, Fatehabad in Haryana. As on date, 17,000 bales (85,000 quintal of raw cotton) arrived across Punjab, Haryana and Northern Rajasthan (comprising Sriganganagar and Hanumangarh and Bikaner districts). Since 15th-20th Sep, there has been an increase in the arrival of cotton to 4,400 bales a day in the mandis of Punjab and 300 bales a day in Haryana mandis whereas till now in Rajasthan it is 50-60 bales.
Abohar mandi, where today arrival was 1,000 quintal of cotton, saw prices going by Rs 2,270 per quintal to Rs 2,450 per quintal. Pradeep Sharda of Gheru Lal Bal Chand Firm, commission agent for various textile mills in the mandi, said with inclement weather (rain lashing the region) when ball opening was taking place the price were going to be firm for the initial period.
“In the past few days Nahar, Malwa Mills, Abhishek, Gini filaments and mills from Samana and Ludhiana with less stock are currently buying though others are waiting for prices to come down. When 15,000 to 20,000 bales arrival begin every day by Sep end in the region then prices will naturally come down,” added Mr Sharda.
Cottonseed prices have come down by Rs 50 and the rates were currently at 1,225 from Rs 1,275 per quintal as on Saturday in Bathinda mandi . According to Sukhdev Singh Chahal, commission agent of Gurtej Singh Sukhdev Singh firm in Bathinda mandi ,”The buyers like Bathinda Chemical, Amritsar Oil Mill and other units in Khanna and Ludhiana are currently waiting for the rates to come down.”
As per the Agriculture Department, Punjab farmers have spent an additional Rs 2,000 per acre (for sprays) to control the mealy bug, whitefly and tobacco caterpillar this year. |
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| Scorpio to switch over to auto transmission |
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| MAHINDRA & Mahindra (M&M) is all set to join the league of Honda, Toyota, Ford and General Motors by offering automatic transmission in its vehicles. The country’s largest utility vehicle maker will be the first Indian company to develop an indigenous automatic transmission which will be initially strapped on its Scorpio SUV. The new Scorpio will be pitted against Honda CRV, Ford Endeavour, Volvo XC90 and Maruti-Suzuki’s Grand Vitara.
The new technology being developed by M&M’s research and development centre at Nasik will take it ahead of its rival and India’s largest Indian automobile company, Tata Motors, which offers manual transmission in all its vehicles. According to a company source, M&M is working on a six-speed automatic transmission for the flagship Scorpio model. This model is expected to be launched sometime in 2008 and will debut both in the domestic and the overseas markets, including South Africa and the US, the world’s most competitive market.
According to a company source, M&M is developing the automatic transmission with an European technical partner (possibly Renault), which would be based on the much superior tourque-convertor technology, rather than the conventional continuous variable transmission technology. “We have developed the technology for commercial production and it is in the final stages of testing. It’s state-of-theart technology, which will be offered for the first time in India and will take our vehicles to the next level of performance on a par with our Korean and Japanese competitors,” a company source said.
The new transmission system will be the standard fitment in all future Scorpio variants, including the hydrogen-powered, the hybrid version and the 2.2 litre Scorpio Eagle, likely to hit the road next year. Besides the Scorpio, the automatic transmission will also be strapped on the proposed multi-utility vehicle Ingenio and the Mahindra AXE, a special vehicle for the defence forces. The company plans to launch four new platforms and 10 new products by 2010
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| Margin call: Auto dealers shift to luxury brands |
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| FROM economy seat to business class, from one BHK flat to a penthouse, from a two-wheeler to a mini car and from a compact car to luxury marquees, now this upgradation bug has hit the Indian automotive industry.
The entry of premium cars is prompting car dealers to diversify their portfolios. Better margins and exclusivity have led several dealers across states to sell luxury cars. Sample this. Nirmal Motors had been operating a small Hero Honda dealership at Karnal in Haryana. Now it deals in Mahindra-Renault cars. One of the largest car dealership in Punjab, AB Motors, has been selling Ford cars for long. Now it is the first dealer in India to sell the all imported Volvo cars—S80 sedan and the XC 90 SUV, which is priced over Rs 52 lakh.
Similarly Navneet Motor in Mumbai has been doing brisk business for Maruti-Suzuki and Hyundai cars. Now it also has the famed German brand BMW under its belt. Delhi-based Yadar Kapoor has been managing two car companies, Ring Road Honda ( for Honda cars ) and A1 Motors for the Tata cars. However, he took a giant leap in his auto business and became one of the first dealer of BMW car in the capital.
On the same count, one of the largest dealer in Hyderabad Acar Motor has moved up from its Maruti-Suzuki business to become an exclusive BMW dealer for the entire Andhra Pradesh. Chennai based Kone Motors, associated with Hyundai Motor and Ford Motor for more than a decade, has now added a BMW dealership under its umbrella. Industry watcher say the high margins in luxury marquees make all the difference for dealers. “The sale of 3Series BMW will fetch higher profit then selling 10 Swifts or 20 Alto’s. A dealer could get upto Rs 1.5 lakh per car depending upon the model. Dealerships for super premium cars are exclusive set-ups. A luxury car maker would operate through a single dealer in a city or state while competition is intense among dealers of Maruti, Tata Motors, Hyundai Motor as they have multiple outlets,” said Rajan Pental of HDFC Bank.
The car dealers backed by superb first hand knowledge and experience of India’s auto mart are upgrading and venturing into luxury marquee business which offers much higher margins and exclusivity. And bigger cars offer better business opportunities.
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| Punjab, HP drive home transport pact Reciprocal Transport Agreement Signed For Providing Better Serv |
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| THE INTER-STATE ‘Reciprocal Transport Agreement’ was signed between the government of Himachal Pradesh and the Punjab, in Chandigarh on Friday. According to the new agreement, Himachal Pradesh would operate buses in Punjab covering 60, 390.5 km against 48,836 km by Punjab in Himachal Pradesh. Himachal additional chief secretary Avay Shukla and Punjab principal secretary D S Jaspal signed the agreement.
Earlier, Punjab could operate buses in 40,626 km in Himachal Pradesh against 43,901 km by Himachal Pradesh buses in Punjab.
The Punjab government is going to tax 5 paise per km per seat each day on Himachal Pradesh buses, whereas it would have to pay 6 paise per km per seat each day to Himachal Pradesh. Speaking to ET, Mr Jaspal said the new agreement was going to bring a relief to private transporters as routes have been specified and a better service will be provided. “Passengers from Punjab will get direct express service, as we are going to introduce new buses, which will cover an additional 8,000 km in Himachal Pardesh,” he said.
The new agreement would enable Himachal Pradesh Road Transport Corporation (HSTRC) to introduce new bus services covering an additional 18,830 km in Punjab. “We will start new bus services to Katra, Delhi, Jammu and Amritsar from important places in Himachal Pradesh,” said Mr Shukla while adding that the aim of the agreement was to encourage long distance inter-state transport of passengers and goods between the two states and to regulate, coordinate and control their operations. The additional chief secretary said that Himachal Pradesh has already signed the transport agreements with Rajasthan and Uttarakhand and is looking to signing agreements with Uttar Pradesh, Haryana and other states in a phased manner
Similarly, Punjab Transport Corporation is in the final stage of signing agreements with Uttar Pradesh and Delhi. Agreements with Haryana and Rajasthan are in the prelimary stage, though Uttarakhand and Jammu and Kashmir are key priorities for the state.
According to the detailed agreement, Punjab Roadways and PUNBUS will cover 33,052 km in Himachal Pradesh where as PRTC will cover 12,530 km. Punjab private operators cover 1,557 km and corridor portion by private operators would be 1,697 km.
Also, HSTRC will cover 57031 km in Punjab, whereas private operators will cover 952 km. The corridor portion covered by the private operators of Himachal Pradesh would be 2407.5 km
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| Sellers not able to unlock value in M&A deals, says study |
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| M&A deals mostly don’t get optimal value realisation for the sellers. Despite being in a more powerful position than ever before in several years, sellers feel they haven’t made most of what is undoubtedly a sellers’ market, failing to extract maximum value from their disposal process. A latest study by KPMG International into the state of the global disposals market shows that almost 50% of corporate sellers feel they haven’t maximised the value from their latest disposal. A similar view is being echoed by one-quarter of private equity (PE) firms.
The study says that many sellers experience a wide range of issues post-completion, which typically result in value leakage. In fact, over two-thirds of corporates and PE firms admit to experiencing post-completion issues. Some of the most prevalent issues include warranty or indemnity claims, unforeseen accounting issues and completion account disputes. Interestingly, these are the same issues which featured most heavily in the previous survey, suggesting that while sellers’ processes may have sharpened up, they haven’t been able to do much to tide over them. “On a more positive note, corporate sellers have certainly upped their game—and there are distinct signs that they are learning from their PE counterparts,” said KPMG global transaction services chairman Gopal Ramanathan. “For example, corporates are putting significantly greater focus on planning and preparation aspects of the disposals process in which PE firms have typically been strong.”
Over 400 merger & acquisition (M&A) decision makers were interviewed for the survey in large and mid-market companies across Europe, North America and Asia including India.
Sellers also struggle during the disposal process to keep control of the timetable, the study noted. They are typically keen on a quick timetable because too long a process can prove distracting for the business being sold and its management, leading to business under-performance and value leakage. However, aggressive timetables can also limit the opportunity for the necessary planning and preparation which many sellers now realise they need to invest in. “One of the more surprising findings is that over two-thirds of corporates and PE firms state they are unlikely to change their approach towards disposals over the next five years,” Mr Gopal said. “Despite this, many sellers are changing their approach and responding to the increasing number and sophistication of buyers.” For instance, it is now widely recognised that the sales process often has to be designed to take into account the needs of multiple domestic and international trade buyers and financial buyers.
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| Maharashtra cabinet may ask for reopening of Akurdi plant |
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| WITH more and more politicians joining the scramble to flaunt their pro-worker credentials, Bajaj Auto’s decision to close production at its Akurdi plant near Pune is gradually snowballing into a major controversy.
Taking a cue from Sharad Pawar, Union agriculture minister, who seemed opposed to Bajaj’s Akurdi unit shutdown—which incidentally falls under his Baramati constituency—the Maharashtra Cabinet on Thursday indicated that it may ask the auto major to reconsider its decision. Sensing the political mood in the country, some of the ministers were all for the state government intervening in this potentially sensitive issue.
“At the Cabinet meeting here on Thursday, the government expressed concern over the issue and is looking into the matter. The Cabinet will take a final view in consultation with chief minister Vilasrao Deshmukh,” said minister for industries and mines Ashok Chavan, after the meet. The minister added that the government would not allow Bajaj to enter other business activity at Akurdi plant.
According to state officials, revenue minister Narayan Rane, too, voiced his concern over the issue at the Cabinet meeting. “The government should not allow industries to leave workers in the lurch,” Mr Rane is believed to have said. “We will ensure that the interests of the labour at Akurdi plant would be protected,” Mr Chavan said. The fate of some 2,730 workers hangs in the balance after the closure of the plant.
“We will not allow Bajaj to shift this plant anywhere. Officially, Bajaj Auto management has not approached the government as yet. However, they require the government permission to shut the plant,” Mr Chavan said. The catch here is the Bajaj management has already made it clear that no worker shall be retrenched or forced to quit. The management has promised to keep them paying though there won’t be any work.
The Bajaj auto management held slump in demand and government policy responsible for rendering production unviable at Akurdi plant, an argument which didn’t find a taker in Mr Pawar. “Where is the slowdown? India’s economy is booming,” Mr Pawar shot back when asked to comment on Bajaj’s argument. Today, members of the state Cabinet echoed similar sentiments.
Many, in fact, asked the government to prevent Bajaj from starting any new activity at Akurdi plant. “The government will not allow Bajaj to enter other business activity from the said plant. Bajaj seems to have plans to enter some new businesses like real estate development or IT sector. The land at Akurdi is very valuable,” Mr Chavan stated.
Meanwhile, as things hot up over the auto company’s decision, Rajiv Bajaj, MD, Bajaj Auto, called on Mr Pawar in New Delhi. “Rajiv was in Delhi and wanted to see Mr Pawar as he may not be available for September 8 meeting in Mumbai,” Rahul Bajaj told ET. The state government, the labour ministry and all parties concerned are meeting in Mumbai on Saturday for another round of discussion to break the deadlock.
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| Govt may pump funds into 10 PSU banks Banks Close To 51% Govt Stake Cap, Limiting Their Fund-Raising |
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| EVEN as the government plans to infuse funds into the State Bank of India, it has a larger problem at its hands, of capitalising 10 other stateowned banks that are close of the 51% ceiling. This limits their options of raising capital to meet expansion needs. The government will consider infusing money into these banks, should they require it, sources in the ministry of finance have said.
“We will consider infusing funds into those banks that have reached the floor. If a bank approaches the government with a proposal justifying their need for capital, we will examine it. As the dominant shareholder in these banks, the government can capitalise the banks to work around the 51% limitation,” an official said.
The government does not want banks to dilute its stakeholding in hurry, as was done in the past. Andhra Bank, Dena Bank, Oriental Bank of Commerce, Bank of Baroda among others are close to the 51% ceiling.
Further, the government has become cautious about letting even those banks that might have enough headroom, because it feels that banks should be able to command sufficient premium to justify reaching the 51% level. This is another reason why the government is having a rethink about diluting its holding in SBI from 59.7% to 55%, it may instead go in for a rights issue.
In the event of the government infusing cash, its equity holding in the bank will be maintained. Infusion of capital will be treated as capital investment and the transaction will be within the bounds of the Fiscal Responsibility and Budget Management Act, an official said.
The government still has some headroom under capital investment and it will not have any revenue implications, a source said. “In any case, the amount can be recovered by way of dividends over the next few years,” he added. In the past, the government has provided capital to quite a few banks in the face of poor financials.
The board of Punjab National Bank has deferred its plan to dilute 6.8% of government equity and raise capital. It has not yet approached the government with a proposal for capital infusion. “We do not need capital at this point. We have deferred the plan to dilute government equity to raise capital. There are other debt instruments at our disposal,” a top official at the bank said.
Banks are cornered because there are limited capitalraising options available to them. They cannot access the market to raise funds, even as they are unable to meet their capital requirement through subordinate debts.
Banks can use other ways to meet expansion plans including raising capital through non-convertible preference shares to help meet capital adequacy requirements. However, there are limitations to using subordinated debt to ramp up capital, since there is a rider that subordinated debt cannot exceed 50% of Tier I capital according to prudential requirements.
Under the previous NDA regime, there was a proposal to amend the Banking Companies (Acquisition and Transfer of Undertakings) Acts, enabling the nationalised banks to bring down the Government shareholding from 51% to 33%. However, approaching the amendment now, will go against the principles in the National Common Mini-mum Programme (NCMP).
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| Punjab fin body gets ISO stamp |
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| THE PUNJAB Financial Corporation has obtained the ISO 9001:2000 standard certification. The corporation received the certificate last month from Det Norske Veritas (DNV) As, Ludhiana an accredited unit of DNV Certification BV, The Netherlands. The certification has been provided for sanctions, disbursement and recovery of loans to small and medium scale industrial enterprises. The certification will help the corporation to gain an edge in the financial market as a financial service provider. But people in Punjab are averse to investing in financial markets as compared to the national investor scenario inspite of a buoyant national financial market.
Dr G Vajralingam, managing director of the corporation said the process of certification has been completed in record time and may help turn the situation towards the positive. “The certification has been obtained to secure a reasonable place in the financial market. The quality of services required for the present day customer oriented market will be ensured by the corporation for providing various kinds of services as per the certification. We shall be conforming to the requirements of surveillance audit as well.” The onus now is on the corporation for continuing the work as functioning standards prescribed by the certification agency. The National Productivity Council was the consultant firm to the corporation for achieving the certification. However, this isn’t the first case of a Punjab government department being awarded an ISO certification. Punjab Infotech (PICT) has also achieved ISO 9001:2000 certification for sustainable development of knowledge intensive high-tech industry clusters for overall economic development of the state
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| Customer Intelligence for maximising customer profitability Customer Is Supreme. So, Is Customer Int |
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| WHO are your best customers? What can you do to retain them? How can you attract others like them? How can you improve the profitability of all your customers? The truth is that most retailers have difficulty understanding and managing customer life-cycles and profitability. This difficulty often stems from an inability to view, measure or track customer interactions, as well as problems in measuring the impact of marketing communications on customer behaviour.
Many retailers also struggle to drive and manage the sophisticated, targeted communications that are necessary today to retain current customers or acquire new ones. Their existing marketing applications are simply not capable of handling the mountains of data now gathered about customer interactions and profiles; nor can such applications turn this data into the intelligence needed to improve the return on marketing investments.
Customer data tends to be scattered across the enterprise, divided according to business lines or regions. The lack of an integrated view of the customer that incorporates all these disparate sources leads to additional problems for retailers. In particular, decision makers will often get multiple answers to the same question, leading to poorer decisions and ultimately inadequate results. Another struggle for retailers is to coordinate outbound campaigns with inbound customer interactions, which means that customer behaviour often fails to trigger appropriate offers and communications.
Unfortunately, attempting to compensate for these difficulties by flooding customers with an assortment of marketing campaigns won’t do the trick. Large retailers must work faster and smarter to deliver and track sophisticated, event-driven marketing communications with ever-tightening deadlines, turning data about customers into knowledge that empowers the retailer to make better decisions.
To address above challenges its important to embrace customer-focused culture and complement that with effective deployment of Customer Intelligence solutions which delivers fast, significant return on their marketing investment by enabling them to carry out measurable, integrated marketing campaigns; maximise customer profitability, acquisition and retention and leverage existing investments in technology.
Manage customer life-cycles
Rather than merely looking at static snapshots of customers, right Customer Intelligence solutions enables an organisation to create a dynamic picture of customer that changes as customers move through their life cycles and gives retail organisation a more accurate way to track past behaviour, predict future behaviour and respond to changes — letting them construct better communication strategies and grow healthier, more profitable customer relationships.
Drive communication moves
It is important to build an organisational capability by deploying right solutions which will enable organisation to meet increasing demand for frequent, complex customer communications. Advanced analytic techniques such as data mining, market-basket analysis, segmentation and profiling powers organisation to define more precise segments for tailored, optimised communications. Additionally it allows retailers to track customer behaviour in real time and respond to behavioural changes right away, ensuring that customers always receive the best offer for any given situation.
Provide integrated support
Because truly successful marketing can only be achieved through efficient collaboration across the organisation, with right customer intelligence solutions all business units have access to powerful analytic capabilities—in a way that directly sup-ports their role. This broadens the potential user base and empowers users to work together more efficiently, whether their role is strategic planning, offer optimisation, or predictive analytics.
The author is CEO and MD, SAS India
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| Bhel Blackout: Govt plans global bids |
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| THE government may invite global bids for sourcing equipment for 800 mw super critical power plants instead of engaging Bharat Heavy Electricals (Bhel) on a nomination basis. The move would come as a setback to the power equipment manufacturer, which plans to enter into manufacturing boilers and turbines for the super critical plants.
“The power ministry has endorsed a proposal for inviting international competitive bidding for 800 mw sets required by NTPC rather than offering the first order of 10 units to Bhel on a nomination basis. The matter is being considered by the PMO (Prime Minister’s Office),” an official in the ministry of power said.
Bhel was to enter manufacture of super critical thermal power plants 800 mw sets (boilers and turbines) on the back of NTPC order. It was proposed that Bhel should initially be given projects on a nomination basis so that it develops the requisite technology for 800 mw plants before starting the process of international competitive bidding. This was even supported by National Manufacturing Competitiveness Council (NMCC) in its letter to the PMO.
However, it is learnt that the power ministry has suggested PMO that the most competitive and transparent method of allotting a tender in keeping with Integrated Energy Policy and mega power policy is through international competitive bidding route. The ministry has argued that projects given to Bhel on nomination basis would not enable it to secure tax incentives under government’s mega power policy. This could increase the cost of electricity being generated by the plant.
“The ministry has suggested that international competitive bidding should be invited with a condition of progressive and compulsory indigenisation meaning setting up a manufacturing base. Bhel, any joint venture or any other company, could be eligible to bid,” the official said.
The proposal would also result in another manufacturer of power equipment in the country to meet the capacity addition programme of the 11th Plan. “International competitive bidding should not deter Bhel’s 800 mw project as it would continue to enjoy edge over competition in the bidding process in view of its strength in indigenous manufacturing,” said the official.
It may be noted that Bhel has indicated that it would reach 90% indigenisation only by the time it supplies the 10th unit of 800 mw by the end of 11th Plan. Moreover, the discussion on these super critical units between Central Electricity Authority (CEA), NTPC and Bhel has already taken more than a year without any results. So, it is now favoured that international competitive bidding would be preferable without any clause on technology sourcing to encourage FDI in the sector
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| UT Industry wants to remain CLUed-in Wants Extension Of CLU Policy For Another 2 Years |
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| THE Industrial and Business Park in Chandigarh, formerly known as the Chandigarh Industrial Area, home to one of the largest clusters of nuts and bolts in the country is increasingly looking towards commercialisation of its industrial plots. Industrialists and entrepreneurs owning land plots in the Park have appealed to the Chandigarh Administration to grant an extension to the ‘Chandigarh Conversion of Land Use (CLU) of Industrial Area’ for another two years. The administration has kept September 19 as the deadline for applicants willing to convert industrial plots to commercial areas. As per city-based industrialists, the policy has more scope and many industrialists are interested to adopt it. Till date, only 39 applications have been submitted since the policy has been implemented in 2005.
According to insiders, another 30 applications are expected to be submitted before the September 19 deadline. “From the time the policy has been introduced, there have been many amendments made by the Administration. So the number of applications has only been 39. We would want the policy to be extended for another two years at Rs 20,000 per sq feet,” says Vinod Mittal, president of Roller Flour Mills, Chandigarh. The real estate prices rising in the city have also propelled a number of plot owners to look at commercialising their plots. Says Madhu Vij, owner of Modern Automobiles — one of the initial sites converted from industrial to commercial — in the Industrial and Business Park, “The land in Chandigarh is expensive and industry in Chandigarh can’t grow due to land constraint. Therefore, a number of industrialists want to convert their plots. The conversion policy can reap a lot of benefits for the Administration if the deadline is extended.” General secretary of Federation of Small-Scale Industries in Chandigarh, Rajiv Gupta says that the association has written to the Administration already. “We have requested the Administration for the extension. That would make the area friendly for commercial activity since many plot owners who do not have successful industries in the Park want to get the sites converted to commercial areas. The extension will help everyone to adopt it easily,” he says.
In 2005, the UT Administration had made important changes in its land use policy, for the Industrial Area. The administration allowed payment of conversion fee in installments for a period that extends more than five years. An Empowered Committee was also created for implementing changes. This relaxation, however, came with an amendment in 2006 where an increased rate of interest of 8.25% was applied (as compared to the earlier 7%). The administration increased the ground coverage up to 50% for plots being developed as multiplex which meant that the floor area ratio of 2 could be achieved without raising height to thirty metre or more saving the plot owners clearance from the Ministry of Civil Aviation, since the industrial area is situated close to the airport.
The amendments further liberalised the conversion policy and had resolved the issues raised by the Chandigarh Industrial Association and some entrepreneurs. In 2006, the revenues earned by the estate office due to the conversion policy came up to the tune of more than Rs 180 crore. As per the Confederation of the Indian Industry (CII) northern region, the Administration is likely to approve the extension. Says Partap K Aggarwal, chairman, CII Chandigarh Council, “The CII has also written to the administration and we are hopeful that the government will keep in mind the interests of the industry. We hope that the prices are not hiked such that more plots can avail the benefits of the conversion policy.”
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| Explain your business model, Dipp asks Bharti on Wal-Mart |
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| THE Department of Industrial Policy and Promotion (Dipp) has yet again asked Bharti-Wal-Mart to explain its business model.
Dipp has asked the company to explain how the model would work in India given the restrictive FDI structure in retail. In its reply, Bharti has said the model is in total conformity with the country’s present FDI guidelines. “We reiterate that the joint venture has c o m p l i e d with the applicable requirements of law and guidelines in India including foreign direct investment (FDI),” the letter says.
The letter also said that the JV with Wal-Mart is on equal share for sale of commodities in select Indian cities for the requirement of customers. In its reply to Dipp, the company has stressed that 100% FDI is permitted in whole sale cash& carry model which is the JV with the Wal-Mart.
Last month, Bharti Enterprises signed two agreements with Wal-Mart. One, to set up a 50:50 joint venture for a kirana store-friendly wholesale (cash and carry) business with Sunil Mittal as the chairman of the six-member board and Raj Jain as the likely CEO. The second agreement relates to Wal-Mart extending technical expertise for various systems and processes to Bharti’s front-end retail venture, for a fee. “As and when the FDI is opened up Wal-Mart would be our natural partners,” Mr Mittal said at the time of signing the backend JV. The world’s largest retailer has finally got a toehold in the Indian market, although serving individual customers may still be far away, as FDI in front away is a distant dream. Wal-Mart is entering a large country like India after a decade, perhaps the only country where it will confine its operations to the cash and carry business and that too with a joint venture partner.
The last large market that Wal-Mart entered was China (1996) where it operates 83 retail stores across 46 cities. With the US market shrinking and the recent exits from Germany and Korea limiting growth, India is the only large market where Wal-Mart can look for additional revenue
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| Tech Mahindra sets up plant in Hyderabad |
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| The $650-million Tech Mahindra, an IT solutions provider in the telecom sector, is expanding its footprint to Hyderabad.
The sixth largest software exporter has set up a development centre here. It has also lined up plans to open a campus at an SEZ (Kokapet) near Hyderabad, joining the league of a dozen IT players that are looking at SEZs for their future growth. Companies setting up shop in these zones will enjoy a slew of fiscal concessions, making their operations more profitable.
Tech Mahindra has invested around Rs 8 crore in the development centre, which will house around 750 employees. It is looking at an investment of Rs 30 crore by 2010 for its campus at the SEZ. The company has acquired 8.5 acres of land in the SEZ — developed by the Hyderabad Urban Development Authority (HUDA). The new campus will be able to house 3,000 people and it is expected to be ready in 2009-10.
“The new development centre, on the other hand, will focus on end-toend (E2E) testing practices and business intelligence for the company’s telecom vertical. At present, the facility employs over 150 people and by this year end, we will ramp it up to 750. We also plan to increase our headcount in Hyderabad to 1,500 by next year end, said Tech Mahindra executive vicepresident & CEO L Ravichandran.
E2E testing will focus on operational tests that evaluate people, processes and the underlying technology that it is built on and the interrelationships among them.
`It allows TechM s telecom clients to form an independent assessment of whether a new product or service that is being launched will meet or exceed customer benchmarks. Besides, this also gives us the capability to analyse the entire solution including those applications developed by our independent vendor partners, he said.
Tech Mahindra plans to employ over 200 people for its testing practices in Hyderabad. The company already has a dedicated team of employees for servicing its clients Microsoft and Motorola in Hyderabad.
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| Badal demands level playing field in new industrial policy |
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| THE Punjab government has asked the United Nations Industrial Development Organization (UNIDO) that the new industrial policy for the state must ensure a level playing field to all the industrialists and entrepreneurs, keeping in view the special incentives to the industry in Himachal Pradesh, J&K and Uttarakhand. Punjab’s new industrial policy would be submitted by the end of December this year. UNIDO has been entrusted with conducting a study of the state and assist the state in formulation of new
industrial policy.
A delegation led by Dr (Mrs) Isher Judge Ahluwalia of UNIDO on Tuesday met Punjab CM Parkash Singh Badal to discuss the formulation of the policy.
The CM urged Dr Ahluwalia to suggest measures for inviting fresh investments in the state and for revival and upgradation of existing industry in the state by optimum utilisation of the state’s strengths. He pointed out that the new industrial policy should aim at increasing contribution of manufacturing sector to GSDP to over 20% and to increase the growth rate of manufacturing sector to bring at par with national growth rate.
Earlier, taking part in the deliberations, Dr Ahluwalia said Punjab still has a tremendous potential in industry due to its excellent past record and congenial investment atmosphere. To substantiate her claims, she mentioned that Punjab’s growth rate was 6.5% in the 70s as compared to 3.5% of the Government of India. She emphasised on the need for motivating the big corporate houses in auto industry like Mahindra, Ashoka Leyland and TATAs to set up their ventures in the state that would further boost the growth of ancillary units in auto parts industry. Speaking on the occasion, UNIDO representative in India and Head Regional Office for South Asia Philippe R. Scholtes said that Punjab was a vibrant economy and the shift from agriculture economy to industry was the need of the hour
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| METRO TO CARRY OUT PUNJAB PLANS • Co To Pump Rs 900 Cr In First Phase; To Start Ops In Jalandhar, Lu |
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| METRO Cash & Carry, the wholesale division of Germany-based Metro Group, on Tuesday unveiled its plan to start operations with units at Jalandhar, Ludhiana and Amritsar.
Director (development & expansion) Erik Schmit on Tuesday met Punjab CM Parkash Singh Badal and unveiled the company’s business plans for the state. To begin with, the company has proposed to pump in Rs 900 crore to start its chain of distribution-cum-retail centres in Punjab. The company would set up three more centres at Mohali, Patiala and Bathinda in the second phase.
In India, Metro serves three types of customers — retailers, hotels and caterers — and other businesses, including IT companies and offices. The company sells around 8,000 type of food products and 10,000 non-food products. The ventures would result in creation of 2,700 jobs for local youth and impart training in modern management practices. Besides sourcing vegetables, fruits and other fresh items directly from local farmers, thereby eliminating the middlemen, the company is committed to supplement the income of the farmers,” said Mr Schmit.
Metro is at present busy setting up its fourth and fifth distribution centres in Kolkata and Mumbai. Its Mumbai centre is being set up at Neptune’s Magnet Mall by the end of 2007. At present, Metro operates two distribution centres in Bangalore and one in Hyderabad. It will open its fourth wholesale store in Kolkata this year.
About 90% of the goods offered originate from local producers and suppliers. In the last four years of its presence in India (till March ‘07), Metro has acquired 3.13 lakh members. Its products are sold only to its registered members
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| REI Agro opens 6Ten in Punjab, Haryana |
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| REI Agro, on Tuesday, launched its retail chain, 6Ten, in Punjab and Haryana. The company has started its operations in the state with the simultaneous opening of five stores in Chandigarh, Mohali & Panchkula. The Initial investment will be about Rs 30-40 crore. The company plans to come up with 1,500 stores across the country by 2011.
The Rs 1,000-crore REI Agro is India’s leading producer and exporter of basmati rice. The company has recently decided to hive off their retail division by forming REI Six Ten Retail. The retail division comprises of over 35 retail outlets in the NCR and other backend facilities including processing and packing units etc, besides the current outlets in Chandigarh, Mohali and Panchkula. 6Ten stores are speciality food stores offering products such as grocery items, FMCG products, fruit & vegetables to consumers. The company is fast expanding its presence in the northern states including Punjab & Harayana. The company targets to open over 50 stores across these two states within next year. The organised Indian retail market is expected to touch $12 billion by 2015. REI would target the organised retail which has a negligible penetration in the overall retail space market in the country today.
Company MD Sundip Jhunjhunwaala says: “With organised retailing growing at more than 30% annually, there is a huge untapped market for these stores in India. We are targeting this space across states like Punjab & Harayana to deliver world-class products and shopping experience to consumers.
The company soon plans to open these stores in Patiala, Ludhiana, Jalandhar, Amritsar and Rohtak. The company has decided to procure fruits and vegetables from several markets in Delhi, Punjab, Haryana, Rajasthan and Chandigarh while staples such as pulses, flour, spices would be procured from millers. Similarly, FMCG items would also be sourced from companies, he said. REI Agro would also set up flour milling facility and a processing centre in north in order to feed its retail stores, he said.
The company undertakes processes of procuring paddy to drying, de-husking, milling and polishing, colour sorting, grading, inspection, packing, branding, distribution and retailing.
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| Export duty on iron pellets may be scrapped |
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| IN A move which may provide relief to steel firms like JSW and Essar Steel and encourage exports of valueadded products, the government is considering a proposal to withdraw the Rs 300 per tonne export duty on iron pellets. Pellets are prepared by an agglomeration of iron ore and is used in steel production.
“The finance ministry is considering withdrawal of export duty on pellets. The steel ministry had earlier asked the finance ministry to revoke duty on pellets as it goes against the principle of promoting value addition within the country. A decision on the matter is likely soon,” said a steel ministry source.
The government imposed an export duty on iron ore at the rate of Rs 300 per tonne for ores having 62% or more iron content and Rs 50 on ores with less than 62% iron.
Though there was no formal proposal to impose duty on pellets, under a new classification of the customs department, pellets also fell under the category of minerals covered under higher level of export duty.
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| Tata Motors to set up auto park near Jamshedpur |
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| TATA Motors has proposed to set up an auto park in Adityapur in the Sareikela-Kharwsawan district of Jharkhand. The company would be investing Rs 1,400 crore for the proposed park.
Senior officials of the company recently met Jharkhand chief secretary PP Sharma and industry secretary S K Satapathy and submitted the proposal.
Speaking to ET, the chief secretary said as Tata Motors is going for massive expansion, the company requires more vendors for supply of auto components. Therefore, the company is setting up auto park to house nearly 100 auto components manufacturing units. These units will not only supply to Tata Motors but would also be encouraged to supply to other major auto manufacturers across the globe. The proposed auto park will be spread over 600 acre.
Mr Sharma said: “There is a good scope for auto ancillaries in Adityapur. The existing and the prospective auto manufacturers would be benefited by the auto park project. The state government will provide all required support to the company for setting up auto park.”
When contacted, the top official of the company said that the company has a plan to set up an auto park in Adityapur but refused to give details about the proposed project. It is believed that the auto park in Adityapur will be some what similar to the companys vendor park or auto park for its Rs 1,500-crore small car project at Singur. The greenfield park in West Bengal will house captive vendors for each high-volume component, with Tata Motors running the main assembly line of its small car project.
The Jharkhand’s first automobiles and auto components Special Economic Zone (SEZ) is also coming up in Adityapur. This productspecific SEZ in Adityapur got its approval from the ministry of commerce and industry, government of India on June 6, 2005. Recently, a special purpose vehical, SEZ Adityapur, was formed to execute the Adityapur auto ancilliary SEZ.
Adityapur is an industrially developed town. Adityapur Industrial Area Development Authority (Aiada) is one of the largest auto ancillary hub in the country. Aiada houses around 800 medium scale, small scale and tiny industries including large scale industries like Usha Martin. It is believed that Auto Park as well as SEZ would not only promote but would also increase exports from the Adityapur region. So far, the majority of the industries in Adityapur are ancillaries to Tata Steel and Tata Motors
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| Local mink blanket units get ready to chase the dragon Clandestine Chinese Import Hurts Local Indust |
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| THE All India Mink Blanket Manufacturers Association has alleged that under invoicing of imports and manipulative tactics has put the domestic mink blanket industry in serious trouble.
Clandestine imports of mink blankets from China are being dumped across the country, which is damaging the domestic and export market of mink blanket manufacturers. With the approaching winter and festive season (peak season for mink blanket units), the association has demanded for strict vigilant action against the exporters to protect the local industries in the country. “Under-invoicing is widely prevalent across the country and we are finalising the petition to be given to the ministry of commerce and finance. Simultaneously, we are also meeting the director, revenue intelligence, to put an immediate stop in import of blankets,’’ said association vice-president Ramesh Jagota.
Policing needs to be strengthened so that the government does not lose any revenue and the local industry doesn’t suffer, said Mr Jagota who is also the managing director of Young Men Woolen Mills, Ludhiana. Largely concentrated in northern India, mink blankets units are present across Ludhiana, Amritsar, Panipat and Moradabad. As per data available, the total manufacturing capacity of the units in India is 50 lakh mink blankets per year, with the demand picking up during winter and festive season.
“We are not afraid of competition from China as our quality and price are quite competitive to them but the import hurts us as blatant under-invoicing for goods imported from China are going on unabated to save custom duty and other charges. The result is that they turn out to be cheaper and are creating unnecessary competition in the market,” said D K Gupta, whose Moradabad-based unit has been operational since 1973. According to industry sources, the scenario has reached a point where the cost of raw material for the yarn by the Chinese is Rs 155 per kg compared to Rs 472 per kg of available yarn in India. Currently, mink blankets attracts attract 25% duty. Giving details on the manufacturing cost, an industry person said that a 3 kg blanket costs Rs 751. Inclusive of all expenses (like cost of raw material, knitting, chemicals, electricity, labour, accessories and packaging), the cost come to about Rs 698.
Compared to it, a Chinese mink blanket in New Delhi, Calcutta and even Bombay is being sold from Rs 300 onward. “The unhealthy competition is an alarming situation and can damage the Indian market, export to the international market and total closure of the mink blanket industry in India,” said association executive director Ashok Sethi.
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| Cement channel partners find business unstable |
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| DESPITE being the secondlargest producer of cement globally, the retail channel of this business in India is quite apprehensive about its future prospects, according to a survey.
A survey by Feedback Business Consulting Services has shown that one in every five channel members is not sure about being in the cement retail business for the long term. The reasons range from increasing direct sales by cement producers to certain questionable practices prevalent in the business.
“The demand for cement is driven by large institutional buyers, infrastructure projects and readymix-concrete (RMC) units. Direct sales account for almost 50% of the total sales in Tier I cities. About 20% of the respondents were concerned about their future in the business, owing to three reasons - they perceive the business as too competitive, they believe there is no pride in the business and the fact that the next generation is not interested in continuing the family business, ”said V Ravichandar, CMD, Feedback Business Consulting Services.
The survey which interviewed over 2,000 cement channel partners across 31 centres claimed that dealer management is not a priority for cement producers. This is despite the fact that cement production recorded a year-on-year growth of 9.1% for 2006-07 fiscal touching 161 million tonnes.
“Sub dealers in particular, who are serviced by first line dealers, are dissatisfied because they feel that companies do not recognise their importance in the channel structure. Another concern is that first line dealers do not pass on the full benefits due to them,” Mr Ravichandar said.
Further, the booming RMC business in the metros is also eating into retailers’ revenues. With close to 300 RMC units operational across the country, this segment churns out an average 60,000 cubic meters of RMC everyday. “RMC units purchase bulk cement, directly from the manufacturers, with a unit’s consumption of cement standing at approximately 350 kg per cubic meter. The savings on every 50 kg of bulk cement purchased vis-a-vis cement purchased from the channel is about Rs 10-12. The channel doesn’t get a share of this business,” said V G Sakthikumar, COO, SCHWING Stetter India.
In this context, it must be mentioned that in spite of such high volumes, RMC constitutes about 5% of total concrete consumption in the country - clearly indicating that the segment has a huge growth potential in the years to come.
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| Emerson looks for big buys in India Sets Up Design Engg Centre In Mohali |
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| ST LOUIS-based Emerson, a Fortune 500 company listed with the NYSE, is expanding its manufacturing segment in India. The company, that has invested more than $150 million in India till date on various verticals, is looking at India as a growth platform and is also open to acquisitions in the process. “We will be expanding across all areas, in manufacturing processes, across network power, process management, industrial automation, climate technologies and appliance and tool businesses. The expansion will be in terms of increasing space in facilities and adding new ones also,” says Emerson Electric president –India region Pradipta Sen, while launching the company’s second design engineering centre in Quark City, Mohali. However, company officials did not reveal any figures on future investment in India. “We are always open to acquisitions,” adds Mr Sen.
Mohali would be the Emerson’s second design engineering centre after Pune, which was launched in 2002. “India is the second largest market in world after China and there is potential to double the numbers in the coming years. Therefore, it makes a lot of difference to have presence here,” says Mr Sen while adding that Emerson has invested close to $25 million in both centres.
The multi-divisional design and engineering centre in Mohali will act as a 100% in-house research and development centre on the same lines as Pune and will engage in development of IT solutions for supporting IT systems for finance, HR and supply chain management for 254 clients across the globe including the US and Canada. “The centre will also involve in product and maintenance engineering. There will be 60-100 people in the first year of operations while the numbers will increase by 100 every year,” says Emerson Design Engineering Centre executive director Dr Amit Paithankar while adding that the Mohali centre will follow the Pune business model but cater to more clients as it will also house entire product development cycles, right from concept design to product manufacturing.
With revenues over $20 billion, Emerson Electric Co is a global leader in providing innovative solutions to customers in industrial, commercial and consumer markets by converging technology and engineering.
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| Cotton arrivals picking up in Punjab, Haryana Being Sold at Rs 2,150-Rs 2,200 / quintal |
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| COTTON ARRIVALS have begun in Punjab and Haryana. 1,800 bales have arrived till date in the mandis of Punjab and Haryana. However, the arrivals have not started in northern Rajasthan. The delayed arrivals has not affected the prices of cotton, which is being sold at Rs 2,150 to Rs 2,200 per quintal and above, compared to the minimum support price of Rs 1,960 per quintal announced by the government.
Arrivals are picking up in the districts of Bathinda, Mansa and Muktsar in Punjab and Fatehabad in Haryana. Till Thursday, 1,600 bales of cotton arrived in the Punjab mandis and 200 bales arrived in Haryana mandis.
The Northern India Cotton Association has predicted a production of 52 lakh bales this year, compared to 47 lakh bales in the previous year across Punjab, Haryana and northern Rajasthan (comprising Sriganganagar and Hanumangarh and Bikaner districts). According to trade figures, Budhlada Mandi, Sunam Mandi, Phikhi Mandi and Tohana Mandi were receiving Rs 350-400 bales against 1,000 bales by this time last year.
Rakesh Rathi, president of The Northern India Cotton Association told ET that the picture of the cotton arrivals was not dismal or very good. “ With delay in sowing of cotton, a resultant of late harvesting of wheat, the arrivals are lesser compared to the previous year. Mill consumers (firms and companies) are currently procuring the cotton at Rs 1960 per quintal,” he said
Sitting in Abohar Mandi, Pradeep Sharda said that large picking would start from 15 Sept where we expect 5,000 to 7,000 bales per day. “Initially, good demand may keep the rate stable and we expect exporters to further increase the rates,” he said while adding that after October, global scenario would charter the cotton rates.
Insufficient rain rains followed by scathing attack of diseases such as mealey bug and leaf Curl virus has affected the crop and the yield. “ In the previous year when the government MSP of Cotton was Rs 1,890 I had sold my cotton at Rs 2,200. Compared to the previous year, I have sprayed four times more, hence I am looking for better prices. The government should give us an additional bonus too,” said Baldev Singh Sarpanch of Kararwala village
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| ‘Experiential marketing is new tool for brands’ |
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| WITH more and more brands climbing on to the retail bandwagon, the FMCG and durable segment will have to rely increasingly on advertising and ground level marketing. With the likes of Future Group to Reliance to Tatas mulling category killer stores, the reach of the brand becomes all the more important. Marketing gurus feel that experiential marketing will be the next big tool to reach a cross section of the Indian consumer market. Priya Monga, business head of RC&M India talks to Gulveen Aulakh. Excerpts:
First there were jingles, then there were punchlines. What will be the next step for brands to firm up brand recall?
Experiential marketing is the new tool which brands like to follow. Whether durables, non-durable and FMCG or service sector, everyone wants to give an experience to their consumers. For e.g. if a consumer wants to buy a motorcycle, he would like to touch, feel, relate and experience the product, prior to buying the same. The product or service that a consumer experiences is really important for the company to create or change the mindset of the consumer. The number of promotional tools like kiosks, stalls, free sampling etc. have increased tremendously in the last decade. Even the consumer want to test the product prior to buying it for e.g. even a pack of biscuits. It’s the experience which is attracting the consumer towards a brand.
With Indian retail giants expanding and the likes of Wal Mart and Tesco coming to India, would experiential marketing be of help to them?
Yes, experiential marketing is a great platform for giants like Wal Mart and Tesco since retail outlets are an experience in itself for the consumer. Experiential marketing further enhances the promotional activities to reach the consumer’s doorstep that will result in brand recall. Through experiential marketing, consumers have immense choice today to experience the product or service through road shows, events, direct marketing or public relations.
Wal-mart is one of the brands which is using experiential marketing to capture audiences overseas. After the release of Star Wars III, Wal Mart, which was the licensed distributor of star wars products, promoters, tents and a person dressed as Darth Vader to pull the crowd. More than 2500 people were hired and trained for the event.
Does the strategy also help smaller chains and stores in expanding?
Yes, this strategy will definitely help the smaller chains and stores to expand as they need more awareness and attention from the consumers and will also get more mileage. The target group will directly get the information about these stores.
How has experiential marketing helped Indian companies, in both large business and the small and medium business segments?
Whether it’s an automobile manufacturing company or a consumer durable company, they all want to gauge the consumer with an experience which will carve a niche for the companies in the market. As the competition gets tougher amongst the corporates, brands offering the best will make it to the top. Big companies are able to offer larger than life experience due to huge budgets on their promotional marketing.
There are many examples to substantiate how experiential marketing has been helpful. Recently, TVS launched a wedding campaign promoting its bikes, to capture the maximum target audience as the wedding season swept entire Uttar Pradesh and Bihar. Wedding theme based mobile vans were used to create awareness and promote the newly launched bikes, namely, StaR sports and StaR city (ES spoke variant) across 50 districts. The marketing tool was a success, generating more than 50,000 enquiries in 1000 days. This campaign created an instant buzz for TVS in Uttar Pradesh. To further exemplify, Whirlpool a renowned name in consumer durable market, launched a campaign for Punjab, Haryana, Gujarat and Maharashtra. The audience experienced the brand functions via roadshows, kiosks and interactive sessions. This promotion generated over 600 enquires in 75 days.
What is the future of experiential marketing in India?
Indian markets are getting more complex and demanding, mass media is working less and less. Currently experiential holds 15% of the total advertising expenditure which is expected to grow by another 10% in the coming years. Durable fraternity would spend almost 60% of their advertising budgets on experiential promotions
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| State govts can buy 30% land for SEZ developers |
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| THE group of ministers (GoM) set up to frame a relief and rehabilitation (R&R) policy for those displaced by industrial projects, including special economic zones, on Thursday decided to give state governments the power to acquire 30% of the land required in case the developer has acquired the rest 70%.
In the wake of violence and social unrest over land acquisition for SEZs, the government had decided to impose a total ban on official acquisition of land for such projects, ruling that all land would have to be bought by the developer. With most developers, backed by state governments, saying this would allow just a handful of people to block any project, it was proposed by the PMO that the policy could provide for the government acquiring up to 10% of the required land for maintaining contiguity and preventing a handful of malcontents from aborting vital projects. Now, the GoM has relaxed the ratio further to 30:70.
“State governments can now acquire 30% of the land on behalf of the project developer if the company has already taken 70% of the land in possession,” commerce minister Kamal Nath told reporters after the meeting. Apart from SEZs, the decision is also applicable to all industrial projects. The GoM, headed by agriculture minister Sharad Pawar, was constituted to frame an R&R policy for the benefit of the people displaced by land acquisition for SEZs and industrial projects. SEZ developers such as Reliance Industries and the Salim Group have been lobbying hard for relaxation of the rule.
In May this year, the Centre had put a complete ban on states from acquiring land on behalf of private players. The decision came after protests by farmers and social activists in various parts of the country, including Nandigram and Singur in West Bengal as well as in Haryana and Maharashtra. The government has so far approved over 500 SEZs, including formal and in principle, but has been facing stiff opposition on the matter, particularly after violent protests at Nandigram in West Bengal and other places
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| Global manufacturers getting focused |
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| Today industry is challenged to deliver costeffective, reliable and flexible solutions. To make sure nothing interferes with meeting this challenge, many companies rely on frequent and incremental technology up-gradation to optimize industrial success.
Exhibitions provide the most effective medium for interaction between users and providers of Technology. They help suppliers meet their endusers, generate feedback and lead to increased visibility and sales.
Refocus toward the region
'Single industry' exhibitions have been around for some time, but more and more manufacturers world over are making a definite and conscious shift toward effective regional exhibitions to get more concentrated interest for their products.
Very large industry events result in spreading too thin, often resulting in no significant impact. Regional events enable manufacturers to "make their mark" within a territory.
India's western belt is rich in Automobile manufacturing, ancillaries and Engineering companies. It is also a solid base for Process Industries such as Petrochemicals, Textiles, Sugar and Cement. There exists a huge buying potential in this region.
Mega-Tech - gets you there
Mega-Tech's central theme is penetration within the region.
It is geared specifically to meet the needs and interests of western India's industrial market for both the Engineering and process technology. It thus ranges from solutions for process control and management to maintenance, engineering and services for the automobile industry.
The exhibition covers all components of industry down to the complete system and offers integrated solutions in one location. The concentrated focus on vertical technologies appeals to decision makers from the entire gamut of industry segments.
A place to do business
Mega-Tech is the region's premier event for the manufacturing sector. Now in its 3rd year, the exhibition runs concurrently with a two-day conference and a series of seminars highlighting the industry's latest applications and innovations. The exhibit hall is packed with key industry buyers and decision makers.
Look who's visiting…
System Integrators, Technical Advisors and users from the large-scale Industrial belt along western India form the very core visitor profile to this event. Every sector of manufacturing - including contract manufacturers from Pune, Aurangabad, Nashik, Kolhapur, Vapi, Surat, Vadodara and Ahmedabad will attend this event. Mega-Tech visitors represent new and existing automobile and engineering projects along the industrially rich western India belt.
Exhibit Profile
Machine Tools and Accessories for the Auto OEM and General Engineering Control and Automation Hydraulics and Pneumatics Plant Equipment Instrumentation, Industrial Electronics and Electrical Power Transmission and Motion control Industrial Safety and Security Material Handling and Logistics Industrial Packaging Systems
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| After auto cos, Japanese parts makers rush in JTEKT Corp Plans JV To Make Power Steerings |
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| A SLEW of new models by Japanese car makers, such as Honda, Suzuki, Nissan and Toyota, is triggering off action on the components front as well. The latest to join the bandwagon is Japanese component major JTEKT Corp (a company formed by the merger of Koyo Seiko and Toyoda Machine Works). The company already has a joint venture with Surinder Kapur-promoted Sona Group, called Sona Koyo Steering Systems.
In a bid to expand its presence, the Sona Group will float a new joint venture with JTEKT that would focus on manufacturing advanced electronic power steerings. These steerings would be made keeping in mind the new models to be introduced by Japanese automotive majors.
According to components industry sources, both JV partners will hold 50% stake in the company. The partners would make an initial investment of Rs 120 crore. The company is likely to set up its plant in the Bawal area of Haryana and start commercial production by early 2009.
Sona Group officials were not available for comment. Industry sources believe the company is looking at a turnover of Rs 300-400 crore by the third year of commercial production. The JV will cater to both the domestic industry as well as the global market.
Japanese component companies are aggressively looking at a bigger share of the Indian market. Most of these companies initially entered the country as technical partners and had licensing agreements with local companies. Auto analysts believe that with India becoming one of the fastest growing auto markets and growth figures slumping in developed countries, most component companies are making a beeline for the country. JTEKT Corp has a consolidated sales turnover of 1,025,297 million yen. The company manufacturers steerings and driveline components, bearings and machine tools.
Sona Group’s aggregate turnover currently exceeds $140 million with exports of $20 million. The group manufacturers a range of products, which includes steering and driveline components for the automotive OEM segments, including passenger cars, utility vehicles, commercial vehicles and speciality vehicles.
STEERING PARTNERSHIP
JTEKT already has a JV with Sona Group, Sona Koyo Steering Systems Sona Group to float new JV with JTEKT to make electronic power steerings Both JV partners will hold 50%. Partners to make initial investment of Rs 120 cr Plant may come up in Bawal area of Haryana and is likely to start commercial production by early 2009
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| Ess Dee closes in on India Foils buy |
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| ESS Dee Aluminium, one of the leading pharma packaging firms in the domestic packaging sector, is in final round of negotiations with the Vedanta group to buy out the latter’s foils business, India Foils. The London-listed Vedanta Resources had appointed management consultant KPMG to scout for potential suitors for the unit which is currently the largest foils maker in India, supplying high value products to companies in sectors such as pharmaceuticals and consumer goods.
While Vedanta Resources executives declined to comment on the development, it is widely believed that the company is expecting a valuation between Rs 250 crore and Rs 300 crore for the Kolkata-based India Foils, due to its large market share and advanced German technology. India Foils last year posted sales of Rs 237 crore, a growth of 24% over the previous year, due to growing demand from the retail sector.
Aluminium foils are typically used to package products and the demand for it has grown as India has recently seen a sharp rise in retail sales with shopping malls and large supermarkets being built in almost every city and town. Growing consumerism has fuelled the need for packaging, while pharmaceutical companies use aluminium foils to cover tablets and capsules.
But growing difficulties in sustaining foils as part of a larger product portfolio by big capacity aluminium companies such as Hindalco Industries and Vedanta Resources has seen foils businesses becoming a part of smaller, focussed companies.
Globally also large aluminium companies such as Alcan have sold their foils businesses due to similar reasons. When contacted, Ess Dee chairman Sudip Dutta said: “We are scouting for acquisition opportunities in India and abroad. We have identified the companies. We are doing the due diligence. We cannot comment on individual deals.”
Vedanta had bought India Foils from the BM Khaitan group in 2000. The company currently accounts for a fifth of the local foil market, which annually sees sales of about 40,000 tonnes
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| eBay clicks on new destinations • Plans B2B Model Foray In Germany, Spain & South-East Asia |
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| e south business BAYIndia -east ( Motors B Asian 2B) countries model is planning to dominated Germany to take its , business Spain the busi and to -
, by ness to consumer (B2C) models. Being the leading online marketplace for sale of second hand vehicles to automobile dealers in India, the firm is planning to bring the best practices experienced in India to markets overseas. “We are planning to take the B2B platform to global markets where we think the model working in India can be applied.“ says eBay India Motors director Amit Bhartiya.
These countries have been largely the ‘new car’ markets, he added. ebay India Motors is also planning to introduce the same model in China, though at a later stage, since “the country has just begun to explore the used car market and therefore the concept is in its nascent stage.”
Global markets will now get a taste of the best practices being witnessed in online buying and selling market in India, which as per analysts is close to $2 billion. However, a timeline has not been decided as to when the practices will be implemented overseas. “We think that the B2B model will be a success in the markets that we are exploring but the time taken to adopt the system will depend on the markets,” adds Mr Bhartiya.
Closer home, Punjab has been able to feed its fetish for the Mercedes as buyers from the state have begun to purchase the car online, adding to its repertoire of being the Merc capital of the country. Buyers or dealers from Punjab have been actively buying Mercedes off the eBay platform. “Dealers from Punjab are facing a crunch of supply, so even the online demand is high. Other than looking for deals in the region, they would go for purchases to as far as Mumbai,” adds Mr Bhartiya. That’s a positive sign because Mercs are not often sold in the used car market as most owners tend to hold onto their cars. Therefore, company officials say that the number of Mercs sold on eBay India Motors is still in single digits, where a Merc priced at 25 lakh is sold at Rs 7-10 lakh. Although the Merc fever still persists in the region, it’s the heavy commercial vehicle (HCV) segment to which the state contributes the most. “Punjab is the largest contributor to the HCV, used trucks and trailers segment in the country online, along with Haryana. In addition to this, Punjab sees the largest consumption of diesel SUVs and MUVs,” says Mr Bhartiya without disclosing any figures. Every five minutes, a vehicle is sold on the site and going by the quantum of sales, the highest traction is recorded in the HCV segment. A large number of fleet operators from cities such as Moga, Bathinda and Amritsar in Punjab and Hisar and Rohtak in Haryana have been participating in purchasing while eastern UP accounts for the higest number of sales of three-wheelers. eBay India motors will expand its network of its present 700-800 dealers in the north as it plans to target transport nagars and tractor mandis.
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| Market slump and inequality Society is not necessarily happier when inequalities fall and equality i |
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| THE slump in global stockmarkets since July has wiped out an estimated $5 trillion of wealth, five times the GDP of India. So, world inequality has fallen dramatically. Are poor people across the world celebrating the great reduction of global inequalities? Are socialists celebrating increased equality? No, not at all.
But why not? For years, analysts have worried about rising inequalities in India. Rapid growth has sent the stock markets soaring, and several Indians have entered the Forbes list of top billionaires of the world. Simultaneously, 300 million remain below the poverty line. This stark contrast has evoked much outrage.
Prime Minister Manmohan Singh says that unless the poor participate in fast growth, uprisings could disrupt our nationhood — over 150 out of 600 districts are affected by Maoist violence. The same theme is echoed in a recent study of Asian inequality by the Asian Development Bank. The ADB chief economist has been widely quoted as saying that high levels of inequality disrupt social cohesion, and could lead to civil war.
If this were really true, then the stock market slump should have healed social tensions. An Indian Express story on August 12 estimated that the richest five Indians had lost more than $10 billion in the previous fortnight. The total wealth lost by all shareholders was $52 billion (Rs 210,000 crore), almost equal to the GDP of Bangladesh.
So, inequalities in India have fallen dramatically. Not even the most draconian tax measures could have reduced the wealth of shareholders by $52 billion.
But are the 300 million poor people of India celebrating? Are landless labourers in Bihar delighted that the wealth of the Ambanis has suddenly fallen by billions? Are the tribals of Chattisgarh and Jharkand joyous that the Tatas have become poorer? Are illiterate Dalit women, the most oppressed and powerless section of our population, ecstatic that the stock market slump has improved income distribution?
Of course not. And this has consequences for theories of social tension. Now that the stock market slump has significantly improved India’s Gini coefficient of wealth, will Maoist insurgents in Chatttisgarh give up insurrection? Will ULFA in Assam cease its depredations because of greater equality between the people of Assam and those of Dalal Street? Will the militants in Kashmir become less militant because of an improved income distribution?
To even suggest this would be farcical. Yet that farcical notion is deeply entrenched in much socio-economic analysis. The millionaires of Nepal are deeply invested in Indian stock markets. Does the ADB think that their stock market losses, which have reduced inequalities, will ease tensions in the neglected Himalayan region of Nepal?
Economists focus on measures of inequality like the Gini coefficient. But ordinary folk have very different concerns. Bihar is the poorest state and Goa the richest, but the poor Bihari does not worry about the disparity. He knows that his travails are due to local politicians and mafia, not rich Goans. He is not interested in impoverishing the Ambanis, he wants to become rich himself. He welcomes a booming stock market that might bring investment and jobs to Bihar.
MANY analysts think society is happier when inequalities fall and unhappier when inequalities rise. Really? In an economic recession, profits fall much faster than wages, so equality improves. But do the poor enjoy a recession, with its unemployment and weak wages? Not at all. They far prefer an economic boom, even though profits rise much faster than wages.
People want more income, not better Gini coefficients. They are concerned with inequality only when they see some powerful people gaining at their expense. They don’t grudge Sachin Tendulkar or Shah Rukh Khan their riches. Both these gentlemen are from families of modest means, and have become billionaires through talent. That makes them role models, not hate objects. They are examples of what ordinary Indians seek — a chance to become rich and famous themselves. They do not want a slice of Mao’s China, they want a slice of Deng’s China. They want the opportunity to rise.
The ADB review is dead right in its key conclusion: governments in Asia must do much more to improve equality of opportunity. In India, it is shocking that after six decades of independence and the spending of millions of crores, literacy is barely 65%, and most people who complete school cannot read simple paragraphs or do simple maths sums. It is outrageous that every village does not have a functioning school and health clinic; does not have electricity, telecom and a pukkaroad; does not have access to effective rule of law or judicial redress.
This is the inequality that I keep complaining about. Instead of doing something about it, socialists point fingers at the rising wealth of Ambanis and Tatas, as though that is responsible for the sad plight of our villages. It would be as ridiculous to blame Tendulkar and Shah Rukh Khan.
The shocking denial of access to basic facilities at the village level institutionalises inequality of opportunity, and prevents the poor from rising. Urban facilities provide some social mobility. But rural facilities are typically so pathetic as to become poverty traps.
For this, our netas and babus are fairly and squarely to blame. These heroes of the Left are the zeros that have ensured continuing inequality of opportunity, poverty and powerlessness. Their solution is to compete in offering castebased reservations, not in providing the equality of opportunity that might make caste irrelevant.
I too am outraged that 300 million Indians remain poor. I am outraged not that a few Indians have become billionaires but that thousands more have not, for want of equality of opportunity. I look forward to an India with thousands of billionaires and millions of millionaires. I do not wish to give the poor a f |
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| Govt planning textile institutes at district level |
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| GOVERNMENT is working on a new plan to meet the demands of over 4 million skilled workers in the textile sector over the next five years. It has proposed to set up a series of textile institutes at the district and sub-district level under a scheme — Neighbourhood Apparel Training Institutes for Job Assurance (NATIJA). The government would open about 400 institutes under public-private partnership (PPP), in association with the industry and the state government agencies. The Apparel Export Promotion Council (AEPC), which operates Apparel Training & Design Centres (ATDCs) to train manpower for the garment sector, would be the designated agency for the execution and operation of the projects under the initiative, textile secretary AK Singh told ET.
While the complete machinery component for the training would be provided by the industry, existing ITIs and polytechnic institutes may be considered for locating such centres. The scheme would give job assurance to the trainees for at least 4-5 months in a year. The AEPC would ink an MoU with the state government agencies and industry associations for setting up the training facilities and provide employment under the scheme. The centres would provide free training and would keep in mind the needs of the local industry. It envisages a three-tier skill development that would include basic and advanced sewing machine operation.
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| Talk Friendship, Walk Business SMEs can steer in interminable business deals by putting their best f |
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| It's about exchanging business cards, being part of business-after-hours, and attending functions associated with presentations, conventions and product launches. Called networking, it is no more a corporate sport. It has become a social investment of SMEs for the long-term motive of exchanging business referrals.
A company, at its start-up stage, should identify groups. These groups should consist of firms operating in vertical or horizontal markets, having complementary goals, and are willing to connect with each other for achieving better performance. "With the internet, it's faster and easier to establish strategic relationships globally, and SMEs that recognise this can build sustainable competitive advantage," says Lalit Saraswat, Founder, iTravelMarket & CEO, Sancoale Technologies.
From the economic point of view, SMEs can share costly infrastructures, services and process . In this context Fakhruddin Ronak, Management Consultant, Ronak & Associates, says, "SMEs need to join together and synergise their competencies to sustain in this extremely competitive arena. SMEs offer a pool of opportunities and socialisation can do wonders for them."
"Business and networking go together, particularly in case of consumer products where we see cut-throat competition and in small scale business large budgets are not possible for advertisements," says Shantanu Pansare, Owner, Lucknow Chikan Palace.
In addition, smaller budget restricts the firms from investing in R&D, but they can network for establishing JVs and seeking the M&A route thereby facilitating cash inflow for research and innovation. In fact, as Mr Ronak says, "M&A is the latest buzzword in the corporate world for socialising."
In order to avail the social and economic benefits of networking, the SMEs can consider the following:
Identify the right group or event: The enterprises should participate in trade fairs, conferences and functions that are in line of their business. "SMEs need knowledge and vision to grow and that is where niche based focused networking is important. Attending seminars, workshops and parties gives you opportunities to share wealth of information," says Deepak Shikarpur, CEO, Autoline Dimensions Software Ltd.
Prepare before the event: Go prepared to a networking event. It is always better to get a list of important people and 'Google' about them. "Ninety percent of networkers in Europe and America do Google about the important attendees of an event, before they leave for the same. Therefore, the verb 'to Google' has become a very important part of online preparation of networkers", says Thomas Power, Chairman at Ecademy.
Willingness to connect: Firms should drop the 'what's in it for me' attitude and look towards an interaction. "The best approach is to initiate a conversation with another delegate on something innocuous like 'how do you like the conference' so far," says Akhil Shahani, Director, The Shahani Group. Most of the firms leave behind a cold contact, which does not really benefit them. "For those who believe that exchanging cards at networking events is the only option to build business relationships, they have missed a large wave while others were busy riding it," says Mr Saraswat.
Make a positive impression: Once a co-networker starts taking interest in the business an entrepreneur should put up an impressive personal and business profile. As Mr Power puts in, "What you do, anybody can do, but who you are is a unique thing. Your profile should speak for you and your beliefs. Your business profile should be attractive in itself, including your finances, risks undertaken, ups and downs of business.” A networker can provide his co-networkers with referral or an introduction to a potential client. If one firm brings in business then the associating firm will also be moved to reciprocate by bringing business to it. "Think of some way you can help your co-networker. You should offer that help and make sure you both agree to fix a follow up meeting after the event is over," says Mr Shahani.
Develop win-win relationships: "An SME can develop a beneficial relationship by displaying profitability, credibility and visibility to his conetworkers," says Mr Power. It is very important to build relationship with the co-networker instead of being a salesperson. "Social networking helps you establish strong relationships with your customers, peers and suppliers," says Mr Saraswat.
Follow-up after the event: A firm should follow-up on the next day with an interest to build relationships. A networker should contact his co-networker within two weeks to further relationship building. This will help the firm to learn more about his co-networker's business and the challenges faced by the latter, where the former can find different ways to help his co-networker. "Keep offering help and advice to people in the network. They will then become attracted to you and will themselves request follow up meetings," says Mr Shahani.
Socialising should aim at building a strong network of trusted entrepreneurs who can stand by each other in difficult times. For this purpose an entrepreneur has to attend all the events organised by the networking group and expand the list of quality contacts. "Genuinely getting involved from the grass roots to the topmost level is very important," adds Bela Shanghvi, CEO, Aavartan.
Any investment in social capital through networking would enable firms to improvise the quality of their deliverables. "Networking in the pre-marketing and postmarketing stage is all about R&D. When you are starting, you need to test your business concepts, messaging, pricing and ideas. The power of networking is intelligence, research and getting ahead of traditional marketing," says Mr Power. Thus, it is very important for networking frims to develop trust, cooperation, clustering and innovation, for increasing competitiveness and productivity.
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| India & China to help Asia make up 30% of world GDP by ’20 |
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| INDIA’S growth story is set to contribute significantly to global GDP from now until 2020, according to a mid-August report of the International Labour Organisation (ILO).
The report, which was discussed at the Asian Employment Forum at Beijing earlier this month, contends that if Asia continues to grow at the historical rate of 4.6-4.7%, it would account for a growing share of global GDP — up from 24.7% to around 30-31% in 2020. Within the region, India and China would be the big drivers of growth, as in the run up to 2006. India’s share of Asia’s GDP is expected to rise from 7.2% to 8.7-10% by 2020.
India’s short-run share of the 2020 world GDP has been estimated at 3% and the long-run growth has been estimated at 2.7%, at a projected annual growth rate of 7.5% (short-run) and 6.3% (long-run).
China’s share of world GDP in 2020, both short and long-run, has been estimated at 9.7% at an annual growth rate of 8.5% (shortrun) and 8% (long-run). “As Asia’s two giants grow and comprise an even larger share of regional output, other regional countries will see an increase in potential benefits...,” said the report Visions for Asia’s Decent Work Decade: Sustainable Growth and Jobs to 2015. It said surging demand from primary and intermediary inputs, energy, technology and investment goods should continue to fuel rising export and output growth in the region. India and China’s neighbours could benefit from the tremendous growth in the region’s consumer market by fuelling growth and increased investment flow. “As China and India grow and move towards higher valueadded production, countries at lower stages of development will have an opportunity to enter into some of the lower cost export markets currently dominated by them,” it said.
Yet, there is strong reason to tread with caution. “...this also increases the danger of rising commodity inflation, which could have disproportionate adverse impact on the poor...,” the report warned.
Here’s a peek at the stench-ridden underbelly of growth which pose the biggest challenges of the future: the continued vulnerability of millions to poverty despite a decline in thse numbers and the persistence of the informal economy. The latter will go up in S Asia from 25% of employment now to 35% in 2015. The most substantial population growth will, in fact, occur in South Asia, where the population is likely to expand by 211 million or 13.8%. Labour force growth will increase the fastest (by 134 m or 20.8%, accounting for 60% of the total in the Asia region) but significantly, labour force participation rates (the number of working age population that is actually employed) will be considerably lower than other parts of Asia and the gap between male and female participation rates will widen..
A good chunk of that labour force could come from farm backgrounds. Between 2006 and 2015, the total employment in agriculture is projected to contract in Asia by 160 million. The services sector will provide the highest (40.7%) of the region’s total employment. E Asia will see a 44.3% declines in farm employment by 2015.Compared to E Asia, though, India is unlikely to witness a sharp shift from the primary sector. (48% in 2006 to 40% of employment in 2015 in S Asia). to either manufacturing or the services sector. Here, the report maintains, two thirds of the population will still reside in rural areas in 2015. The future gains of the shift from agriculture to the services sector in the region, compared to E and SE Asia, would depend heavily on whether the increase in services sector jobs is more on the lines of lower productivity, informal jobs or continued high value added service-related jobs.
Worse, the largest share of informal economy workers in total employment will be in the S Asia-India region, at more than 70%.. The persistence of the informal economy is not the only bad news for the S Asia-India region.
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| Punjab-UK Combo On A New High |
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| INDIAN investment in the UK is at an all-time high. In the first half of 2007, Tata-Corus ($9 b) and UB-Whyte and Mackay (£ 600 m) deals alone pushed India onto the big league of investors in the UK. This time UK government is keen on investors from Punjab and is ready to offer varied incentives and packages to the entrepreneurs. For the same purpose, UK Trade & Investment team that will be accompanied by representatives from four Regional Development Agencies - Think London, One North East, British Midlands and Invest Northern Ireland — will be visiting the state and meeting the industry representatives.
Jane Owen, director, UK Trade & Investment, India, says: “The UK is a vibrant, diversified economy that offers opportunities for companies to prosper and realise their international potential. The government is keen to further boost its business relations with Punjab’s business community The entrepreneurial characteristic of the Punjabi community is well known - in the UK we recognize it and celebrate it. Therefore, it is only natural for the country to enhance its business relations with the next generation of entrepreneurs in Punjab, across all sectors.”
With UK having a beneficial tax regime, it’s felt that by 2016, the country will be home to the world’s largest concentration of $ 1 million households, i.e. 1 in 4. UK is India’s second largest trade partner, accounting for 5% of India’s total foreign trade in goods and the bilateral trade between India and the country is set to grow further.
“If you have an exciting business idea, or are keen to expand your business overseas, UK Trade & Investment experts will assist you through the journey. Our network of experts will help you reduce cost, time and risk involved in selecting the right partner or location in the UK,” adds Mr Jane Owen.
The seminars, scheduled for 29 August in Chandigarh, and 30 August in Ludhiana, are being supported by the Confederation of Indian Industry (CII) and PHD Chamber of Commerce & Industry (PHDCCI). In 2006-2007 British economy grew faster than all the other G7 economies - stronger than America and Japan. Over 65% of Fortune 500 companies are represented in the UK.
UK Trade & Investment is a UK ness and UK government companies in overseas the , UK organisation . companies do business that do abroad helps
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| Punjab road commuters in for a smoother ride |
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| THE Punjab government has decided to implement a long-term maintenance contract of roads, to keep all them in proper shape throughout their total life. Under this program 7,200-km road network in Punjab would be covered. Funds for upgradation, strengthening, rehabilitation and renewal coat proposed would be met from budgetary allocation of the department. “The aim is to enable road commuters in Punjab to enjoy a smooth ride,” said PWD (B&R) minister Parminder Singh Dhindsa.
Under the scheme, all major district roads, district highways and roads linking various districts would be covered in a phased manner. “This year, we will start from 600 km and from 2008 we will cover 1,200 kms network every year to cover the total state under this scheme,” he added. The budgetary allocation of the department for Rs 200 crore from the road maintenance scheme would enable the project to progress. “Normally, roads are expected to serve for five years with routine maintenance but with this contract, their life is expected to increase to six resulting in saving to public exchequer and simultaneously ensuring increased level of public satisfaction,” the minister said.
The contract would also ensure that employees posted on strategic roads at various points would attend to accident victims and informing the police. The contractor would also be responsible for keeping the road clean. Upkeep of road signage, markings, reflectors, furniture and cosmetics would be part of this contract, Mr Dhindsa added
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| CDMA rings in higher growth than GSM Low-End Devices Drive CDMA Market Upwards |
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| IT’S the very low-end (VLE) devices driving the CDMA market skyward. As per latest figures provided by the CDMA Development Group (CDG), the CDMA subscriber base has crossed 50 million across India and VLE devices, including mobile and landline, have been able to bring the growth up to 5%.
CDG COO James Person says: “CDMA2000 is equally adept in serving a variety of telecommunications scenarios most economically, from urban centres to rural areas, from fixed to mobile deployments, from telephone to television services, and from ultra low-end (pre-paid) to high-end (post-paid) devices. As a result, CDMA2000 is quickly becoming the technology of choice for emerging markets.”
CDMA2000 is the technology used in CDMA phones and is the most widely deployed 3G technology globally. The CDG attributes this rapid growth in the region to the economic delivery of differentiated value-added services, network expansion into the rural areas of India and the growing availability of very low-end (VLE) devices. The catalysts in achieving the growth rate have been more effective in the rural areas across the country, including regions having high tele-density such as Punjab and Kerala.
Reliance Communications and Tata Teleservices, the only players in India offering CDMA services have cut through competition offered by GSM players that currently hold a majority in the telecom industry. VLE devices, such as Reliance Classic series and value added services such added talktime from Tata Teleservices, seemed to have created a market, specially in the rural areas for CDMA, which is now apparently growing faster than GSM.
“With up to 2.01 million net subscriber additions in June 2007, CDMA2000’s 5% growth rate exceeded that of GSM, at 4.1%. Reliance Communications and Tata Teleservices, who are among the top 20 fastest-growing operators in the world, are investing in the CDMA2000 business to further accelerate this growth rate. CDMA2000 devices have witnessed 50% year-on-year growth since 2003, with more OEMs participating than with GSM,” added CDG India country head BV Raman.
CDMA2000 operators will begin upgrading existing networks to advanced mobile broadband technology in the industry - EV-DO Rev A for enabling affordable broadband internet access and value-added services in both rural and urban markets. BSNL has already announced tariff plans for EV-DO broadband data service. In addition, Reliance will also expand its network to reach more than 20,000 towns and 300,000 villages.
However, the ambitious CDMA plans will have to be revved up as the GSM subscriber base has increased to 136 million. According to Cellular Operators Association of India (COAI), the All India GSM subscriber base grew from 130.6 million in May 2007 to 136 million in June 2007 – recording an addition of 5.4 million in June.
GSM service providers, including Bharti-Airtel, Hutch and Idea are rapidly enhancing coverage and reach of service, which is getting reflected in the healthy subscriber growth, said COAI director general TV Ramachandran. In fact, the markets which the CDMA players target across the country also form part of the highest growth sectors for GSM. As per COAI, among all circles, those in Category B witnessed the highest growth rate at nearly 5%. The highest growth was recorded by the UP (West) Circle at 6.5%. Further, Category C circles witnessed a growth of 3.2% where Orissa recorded highest growth at 5.4% followed by Himachal Pradesh at 3.9%.
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| Starting a biz just got easier |
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| COMPANIES wanting to set up new businesses in India will have to go through far fewer procedures than before. The ministries of industry, labour, company affairs and finance have worked together on new systems to reduce time taken to obtain various clearances, from 305 days to 166 days.
Businesses will also be able to avoid some 120 procedures that they currently go through to meet the requirements of labour, land and revenue departments.
This action follows a World Bank report which rates India quite low in respect of the ease of doing business. The Centre’s attempt is to reduce time taken at the time of registration of the company, approving the memorandum and articles of association, obtaining PAN and TAN, registration under the Shops and Establishment Act, registration for VAT, establishing the employees provident fund and so on.
The government will soon inform the World Bank about the reduced procedures so that it can incorporate it in its yearly publication, which rates countries based on the ease of doing business. The trigger for the government to act is the annual world bank report — 2006 and 2007 — which rates India quite low, down at 134, among 175 countries in terms of the ease of setting up business.
Reacting to the World Bank report, the government set up up a committee of secretaries (CoS) to go into the issue. The CoS studied procedures adopted and time taken by various relevant ministries in giving clearances. After an elaborate exercise, some new models have been adopted which cut both time taken and procedures adopted substantially. The cabinet secretary will formally be apprised of the new models this week. The small-scale industry ministry has also initiated faster methods to help closure of SMEs that are not registered under the Companies Act 1956.
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| Govt may ground five-year bind on flying abroad Civil Aviation Ministry Likely To Allow Carriers To |
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| THE government is likely to do away with the mandatory norm that requires Indian carriers to operate in the domestic market for at least five years before they fly abroad. The civil aviation ministry has veered round to the view that each airline should be evaluated on its own merits instead of a blanket eligibility criteria based on domestic flying experience.
“We are willing to do away with existing norm and allow airlines to fly on international routes on a case-to-case basis. In no part of the world airlines are allowed to operate internationally on the basis of their five or three-years of experience in the domestic market,” civil aviation minister Praful Patel told ET.
The domestic airline industry is divided on this issue. While older private airlines like Jet Airways favours continuing with the existing rule, new entrants like Kingfisher, SpiceJet and Air Deccan want relaxation in the norms so as to carve out a share of the international traffic.
“We want to take Indian carriers’ inbound and outbound market share in the total international traffic to 50% which can only be achieved by encouraging our airlines to fly abroad,” Mr Patel said. “Allowing airlines to operate in as many as destinations bring competition, resulting in competitive fare and better on-board facilities to the travellers. Not only that a liberal approach on the issue would provide carriers access to new market,” he said.
The new thinking of doing away with the minimum experience criteria altogether comes at a time when a group of ministers headed by external affairs minister Pranab Mukherjee is deliberating on the national civil aviation policy. The policy includes among other things norms for domestic airline companies to fly abroad. The next meeting of the GoM is slated in the first week of September.
The new move may pave the way for carriers such as Kingfisher and Air Deccan to operate internationally. Currently, an airline seeking to start overseas flights needs to have an uninterrupted flying experience of five years in the domestic skies and have a minimum fleet size of 20 aircraft.
Only three airlines — Air India, Indian Airlines (Indian) and Jet Airways — presently meet the minimum eligibility criteria to operate international flight and are having scheduled services for global destinations.
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| Lord Paul to drive into Singur with metal plant |
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| BIT By bit, the much-talked about Rs 1,500-crore Tata Motors small car project at Singur in Hooghly district of West Bengal is taking shape.
Even as the political quagmire threatens to steal the thunder at times, the “vendors” have slowly begun to troop in, determined to make the first car roll
out on the promised date in June 2008. Among the latest to have taken up positions on strife-torn Singur is the € 2 billion Caparo Group of the UK, through its wholly-owned subsidiary Caparo Engineering India, which is investing in sheet metal and stamping facility at the vendor park to supply the classy interiors the Tata small car is destined to sport.
Confirming this from his London office, Swraj Paul aka Lord Paul of Marylebone told ET: “We have investment plans for the auto component park in West Bengal. My team is working on it. Things will take final shape within two weeks. We can talk more about our investments then.”
If that leaves even the slightest niggle of doubt, shed it. West Bengal government sources went a step ahead and actually said the Caparo Group has already kicked off construction work at Singur, a sign of the mood that reigns within the factory site, despite everything.
And Caparo isn’t the only one. Many others have started digging their heels in and the lineup includes eminent auto component makers such as Rasandik Engineering, Rucha Engineering, Lumax and JBM Auto. All these developments apparently come in the wake of a single Tata Motors’ SoS recently requesting component makers to step on the gas to help roll out the small car in time.
ET’s email to Tata Motors MD Ravi Kant on Tuesday regarding the developments, prompted the official spokesperson to say: “Tata Motors has always said the small car will be launched in the first half of 2008-09. Every activity, connected to the project, is tuned to meeting this objective. The total investment by Tata Motors will be about Rs 1,500 crore. Vendors, who are setting up facilities at the adjacent vendor park, will make additional investments.”
While Caparo Engineering would contribute to the interiors of the car, the fuel tank would be supplied by Rasandik Engineering Industries. Rasandik already supplies fuel tanks for Indica X1 and other critical components like welded blanks, door inners, cross-car beams, press tools and dyes.
Rasandik plans to invest Rs 55 crore at the Singur vendor park in the first phase. In this context, Rasandik Engineering VP commercial Mohan Sukhal said: “Spread over approximately 12 acres, the unit will have a state-of-the-art press line. It will be our fifth plant, the other four being located at Gurgaon, Greater Noida, Pune and Mysore.”
Rucha Engineers will supply the complex assemblies of sheet metal and tubes for the interiors and Umesh D a s h r a t h i , MD of the company said: “We have already started construction of our unit at Singur. We are investing Rs 45-50 crore in the unit which is spread over 10 acres. The unit is expected to be ready by December 2007. At present, Rucha has two units in Maharashtra, one in Aurangabad and the other at Chakan.”
The Rs 500-crore Sharda Motor Industries will supply exhaust systems for the car. The company has a number of factories at Noida and Chennai.
Anil Wadhwar, president of the company, said: “We have acquired seven acres at Singur. Right now, we cannot comment on the volume of investment. We will be supplying the exhaust system to the small car.” Sharda Motor has a technical coll a b o r a t i o n with Sejong Industrial Ltd, a leading Korean firm, for exhaust system.
Backed by the huge experience of Lord Paul and the Caparo Group, the Rs 400-crore Caparo Engineering India of course, specialises in the manufacture of automotive stampings in steel and aluminium. The company supplies a vast range of products from auto body parts, chassis components, reinforcements, brackets to frame addons and other general stampings to various carmakers. Caparo Engineering, at present has stamping units at Pitampur ( M a d h y a P r a d e s h ) , Greater Noida (UP) and Halol (Gujarat) and a fastener manufacturing unit in Chopanki (Rajasthan).
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| Godrej Hershey may put Jumpin and Xs on block |
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| GODREJ Hershey Foods & Beverages, a joint venture between Godrej and Hershey’s, is debating a proposal to put its two fruit drink brands, Jumpin’ and Xs, on the block. The development comes within four months of the US confectionery maker acquiring controlling stake in Godrej Foods (GBFL). Sources say the two beleaguered brands find little fit with Hershey’s overall brand strategy in India. While Adi Godrej, chairman, GBFL, that still holds 43% in the Hershey’s-controlled company, denied it, another company executive said, “It would not be pertinent to comment on the development at this stage.” An email query to Godrej Sara Lee MD A Mahendran, who also heads Godrej Hershey’s, went unanswered. Instead, a Godrej Foods media relations executive informed ET that Mr Mahendran didn’t want to “comment on the rumours.”
Industry sources, however, maintain that the two fruit drink brands are underperformers and have little to offer either in terms of market share or distribution muscle to Hershey’s foray into the Indian market. “This looks like a clear case of acquired brand’s status as a burden rather than a support to the company that bought them. Hence, this debate of offloading them,” an industry veteran told ET.
In April this year, Hershey’s had acquired 51% stake in GFBL for $60 million, that included buying out stakes and also capital investment. Hershey’s had bought 40% stake in GBFL held by IL&FS, which has now exited from the company. GBFL, on its part, sold 5%, and now holds a 43% stake in the company. Similarly, GBFL director A Mahendran sold 6%, and is now left with 6% in the company. GBFL, which has two manufacturing plants in Bhopal and Chittoor in Andhra Pradesh, is opening a third eclairs manufacturing plant in Himachal Pradesh. The company had also acquired Nutrine Confectionery last year.
Hershey, which makes candies, including Kit Kat and Almond Joy, has been cutting jobs in the United States, but expanding in Asia. Chocolate makers hope that a tiny per-capita consumption of their products in Asia may translate into fast growth later. Hershey’s will now compete with Cadbury and Nestlé in India.
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| Bajaj Hindusthan honcho to head In Bev’s India ops |
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| RAVI Jaipuria’s RJ Corp and beer giant InBev combine has roped in Raja Mukerji to spearhead its joint venture operations in India. InBev India International Ltd, in which RJ Corp holds 51% stake with InBev holding the rest, is expected to unveil brewery tie-ups in the coming weeks.
When contacted, Mr Jaipuria confirmed the induction of Mr Mukerji who is expected to be designated as President. He joins from Bajaj Hindustan and has had previous stints with Radico Khaitan, Shaw Wallace and Coca Cola. ET had earlier reported about InBev’s plans to hit India with a German beer Lowenbrau to be followed by international beer s like Stella Artois and Beck’s. InBev is the world’s largest brewer by volume and the last among the Big Five global brewers to enter India.
The JV has been on the prowl for top management with alcobev sector facing shortage of experienced senior executives even as the top global brewers foray into India’s booming beer consumption. Mr Mukerji comes with experience in handling country liquor and Indian Made Spirits in the north Indian markets.
It may be mentioned that another brewing giant Carlsberg has already had trouble at the top with its India CEO Dasrath Raman, who came in from outside the sector, quitting very early. Incidentally, none of the invading brewers like Anheuser-Busch (A-B),
InBev or Carlsberg have succeeded in disturbing the operational structure of the market leader United Breweries (UB), which has seen its top management remain intact for several years now. Heineken arm Asia pacific Breweries (APB) managed to bring on board a former UB and Shaw Wallace & Co honcho Ravi Kaza to head operations making it perhaps the only top-level induction directly from the brewing sector.
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| Empower the board to review pay scales of PSUs: Scope |
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| New Delhi: The Standing Conference of Public Enterprises (Scope), a representative body of state-run firms, on Wednesday demanded that the government give more autonomy to Board of Directors to fix wages for employees to check attrition. Scope has presented a report on ‘Compensation Management Practices in Public Sector Enterprises’ to the Second Pay Revision Committee on July 24, Scope Chairman Sarthak Behuria told reporters here.
“The board of directors of an organisation has immense power in all matters, like investment, expansion, production, distribution; but no power at all regarding pay scales,” he said, demanding that the PSU Boards be given more power and autonomy to fix wages for their staff.
“Empowered boards will help in retaining talent and fighting growing attrition by introducing performance based compensations among employees, which is alarming at the management level and in employees engaged in core and critical functions to businesses of PSUs,” he said.
Strongly recommending to de-link the salary of public sector executives from those applicable to employees of the government or civil services, Scope has suggested that the salary level of PSEs be based on factors such as capacity to pay of each individual PSE, relevant market benchmark for pay and benefits and team and individual performances. The rate of progression of salaries in PSUs is gradual and the ratio between the entry-level executives salary and that of the CEO is about 1:4. Scope has recommended the need for differential salary compensation linked to the employees role and responsibility, particularly for employees with technical expertise.
Accordingly, starting executive salary levels for the Navratnas, Miniratnas, profit making PSEs and loss making PSEs have been recommended along with internal relativities between the starting salary and that of the executive directors. Two other important measures that Scope suggested are — merger of 50 per cent DA into basic pay and extending the retiring age to 62 years. Recommending periodic pay reviews in three years, Scope Director General S M Dewan said, “The practice of revising wages once in ten years is without a linkage to affordability, business needs or pay practices prevailing in the market.”
Dewan said the Scope study had found that there was a wide disparity between compensation given by private and public sector companies.
“We are not competing with private sectors,” Behuria added, “but if the commission accepts most of our recommendations, then the difference will get narrowed.”
Scope has also recommended PSEs should have the autonomy to introduce stock options and retirement benefits that will enhance the ability of the companies to attract and retain talent. Behuria, who is also Chairman of Indian Oil Corp, said that Scope would ask for an interim report from the pay commission in January 2008.
When asked about the chances of accepting the Scope recommendations by the pay commission, Dewan said, “CPSEs have given Rs 70,000 crore profit to the exchequer in 2005-06 and if employees continue to leave, the work of the organisations will suffer, which no government can afford, so they have to accept.”— PTI
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| Decks cleared for 7 road projects in Punjab |
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| ROAD infrastructure in Punjab is heading to get some facelift as decks have been cleared for seven road projects to be undertaken by the National Highways Authority of India (NHAI).
The seven projects cleared included four-laning of Amritsar-Pathankot stretch on NH-15, six- laning of Chandigarh-Ludhiana stretch on NH-95, fourlaning of Ludhiana-Moga-Talwandi-Ferozepur stretch on NH-95, Jalandhar-Dhilwan section of NH-1, Section Desu Majra to Kurali of Chandigarh-Ropar-Kiratpur stretch on NH-21, six-laning of the Jalandhar-Panipat section and the stretch from Jalandhar to Wagha Border via Amritsa, NHAI chairman Jivtesh Singh Maini said.
Mr Maini also agreed to consider the proposal to extend the four laning of Ludhiana-Moga-Talwandi-Ferozepur stretch on NH-95 upto Hussainiwala keeping in view its historic importance. freedom fighters Bhagat Singh, Rajguru and Sukhdev belonged to this region.
He also promised to expedite the four laning of the Amritsar-Pathankot section on NH-15 provided the state government hastens the pace of land acquisition on the tract. Mr Maini informed the Punjab Chief Minister Prakash Singh Badal that six laning of 68 Km of the Chandigarh-Ludhiana Road (NH-95) had been approved under the National Highways Development Project (NHDP) phase-V by committee on infrastructure and the feasibility and Detailed Project Report (DPR) would be prepared by NHAI.
Mr Badal urged the NHAI chairman to extend the four laning of Chandigarh-Ropar-Kirtarpur Sahib road to Sri Anandpur Sahib, the later being an important religious tourist destination. He also assured full cooperation from the state government for an early execution of ongoing projects under NHDP in the state.
Mr.Badal pointed out that the six laning of Jalandhar to Wagha Border via Amritsar road now assumed far more importance in the wake of Indo-Pak’s decision to allow free movement of trucks through the border.
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| Following Punjab model, SBI plans to re-energise Apple orchards in Himachal |
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| WEATHER gods may have played havoc with the apple growers in Himachal pradesh, but with banks stepping in at the right time, things may change in the near future. Three area specific schemes launched by State Bank of India during the on going apple harvesting season in Himachal has brought smiles to the Himachal orchardists. The bank has earmarked Rs 40 crore for one year under the schemes. Depending on the response, it may extend it further.
Its felt that in addition to the credit need for meeting cultivation cost for apple, there is need to have an integrated infrastructure support as a package for producing quality apple. It will provide a consistent base to raise quality produce and enhance productivity.
SBI Agri-DGM Mr L S Srivastava says, “This, ultimately, will rejuvenate the old orchards of the state, leading to higher production of quality fruits. Repayment of loans taken for replacement of old orchards is convenient to the farmers without any extra burden onthem during the replacement period “.
Apple growers have been facing bad times for the last few days. D ue to floods, apple growers were unable to transport over 70,000-1 lakh boxes of apple from places like rampur Bushar.
A few months back a consortium of textile mills and banks in Punjab together to improve the yield and quality of cotton here. Groups like Vardhman, Trident, Nahar et along with banks like Canara Bank, SBI, State Bank of Patiala and Punjab National Bank have adopted almost 50 villages so far in the current year itself.
Interestingly, in 2005-06 this consortium acquired 19,000 acres of land in 25 villages of Punjab and the yield was 873 kg per hectare in the acquired villages. Whereas cotton yield in rest of Punjab was 600 kg per hectare in the same period. By 2009-10 it is focusing to enhance the cotton production to 1,000 kg per hectare.
In case of the present schemes launched by the SBI, the first scheme is for infrastructural support to the existing apple orchardists to meet their capital requirements of pump-sets/irrigation systems, sprayers, other orchard equipment, transport vehicle and support systems like water storage tanks, drip system, grading/storage/packing house etc.
The second scheme is for rejuvenation of old apple orchards. Under the scheme the old, low producing orchards will be replaced in phased manner with new varieties that can bear quality fruit at an early age.
The third scheme is for financing lessee of apple orchards to meet the financial requirements of the farmers who, in addition to their own orchards, take on lease the orchards of the farmers who find it difficult to manage/market their orchards/produce due to their engagements else where.
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| Punjab to set up SPV for food park, marketing To Take Care Of Milkfed And Markfed Products |
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| A SPECIAL purpose vehicle (SPV) is going to be created by the State Cooperation department for marketing products from Milkfed and Markfed and also for setting up a food park in the state. Speaking to ET, Punjab Cooperation Minister Capt Kanwaljit Singh said the government was working on creating an apex body to go for processing and also marketing at corporate level.
“Work is on to form the SPV by the Cooperation department for both the marketing and the setting of a food park in the state. We have not named the company yet. The matter of corporate entity and the official licensee will be decided soon,” he said. According to him the SPV made sense, considering that the management and working would be unlike a government set up and would give competition to the upcoming retail chains.
The SPV would concentrate on marketing Milkfed brand ‘Verka’ and Markfed brand ‘ Sohna’ across the country. Currently, the Verka products (milk, paneer, dahi and desi ghee) are being sold across Punjab, Chandigarh, and parts of Shimla, Jammu and Haryana. Similarly, the Sohna products (basmati rice, refined mustard oil, vanaspati, pickles, squashes and canned products) are being sold across the country, but does require corporate management to expand further.
Also, the SPV would help in developing a agri-processing zone or a food park in Punjab, most likely in the doaba belt (Jallandhar, Kapurthala and Hoshiarpur), as it has to be a cluster approach, according to the Cooperation minister.
“The Union food processing industries ministry is in the process of finalising a project to set five food parks across the country. I have met Minister of State for Food Processing Industries Subodh Kant Sahay in New Delhi, who has assured me that Punjab would have one of the food parks,” he said.
He further said Markfed would soon advertise for recruitment of some retail experts.
According to sources, the SPV will have to get clearances from various departments, get the land bank, and ask for expression of interest from companies before running the project on a public-private partnership model. “A food park spanning across a radius of 100 km will require both a strong backward and forward linkage. The strong network of cooperative societies in Punjab makes our work easier,” a senior official of Markfed said.
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| Traders seek nod for evening trade in globally-linked commodities |
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| TRADERS and commodity exchanges have asked the market regulator, Forward Market Commission, to allow evening trading in internationally linked agri commodities like edible oil complex. "With increased participation in edible oil and oilseed complex by the industry, the timing is right to introduce evening trading in commodities that take price signals from the international markets," NCDEX chief business officer Shrikant Subbarayan told ET.
This will also help in restricting the parallel trade that takes place once the domestic market get closed, he added. Sources said the size of such parallel trade is more than the size of combined turnover of all the three exchanges and introduction of evening trade will provide a legal alternative and will increase participation of industry.
Currently, evening trading is allowed in coffee but there are several other commodities, like edible oil complex, sugar, cotton and maize, where the industry feels that evening trading should be introduced.
FMC member Kewal Ram said that in principle, the regulator is not against opening the agri commodities for evening trade but it is waiting for the right time when these commodities can be globally integrated. "We had started evening trade in some agri commodities but there were complaints from traders that they were under pressure in night trading that was dominated by speculators," Mr Ram said. He said evening trade in coffee was allowed as around 70-80% of the commodity was exported. An Indore-based edible oil body official, who wished not to be named, said evening trading was stopped at the behest of regional exchange NBOT whose volumes were affected. "But even after evening trade was stopped, there was no jump in the volumes on account of flourishing parallel trade," the official said. Solvent Extractors' Association of India executive director B V Mehta said evening trade will provide a better price discovery mechanism in addition to liquidity. In a letter written to FMC earlier, the association mentioned that earlier when the evening session was available for soya complex, the solvent extractors units were able to manage risk far more effectively.
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| PSU banks slash short-term FD rates |
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| FIVE major public sector banks have cut interest rates on short-term fixed deposits by 0.5-2.25% after RBI’s quarterly review of credit policy.
On July 20, interest rates for fixed deposits up to one year stood at 3-9.5%, which was revised downward to 3-7.25% on August 10, minister of state for finance Pawan Kumar Bansal informed Rajya Sabha in a written reply.
During the period, rates on term deposits for 1-2 years were revised from 7.5-9.5% to 7.5-9%, he said, adding that fixed deposits of over two years attracted the same interest as earlier.
In its first quarterly review of credit policy for 2007-08 on July 31, RBI hiked the proportion of depositors money that commercial banks need to park with the central bank by half a per cent to curb money supply. The move was aimed to suck about Rs 16,000 crore from the market.
Replying to another question, Mr Bansal said, all public sector banks put together have written off bad debts amounting to Rs 9,424 crore in 2006-07 as compared to Rs 8,832 crore in the previous year. Leading the pack, State Bank of India has written off Rs 1,397 crore, followed by Punjab National Bank (Rs 883 crore) and Oriental Bank of Commerce (Rs 777 crore).
On the growth prospect of Indian banking sector, Mr Bansal said global consultancy firm McKinsey & Company in its study has projected the sector’s revenue from consumer finance at Rs 74,000 crore by 2009-10 as against Rs 28,500 crore generated in 2004-05.
He allayed fears that the country was getting into an internal debt trap in response to another question.
To a separate query, Mr Bansal said the government has decided to step up minority communities’ share in the priority sector lending from 9% to 15% over three years.
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| Rupee gains as traders look to Wall Street |
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| THE Indian rupee shrugged off a 3% fall in local stocks to end stronger on Tuesday, with traders saying a rise in US stock futures was supportive and should encourage investors to bring some money back to India.
The partially convertible rupee ended at 41.08/09 per dollar, moving up from Friday's 41.33/34, having briefly breached the 41 mark to hit a high of 40.97 during trade. Local currency markets were closed on Monday for a holiday.
"Wall Street is looking good, which means the Sensex will do well tomorrow, and the rupee market already has priced that in," said a senior dealer with a private bank, referring to India's benchmark stock index. The local share index slid 3.04% to a three-month closing low on Tuesday on worries about a global credit squeeze and local political troubles over a nuclear energy deal with the United States.
US stock futures rose after the Chinese central bank raised interest rates and also on hopes the Federal Reserve might take additional steps to shore up credit markets. The Chinese move saw the yen pare some earlier gains, which helped soothe nerves about further unwinding of carry trades.
The rupee, which hit a nine-year high of 40.20 per dollar in July, had benefited this year from the carry trade, where investors borrow in currencies with low interest rates, such as the yen, and use the funds to invest in high-yielding currencies.
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| New Zealand investigating Chinese garment imports |
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| NEW Zealand launched an investigation into Chinese garment imports Monday after children’s clothes from China were found to contain dangerous levels of formaldehyde, officials said.
The government ordered the probe after scientists testing clothes for TV3’s ”Target’’ consumer watchdog program discovered formaldehyde concentrations up to 900 times above the safe level in woolen and cotton clothes from China.
”Target’’ producer Simon Roy said scientists from the government agency AgriQuality tested a variety of new children’s and adult’s clothes and the results were so astounding they thought they had made a mistake.
”Our results were shocking, ranging from 230 ppm (parts per million) to 18,000 ppm,’’ he said. ”Some of the clothes tested have a reading of 900 times the level that actually causes harm.’’
Formaldehyde — a chemical preservative that gives a permanent press effect to clothes and is also used as an embalming fluid — can cause problems ranging from skin rashes to cancer. Ministry of Consumer Affairs general manager Liz MacPherson said it had launched an investigation into the nature and size of the problem. ”We’re taking some urgent action to investigate it ... We’re taking it very seriously,’’ she told National Radio.
Prime Minister Helen Clark told reporters New Zealand has”the ability to ban products outright where they don’t meet appropriate standards.’’ ”These aren’t country-specific standards, they are universal standards and if companies don’t meet them their goods don’t stay here,’’ she said when asked what remedies could be taken over the clothing imports. ”Target’’ production manager Juanita Dobson said the garments tested were ”randomly selected items’’ that are ”readily available from common outlets around New Zealand.
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| Connecting with success |
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| Many SMEs are keen on getting aboard the telecom bandwagon. What are the challenges? What are the opportunities? This analysis tries to get some answers
The India telecom story has just started to unfold and the future looks exciting. Having already achieved the distinction of boasting the lowest call rates, the fastest growth in number of subscribers, the fastest sales of million mobile phones, the cheapest mobile handset and the world's most affordable colour phone, India offers an unprecedented opportunity for telecom service operators, infrastructure vendors, manufacturers and associated services companies. The rapid rise of this sector has presented several challenges to the SMEs who are riding high on the telecom wave.
Evolution
The process of opening up of the telecom sector to competition and private sector participation started in India in the 1990s. Telegraph services came to India in 1853: only 9 years after Samuel Morse invented the telegraph transmitter. Telecom services followed soon after Alexander Bell's invention in 1876.
However, the progress in building up the network was extremely slow and there were hardly 80,000 telephone subscribers by the time India became independent in 1947. In 1981 there were barely 2 million telephone lines in India; the population in India, at that time, was 683 million people.
The picture today is quite different. The total telecom base today is at 214 million, amongst top 5 in the world. Our wireless subscriber base is at 168 million which is again the third largest in the world despite the fact that our wireless penetration of 15% is lowest in the world. Our fixed line subscriber base is at 46 million and broadband subscriber base is at little over 2 million. With huge potential to grow in all segments, Indian telecom is well placed in the world telecom space.
Telecom value chain
With the increasing emergence and popularity of new convergent technologies like Voice Over Internet Protocol (VoIP), the Indian telecom landscape will undergo a change thereby impacting the existing revenue models.
The value chain analysis indicates that our telecom sector is bound to move from a centralized structure to a distributed structure which will essentially mean that there will be a beeline of companies to provide aggregated services.
Smaller, highly mobile start-ups need to leverage disruptive IP-based technologies and platforms to give the big companies a run for their money.
Key opportunity areas for SMEs Voice (wire line)
• Increasing wireless penetration is resulting in net line decrease
• VoIP is displacing circuit switched for both initial deployment in developing markets and new entrants in mature markets.
Broadband Wireless
• Capital intensive network upgrades to launch of 3G services is next wave
• Application and content development becoming hot sectors
• Data and VAS has contributed to 9% of revenue in 2006
• Messaging and music (ringtones, downloads, etc.) to be key contributors.
Data (wire line)
• DSL has taken off in mature markets, nascent in India
• Business (customer) services moving towards higher value-add services, e.g. VPN
• Business bandwidth requirements have grown: Low-end 1.5M to High-end SANs.
Cable TV
• Incremental data business has made this more attractive in the specific metros with high TV penetration and consolidated operations, however, these markets are few
• Convergence of Broadcast TV -Data - Voice
• Digital broadcasting -the "3G"of Cable TV.
Enterprise Services
• Managed services area looks very attractive. Consulting on various aspects of telecom like Telecom Cost Management and the likes provides good opportunities
• Enterprise Networking
• Telecom Equipment Manufacturing (TEM)
• India represents one of the fastest growing areas for handset and network equipment manufacturers
• Handset Design offers good opportunity for growth.
We estimate that in a competitive narrowband environment like a Dial up/ISP, the returns will be low, whereas in a regulated narrowband environment like fixed-Line voice the growth is low and limited. Broad band areas like VPN, DSL-ISP, Leased circuits and 3G offer not only high growth but very high returns too.
Broadband business looks to offer the most attractive opportunity in the areas of mobile, proprietary and last mile infrastructure. With equipment prices already at the world's lowest it is a competitive market for handset makers too.
Before plunging in
SMEs need to appreciate the market dynamics before committing to a specific segment within the telecom sector. Our analysis indicates that competitive pressures will result in a split between network specialists and marketing (content) specialists.
The critical success factors for network specialists will be scale and pricing while their content counterparts will have to focus primarily on branding. Consolidation will be on the cards as SMEs will find it difficult to keep up with the business requirements especially in the unregulated areas where over competition have driven down margins. Industry restructuring to specialize or to gain economies of scale will offer significant opportunity for investment.
Broadband has emerged as the key driver of IP traffic growth. The regulated broadband sectors will offer the most potential viz. 3G.
Asset sharing is likely to be the next big opportunity viz. Tower Sharing, Mobile Virtual Network Operator (MVNO). The tower business space needs to be watched very closely as a lot of activity is expected in the next 12 to 24 months.
Way forward
SMEs in telecom need to address three categories of issues; cannibalization of existing markets, significant overcapacity in commodity markets, and tapping the right opportunities.
The future growth seems to be from the wireless based services. It is crucial for SMEs to ident |
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| Exports from Haryana and Chandigarh up 20% |
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| EVEN when the total exports from Haryana and Chandigarh recorded a growth of 20% at Rs 30,000 crore in 2006-07 as against export of Rs 25,000 crore in 2005-06, exporters across the state feel that the lack of infrastructure, delayed import facility at Panipat and unfavorable tax norms were not assisting them to grow.
For the 50 members of the Panipat Exporteres Association, which has an export turnover of Rs 2,000 crore annually, the non-availability of infrastructure for import at ICD Babarpur, Panipat was the key issue. A textile exporter said that even after the area being notified for imports and for DEPB shipping bills on March’2006, no infrastructure, like railway hub, holding of empty containers, crain and fork lifter, separate warehouse and suitable houses for custom officials has been provided.
An uneven tax norm between Punjab and Haryana was affecting the rice exporters in the state, according to Rakesh Aggarwal, managing director, Sunstar Overseas Limited. “Unlike Punjab, where rice exporters are refunded 2%market fee and 2% rural development fund, rice exporters in Haryana are not given the benefit. Apart form hitting the business, it is also demoralising the exporter,” he said.
For now, the district of Hisar has been declared as the highest exporting district with a share of 30% in overall export, says a report of Sub-committee of State Level Bankers’ Committee for Export Promotion. District wise export data show that after Hisar, other districts, which contributed their export share as percentage, include Panipat (18), Karnal (11), Gurgaon (10), Sonepat (7), Faridabad (6) and Chandigarh (6). In financial terms, the total exports from Hisar stood at Rs 2,520 crore, Panipat at Rs 1,490 crore, Karnal Rs 940 crore and Gurgaon at Rs 844 crore.
However, some districts including Panchkula, Rewari, Rohtak and Sonepat observed fall in their export figures as compared to figures of 2005-06. Item-wise, export of steel contributed maximum share of 22% in the total exports from these states, the report added. Other items were, Rice(18%), handlooms and handicrafts (15%), textiles (8%) and medicines (7%).
Menawhile, the export in steel products increased by 85%, medicines jumped by 168%, handlooms and textiles by 23% and readymade garments by 127%.
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| MRTPC lens on Cipla’s African exports |
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| THE Monopolies and Restrictive Trade Practices Commission (MRTPC) has asked its investigation wing to probe a US-based NGO’s allegation that pharma major Cipla is selling a crucial AIDS drug in Africa twoand-a-half times cheaper than in India. MRTPC wants to know why Indian consumers should subsidise the drug for patients in Africa. Cipla denies the allegation, saying it does not sell Viraday, a combination of three drugs, in Africa.
The commission took note of the recent advertisements by the AIDS Healthcare Foundation, which said the Cipla brand is available to a patient in Africa for Rs 21,200 for a year’s treatment while it costs Rs 54,000 in India. It has asked the director-general of investigation and registration (DGIR) to find out the facts from the NGO and Cipla. The commission believes that the NGO must have some basis for making such an allegation through advertisements in leading Indian newspapers. It will ask whether the NGO has got any proof such as an invoice from Cipla to any importer in Africa.
Cipla joint managing director Amar Lulla told ET that the company has not sold a single unit of Viraday in Africa. Asked if it was possible that NGOs that procure drugs from Cipla might be selling the drug in Africa at a subsidised price, Mr Lulla said, “Not a single unit has gone to Africa. This would be our response to the commission.”
While MRTPC is not a price regulator, it intervenes where it feels there is an unfair trade practice. It had directed biotech major Mahyco-Monsanto to reduce the price of its of genetically modified Bt-cotton seeds, saying the price should be reasonable. It asked the company not to charge Rs 900 for a packet of 450 gm and to fix a reasonable trait value as charged by its parent company, Monsanto in China. After the Supreme Court refused to stay the MRTPC order in an appeal by the company, the APgovernment fixed the price at Rs 750. MRTPC sources say prices could be a function of market forces, but on essential goods like medicines, there should be a reasonable connection between the price in the country where it is manufactured and the export price.
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| Blackstone picks 50% in Gokaldas for $165 million PE Major Seals Biggest Deal In The Domestic Appare |
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| THE Indian arm of the NYSE-listed Blackstone Group has sewn the biggest deal in the domestic apparel industry, acquiring a 50.1% stake in Bangalore-based Gokaldas Exports (GEL), the country’s largest garment exporter.
A press release issued by GEL said Blackstone would be investing close to $165 million (Rs 682.1 crore at current exchange rate).
The company, which had gone for an IPO in March 2005, has an employee strength of 47,000 across 46 facilities with a capacity to produce and export 2.5 million garments a month.
The acquisition will also see the private equity (PE) player making a mandatory “open offer” for 20% of the outstanding shares. GEL, which counts brands like GAP, Nike and Reebok as its customers, had gone for a listing in March 2005.
The GEL-Blackstone deal comes close on the heels of the Mumbai-based Bombay Rayon Fashions acquiring a majority stake in Leela Scottish Lace for $38 million (Rs 155 crore) in July this year.
ET had spoken of a deal in the offing with Blackstone Group in its edition dated August 6.
“With its global reach and deep relationships, Blackstone is an ideal partner to help us realise our vision of building a global industry leader. Blackstone is a long-term partner and intends to work with us to deepen our customer relationships and accelerate our growth plan,” said GEL executive director Rajendra Hinduja.
“This favourable industry dynamic combined with our highest regard for the management team of Gokaldas Exports were key factors in our decision to enter into this partnership. We are looking forward to using our global network in contributing to the growth of the company in a meaningful way,” said Blackstone Advisors India CMD Akhil Gupta.
Mr Hinduja told ET that it would be work as usual at the company, though there would be changes at the board level, which would be expanded to include three nominees of the PE player while Madanlal Hinduja would continue to be the chairman of the company. The board of directors includes former Crisil MD Pradip Shah.
It is believed that the Hinduja brothers (Madanlal, Rajan and Dinesh) would be investing the proceeds from the stake sale in the apparel SEZ planned by the group. The GEL stock closed on NSE at Rs 229.1 against Friday’s closing price of Rs 223.05. For the first quarter ended June 30, 2007, GEL’s total income stood at Rs 266.94 crore (Rs 223.79 crore), indicating a rise of 19.28%, though thanks to the northward movement of the rupee, the net profit dipped 22.13% to Rs 10.52 crore (Rs 13.51 crore).
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| MSMEs may land 10% advances from banks |
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MSME MINISTRY MOOTS PROPOSAL FOR SSI SUB-SECTOR
Gunjan Pradhan Sinha HYDERABAD
BANKS may have to earmark 10% of their advances every year for the small-scale sector if the Reserve Bank of India (RBI) endorses a proposal mooted by the ministry of micro, small and medium enterprises (MSME). The ministry has made out a case for fixing a sub-target for loans to the small-scale sector — comprising small and micro enterprises — to ensure a more serious commitment to the sector. It has cited the recommendations of a parliamentary committee to bolster its case.
Bank loans to the small-scale sector are covered in the overall priority sector lending norms. Going by the norms, public and private sector banks are mandated to allocate 40% of their net bank credit to the priority sector. There is a subtarget for loans to the farm sector: 18% of the net bank credit should be earmarked for the sector.
Micro and small enterprises, retail trade, housing and education are also categorised as priority sector. However, there are no sub-targets for the sectors. This means small-scale units have to compete with others such as retail traders, transporters, self-employed professionals and others to access bank credit.
According to a senior official, the share of loans to micro and small enterprises has witnessed a significant drop over the last decade or so: it has declined from 17.5% of net bank credit to 7.5%. The sector is also facing pressure due to the rise in interest rates — loans have become more expensive.
“The MSME ministry has already written to RBI and the ministry of finance on the issue,” a senior government official said. The move follows a decision taken at a meeting of the National Board of Micro, Small and Medium Enterprises headed by the Union MSME minister Mahabir Prasad.
Going by regulations, banks have the leeway to set targets for advances to the small-scale sector. Loans extended by public sector banks — such as the State Bank of India, Union Bank of India and Bank of Baroda — to SMEs have posted a healthy growth. However, some other banks have lagged behind, raising concerns from the government side.
On its part, the government has asked banks to ensure a 20% year-on-year credit growth in the SME sector.
“If the move gets RBI nod, it will mean a minimum benchmark will be set for lending to the sector. This would, in fact, help small-scale and micro entrepreneurs. As far as nationalised banks are concerned, achieving the target will be no problem as they have a huge rural and semi-urban lending network where these enterprises mostly operate,” Union Bank of India manager (SME lending) said.
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| Japan’s Metal One seeks FIPB . nod for three-party JV |
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| JAPANESE trading giant Metal One Corporation has applied to the Foreign Investment Promotion Board (FIPB) for a 5% stake in a three-party joint venture. The other two partners in the JV would be Tata Metaliks and Japan’s Kubota. Tata Metaliks, a pig iron manufacturing company of the Tata Group, would be the majority stakeholder with 51% stake. Kubota would hold 44% while Metal One would invest Rs 3.75 crore in the JV for a 5% stake.
While Tata Metaliks would bring its expertise in the manufacture and sales of ductile iron pipes, fittings and accessories, Metal One would be a provider of supply chain and distribution network. Kubota would be the technology partner. Kubota is one of the world’s largest ductile iron pipe makers.
The venture would allow Tata Metaliks to foray in the ductile iron pipes business. The project would involve investments of Rs 150 crore.
This manufacturing unit located at Kharagpur in West Bengal would use liquid pig iron from Tata Metaliks and is likely to become operational by the end of FY09. Initially it would produce 1.1 lakh tonnes per annum.
Metal One was formed in 2003 when the trading giant Mitsubishi’s steel products division merged with the metal unit of another Japanese company Sojitz Corporation. Through this merger, it inherited three ventures in India — a JV with Mahindra & Mahindra called Mahindra Steel Service Centre, Sona Okegawa Precision Forgings and Neel Metal Products. None of these ventures are engaged in the business of manufacturing ductile iron pipes.
For Metal One, this would be its second minority equity partnership in the Asian region. It acquired a 5% stake in Thai Metal Trade, a public-listed steel company in Thailand early this month. Thai Metal Trade is Thailand’s largest hot rolled product service centre, steel distributor and manufacturer.
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| Punjab to prepare master plan to control flood |
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| THE Punjab government would soon prepare a comprehensive master plan to tackle the problem of floods in the state. An announcement to this effect was made on Sunday by Punjab Chief Minister Mr Parkash Singh Badal while visiting the site of breach of Charan Ganga Rivulet at Anandpur Sahib that had caused extensive damage to the property and crops in 31 villages.
The official team examined the plugging work of the near 70 feet wide breach and directed the irrigation department to strengthen the banks of the rivulet from both sides to avoid such type of situation in future.
The government has also directed the health department to take effect measures and depute a special team of the doctors and paramedical staff for the flood affected areas to prevent any outbreak of diseases. The 31 villages namely Sahota, Chak, Nanowal, Mainpur, Lamlehri, Lodhipur, Balowal, Mindwan, Gajpur, Kotla, Bhadhalhethla, Burj, Mehndli, Bal, Mataur, Chinjvi, Agampur, Bikapur, Surewal, Lalpur, Sandoa, Mehana, Khamera, Chandpur, Kiratpur Sahib, Mangewala, Kotwala, Taraf, Aaspur, Majri, Avankot, were declared flood affected by the district administration
A few months back hailstorm and unseasonal rains had severely damaged 18.34 lakh acres of area with standing crops. Then the state government had released compensation of Rs 70.76 crore to the farmers whose crops had been extensively damaged.
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| Automobile slowdown Companies Need To Work Harder |
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| THE reasonably good 12.3% growth in domestic passenger car sales in April-July 2007 provides a stark contrast to the 9.2% drop in two-wheeler sales over the same period. This large difference precludes any sweeping generalisation about consumer demand — automobile sales are considered a good lead indicator of consumer sentiment. However, a closer look at the number offers some explanations for the difference in growth. The company-wise breakdown of domestic sales shows most passenger car manufacturers are struggling to report growth. According to SIAM statistics, with the exception of Maruti, all major passenger car majors have reported lower sales in this period — Tata Motors 55,488 against 56,019; Hyundai 63,609 on 64,187; Ford down to 10,660 from 11,992; and Honda is up only marginally from 17,002 to 17,672. Apparently, only the companies that have had new launches have managed to better the sales numbers. In the first four months of 2007-08, Mahindra Renault has sold over 8,000 units of Logan. Meanwhile, General Motors has managed to sell over 9,500 units of Spark and U-VA. And Maruti has the new SX4 and Zen Estilo to thank for the kicker to sales growth (18% in this period). Minus these new launches it is likely that the passenger car sales growth would have been lower. The script is somewhat similar in the case of two-wheelers. Honda Motors continues to reap the rewards of recreating the scooter market with good products. Its scooter sales are up 33% over this period. Others have done well in some segments but would be down overall because of the 21% drop in the largest two-wheelers category, 75-125 cc motorcycles/step-throughs.
Clearly, despite the large difference in growth, the underlying factors driving the passenger car and the two-wheeler industry appear very similar. While some are doing well, a reasonably big chunk is finding it difficult to grow. In commercial vehicles too while the medium & heavy segment is down 4.4%, light commercial vehicles are up 15%. It is no longer the case of rising tide taking everybody along. The consumer sentiment appears to have turned, possibly because of the higher interest rates and inflation over this period. Companies need to work harder in such a market.
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| Backward march on SMEs Enable Them To Compete |
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| THE ministry of micro, small and medium enterprises wants to give legal backing to the existing price and purchase preference available to micro and small scale enterprises. This is a retrograde proposal that would discourage scale economies and in the long run compromise their competitiveness. Under the current purchase preference policy the government has reserved 358 items including eight handicraft ones for exclusive purchase from registered small scale units. They also enjoy a 15% price preference in the case of items manufactured by both SSI and large-scale units. However, for want of legal backing and the registration requirement, the scheme has not been effective. Instead of trying to make it work and extend its scope to PSUs, the government would do well to junk the idea all together, in keeping with the progressive de-reservation of the small-scale sector. The list of items reserved the SSI sector has been pruned massively, from nearly 900 in the late 1990s to 114 now. This means that of the 358 items eligible for purchase preference, a large number are no longer reserved for exclusive manufacture by SSIs and would be competing with large private companies. In these products government purchases alone would generate sufficient volumes. In other product categories the 15% price preference is unlikely to make them competitive vis-a-vis larger players who enjoy scale economies.
In an increasingly globalised market it has become difficult to shield SMEs from imports in the domestic market. And an implicitly subsidised government procurement alone would not be able to support a vibrant SME sector. We also need to get away from the concept that SMEs have to be enabled to compete with the large players. That is not going to work. What is needed is an environment that ensures that SMEs are not disadvantaged in anyway in terms of access to market, technology, credit and research. Once the facilitating institutions are in place, SMEs would find their niche as suppliers to bigger companies or come together to take on bigger projects. If market principle has delivered a vibrant SME sector in advanced markets there is no reason why that should not happen in India.
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| ECB curbs to hit lending to SMEs |
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| CURBS on external commercial borrowings (ECB) will have an impact on the lending to small and medium enterprises. With the increased cost of overseas borrowings for corporates and a subsequent liquidity squeeze, SMEs will be affected due to longer repayment cycles of the corporates, bankers feel.
Most public sector banks classify SMEs based on their investment in plant and machinery up to Rs 10 crore as per guidelines of the ministry of small-scale industries. The SMEs typically do not go in for ECBs, but depend on banks for their working capital loans. SMEs are already facing the heat with increase in interest rates, power shortages, rupee appreciation among other issues. With the services sector dominating the SME, and large corporates outsourcing their various requirements to Indian service providers, repayment cycles become crucial, bankers said.
For working capital up to Rs 5 crore, SMEs are further constrained by the Nayak Committee guidelines, that prescribe a turnover method for financing working capital needs of the SMEs at 20% of the projected turnover based on the assumption of a three-month operating cycle.
“Invariably SMEs suffer on account of delay in repayment by large corporates and subsequently loose orders. Though banks provide a 80-85 day cover to meet working capital requirements, the credit cycle for larger corporates extend to 90 days in times of liquidity crunch and adversely affect SMEs,” an official at State Bank of India said. In case of such delays, SMEs come back to banks for additional limits to keep up with working capital needs, he added.
The SME lending at SBI grew by 35%, more than the industry average. SME lending has not been growing at par with the overall credit growth. When overall credit was growing at 30%, SME lending was in the order of 25%.
For Punjab National Bank (PNB), while the credit growth was at 29% during 2006-07, the growth in SME lending was 24%. The size of the SME portfolio is about Rs 14,000 crore for PNB.
“Due to the curbs on ECBs, it will not have an impact on big corporates, because for large projects there is automatic approval under RBI. However, for mid-corporates and SMEs, the component of imported machinery is higher in proportion to the overall cost of the project, they are likely to face pressure,” PNB general manager (credit section) LP Aggarwal said.
Last week, the government introduced curbs on companies going for ECBs to meet domestic expenses. These companies will now look for local banking channels. They can now raise only $20 million through ECBs for rupee expenditure after taking RBI permission. Larger corporates were looking for external funds to take advantage of the interest rate arbitrage.
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| Punjab draws up Rs 2k-cr power plan |
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| THE power infrastructure for urban and agricultural sectors in Punjab is all set for a complete revamp as the government today announced a comprehensive Rs 2,000-crore plan to streamline supply and distribution arteries.
A decision to this effect was taken at a high level meeting chaired by Punjab Chief Minister Mr Parkash Singh Badal here. Under this plan, 301 new sub-stations of different capacities would be set up. These include 13 of 220 KV, three of 132 KV, 188 of 66 KV and seven of 33/66 KV sub-stations. In addition, 47 existing sub-stations would be upgraded. Of these, nine sub stations of capacity of 132 KV to be upgraded to 220 KV, 11 of 66 KV capacity to be upgraded to 220 KV and 27 existing sub-stations with capacity 33 KV to be upgraded to 66 KV sub-stations as per this new plan. Besides, augmentation work of 280 sub-stations would also be carried out.
Apart from setting up new sub-stations and upgrading the existing units, more than 12,000-circuit km distribution lines across the state would also witness a complete modernisation.
According to the new plan, Rs 203 crore would be devoted entirely for the upgrade and strengthening of power infrastructure in border areas. With a view to providing better and quality power supply in the state the new plan would be implemented in a given time frame so as to avoid additional stress on the distribution lines from the ever increasing demand. Special care is being taken that much of the new infrastructure is in place before the peek demand period next year and positively before the paddy sowing season.
The meeting was attended among others by Media Advisor to Chief Minister Harcharan Bains, Chief Secretary RI Singh, Principal Secretary to Chief Minister DS Guru, Principal Secretary Finance DS Kalha and Secretary Power Suresh Kumar.
7 sugar mills to co-produce power
Madhvi Sally CHANDIGARH
SUGAR mills in the cooperative sector in Punjab have at last realised that co-generation of power would be the only solution to bail them out of the whopping Rs 437-crore losses (as on March 31).
Soon seven operational sugar mills out of the 15 sugar mills in the state (out of which 9 mills are running and 6 mills are under liquidation) with a 15,766 tonnage crushing capacity would have bagasse-based co-generation plants. The plants would have a proposed capacity to co-generate 84 mw and would be set up by the Punjab State Federation of Cooperative Sugar Mills Ltd (Sugarfed) with the assistance of the Punjab Energy Development Agency (PEDA).
“An investment of around Rs 340 crore will be required, with PEDA investing close to Rs 260 crore. The rest will be generated by private sector investment and equity issue,” said Punjab Cooperation Minister Capt Kanwaljit Singh. Investment per mw would be Rs 4 crore, for which loan to PEDA would be given by t he Japan Bank for International Cooperation.
The seven sugar mills would include Nawanshahr, Gurdaspur, Morinda, Nakodar, Fazilka, Ajnala, Batala,Bhogpur and Budhewal. Out of these, Nakodar and Fazilka, whose individual co-generation capacity would be 8 mw each, would be under the build, operate and transfer (BOT) model.
“We have to now think beyond sugar production alone by sugar mills which is leading to huge losses. Apart from utilising the power in the sugar mills, we will enter into an agreement with the Punjab State Electricity Board to sell power at the rate of Rs 3.49 per kw,” stated Capt Singh.
Unable to recover conversion cost and not generate enough to pay salaries, Sugarfed had been dependent on the state government to bail the mills out. The nine sugar mills in the state, employing more than 5,400 workers, are in season for about 100-150 day in a year, depending on the tonnes crushed per day (sugar mills of Nawanshahr, Ajnala and Morinda which are the larger sugar mills have a capacity of 2,500 TCD).
Workers were being paid their wages and other incidental expenditure incurred by these mills during the off-season too, without the industry getting anything in return. The new move is expected to infuse fresh life into the ailing sector, according to government officials.
POWER MATRIX
301 new sub-stations of different capacities would be set up
More than 12,000 circuit km distribution lines would be modernised
Rs 203 crore would be devoted entirely for the border areas
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| Seasame traders gear up to resume exports to Russia |
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| WITH rice exports to Russia taking off once again, Indian exporters are now gearing up to resume exports of sesame seed to that country. Russia has stopped importing Indian sesame since May over a dispute on its quality. Knowing that Russia would not permit Indian sesame seeds without quality certificates, the exporters have shortlisted two Hyderabad-based R&D institutions — Vimta Labs and Vimta Specialities — as certification agencies for this purpose. The two institutions are accredited by the Gosstandart of the Russian federation. Gosstandart is the quality standard followed by the Russian federation.
Taking up their cause, Shellac and Forest Products Export Promotion Council (Shefexil), which oversees export promotion of sesame seeds, has requested the commerce ministry to pursue the matter with the Federal Service for Veterinary & Phytosanitary Surveillance (FSVPS), a wing of the agriculture ministry of Russia that monitors quality of imported agriproducts entering Russia, which is due to send a a delegation to India in October.
Rice exports to Russia started again from July 20, after a gap of eight months, following a protocol signed recently by FSVPS from the Russian side and the Agriculture and Processed Food Products Export Development Authority (Apeda) from the Indian side. Under the protocol, Russia has selected the New Delhi-based Shriram Institute for Industrial Research as the authorised agency for issuing certifications on safety, quality and phytosanitary aspects of Indian rice which would be despatched to Russia.
Sources said FSVPS would be sending a delegation to India in October to take a look at the Indian system of cultivating rice, sesame seeds and groundnut and their processing to resolve disputes arising out of their quality and safety aspects. In fact, FSVPS has requested the Indian commerce ministry to prepare a list of R&D institutions which are competent enough to certify the safety and quality aspects of sesame seeds.
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| SME pharmas may get interest subsidy |
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| THE government may provide an interest subsidy to small and medium-size (SME) pharma companies to upgrade their facilities in order to meet stringent quality protocols.
This particular proposal in the draft pharma policy is getting support from different wings of the government. The Prime Minister’s Office is keen to take forward the proposal for extending 5% interest subsidy to SMEs facing a fund crunch in order to meet the health ministry’s revised good manufacturing practices (GMP).
A group of ministers (GoM) reviewing the new pharmaceutical policy is likely to take a decision on the issue soon, an official source said. The Planning Commission has already accorded an in-principle approval to provide Rs 560 crore for the scheme in the Eleventh Plan.
The proposal is likely to get a goahead even as finance ministry cautioned the government on the budgetary implications of providing numerous fiscal incentives proposed in the draft policy.
Once implemented, the interest subsidy scheme is likely to benefit close to 2,000 SMEs drug makers. The scheme would also come to the rescue of drug makers in Gujarat and Madhya Pradesh, several of whom have closed down due to lack of capital while others are struggling to find resources to meet the new GMP requirements. Several companies have also defaulted on loan repayments due to paucity of funds.
The new GMP norms notified by the Union health ministry became mandatory with effect from July 1, 2005. The new requirements are comparable with WHO GMP norms. While the new norms have helped in standardising drugs produced by the SME manufacturers to those available elsewhere in the world, the exercise has substantially increased the upgradation cost for manufacturers.
It is felt by government officials that low-cost advantage of SME drug makers should be protected in the larger national interest by providing suitable fiscal incentive in the form of an interest subsidy. As per a report of the Development Commissioner (SSI), contribution of SSIs in Indian Pharma market is 50% by volume and 30% by value.
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| PM stresses agri growth, industrialisation too |
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| Prime Minister Manmohan Singh marked the 60th anniversary of Independence on Wednesday with a pledge to focus in the coming years on crisis-hit agriculture, but insisted that industrialisation was critical for progress and employment.
Addressing the nation from the Red Fort here on a bright and clear day, Dr Singh sounded confident - despite a political crisis sparked by a spat with his Left allies -as he spoke in Hindi, touching upon an array of subjects, but focusing on education and agriculture.
In his crisp 35-minute address, heard by millions across India and abroad, the prime minister voiced his government’s determination to crush terrorism, without any reference to Pakistan, and said instead that New Delhi desired “the best of relations” with all its neighbours as well as other countries. He also urged political parties not to split up Indians on sectarian issues, asked people to keep the country clean and green and to use the Right to Information Act to check corruption, and promised social security to the poor over 65 years of age and those in the unorganised sector.
However, in recognition of a severe crisis that has enveloped agriculture, which has resulted in farmer suicides in thousands, Dr Singh devoted much of his time on the subject, promising a Rs 25,000-crore package to boost farm output.
“In the coming years, our main emphasis will be on agricultural development,” he said. “We will soon launch a special programme to invest Rs 25,000 crore in agriculture, to enhance the livelihood of our farmers and increase food production. We will also focus on the needs of our farmers in dry and droughtprone regions,” he said, adding food grain production is sure to get a boost when his government rolls out an ambitious agriculture development programme.
The prime minister also said the National Rural Employment Guarantee Act that guarantees at least 100 working days in the countryside would now be extended to all parts of the country.
But the economist-turned-politician made it clear that there are limits to how much income agriculture alone can generate, given the large population dependent on farming and the small size of farms. “India cannot become a nation with islands of high growth and vast areas untouched by development, where the benefits of growth accrue only to a few,” he said.
“Therefore, it is essential that we create new employment opportunities outside of agriculture. There is no developed country today anywhere in the world that is not an industrial economy. Industrialisation is critical for progress. “If employment generation is the best weapon against poverty, industrialisation is the most effective means to create new job opportunities... We will pursue policies that will help in our rapid industrialisation.” he averred.
Seeking a “evolution in the field of modern education” Dr Singh announced the setting up of colleges in 370 districts, 6,000 new high quality schools - one in every block of the country - and 30 new central universities.
The government, he added, would also promote five new Indian Institutes of Science Education and Research, eight new Indian Institutes of Technology, seven new Indian Institutes of Management and 20 new Indian Institutes of Information Technology.
“It is my fervent desire that India becomes a fully educated, modern, progressive nation... We will make India a nation of educated people, of skilled people, of creative people,” he said.
Cheered occasionally by the audience, in particular the colourfully dressed schoolchildren, the prime minister vowed to crush extremism and terrorism and said those who profess hatred, communalism and violence have no place in the society.
“I assure all our neighbours that we in India want peace and the best of relations with all of them. I sincerely believe that in the prosperity and well-being of our neighbours lies the key to our own security and progress,” he added.
Amid a political crisis sparked by the Left’s refusal to back the civil nuclear deal with the US, he said while the country is moving forward in the right direction, “we have been slow in taking some steps; we have dithered at times, and stumbled some times. We have had success on some fronts and setbacks on some others,” he said and added, “But there is no doubt that we have been steadfast in our resolve.”
He said the Indian economy is growing “at historically unprecedented rates”, sought more creative process of urbanisation to overcome the many problems urban areas face, and advocated cleanliness drives in all areas.
The prime minister pledged to bring greater prosperity to the less developed regions such as the north-east and Jammu and Kashmir, and said his government has a vision to bring new investments to all three regions of Kashmir.
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| Metro may snake its way to Punjab Detailed Study By DMRC On Cards |
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| THE Delhi Metro Railway Corporation (DMRC) is going to do a detailed study for starting the metro rail project in the cities of Ludhiana, Jalandhar and Amritsar. The work on the project is likely to start within a year, with the basic data already been provided by the Railway Institute of Technology & Engineering Services. A decision to this effect was taken in a meeting between the DMRC managing director E Shreedharan and the SAD working president Sukhbir Singh Badal in New Delhi on Monday.
A team of DMRC experts would conduct a survey within 4 to 6 months for Ludhiana. The DMRC would send a proposal in this regard for the approval of the state government in the next few days. Giving details of this project Mr.Shreedharan said that the Ludhiana metro rail alone would have a daily capacity of 4.8 lakh passengers. He said that the project would cost Rs 80-90 crore per km. An underground metro would be constructed to cover the old city section. While advocating a strong need for establishing metro in Ludhiana, Mr Badal said that the hub of Indian hosiery was today facing a great hardship due to traffic congestion and inadequate road network. He also informed that despite having a good connectivity by road, rail and air, Ludhiana badly needed metro rail to avoid increasing air pollution in the city. He also added that the metro would also help decrease the congestion in Amritsar, a holy city having a population of 10,11,327 as per a study conducted in 2001. He said that the system could also facilitate the pilgrims.
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| POSCO plans $4.5-b steel mill in Vietnam |
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| POSCO, the world’s third-largest steel maker, is seeking approval from the Vietnamese government to build a $4.5 billion steel mill with a local partner, state media reported on Monday. The Dau Tu (Investment) newspaper quoted a POSCO proposal to the Vietnamese government as saying it would form a venture with dominant state shipbuilder Vinashin in which Vinashin will hold a 30% stake in the mill. The hot-rolled steel mill, located in Van Phong Bay in the south central coastal province of Khanh Hoa, adjacent to a key transhipment port project, will be completed by 2010, the report said. The group has already started construction of a $1.13 billion coldrolled steel plant, which is scheduled to begin production in 2009 in the southern coastal province of Ba Ria-Vung Tau.
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| China’s Chery Automobile to form $370-m car venture in Iran |
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| SHANGHAI: Chery Automobile Co, a mid-sized but fastgrowing Chinese car maker, has agreed to set up a $370 million assembly plant in Iran with two foreign partners, targeting Iran and neighbouring markets. Chery will hold 30% in the venture, with Iran Khodro Corp, Iran’s biggest car maker, holding 49% and Solitac, a Canada-based investment company, holding the remainder, Chery said in a statement over the weekend. The plant, with a designed annual capacity of 200,000 units, will assemble Chery QQ6 compact cars from knock-down kits, it added.
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| JCB may invest Rs 500 cr in Haryana unit |
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| JCB India, fully-owned subsidiary of JCB Excavator (UK), one of the top five construction and earth moving equipment manufacturers in the world, is expanding its manufacturing facility in Ballabgarh, Haryana. The fresh round of infusion could touch Rs 500 crore, claimed company sources, making it the largest plant of its kind in the world.
An announcement regarding this is expected to come on Tuesday after a meeting between JCB Worldwide Group COO Matthew Taylor and Haryana chief minister Bhupinder Singh Hooda. Though the company officials are tightlipped about the exact quantum of investment involved, Mr Taylor told ET that it will definitely be more than Rs 100 crore. JCB sources said the company was looking forward to start exports from India to West Asian countries, beginning with Turkey by the end of next year. Mr Taylor is in India along with his team comprising Alan Blake, Group Manufacturing Director, JCB UK, and Vipin Sondhi, MD & CEO, JCB India. Speaking to ET, Mr Taylor confirmed that he is in India to discuss the investment proposals of the company with the Haryana CM. "We are keen to invest in Haryana further. The investment amount will surely be above Rs 100 crore. The region has the potential and we have been growing by 25-30% every year. We are consolidating and enhancing our capacities so as to cater not just to the Indian market, but to the overseas market as well from here," said Mr Taylor.
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| Companies add spice to functional food business |
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| NESTLE is upping its ante in the functional food segment, just ahead of its arch rival Danone’s entry into this segment in India. Internationally, a market worth $80 billion, the functional food market is gathering heat here too with smaller players like Amul, Avesta Good Earth and Mother Dairy also catching on. Having launched its probiotic curd, Nesvita, the Swiss behemoth plans to extend the probiotic portfolio into yoghurt products and drinks, which is also core to Danone. The company expects Nesvita to contribute 30-40% of the revenues from the curd segment in the next two years.
“We plan to introduce milk products for lactose intolerant people and people suffering from diabetes. We will extend this functional food range in the next few months,” said Mayank Trivedi, GM, dairy division, Nestle India. The company plans to spend around Rs 4-5 crore in product promotions in first year itself.
French foods giant Groupe Danone, with a much feted portfolio of functional foods, is likely to enter the market early next year after sorting out shareholder issues with its current India partner, Wadia Group. The products would be launched across all price ranges and industry observers believe the French giant would unleash an array of functional foods across fresh dairy business, including probiotic yoghurt snacks and health drinks.
India tops in per capita consumption of milk even though exact numbers are not available. With obesity and lifestyle diseases like diabetes growing at an alarming rate on the back of increasing prosperity, global leaders in functional foods like Danone and Nestle believe there exists a huge market potential here. Danone, which divested its biscuit business recently, has been building a robust health foods business, centering around fresh dairy and beverages.
In context, it may be mentioned that Danone had picked up a small minority stake in Bangalore-based bio-nutritional company Avesthagen to bolster R&D behind its global organic food play under Stonyfield brand. Similarly, Nestle is also seen working with Avesthagen for developing products targeted at the diabetic population. Internationally, the probiotic market is valued at $15 billion. Amul is already in the game having recently launched its probiotic ice cream. Mother Dairy, a wholly-owned subsidiary of National Dairy Development Board, also launched its probiotic curd recently. Among the smaller players in the fray is Avesta Good Earth, which is incidentally the functional foods division of Avesthagen.
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| Punjab govt issues Rs 500-crore paper |
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| THE Punjab government today notified the sale of Punjab Government Stock (Securities) of 10-year tenure for an aggregate amount of Rs 500 crore.
The loan is being revised to finance parts of capital expenditure of the Plan schemes and other development schemes under execution. Centre’s consent has been obtained for floating this loan as required by Article 293(3) of the Constitution.
The government stock will be sold through RBI’s Mumbai office through auction in the manner as prescribed in paragraph 6.1 of the coupon rate to be determined by the central bank at the yield auction, under multiple price format.
The auction will be conducted on August 16. The payment by successful bidders will be made the next day, before the close of banking hours by means of cash, banker's cheque/pay order/demand draft payable at Reserve Bank of India Mumbai/New Delhi, or a cheque drawn on their account.
The tenure of the stock will start from August 17.
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| Rs 1-lakh car rollout may miss deadline: Tata Blames Vested Interests For The Delay |
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| TATA Group chairman Ratan Tata, on Friday, for the first time indicated that the much-awaited rollout of the Rs 1-lakh small car from the Singur factory could miss the June 2008 deadline due to “vested interests”.
“The Tata Motors small car project in Singur is getting delayed due to vested interests. There’s an effort to delay the project. But we remain optimistic about meeting the rollout deadline of June 2008. We will use our own capability to overcome the delay and find out our own way,” asserted Mr Tata, without mincing any words. He was speaking to reporters on the sidelines of the Tata Tea AGM in Kolkata.
Mr Tata, however, declined to elaborate on the “vested interests” bit. He had famously hinted along these lines several months ago in a widely publicised media interview.
On completion, the Rs 1,000-crore Singur small car factory will be geared to churn out 2.5 lakh cars annually. In the past one year, the politically-sensitive Singur project has been in the eye of a storm, facing intense opposition from political parties of varying shades. The most strident opponent has clearly been the Mamata Banerjee-led Trinamool Congress, which has launched a crusade against farmland acquisition for the Tata Motors venture in Singur. Ms Banerjee went on a month-long hunger strike in a bid to force the Buddhadeb governement to halt the project. Worse, there have been numerous attempts by different political parties to disrupt construction activity at the Singur project site and even tear down the boundary wall.
Mr Tata firmly believes that the continuing land acquisition controversy is politically motivated. “Those who are expressing concern for farmers should do something for them. This controversy is politically motivated. Why are farmers in Maharashtra committing suicide? Why are farmers living below the poverty line,” said Mr Tata, even as he was literally being hemmd in by the media at the venue of the Tata Tea AGM.
Significantly, Mr Tata’s comments come at a stage when the Buddhadeb government has convened an all-party meeting to get consensus on the proposed site of the Salim Group’s chemical hub, a project which has already been delayed by over a year. The West Bengal chief minster has seldom missed an opportunity in emphasising that it took intense persuasion from his side to convince the Tata Group chairman to decide on investing in the Singur auto project. In this light, Mr Tata said: “Today, West Bengal is the most investor-friendly state in the country. The state has a pragmatic chief minister and an enlighetened state government. Even though the state has great potential, the people here did not have the opportunity to prosper. “
Stating that West Bengal had been ignored by the industry for historical reasons, he said “Tata Motors had decided to locate the plant in Singur because the Tatas believed that somebody would have to make a start”.
“The Rs 1 lakh car project is a showcase project for Tata Motors, which is why the company chose to locate it on the national highway due to the visibility factor,” asserted Mr Tata.
Meanwhile, the super-speciality cancer hospital being set up by the Tatas in Rajarhat will become operational by the third quarter of 2008. “It will be a premier institute with state-of -the-art facilities,” claimed Mr Tata.
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| IIP growth almost flat at 9.8% |
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| The country’s industrial production in June grew at the slowest pace in last eight months at 9.8% though marginally up from 9.7% in June, 2006. It is the first time annual growth had fallen below 10% since last October, and analysts said the impact of five increases in official interest rates between June 2006 and late March and the rise of the rupee was starting to be felt.
Manufacturing, which makes up about 15% of gross domestic product and nearly 80 % of industrial output, rose 10.6 % in June from year earlier.
Experts said the growth momentum of previous year could have withered away and lagged effect of interest rate increases and slowdown in exports was begining to show up.
Mining was down to 3.6% in June 2007 from 4.7% in June 2006 while electricity sector grew by 6.8% in June 2007 compared to 4.9 in the month year ago.While capital goods grew by 29% compared to 21.9% in June, 2006, consumer durables which recorded a growth of just 0.6% and 5.4% respectively in June, 2007 against 19.9% and 1.8% . The overall growth in consumer goods was 4.2% against 6.1% in June, 2006. Metal products and parts, except machinery and equipment showed a negative growth of 7.7%, in June 2007.
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| India less exposed to US subprime crisis: Rajan A wakeup call for market players, says IMF former ch |
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| INDIA is relatively less exposed to the aftermath of the US sub-prime mortgage collapse crisis that has sent global stock markets into a tizzy. But, it is nevertheless a wake-up call for a number of players who think that markets go only one way, cautions former Chief Economist at the IMF Raghuram G Rajan. Incidentally, Dr Rajan is tipped to head a high-level committee on Indian financial sector reforms.
Dr Rajan said, domestic companies may find it harder to access external commercial borrowings (ECB) though they may not be directly impacted if international investors unwind their equity holdings in listed companies. There could be some re-pricing of Indian assets as well. On the sentiment side, the whole episode may cast a shadow on an overall attitude towards credit and risk-taking.
In the near term, the crisis would, in fact, help the Reserve Bank of India (RBI) tackle the surging rupee. This, in turn, would give a breather to exporters whose rupee earnings have dropped over the last few months, he told ET.
But if the crisis does continue and causes a general economic down turn, India will not remain insulated. The biggest worry then would be of a slow-down in the economy. “Few people realize that Indian growth has accompanied world growth. To that extent, if world growth is lower, it will affect India’s growth. Markets nowadays are so well-connected that things never really remain fully isolated anymore,” he said.
Since last week, Indian bourses have been volatile taking cue from global markets. The US sub-prime mortgage crisis is attributed largely to defaults arising out of loans made to customers with low creditworthiness and history of defaults. Because these mortgages are traded in the markets, it has a spillover effect on banks, hedge funds and institutional investors who participate in it.
Hedge funds, FIIs and other institutional investors, who have put money in mortgage-backed securities in the US, are usually invested in emerging markets as well. These funds off-set the losses suffered due to the sub-prime loan crisis by divesting their portfolio in other markets. To that extent, these investors could suck out liquidity from emerging markets like India and making them vulnerable to the global turmoil.
Dr Rajan’s prescription to investors lies in an age-old adage. “Be diversified and invest for long-term,” he says.
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| US firm to bring innovative energy conversion technology to Punjab |
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| USING the two forms of electromechanical radiation energy, especially Infrared light and microwaves, Infrared Power Inc of Phoenix, Arizona, is proposing to bring an innovative energy conversion technology to Punjab.
Pawan Singh Dhindsa, the director of the US-based firm said, “the conversion of electromechanical energy, in the form of microwaves and infrared light, into usable heat is what the company intends to do. When this concept is combined with the use of modern materials, such as ceramics and carbon fiber components, it results in an operating system with very special and unique properties,” he said.
Mr Dhindsa said the technology could be used in almost any application that currently used fuel oil, natural gas, coal, or nuclear power as a heat source. The Los Alamos National Laboratory described the concept as a high efficiency, high temperature form of energy conversion, Mr Dhindsa said.
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| Ludhiana to have PVR multiplex |
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| MUMBAI: PVR has announced opening of two multi-plexes in Delhi and Ludhiana on Friday, taking the company's total number of silver-screens in operation to 89 across the country. The PVR multiplex at Rohini in Delhi would have three screens with 818 seats at the Fun City Mall, while the one in Ludhiana would be at Flamez Mall with four screens and a capacity of 1,068 seats, the company said in a filing to BSE. PVR Flamez is the first multiplex in Punjab and is eligible for exemption from payment of entertainment tax in accordance with the Entertainment Tax Policy of the state government. With the opening of these multiplexes, the company would have presence in 14 cities across nine states. |
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| Auto sales misfire with 7% slide in July |
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| THE domestic automobile industry continued to reel under high interest rates and poor demand as combined sales fell nearly 7% this July. Motorcycles took the biggest hit but passenger cars managed to post a double-digit growth.
Monthly sales data released by the Society of Indian Automobile Manufacturers (SIAM) on Thursday revealed that total vehicle sales fell to 683,684 units in July against 730,194 units in July 2006. Passenger car sales were driven mainly by market leader Maruti Suzuki, which posted an 18% rise in volumes. Rivals Hyundai Motors, Tata Motors and Honda Siel Cars India, meanwhile, reported a sales decline.
According to Religare Securities auto analyst Arvind Jain: “Companies that had launched new models have the benefit of product excitement and have done well in the market. While high interest rates are impacting retail sales, the new launches are pushing sales for Maruti, General Motors and Mahindra Renault. The trend is likely to continue till the festive month of October, when some new cars are expected to hit the market.”
The two-wheeler segment continued its slump in July as motorcycle sales fell 17.25% at 375,004 units against 453,152 units in July 2006. Market leader Hero Honda posted a 14.49% sales fall at 186,848 units while rival Bajaj Auto saw a 17.2% dip at 116,305 units. Sales of the third-largest player TVS Motors dropped 41% at 35,237 units in July. But these firms made marginal gains in scooters, which grew 14.81% at 87,830 units as against 76,495 units last year. “While scooter sales are on the rise, there is some enthusiasm in the market with Bajaj Auto showcasing its revolutionary 125cc engine today. Its new DTS-Si engine, which the company claims will deliver a fuel efficiency of 109 kmph, is likely to restore some sentiments and push sales,” said Angel Broking analyst Vaishali Jajoo.
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| Tata Steel mops up additional $150 m |
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| A DAY after it announced the issue of $725 million offering of foreign currency convertible alternative reference securities (CARS), Tata Steel on Tuesday said that it has raised $150 million more by selling additional securities through the greenshoe option.
The total offering now goes up to $875 million. This is part of the $7.4-billion equity contribution to finance the Corus deal, valued at $13.7 billion, including debts. The equity part, which was earlier raised by $700 million from $ 6.7 billion, is being raised by Tata Steel and its Singapore-based subsidiary Tata Steel Asia. The company’ stock was down 1.1% at Rs 642.6 on the BSE on Tuesday. The metal index was down 0.8%. Apart from the money raised through CARS, the country’s largest steelmaker is also expected to make a foreign issue of $500 million. The increased equity infusion also includes convertible rights issue of Rs 6,000 crore, which is about Rs 1,750 crore more than the earlier allocation. |
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| Greenfield AEZs needed for food security & exports |
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| The scheme for AEZs doesn’t seem to have yielded the desired results. These zones hardly helped in creating new irrigation & supply chain infrastructure at right locations. So, small & marginal farmers are left in the lurch, even as the demand for processed foods surges in domestic and global markets, says Prabha Jagannathan
RECALL the parable of the village council meeting in which ryots thundered about having to build a new little wooden bridge over the rivulet every year, because the children played swinging from it and weakened it. The story goes on to say a small voice piped up from the back and said: “Why don’t we make the bridge so strong that it lasts for many years and children can swing from it?” The Union government would do well to hire this rational solution provider to formulate its long-term farm policy.
In 2001-02, the nodal agri-exports authority — APEDA — formulated the scheme of agricultural export zones (AEZs). It went into operation a year later. Almost half the MoUs under AEZs were signed in 2002-03, when it was obvious that a comprehensive programme was needed to boost stagnant food production. The multilateral trading regime under the WTO mandates the country to focus on SPS rule-friendliness, quality of the products and the strategy to counter technical barriers to trade. But by 2005, a peer review of the performance of AEZs proved that out of the 60 zones, 54 had not met the targeted levels of exports or attracted the envisioned investments. Actual investments made by then were Rs 820 crore (against a target of Rs 1,718 crore) and the actual exports were Rs 5,316 crore (against a target of Rs 11,821 crore over five years).
The government subsequently junked 34 more AEZ proposals. In 2006, the Centre began chanting the new mantra of mega food parks. In July this year, MoS for commerce Jairam Ramesh declared AEZs a “failure”. The entire process took barely five years in a sector which, during the 10th five-year plan, has refused to move up beyond 2.4% growth, thanks to ad hoc policies that undermined its growth.
Assocham, in a recent study, has suggested that PPP model be explored for reviving AEZ fortunes. APEDA still presides over core policies on agri-commodity exports. A recent parliamentary committee note to the ministry of commerce acknowledged that India continues to rank abysmally low (below 2.5%) in world agri-trade marketshare for want of strong supply chain infrastructure, critical to the growth of exports in agro commodities and to meet domestic food needs. This year, APEDA has come up with a Rs 2500-crore plan to develop 12 centres countrywide to process agri perishables!
So why didn’t AEZs, which would have helped farmers directly, get the requisite policy push? Lack of special benefits and the fact that there was no single entrepreneurial agency running AEZs, admits the government.
In half the time, the Centre pushed through crucial decisions that affect longterm production in the farm sector, including the entry of FDI in retail and the establishment of SEZs, both of which made the private sector prime players. The latter, which will access close to 5% of the country’s arable land from farmers, are supposed to be the advantage theme, but will come up in areas where port and road linkages and other key marketing infrastructure exist in good measure. The takeover of such arable land without any alternative long-term livelihood options for farmers is controversial.
“The government will never have the resources to tackle the production problems concerning food security and exports that hounds the sector alone. Private sector investment is imperative to any policy on this. Both the SEZ policy and the retail policy have laid out big incentives, paving the way for optimum tapping of potential,” points out a Delhi-based supply chain analyst who is consultant to a major agri produce export firm. A working group on agricultural marketing infrastructure and policy for the 11th plan pegged the total investment needed at Rs 64,312 crore, with private sector investment of Rs 30,625 crore.
But even more importantly, emphasises agri-trade analyst Madan Diwan, the AEZ concept didn’t take off because it never addressed the basic questions of production — whether in relation to exports or food security. This question of whether and how to hike output can’t be addressed without factoring in the fact that 60% of the country’s cultivated land is rain-fed. Developed together, greenfield agricultural zones, FDI in retail and SEZs could have catalysed creation of the link between the farmer and the consumer, with big advantages for both, and also the investors. There could have been many benefits — strengthening backward linkages and infrastructure including cold chain, boosting processing to minimise post-harvest wastage in fruit and vegetables (which is 40%), etc.
AEZs, however, were conceived as mere processing sheds meant to tap existing goods produced in regions. The government should have conceived agri-zones as dedicated zones backed by contract farming and designed to rope in the private sector as key drivers, buttressed with all the fiscal incentives that they are getting in SEZs and in retail and set export obligations.
But instead of tapping existing regions where agri-produce was already doing well (grapes in the Nasik region, for instance) and where infrastructural linkages existed, the zones should have come up on rain-fed lands and wastelands so that the private sector and farmers’ cooperatives that transform to corporates used the land price advantage to invest heavily in development of infrastructure. Only the enabling policy super structure and power and water supply concerns should have been that of the government.
AEZs in China are developed differently, involving contractual agreements with farmers over several hundred acres and include several villages and residential areas with big fiscal and in |
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| Infy’s SEZ among 6 cleared by BoA, Maha Mumbai gets extension |
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| TWO special economic zones (SEZs) proposed by Infosys in the IT and IT-enabled sectors in Andhra Pradesh were given a formal go-ahead by the government on Wednesday. Other proposals approved by the board of approvals (BoA) for SEZs include IT/ITes SEZs by Genpact India in Rajasthan and Enfield Infrastructure in West Bengal.
The development comes even as the commerce department extended in-principal approval for Mukesh Ambani-promoted Maha Mumbai SEZ by a year. The condition for the extension is that the size of the SEZ has to be limited to 5,000 hectares instead of the 10,000 hectares proposed initially. Also, land acquisition has to be completely voluntary. “There is nothing special about the extension given to Maha Mumbai SEZ. It is in line with the government’s recent decision to extend validity of in-principle approvals by a year for all SEZs that apply for an extension before the expiry of the approval,” an official said.
BoA also gave in-principle approval to two projects, including a multi-product SEZ proposed by Ispat Industries and a biotech SEZ by Veritas Infrastructure Development. Both the projects are in Maharashtra. The Rs 10,000-crore Ispat project will be spread over 3,000 acres, targeting $1 billion export per annum when fully operational and generating employment for 1 lakh.
A total of eight projects were considered by BoA at its meeting. The developers who received formal clearance for their SEZ proposals could start the process of getting their zones notified following which commercial activities could begin. Those with in-principle approval have to come back to BoA after acquiring land to seek formal approval.
According to BoA chairman GK Pillai, formal approvals have been granted for setting up 362 SEZs, of which 136 have been notified. He informed over Rs 45,377 crore have been invested in these notified SEZs and the zones provided direct employment to over 38,405.
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| Cheaper credit turns mirage for exporters |
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| THE concessional credit facility announced by the government to help exporters tide over appreciation of the rupee has run into difficulties, claim exporters. Several banks are telling exporters to pay full interest now and get refunds three months later as part of the concessional benefit announced in the package. Exporters have also been told by some banks the concessional facility does not mean interest rate goes below their floor rate — which, in many cases, is cited at 8.5%. Some entities like the Exim Bank have gone a step further by saying the directive to provide concessional credit covers only scheduled banks.
The net result is disappointment for exporters who have been banking on the government’s export package to fight the adverse impact of rupee appreciation. “We are not getting the desired benefits from the government decision,” Delhi Exporters Association (DEA) president SP Agarwal said. The government had announced the banks will extend concessional credit to exporters from various sectors including textiles, readymade garments, leather goods, handicrafts, engineering products, marine products, processed agricultural products, sports goods and toys.
Exports in the category were to get rupee export credit at rates 4.5% lower than the prime lending rate (PLR) on preshipment credit for up to 180 days. The concessional lending was to be made applicable for post-shipment credit up to 90 days. The facility was applicable during April-December 2007.
Exporters have brought to our notice difficulties in availing concessional credit, Federation of Indian Export Organisations (FIEO) officials said. The Exim Bank, they said, feels the directive is meant only for scheduled banks.
The reason cited by many banks for asking exporters to first pay full interest and claim refund later is the system formulated by RBI for compensating banks. Banks are supposed to get refunds from the apex bank to the extent of the concession provided by them on a quarterly basis. Therefore, they want exporters to claim refunds rather than get the benefit upfront. “What’s the use if we have to wait for refunds?” Mr Agarwal asked. “Exporters are facing a crisis now and there is no justification in asking them to wait for months to get refund for concessional interest,” he added.
The other issue hassling exporters is they are being denied the benefit of credit at 200 basis points below PLR announced by the government. Banks are insisting they cannot let their lending rate go below 8.5%, exporters said. Therefore, the two percentage-point benefit is available in full only to those availing credit at rates higher than 10.50%. If an exporter is availing credit at 9% now, the concession is not going to reduce the rate to 7%, they added. “We are bringing the issues to the notice of the government,” Mr Agarwal said.
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| Vulture investor Ross sets sights on subprime |
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| HE’S made a fortune picking through the bones of failed steelmakers, textile mills and coal miners. Now billionaire investor Wilbur Ross is taking aim at another beleaguered industry: subprime mortgage lenders. He took his first step on Monday by providing $50 million in debtor-in-possession financing for American Home Mortgage Corp, which filed for bankruptcy earlier in the day.
It’s a tiny step, but Ross told Reuters there are many more to come. “We’ve been looking at subprime for quite a while. This is the first affirmative commitment we’ve made. It’s not a very large step, but it’s our initial foray into subprime,” he said in a phone interview.
More than a half-dozen subprime lenders, those specializing in borrowers with poor credit, have filed for bankruptcy over the past year, including New Century Financial Corp.
Worries about slumping home prices and rising loan losses led to shrinking values for mortgages and asset-backed securities. Soon investment banks turned off the credit spigot for mortgage firms, forcing some to file for Chapter 11 or else find buyers. And with housing markets still expected to head south, the suffering looks set to continue.
“There’s a good chance it will get worse,” Ross said. “We think there is going to be a lot more trouble to come in the way of defaults.” There’s $170 billion of subprime mortgages expected to re-price between July 1 and Dec. 31, plus about $400 billion that will re-price next year, Ross said. That’s expected to fuel an increase in loan defaults and push more lenders over the brink.
For investors like Ross, that’s good news. For more than 20 years Ross bought distressed assets at steep discounts, slashed costs, merged them with rivals and then sold on the combined packages at higher prices.
That formula worked in steel, where Ross rolled LTV and Bethlehem Steel into what in 2002 became International Steel Group. Ross then sold ISG to Mittal Steel for $4.5 billion in 2005. Likewise he consolidated coal miners into International Coal Group, which currently has a market value of $605 million. In the past year he’s been acquiring auto parts businesses, taking advantage of turmoil in that sector.
Last August, International Textile Group and Safety Components International, both majority owned by Ross, agreed to merge. The deal was part of Ross’s goal to build several competitive auto parts companies from businesses acquired through bankruptcy courts.
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| Realty mkt size to triple in 3 years: Industry body |
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| THE size of the Indian real estate market is expected to more than triple over the next three years to Rs 200,000 crore, a senior industry official said on Tuesday. The emergence of IT and ITeS, pharma, nanotechnology and retail sectors have made a big impact on the real estate industry. The size of the realty market is currently estimated at Rs 60,000 crore and is expected to reach Rs 200,000 crore by 2010, Builders Association of India vice-president Cherian Varkey said at a seminar here.
The current boom period has prompted many realty companies to list on the bourses. In the last few months, initial public issues of Sobha Developers, Akruti, DLF and Parsvnath were oversubscribed and these companies raised roughly Rs 20,000 crore from the capital market, he said.
Pointing out that there had been a slowdown in the real estate market, he said the present stagnation would be only for a shorter duration as incomes of all classes were rising. By 2008 or in the next 10-12 months, this phase is likely to be over, he said. Real estate investment in India has been providing excellent returns and capital appreciation to investors over the last five years, Kerala Chamber of Commerce and Industry vice-president Najeeb Zacheria said.
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| Bengal artists a hit in local & foreign mkts |
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| EXHIBITS of Bengal artists are on the rise in art hubs like Mumbai and Delhi. Shows of this genre are also travelling to leading overseas centres like New York, London and Dubai. Based on estimates, Mumbai and Delhi could be each witnessing around four to five major shows of Bengal artists yearly. In step, half a dozen smaller exhibits of artists from Kolkata are also unfolding in both the metros.
“While this trend has been around for sometime now, it has definitely picked up much more in recent times. A couple of reasons, one feels, are triggering this development. The first centres on the quality of works that Kolkata artists produce. Second, Bengal artists are still more affordable compared to their counterparts in Mumbai and Delhi. It is also true, of course, that gallery owners in Mumbai, Delhi or even overseas are giving Bengal artists a closer look than they used to earlier,” an art market source told ET.
The major events, the source said, are those revolving around solo shows of reputed artists, while the smaller shows normally field the younger lot of lesser known names.
Some of the established Kolkata galleries, which have fielded exhibits in Mumbai, Delhi and overseas, include Sanskriti, Galerie 88, CIMA, Chitrakoot, Akar Prakar and Birla Academy. At the same time, galleries in the other cities or overseas have also invited artists in Kolkata to stage shows.
Among the artists who have been shown in other cities in India or abroad lately are Shyamal Datta Ray, Jogen Chowdhury, Ganesh Haloi, Suvaprasanna, Chandra Bhattacharjee, Shipra Bhattacharjee, Prasenjit Sengupta, Jayashree Chakravarty and Partha Shaw. Sanskriti is soon planning a major exhibit of Lalu Prasad Shaw in Kolkata, which will subsequently move to Mumbai and Delhi. The show, which will feature 100 early and later creations by Lalu Prasad Shaw, could travel to an overseas locale too.
“These shows are benefiting city-based artists. They are helping the artists to get a wider exposure. Various buyers, including collectors and investors, are viewing the works.
Thus, artists grow their reach in the art market. The volume of sales of their artworks also increases. Although one can’t step up prices of the works just because the exhibits are being fielded in larger centres, the artists’ values rise in the normal course as they gain more popularity in these markets,” the source said.
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| SME WATCH SME EXPO – Logistics 07 |
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| SME Expo – Logistics 2007 (August 16–18, 2007, Nehru Centre, Mumbai) will provide a platform for the SMEs to explore business opportunities and network with the stakeholders within and outside the logistics industry Logistics is one of the most complex business
activities as it involves combining
diverse functions and using service
providers who may be culturally and
objectively different. Like most industries in India, the logistics industry is
also dominated by SMEs. Being a
very diverse industry, all the SMEs in
the logistics industry do not have a
common platform for networking
and knowledge sharing.
SME Expo – Logistics 2007 aims to provide exactly that. This one of its kind expo is aimed at giving a B2B networking platform for SMEs in the logistics industry. It will see participation of the complete value chain of the logistics industry viz. Supplier, Buyers and peers.
With ICICI Bank as the title sponsor, SME Expo – Logistics 2007 would provide SMEs in the logistics industry an opportunity to get acquainted with the latest and most innovative products and services.
Exhibitors' profile would include commercial vehicles, ancillary manufacturers, 3PL, warehousing & storage, etc. Visitors' profile will include high profile buyers from the India and abroad, Logistics & SCM professionals, export agencies, government agencies,etc.
The Expo will also see two days of parallel conference (August 16–17, 2007) that would provide opportunity to highlight the latest relevant industry issues. The conference will feature new concepts, innovations, latest technology, case studies and best practices in logistics and SCM. All in all, the SME Expo is aimed to be created as an annual event where all stakeholders in the logistics industry would come together to network for business and share their knowledge about the industry.
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| Fiat finalises engine deal with China’s Chery |
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| • SHANGHAI: Fiat said on Monday it has finalised an engine purchase deal with China’s Chery Automobile, enabling the Chinese auto maker to supply more than 100,000 engines per year to the Italian company. Under the agreement, Chery will supply 1.6 and 1.8 litre engines for Fiat cars made China and overseas, it said in a statement. “This is also a good basis for studying further cooperation with Chery in the automotive industry,” Sergio Marchionne, CEO of Fiat Group, said in a statement. Industry sources told Reuters late last year that Fiat and Chery had been exploring opportunities for a production alliance after signing a framework engine agreement in October. One option was for Chery to make cars using Fiat technology, and Alfa Romeo was one of the Fiat models that could be made in China, the sources said. While General Motors and other auto companies are making hefty profits in the fast-growing China market, Fiat has been struggling with its money-losing car venture with Nanjing Automobile.
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| Industry clocks 10% growth in Q1: CII-Ascon survey |
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| DESPITE an appreciating rupee and hardening interest rates, most sectors in the CII-Ascon survey for the April-June quarter have shown a year-on-year production growth of over 10%.
Of the 101 sectors reporting production figures in the survey, 23 reported excellent growth rate of over 20% and 27 sectors recorded a high growth rate of 10-20%. While 36 sectors registered a moderate growth of below 10%, 14 reported a degrowth. “The percentage of sectors in each category remained almost constant over the period April 2006 to March 2007, which reaffirms that Indian manufacturing is on track,” a CII statement said.
According to the survey, aluminium, petrol, pig iron, textile machinery, industrial gases, electric fans and microwave ovens were among those reporting excellent growth. One of the new entrants in the category was electric twowheelers. Energy meters, abrasives, industrial valves, machine tools, water equipment and air conditioners figured in the high growth category.
“It is good to see that 50% of the manufacturing sectors have shown above moderate growth despite various pressures in terms of the appreciating rupee and hardening interest rates,” CII Industry Council chairman Satish Kaura said.
Of the 27 sectors reporting sales growth figures, six registered excellent growth, 11 sectors registered high growth, four sectors reported moderate growth and four recorded negative growth.
The excellent growth sectors included sponge iron, textile machinery, water equipment, tractors, electric fans, and electric two-wheelers while the high growth category included ceramics, forgings, industrial valves, scooters and cars.
Of the 26 sectors reporting export figures, four posted over 20% growth in the April-June quarter this year over the same quarter last year. While eight sectors figured in the high growth category of 10-20% growth rate, five recorded moderate growth of below 10% and nine registered a fall in exports.
Three-wheelers and motorcycles were sectors that registered excellent export growth. Those in the high growth category include ball & roller bearings, forgings, industrial valves, machine tools, water equipment and electric fans. Sponge iron, textile machinery and tyres reported a moderate growth while scooters, cars, tea and ceramics reported an export degrowth.
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| Paraguay keen to help Indian cos explore Latin American markets |
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| PARAGUAY was working to sign a preferential trade agreement with India to boost export to the landlocked country and provide Indian companies opportunities to tap the South American markets, senior officials said on Sunday.
The country has been in discussions with India as part of the Southern Common Market (MERCOSUR) created by Argentina, Brazil, Paraguay and Uruguay. “In all, we have identified 460 products with export potential, like soybean and organic cotton. We hope to bring 605 products form India under the Preferential trade Access Agreement once the pact is signed between the two countries,” said Paraguay’s Ambassador to India Genaro V Pappalardo.
According to him India is currently exporting pharmaceutical, agricultural machinery, automobiles spare parts and spices to the Latin American country. “ We want to have joint venture and technology transfer in communications, agriculture and food processing, ayurveda and biodiesel sectors. We see a huge potential of Punjabi businessmen investing in our country or either going for a joint venture with existing Paraguay players,” said Mr Pappalardo.Currently, trade transaction between India and Paraguay is only worth $20 million. “We want to increase the volume of our trade, particularly, the soybean import to India,” he said.
A few Indian companies from the pharmaceutical and food processing sectors have invested in the country to get benefits from the free trade zones and access the Latin American markets. “A businessmen doesn’t have to pay VAT (which is 10%) and is also exempted from excise duties for the first five years. Also, depending on the investment and company, the government gives additional incentives. In addition to this, the tax burden in Paraguay is 9.9 % compared to 21.4% in Brazil and 20.4% in Argentina,” said Mr Pappalardo.
He further added that considering the average cost of land which varies between $800 and $1,000 per hectare and availability of young labour (70 % of the population is below 30 years), Punjab farmers can find a huge opportunity to invest in the country. Realising the importance of a direct flight from India to Asunción (capital of Paraguay) Mr Pappalardo said he intended to bring the matter to before the Indian government. “The Amritsar International Airport could be from where we could start the flight,” he said. Dr Saryen Yadav, along with his associates from the US, plans to invest close to $500 million over the next five years in the Latin American country.
Setting up a food processing unit of soybean and establishing a private ayurveda university are high on his agenda. “It is a virgin market to explore and invest. With the establishment of the units there we have a big market to cater to from Brazil to Argentina,” he said.
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| LLP Bill to help SMEs attain better governance culture |
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| SMALL and medium enterprises (SME) — the largest job creators in the country accounting for 9% of the GDP — can look forward to greater access to credit by the end of the year. The ministry of corporate affairs will remove certain ambiguities in the limited liability partnership (LLP) Bill to ensure that besides entities in the services sector, firms in the manufacturing sector too can get converted to LLPs. The facility to get converted to LLPs, together with a set of corporate governance norms soon to be introduced for SMEs, are set to give SMEs a legal form and governance culture well appreciated by banks.
The manufacturing sector is now dominated by SMEs most of which are registered as partnerships and not as a company due to the high compliance cost. Once the bill is passed, they could get converted to LLPs, a new business structure which has an internal governance system that financial institutions and banks would like to see in them, experts tracking the sector said.
Now, 95% of industrial units in the country are SMEs and about 40% of value addition in the manufacturing sector takes place in the segment. Over 90% of SMEs are registered as proprietorships, about 2%to 3% as partnerships and less than 2% as companies as per a survey conducted by the ministry of small-scale industries.
Officials in the ministry of corporate affairs said they would amend the bill’s statement of objects suitably and that they would prefer to introduce the bill in the winter session of the Parliament after a parliamentary committee okays it. The new legislation would allow even corporate houses to set up LLPs with individuals as other partners.
The National Foundation for Corporate Governance, an initiative of the ministry and the industry, is now evolving corporate governance norms for SMEs. “This is meant to be adopted voluntarily and would go a long way in satisfying lenders,” said an official.
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| Entrepreneurship to hog limelight in E-revolution ’07 |
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| “THE industry is looking for new places to enter and people are experimenting with concepts like rural BPO. Now, all that will come to an end as there are no incentives,” said Kiran Karnik, former president of Nasscom during E-revolution, 2006 —a two-day event to propel innovation and create a synergy in entrepreneurship in the region — in an interaction with ET.
Post E-revolution, Chandigarh administration has been able to erect a regional cyber security centre, an education city spanning over 150 acres, develop an entrepreneurship development cell and become one among the first states to introduce NAC test. However, the development of the IT Park has seen its ups and downs with the Punjab and Haryana High Court staying acquisition of 270 acres land for development of Phase III. Now, that the Union Territory has the court’s decision in its favour, the city is taking the plunge to make the region an entrepreneur’s hub. Chandigarh is pegging entrepreneurship as the theme for this year’s E-revolution.
The Band of Angels, Indian Venture Capital Association and The Indus Entrepreneurs will come together for the two-day event in association with the Chandigarh Administration and the governments of Punjab and Haryana.
“It has to do with the policies that the governments adopt. Karnataka projected Bangalore and Chandra Babu Naidu, the former Andhra Pradesh chief minister, promoted ‘Cyberabad’ by being highly proactive and inviting companies like Microsoft to set up operations. Kolkatta followed suit by offering near-to-the-ground attrition rates to companies like IBM. Activity on the IT front in Punjab began four to five years back and things have moved slowly,” says Saurabh Srivastava, chairman of India Venture Capital Association, the apex body of VC funds in the country.
He went on to say that Chandigarh would have to grow along with Punjab and Haryana since the city would act as a focal point for IT development in the region.
It seems that Chandigarh is taking the entrepreneurship development theme a league ahead this year by bringing Lakshmi Narayanan, Chairman, Nasscom and Vice Chairman, Cognizant Technology Solution, who would address issues of changing landscape of India’s emerging knowledge economy, talent management, performance issues, building an ecosystem, deploying the power of online resources, and achieving excellence by adapting global standards.
In addition to APS Kairon, Minister for Information Technology, Vishnu Dusad, managing director, Nucleus Software Exports and Srinath Batni, director and group co head (Worldwide Customer Delivery), Infosys Technologies will address issues of changing trends and future opportunities in global outsourcing.
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| Punjab in talks with Uttarakhand to set up 500-mw power plant |
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| THE Punjab government is holding parleys with neighbouring Uttarakhand for joint hydel power generation. Punjab chief minister Mr Prakash Singh Badal has held talks with his Uttarakhand counterpart Mr B C Khanduri to work out the modalities to set up the power projects in Uttarakhand.
Expressing optimism, Punjab chief secretary, Mr Ramesh Inder Singh said the two chief ministers had agreed in principle to venture into joint power projects. He said Punjab was contemplating to set up jointly with Uttarakhand a 500-mw hydel power plant in the hill state.
“The two chief ministers have met and have agreed in principle to set up the proposed power project. We have urged the Uttarakhand government to suggest us the site where a project of 500 mw size can be put up,” he said.
Further discussions in the matter were in the offing, he said and added that now the Uttarakhand government would need to revert to Punjab in the matter.
Uttarakhand has identified a potential of 20,000 mw of hydel power in the state. The state currently is generating only 2,819 mw power.
Mr Singh said Punjab was also in discussion with the coastal states for putting up thermal power plants in coastal areas in joint venture with the central public sector undertakings (CPSUs). Discussions were on with the Gujarat and Maharashtra governments. The government, it is learnt, is also in talks with the Gujarat-based Adani Group for setting up a 2,000-mw thermal power project at Mundra. The Power Finance Corporation (PFC) has been appointed as a consultant for this venture. However, for the Mundra project, the government will need to go in for a tariff bid.
Coastal areas are being considered in view of imported coal as a feedstock, which may turn out to be cheaper if sourced from Asian countries.
Punjab government is also contemplating holding talks with state governments where power projects could be put up at the pit heads.
According to the Central Electricity Authority (CEA), the demand for power in Punjab is expected to increase to 11,000 mw by 2012. The state’s total generation capacity as of now is 6,088 mw. Only recently, the Punjab government has cleared a 1,200-mw thermal power project at Nabha and a 1,800-mw thermal power project at Talwandi Sabo.
The Badal government has already launched the 600-mw Goindwal thermal power project and proposes to generate 500 mw of power this year at Lehra Mohabbat. The SAD-BJP government is committed to provide round-the-clock power supply in Punjab within a span of five years and make the state surplus in power.
Recently, the Punjab State Electricity Board (PSEB) sent a proposal to the Badal government for putting up a 1,200-mw thermal power plant at Rajpura in Patiala district on BOOT basis.
POWER MOVES
Chief ministers of Punjab and Uttarakhand have agreed in principle to set up a 500-mw hydel project
Punjab is also in discussion with Gujarat and Maharashtra for putting up thermal power plants in coastal areas in joint venture with CPSUs
The Punjab government has cleared a 1,200-mw thermal power project at Nabha and a 1,800-mw thermal power project at Talwandi Sabo recently
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| Excise dept to tap power bills for netting evaders |
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| ATHIRD party information system to prevent excise evasion –– on the lines of the reporting system put in place to track income tax evasion –– could take shape soon to rein in those cheating on this indirect tax. The excise department is exploring the possibility of using power consumption of manufacturing units to check underreporting of production.
Usually, most manufacturers show lower production to evade payment of excise duty. With details of power consumption in hand, the department would be in a position to match it with the quantum of production and check if there is under-reporting, a government source told ET.
This could work on the similar lines as the third party information network in the form of annual information returns (AIR) which is seen as
critical input for the income tax department. Data from AIR has proved very useful in income tax department enabling it to prepare 360 degree profiles of assessees.
The proposal to track excise evasion on the basis of power consumption was discussed at the chief commissioners conference of excise and customs last week. The final modalities for implementing this strategy are being worked out now.
The department has already firmed up a proposal to exchange data with state value added tax (VAT) departments. There is a huge concern about evasion in excise with the collections growing by just about 6.8% in comparison to other indirect taxes where the growth is in double digits. There are issues of compliance in small scale industries sector where the exemption limit was raised to Rs 1.5 crore this budget. These units are exempted from filing of declarations also as long as there annual clearances are below Rs 90 lakh –– Rs 60 lakh less than the full exemption limit of Rs 1.5 crore.
A comparison of power consumption statistics with the production figure will help the excise department in tracking if there is deliberate under-reporting to keep clearances below Rs 90 lakh to avoid filing of declaration itself. Besides, the SSI sector, the department would also keep a close watch on the manufacturers of evasion prone sectors which appear the list of 20 commodity group showing adverse credit to cash ratio. The data thrown up in the audits would also be tallied with other data to detect evasion.
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| Kerala to set up defence industry ancilliary park |
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| TO ENHANCE the share of the state in the production and supply of defence equipment, the Kerala government is taking the initiative to set up a Defence equipment ancillary park.
Industry minister Elamaram Kareem told reporters here that the state identified Palakkad, Kochi and Thiruvananthapuram districts for starting the park. The park would have units of PSUs, which are now supplying materials to the defence industry, as well as private SME units. Efforts will be made to include traditional industries like coir in the venture.
The government would appoint a consultant to conduct a feasibility study on the raw materials available in the state and the type of equipment that could be made for the defence industry.
The government would provide the land and act as a facilitator in starting the park.
he government would try to rope in any of the big private companies like Tata, Mahindra, L&T, Jindal who fall among the major suppliers to the defence industry as the anchor customer, Mr Kareem said. The services of DRDO and the defence sub committee of CII would also be sought to make the venture a success.
The government already has around 200 acres in Palakkad which could be utilised for the park especially since there are units of Instrumentation and ITI nearby. On the other hand several experts have suggested Kochi as the ideal place for such a park. The Central PSU FACT had floated a proposal for a Defence ancillary park in its land through a joint venture with state government.
The state government is also taking steps to strengthen the state PSUs with the Central support. This is evident from the recent tieups like NTPC-TELK, DRDO-Keltec, ISRO-Keltron and Railways-Autokast, Mr Kareem said. The government is now trying to strengthen two another state PSUs namely KEL and SIFL through an agreement with BHEL
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| Punjab Infotech Venture Fund scouts for strategic partner |
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PUNJAB Infotech Venture Fund (PIVF) is scouting for a suitable strategic partner/investor under the public private partnership (PPP) initiative to enhance further its level of operational efficiency and to bridge the gap in the existing fund corpus.
PIVF, with a corpus of Rs 20 crore, was set up by the Punjab government through its corporate bodies like Punjab Information & Communication Technology Corporation Limited (Punjab Infotech), Punjab State Industrial development Corporation Limited and Punjab Financial Corporation in association with the Small Industries Development Bank of India as a 10 year close-ended fund, with the objective of investing in small and medium enterprises (SMEs), primarily in the information technology and software sectors.
However, PIVF is now looking for strategic investors in like venture capitalists, private equity firms, banks, financial institutions and other private sector entities to help it bridge the gap of Rs 15.50 crore in the existing fund corpus. It has, therefore, sought expression of interest(EOI)- cum-request-for-qualification from interested parties.
Talking to ET,Punjab Venture Capital Limited (PVCL) CEO R K Bhandari said the fund would be open to all kinds of transactions and will invest in start-up/seed /R & D ventures, growth capital, turnarounds and buyouts. With the induction of a strategic partner, PIVF would be in a position to enhance further the level of operational efficiency through efficient systems and processes in managing the fund, bridge the gap in the existing fund corpus and assist the fund to increase its corpus to Rs 50 crore and further to Rs 100 crore in the next two years.
He said, “ our endeavour would also be to widen the sectoral coverage from existing IT and software sectors to target SMEs in other knowledge-based sectors.”
He said the suitable partner will get an opportunity to take a stake in Punjab Venture Capital Limited, the investment manager and Punjab Venture Investors Trust Limited, the trustee company and would have the management rights commensurate with the level of participation. Interested parties have been given time till August 31to apply.
Mr Bhandari said PIVF had raised Rs 4.5 crore of which Rs 2.5 crore had come from the Punjab government through its corporate bodies and Rs 2 crore from SIDBI. PIVF had sanctioned Rs 17.9 crore to eleven companies. However, Rs 6 crore sanctioned to two companies was subsequently cancelled. It has so far disbursed Rs 3.4 crore to nearly half a dozen companies of whom two are dividend paying companies and two are startup/marketing stage companies. Nearly Rs 8.5 crore commitment to sanctioned companies was pending. However, due to non availability of funds further investments could not be made.
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| Industrial training institute to be set up in Bhiwani: Hooda |
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| THE Haryana Chief Minister Bhupinder Singh Hooda has said that the first unit of 600 megawatt of Rajiv Gandhi Thermal Power Plant at Khedar in Hisar will be commissioned by December, 2009 and the second unit will be ready by March 2010. The CM also said that an industrial training institute, costing Rs 10 crore would be set up at Siwani in Bhiwani district for providing qualitative technical education to the youth of the area.
The Rajiv Gandhi thermal power plant was being constructed at a cost of Rs 4,297 crore which is the only mega project of northern India. The CM said that sufficient power would be made available to the people of the state during next two years as a number of power projects were in the pipeline. He assured the farmers that ample power would be given to the agriculture sector even after purchasing on the higher rate. He said that the power was being purchased on the rate of Rs. 8 per unit from the other states to meet the growing demand of power. He added that the main aim of the government was to provide equitable water to all parts of the state and for this purpose, BML Hansi-Bhutana Multipurpose Canal being constructed at a cost of Rs. 350 crore. Similarly, Dadupur Nalvi Canal was being constructed at a cost of Rs. 267 crore.The CM also said that an Industrial Training Institute, costing Rs. 10 crore would be set up in Siwani in Bhiwani district for providing qualitative technical education to the youth of the area.
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| POWER PUNCH: DHBVN to upgrade service |
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| UNDER a comprehensive plan of Rs 702 crore, the Dakshin Haryana Bijli Vitran Nigam (DHBVN) has decided to renovate, augment and strengthen power distribution system in its area.
DHBVN has launched a Rs 268 - rore scheme to segregate domestic and agriculture load in villages by the end of December.
DHBVN has also planned to spend Rs 139 crore for rehabilitation of 100 overloaded and lengthier feeders of 11KV by dividing each feeder into 2 or 3 feeders. During the process of rehabilitation of the feeders, the complete system would be renovated and demand of additional distribution transformers would be met with. Under the scheme, old conductor would also be replaced with new conductor of proper size and capacity.
DHBVN has also started construction of 37 additional sub-stations and augmentation of ten existing substations of 33 KV level in rural areas having target to complete with in a period of one year to inject power in this strong distribution system,. Under this Rs. 37 crore plan, the capacity of transmission and distribution capacity would be augmented by 385 MVA, which would overcome the problem of low voltage.
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| Priknit Apparels has big plans up its sleeve |
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| LUDHIANA-based 'Priknit Apparels' plans to upgrade the base unit and enhance capacities as well. After opening its outlet in Ludhiana, the company further plans to spread its wings in other parts of the country. It plans to come up with additional 120 outlets by March 2008. That translates to expansions worth Rs 80-100 crore.
For this a part of the fund will be raised under the TUFS Technology Upgradation Fund Scheme. Vijay Ghai, MD, Priknit Apparels, said: "Initial investment in phase –1 will be close to Rs 50 crore. Once over with it we will continue with the expansions. Priknit has 74 stores across North India, UP and Rajasthan. We plan to come up with special schemes as well in the coming months."
The company has also increased its production facilities to meet the ever growing demand and has increased warehousing facilities too to keep ready stocks to dispatched at the time of need and demand. Priknit is entering the ladies wear market now with proper , authentic and likable range Priknit Apparels started its business in 1983. Initially the company was manufacturing Woollen Knitwears, Jackets and T-Shirts. In 2004 Priknit Apparels Pvt. Ltd. entered into Indian retail markets with its own brand "Priknit." Priknit western wear is available in wide ranges for men and women. Priknit range comprises of T-Shirts, Shirts, Trousers, Cargoes, Pullovers, Cardigans etc. Priknit is fullyequipped with latest fashion trends.
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| ‘Distance no bar for trade’ |
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| NO COUNTRY is more distant from India than Chile. However, that does not hinder growth in trade between the two countries, feels Jorge Heine, Chilean ambassador to India. Having boosted Chile’s exports to India in a big way in the past couple of years, the envoy is looking forward to greater investment flows between the two countries. Mr Heine spoke to Amiti Sen and G Ganapathy Subramaniam about the prospects for stronger economic linkages between India and Chile . Excerpts:
Why do you think economic linkages between India and Chile can improve significantly despite the geographical distance separating the two?
There are tremendous complementarities between India and south America. India needs lots of natural resources for its industrial development and infrastructure. South America is the richest region in the world in terms of commodities and natural resources. We have oil, iron ore, copper, gold, silver and a lot of agricultural produce. A lot of raw materials that India needs is available in Latin America. Geography is not a issue at all. India trades more with Chile than with Bangladesh. We export mostly commodities while India exports high-end products like cars, engineering equipment, chemicals, pharmaceuticals, textiles and diamonds. There is a lot of potential for increasing trade in these areas.
What are your expectations from the India-Chile trade agreement?
The PTA, which was signed last year, is about to be ratified by the Chilean Congress. It will give impetus to further trade. Although it is a modest agreement involving just 300 products, it is a good start. It is the first trade agreement which will be implemented between India and Latin America since the India-Mercosur agreement has not been ratified yet.
Which are the key areas that Indian exporters should focus on?
While India is doing very well in a number of sectors, pharma is emerging as an area where India should focus on. I held a seminar on Indian pharma and Chilean health system in San Diego in June 2005 and Indian pharma companies travelled all over Chile. Since then pharma exports to Chile from India has picked up. I think it is a win-win situation. We need affordable pharma products, while India needs to expand its market.
Are Indian companies being encouraged to invest in Chile?
India’s presence in manufacturing is growing in south America and also Chile, not just in terms of sales but also in terms of joint ventures. Tata Motors is in joint venture with a Brazilian bus company making buses. Essar has a 1.2 million steel project in the region. There is also tremendous opportunity in the IT sector. TCS is in Chile after buying a Chilean company in 2005. HCL is setting up a centre in our country. However, what we are most excited about is the possibilities of tie-ups in offshoring. Companies in India are exploring possibilities of setting up shop in Chile which is in the same time zone as the US east. Our minister of economic affairs will be visiting India in January, along with a number of our IT companies and they will go to Bangalore, Delhi and Mumbai to look at opportunities.
Apart from copper, what are the key items exported from Chile to India?
We are the world’s largest producer and exporter of copper. As much as 75% of our forex earnings comes from copper. However, we are also focusing on exporting other items. We are one of the biggest exporters of fresh fruits, wood and wood products and fisheries. Our exports have grown from $9 billion in 1990 to $60 billion in 2006 mainly because of our efforts to diversify our products. Apart from copper, we are also focusing on other products like fresh fruits. This year our fruit exports to India will touch $8 million from almost nothing three years ago. This has also been possible due to the cold-storage technology which keep fruits fresh throughout their shipping time. This was not possible ten years ago. Using these technologies, India can export tropical fruits like mangoes to south America.
Is India a good market for Chilean wine? Do you think the recent cut in duties will help in increasing exports?
We have 18 distributors of Chilean wine in India. I have seen people enjoy it in cities like Mumbai, Goa and Bangalore. However, the problem is the duties. The price of wine in India is outrageous. While some duties have been reduced, the state governments are going to impose other taxes. We are waiting to see if the total duties would actually go down.
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| Indian textile export may get Japanese touch |
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| INDIA is all set to double its share in the world market for textiles and clothing in the next five years, minister of state for industry Ashwani Kumar has said. Japan could play an important role in helping India reach the target by collaborating in the area of textile design, manufacture and marketing, the minister said at the opening of the India-Japan friendship year fashion show in Osaka. Japanese designer Hiroko Koshnoi and her Indian counterpart Manish Arora presented textile collection from India to Japanese businessmen to showcase the potential Indo-Japanese collaboration holds in the world of textiles and garments. Mr Kumar pointed out that with growing demand for Indian textiles, the country was seriously targeting doubling its market share from the current 3.5% to 7% in 2012. Exports are expected to touch $110 billion from the existing $51 billion in five years time, he said. “Textile is the next big wave in India. We hope to get Japan’s support in achieving our goals. It can only be a win-win situation,” he said. Ms Koshnoi is already supplying her designs to India where they are mass produced and exported to other countries. “I would now like to exclusively produce garments for the Indian market with Indian fabric. If I get a partner in India, the Indiarange can be both sold in the country and exported,” Ms Koshnoi said in an exclusive interview with ET.
Ms Koshnoi has been in the fashion industry for 50 years and exports her labelled garments worldover. “We Asians have to come together to take the lead in the global textile market. The future belongs to Asia,” she said.
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| Australia may sell uranium to India |
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| AUSTRALIA has said it would consider supplying uranium to India despite the country not being a signatory to the nuclear Non-Proliferation Treaty (NPT), provided it agrees to inspections by the International Atomic Energy Agency.
The proposal, which has been strongly backed by Prime Minister John Howard, has put Opposition leader Kevin Rudd at the loggerheads with the Labour government, which had earlier argued that selling uranium to India would undermine the NPT. Foreign minister Alexander Downer said Australia would consider supplying uranium to India even if it does not sign the NPT, provided it agrees to inspections by the UN atomic watchdog.
Federal resources minister Ian Macfarlane, meanwhile, said the government would seek further legal advice on whether it has the constitutional powers to override the states’ bans on uranium mines in western Australia and Queensland, ‘The Age’ reported on Friday. Mr Downer said while he would prefer the countries sign the international non-proliferation treaty, “you have to face up to the facts.”He said India has no record of exporting nuclear weapons technology to other countries and the export of uranium would help curb greenhouse emissions on the sub-continent.“India is the second biggest country in the world in population terms,” Mr Downer said, adding, “its economy is growing at nearly 9% a year. It’s going to be a massive consumer of energy, and we want to deal with the issue of climate change.”Mr Downer said any uranium exported to India could be used only in civil nuclear facilities, and Australia would never sell yellow cake for nuclear weapons or nuclear-powered military vessels.
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| Steel Scarcity: Real or invented? |
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| THE scarcity of steel in the domestic market has set off a relentless war of words between the country’s integrated steel manufacturers and the cold rollers.
The integrated steel producers claim that the scarcity is “manmade” and has led to unregulated imports, creating a surplus of almost 5 mil-lion tonnes of flat steel in the domestic market. This has created a sup-ply glut, say the bigger companies, represented by Indian Steel Alliance (ISA).
On the other hand, Cold Rolled Steel Manufacturers Association of India (CORSMA) has accused the bigger players of jacking up domestic prices of hot rolled steel. They have asked the government to cut import duty to increase the supply of steel in the domestic market.
Interestingly, the figures quoted by the two sides differ. The integrated steel companies claim that 3.6 million tonnes of flat steel was imported till March this year. “Thus while the annual demand is about 19 million tonnes, the supply is almost 24 million tonnes,” a senior industry official had told ET.
Immediately after the report was published, CORSMA wrote to the ministry of steel, accusing ISA for “wrong assumptions”. According to the association, only 360,000 tonnes of steel was imported last year. “There is a clear gap between supply and demand,” said a CORSMA official. “Steel production in the country rose by 8.8% till May this year whereas consumption grew by 11.6%. Last year itself, the scar-city of hot rolled coils in the country amounted to 1.4 million tonnes. Moreover, supply of flat steel fell short by about 1.5 million tonnes,” he adds.
Lack of access to statistics means that neither of the claims can be verified. Statistics collected by Joint Plant Committee, formed in 1964 to promote the industry, are yet to be made available to the public. To make matters worse, the government is yet to wake up to address the rift. However, observers point out at the real problem facing the industry. “The basic issue here is the scarcity of steel in the domestic market. Even if one goes by the figures quoted by the steel industry (where supply barely meets the demand), it is apparent that steel production is yet to take off,” said an industry analyst.
Little wonder that the cold rollers have been asking for a reduction in the Customs duty on imports of hot rolled coils from the present 5% to 2% per tonne. They have even proposed levying a duty of 10% per tonne of exports “to improve domestic supplies as done by other countries, including China and the US”. Asks the CORSMA official: “If they can have duty on iron ore exports, then why not on steel?” It is anyone’s guess that the suggested solution won’t be to the liking of the integrated players.
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| PSUs can now invest 30% surplus in MFs |
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| THE Cabinet committee on economic affairs on Thursday gave its approval for investment for PSUs to invest up to 30% of the funds in the equity mutual funds to maximise returns on surplus funds of public sector enterprises. This could see a flow of more than Rs 60,000 crore in the buoyant capital market. Blue-chip companies such as ONGC, IOC, Bhel and SAIL, sitting on huge cash reserves of over Rs 2,50,000 crore, can now ride the booming equities market.
The Cabinet has also decided that a white paper on disinvestment will soon be tabled in the Parliament. The government has made it clear that it will not support strategic sale but the white paper will only furnish a chronology of developments since 1999.
A decision to this effect was taken by the Cabinet Committee on Economic Affairs (CCEA) headed by Prime Minister Manmohan Singh, but with a caveat that these funds would be channelised only through funds managed by public sector financial institutions.
The board of PSEs would decide the guidelines, procedures and management control systems for investment in MFs in consultation with their administrative ministries.
“The approval would provide Navratna and Mini Ratna PSEs with a level playing field with private sector entities who can invest in MFs and provide flexibility to choose schemes based on relative performance of the MFs,” Priyaranjan Dasmunsi, minister for information and broadcasting, told reporters at a briefing after the Cabinet meeting.
Profitable public sector undertakings generate huge cash surplus every year. However, they can park this surplus only in limited avenues like fixed deposits of state owned banks or government securities. While SAIL has about Rs 6000 crore, Bhel has Rs 4000 crore of cash pile. Even a small percentage of the total cash reserves available with any of these companies would increase flow of funds into the mutual funds market.
Since public sector undertakings despite being listed stock exchanges have stayed away from investing in equities so far due to the risks involved, it may take some time for them to go for equity mutual funds initially.
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| UT to host e-Revolution conclave from August 2 |
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| A TWO-DAY IT conclave, ‘e-Revolution,’ hosted by the Chandigarh administration in partnership with Haryana and Punjab governments and Nasscom will be organised here on August 2 - 3.
Adesh Partap Singh Kairon, Punjab IT minister, said on Wednesday that the development of IT in the region is based on co-operation among the states and not on competition. Manjit Brar, director, IT, Chandigarh, said ‘e-Revolution’ has emerged as an important annual event for the IT industry in the country. It not only helps in showcasing the IT capabilities of the tri-city, but also provides opportunity to local entrepreneurs to network with the industry leaders, he added.
This year’s IT conclave will have as its theme ‘Achieving excellence through a 360o approach,’ on the first day, while on the second day the theme will be ‘Entrepreneur: Innovation is the future.’
The Chandigarh administration, Haryana and Punjab governments, and the Software Technology Park of India (STPI) are the major partners of conclave, in which Nasscom, Band of Angels, The Indus Entrepreneur (TiE), Indian Venture Capital Association, Chandigarh IT Club and the Society for Promotion of IT in Chandigarh (SPIC) will be associates.
V S Kundu, director, IT, Haryana, and MD, HARTRON, said Haryana continues to be one of the largest exporters of software in the country, and major infrastructure developments have been planned to give a boost to the industry. He said the emphasis is on upgrading the education system using educational satellite and enhancement of soft skills, besides facilitating growth of IT sector in the areas around Chandigarh.
R K Verma, director, IT, Punjab, and MD, Punjab Infotech, informed that a headway has been made in developing Mohali district as an IT hub.
Dr Sanjay Tyagi, additional director, STPI, Mohali, said last financial year saw the growth of SMEs in the region, with exports touching Rs 594 crore.
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| Punjab plans 40 centres of excellence for industry-based training |
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| THE Punjab government would set up 40 centres of excellence next year to meet the skill requirements of manufacturing industries and information technology companies. Disclosing this at an official meeting, S Bikramjit Singh Khalsa, chief parliamentary secretary, technical education department, said the state has already set up 10 such centres of excellence under a special scheme of the director general - education and training (DGE &T), government of India, and 10 more centres would be established this fiscal year.
These centres would offer multi-skill training on modular pattern with a multientry/exit provision. Every year, about 12,000 students would be trained in these centres and they could get employment easily in industries or start their own enterprises. The government also plans to fill up the vacancies at various levels in the department and ITIs. A recruitment process has already been initiated, and it would be completed next month, he added.
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| Cheaper credit for SMEs on cards |
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| SMALL and medium enterprises (SME) can look forward to cheaper credit. Apart from lower interest rates, they are also likely to get more credit from the banking system and direct access to the Small Industries Development Bank of India (SIDBI). The National Board for Micro, Small and Medium Enterprises (NBMSMEs) has urged the Reserve Bank to direct banks to earmark at least 10% of their loan disbursals to micro and small units. SIDBI should expand its direct lending and function like a bank, the recently-constituted Board has emphasised.
According to government sources, the Board also discussed ways to ensure that cost of credit for small units is at least 1% cheaper than the prime lending rate (PLR) which is available to large corporates. At present, the rate at which the loans are extended to large enterprises ranges between 9% to 10%. If the board has its way, SMEs could be given loans at 8% or 9%. At present, SMEs have to pay at least 11% on loans from the banking system.
“Due high-risk factors, the sector does not get access to cheap and easier credit. Non-availability of timely credit is the major cause of SME sickness today,” a senior government official said. The government wants to emulate Japan where SMEs get loans at 2%. “Maybe we cannot do a Japan in one go but we should move in that direction. We can empower the sector through such initiatives. Only then the SMEs can be competitive in India,” the official said.
The government is also planning to create special package for the SMEs to subsidise credit to this sector. Ministry of small and medium enterprises has asked RBI and IBA to prevail upon banks to provide loans for SMEs on easy terms, which is the biggest employmer in the country after agriculture. “RBI has been asked to incentivise the banks who perform outstandingly for the sector,” the official said.
According to government sources, the RBI is of the view that SMEs being partnership firms or proprietorship concerns are perceived as high risk in the banking sector. Moreover, NPAs are high in the sector.
SMEs are expected to get a larger share of the Rs 33,000 crore that is likely to be disbursed as priority lending during the current financial year since many sectors have been taken off the priority list. An additional amount of Rs 22,000 crore would be available for priority sector lending which is targeted at sectors like agriculture, education and housing.
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| Global certifiers to be shortlisted to help expedite cement imports |
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| NEARLY two months after it made public its intention to allow import of cement certified by international agencies, the government has actually set out to designate these agencies. The process is likely to be completed in a month. The actual import through this process, however, may take over two months belying hopes of early import from foreign manufacturers, mainly in Pakistan.
Foreign manufacturers need Bureau of Indian Standards (BIS) quality certification to be able to export cement to India. It may take more than a month for any Pakistani manufacturer to obtain such licence. Several Pakistani cement makers had applied for BIS certification following the government waiver of all import duties on cement four months ago. But due to lengthy BIS certification process, no cement has been imported from Pakistan since then.
In this backdrop, department of industrial policy and promotion (DIPP) initiated move to allow third party certification meaning thereby that a quantum of cement certified by an independent international agency could be imported into India. But, it would be applicable only in the case of those manufacturers, whose application were pending with the BIS.
DIPP had sought BIS help in identifying these agencies. But, the country’s apex certification agency showed its reluctance and put the onus of designating international agencies on DIPP. However, it later agreed to help DIPP evolve a guideline, based on which international agencies could be identified. The guideline is likely to be ready in a week’s time, following which government will invite expression of interest from the international agencies. According to a government official, the list of international certification agencies would be ready in a month.
These agencies can then examine samples of export-ready cement of foreign manufacturers and certify its quality.
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| Strategic Moves For companies big and small CRM has become a necessity - SMEs in particular have rea |
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| We all know the meaning of CRM – Customer Relationship Management. The term CRM is also used to describe a software that helps a business organise and manage customer data. As and when the business grows, the SMEs become aware that they can no longer continue the informal and regular personal interaction with their customers. Hence, CRM system can be a strategic tool for retaining customers and acquiring new ones. “Customer Relationship Management is ‘sine qua non’ in doing business in the current scenario. It constantly assesses performance with systematic feedback from customers thus constantly renewing the organisations adaptability in the changing business environment,” says Ajit A Kamath, CMD, Arch Pharma labs Ltd, winner of the Best SME in the Pharma & Chemicals sector in the Emerging India Award 2006.
Speaking about CRM in SMEs, Basil Daniells, Regional Sales Director – Middle East, North Africa and India, Epicor Software Corporation (a leading provider of ERP Software to mid-market companies) says that now, with increased competition and rapidly expanding customer needs, SMEs realise the importance of leveraging CRM software for customer retention and customer delight.
A modern CRM solution enables the SME to manage the entire lifecycle of a customer, from generating leads to closing sales, and to providing superior support that results in additional business. It provides integrated sales and customer support functionality that helps organisations acquire, retain and grow profitable long-term customer relationships.
As an SME grows, customer service can often be a key differentiator in a fiercely competitive market. “CRM is a very successful module and for us it has been very beneficial. Our customers can just log in through the system and it is integrated to our backend. So with just a click of a button, our customers can get online information on pricing, design and so on,” says Mamta Apparao, Chairperson, Kama Jewellery (India) Pvt Ltd, winner of the best SME in Gems and Jewellery Sector at the Emerging India Awards 2007.
As far as SMEs are concerned, they need software that adapts to their customer care needs while still being less expensive. “CRM is the backbone of any industry and it also plays a vital role in SME industries; especially construction industry, which is totally a customer-oriented business whereby there is always direct contact with customers. CRM has to be used on a regular basis so as to add satisfaction to the buyers and add more prospective buyers” says Arun Kumar Kedia, Director, Garnet Constructions Ltd.
Now, how can SMEs leverage CRM solution for better customer service? Mr Daniells feels that for most companies, responding to customers in a timely, meaningful manner can be the difference between keeping their business and losing them to a competitor.
A world-class CRM solution can help the SME deliver first-rate service to its customers while controlling costs. This results in a strong return on investment through happy customers who make additional purchases and generate new business through referrals.
A CRM solution allows to easily gather, organise and share customer information, making possible a real-time, two-way flow of communication between the SME and its customers. Case management features empower the SME to deliver timely, accurate, complete and clear information to customers. The customer service desk can easily open, track, report on and close calls. Moreover, follow-up reminders can be attached to calls to ensure commitments are kept, and even allow managers to prioritise workflow.
“With CRM in place, our customers need not wait for their e-mails or queries to be answered. Ninety per cent of the questions asked on a daily basis can be answered using CRM. Moreover, CRM is an ideal tool for us as we can reach global customers who are interested in our jewellery,” says Ms Apparao.
The retail sector is currently experiencing an amazing growth and many SMEs are tapping it. “It is becoming increasingly important in this sector to have multi-channel analysis of customer data and allow every sales channel to personalise the company’s product/service offerings by understanding the customers’ needs,” Mr Daniells further says.
CRM has attained great significance post globalisation. “In the modern globalised business world, to maximise customer service, an enterprise has to align its CRM strategy with that of its suppliers, customers and other partners in the global value chain. Latest technological frameworks like Service Oriented Architecture (SOA) allow the CRM applications within enterprises to be extended to the external applications of its customers and business partners. This promotes continuous performance initiatives and service and support quality levels within the organisation or across the value-chain,” states Mr Daniells.
On a final note, it should be understood that simply installing CRM software does not ensure a successful customer relationship. To achieve this, business processes and the company culture both have to be redesigned to focus on the customer. In short, CRM software can only be a tool to implement customer strategy. The focus, always, must be on the customer.
For companies big and small CRM has become a necessity - SMEs in particular have realised its vast importance.
We all know the meaning of CRM – Customer Relationship Management. The term CRM is also used to describe a software that helps a business organise and manage customer data. As and when the business grows, the SMEs become aware that they can no longer continue the informal and regular personal interaction with their customers. Hence, CRM system can be a strategic tool for retaining customers and acquiring new ones. “Customer Relationship Management is ‘sine qua non’ in doing business in the current scenario. It constantly assesses performance with systematic feedback from customers thus consta |
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| What are the key challenges that SMEs face in the auto component industry? This analysis tries to fi |
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| Small and Medium Enterprises (SMEs) form the backbone of the auto component industry in India. A scan of companies in the automotive industry reveals that large auto component groups/brands like Sona, Caparo, Rane, TVS, Amalgamation, RSB, are actually a cluster of smaller companies with a turnover of Rs 150–250 crore. These companies, however, leverage on the group's strength to grow in the auto components space. A more liberal interpretation of revenue norms of classification could lead to over 95 per cent of companies in the auto component being classified as either small or medium scale enterprises. This analysis, however, uses a revenue benchmark of less than Rs 100 crore and considers companies in this band as SMEs.
SME evolution in India
The first round of SME evolution in India probably occurred during the entry of companies like Honda, Suzuki, Piaggio, as JV partners with Indian
companies for the
manufacture of scooters and motorcycles. Additionally, the entry of Nissan, Mazda, and Toyota in the commercial vehicle segment provided an opportunity for new SMEs to be formed. These companies were predominantly formed by technocrats with strong product knowledge. Others included vendors for specific OEMs like Hero Honda. Not to be left behind, Suzuki's tie up with Maruti created a new breed of entrepreneurs forming technical and financial JVs in India. According to a recent study by D&B, SMEs have a very strong presence in the Northern part of India (over 150 companies), followed by West and South with over 130 and 80 companies, respectively. SMEs follow the automotive industry clusters of Gurgaon, Pune and Chennai. According to the study nearly 65 per cent of the companies have reported a turnover of less than Rs 25 crore.
Key challenges that SMEs need to address to benefit from the strong Indian growth story are outlined here.
Scale of output and investment
SMEs would be required to invest in product development, machinery and critical manpower to scale up to the next level of growth. The scale of operation and inability of many to come out of the operational workflow and working capital fund requirements leaves less time for strategic planning and building up of growth avenues.
Many SMEs are caught in the lower tiers of the component value chain. Moving to a higher level and catering to a broader customer base requires investment in managerial talent in marketing, R&D and production.
Companies in India operate at very low scale of production and this hinders their ability to cater to the international markets. Capturing a certain scale of operations is very critical in the SMEs growth path.
Management depth
An industry wide challenge but one that impacts SMEs in India the most is the lack of managerial depth. SMEs are driven largely by entrepreneurial spirit. The lack of core middle and senior management impacts a company’s ability to grow in size. The entrepreneur’s core strength and customer relationships are key success factors that drive the business. In the absence of the next level of management the entrepreneur assumes multiple roles within the organisation diluting the core focus of developing and driving company's growth avenues.
This leads to larger issues of management vision and building sustainability of the business. SMEs with clear management vision have succeeded in building large business with a professional approach. For SMEs in India to sustain and grow, the key issue to be addressed is of management vision and depth.
Dependence on process and technical know how
Many SMEs were created as ancillary units of large automobile companies and modelled their business around OEMs. Similarly, the contract manufacturing route was adopted by companies. These companies received design and application engineering support from OEMs or OEM vendors through technical assistance programmes. Product range and customer base were restricted to servicing OEM requirements. The strengths of these companies are their strong manufacturing and production process and adherence to strict quality control of OEMs.
Many ancillary companies have realised that growth is essential from a long-term perspective, and the route is through product range expansion and broad basing customers and customer segments. Management building would also be essential for these companies to move away from a fairly protected environment of vendor-OEM relationships to competing for business with other customers.
Lack of understanding of global business dynamics
SMEs’ exposure to the global business dynamics is limited in comparison to large auto component manufacturers. The current institutional framework has taken initiatives to help the automotive industry through various knowledge sharing programmes and international exposure programmes. Awareness levels on many issues starting from the best of manufacturing processes, quality and process improvements, market intelligence, international practices among others is lower in SMEs. Institutional assistance specially focused on SMEs is required to improve overall skill and knowledge levels to move up the value ladder.
SMEs have their task cut out. Global integration of the Indian economy is moving ahead with India engaging many economies through free trade agreements (FTA). The India-Thailand FTA has the automotive and auto component industry waking up to the challenge of competing with Thailand. SMEs would face severe competition from unknown competitors across product lines. Survival would then depend on how well they create areas of expertise that increase entry barriers for new business to enter their customer gates.
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| US banks attracted to SME business |
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| US BANKS have spotted a huge business opportunity in the small and medium enterprises (SME) here that contribute 9% of the country’s $1-trillion GDP.
A wave of liberal offers for credit along with US government guarantee is set to make its way to the segment with the US seeking to boost its exports by providing trade finance to SME importers in emerging economies.
The US government has asked its banking sector to be proactive in extending credit to SMEs in emerging economies with this objective, minister counselor for commercial affairs in US embassy in the capital Carmine D’Aloisio told ET. The move comes at a time when India expects its trade with the US to double to $60 billion by 2009. US, which is India’s largest trading partner, accounted for 16.8% of India’s exports and 6.3% of imports in 2005.
The first bank to come to Indian shores with an SME-focus is New York-based M&T Bank. Its line of credit has US Exim Bank guarantee and does not require collateral—which most Indian banks insist on from SMEs. The other banks learned to have partnered with the US department of commerce’s trade promotion unit in this regard are AmSouth Bank, North Carolina-based Branch Banking & Trust Company, Atlanta-based Sun Trust Banks Inc. and Bank of Oklahoma N.A.
They are learned to be evaluating their India strategy, while M&T Bank, that does not have branch presence in India, has last week tied up with city-based law firm Kesar Dass B & Associates and its corporate finance affiliate Tree Pie Advisory Services for reaching out to SMEs. The bank which manages assets worth $57 billion offers credit for importing capital goods, technology and services from US firms.
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| The Khannas & The Order Of Taxation |
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| WHEN there is a new Harry Potter book due and the latest Harry Potter film is in theatres, the Khannas should be consumed by Pottermania. Not surprising, given that Mr and Mrs Khanna have two precocious kids, who are obsessed with the wunderkind of Hogwarts. Unfortunately for the kids, mom and dad spent much of the weekend labouring through eight ITRs (income-tax returns) in an effort to file their returns in time.
The latest changes in the filing formats have convinced them that someone in the government has decided to cast the ‘Confundus charm’, which is used to confuse objects and people, on unsuspecting taxpayers. While ET cannot magically fill the forms for the Khannas, we can definitely make their task easier. Here are some useful tips from its wizards of personal finance for hassle-free filing of tax returns.
WHICH FORM TO GO FOR
The old Saral form might have to go into the wastepaper basket. New forms have to be filed for the assessment year 2006-07. There are eight forms — ITR 1,2,3 and so on. Of these, the first four are applicable to individuals and Hindu undivided family (HUFs). Thus, if you simply have salary and interest income, you have to fill form 1. However, if the income is derived from sources such as house property or capital gains or dividend, it would be form 2. Forms 3 and 4 are for businessmen and professionals. Check the matrix to see which form is the one to file if you have multiple income sources.
OLD INCOMES
If the taxpayer has to file the return for the year April 2005 – March 2006 or any other previous year, the same has to be filed through the old Saral form.
CLUBBED INCOMES
If you want to club the income of your spouse or minor child with your income, ITR 1 is not the one for you. ITR 1 is a limited purpose tax return having provision for disclosure of income derived from salary, interest and agricultural income only. So, if you have derived income only from salary, but your spouse has income from house property, which is to be clubbed in your return, you will have to file the return in form ITR 2 instead of ITR1.
DISCLOSURE
An additional burden on the taxpayers this year is the disclosure of transactions such as large investments made in bank deposits, mutual fund units, shares or even property in the year 2006-07. This list includes:
• Cash deposits up to Rs 10 lakh in any single bank during the year
• Payments made via a single credit card for an amount aggregating to Rs 2 lakh
• Purchase of units of a mutual fund for Rs 2 lakh
• Acquisition of bonds or debentures issued by a company for Rs 5 lakh or more
• Acquisition of shares for Rs 1 lakh or more
• Purchase or sale of immovable property for Rs 30 lakh or more
• Investment in RBI bonds for Rs 5 lakh or more
E-FILING
ITR forms are available on the website of the department www.incometaxindiaefiling.gov.in. Taxpayers are required to print, fill and submit it to the department. Alternatively, the forms can also be filed electronically. If the return is digitally signed, the return filling process is completed upon generation of the acknowledgment form by system once the tax return is successfully uploaded. However, if the return has not been signed digitally, the system shall generate form ITR-V (acknowledgment-cum-verification form) instead of the single page acknowledgment form. You are required to take a print out of ITR-V, fill up the verification details and submit the same physically with the local income tax department within 15 days of e-filing of the return.
NO DUPLICATES
You no longer have to fill forms in duplicate and in its stead is now an acknowledgment form. The tax department has provided a separate single sheet for acknowledgment that is to be filled up along with the return. The same shall be stamped for acknowledgment and given back to the taxpayer.
NO ANNEXURES
This year, you need not provide photocopies showing investment proof, or even Form 16/ 16A. It’s only the ITR form that reaches the tax department. Any proof of investment, advance tax receipts, self-assessment tax receipts or any other document whatsoever have been done away with. The tax officers in fact have been asked to detach and return any such annexures attached to the return.
USING EXTRA SHEETS
In the new forms, there is space enough for only two entries under the salary, house property and TDS heads. Where space is a constraint, separate sheets could be attached. Thus, if one has salary income from more than two employers or is holding more than two house properties or where tax has been deducted from more than two sources, attach a separate sheet of paper.
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| SEL plans Rs 50-cr IPO for expansion |
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| THE Ludhiana-based textile company, SEL Manufacturing, plans to come up with an IPO worth Rs 50 crore. The company will be floating 54 lakh shares in the market with a price band of Rs 80-90 per share. The issue will open on July 26 and will close July 31. Exim Bank has taken a 5% stake in SEL, which roughly translates to Rs 5 crore.
Neeraj Saluja, MD, SEL Manufacturing, says, “As we are mainly into exports, our association with Exim Bank will give an international credibility to our businesses. This has opened new avenues for the company, and this is the second such development in the Indian textile industry.”
The company proposes to expand its manufacturing capacities in garment manufacturing, knitting and spinning at a total cost of Rs 184.57 crore. SEL plans to enter the capital markets with a public issue of 53,99,210 equity shares of Rs 10 each through 100% book building process for funding the equity component of the project cost.
UTI Bank has been mandated as the book running lead manager for the IPO. The company has already received Sebi observations with regard to the IPO. After the expansion of the project, the company will consolidate garmenting capacities to manufacture 6 million pieces per year, fully backed by facilities for spinning, fabric knitting and processing.
The financial appraisal of the expansion project has been done by SBI Project Uptech and the debt component of the project cost of Rs 103.79 crore is fully tied up under technology upgradation fund scheme (TUFS).
To cater to its exports markets, SEL has opened representative offices in Russia and Dubai. Presently, a majority of the company’s production of garments is exported to Russia and the UAE.
It is operating with a consolidated capacity to manufacture 4.5 million garment pieces per annum. Its capacities in cotton and combed yarn manufacturing, fabric knitting and yarn dyeing are at 29,856 spindles per annum, 1,950 tonnes of fabric knitting and 3,000 tonnes of yarn dyeing per annum respectively.
For the fiscal 2005-06, SEL had consolidated net revenue of Rs 142.51 crore and profit after tax (PAT) of Rs 13.62 crore.
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| Industry wants fixed power load concept to go |
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| A CROSS section of Punjab industry feels that despite shortage of electricity, the regulations over its use are plenty, and as a result industrial growth receives a setback. The Apex Chamber of Commerce and Industry (Punjab) has brought it to the knowledge of Chief Minister Prakash Singh Badal and the Punjab State Electricity Board (PSEB) that these regulations need to be eased in the interest of the industry.
Industries have their connected load sanctioned by the PSEB as per contracts. While the consumers fix their maximum demand, if they “violate this, they have to pay a very heavy penalty. With this contract demand the concept of connected load becomes meaningless,” according to P D Sharma, president of the chamber.
Talking to ET on Friday, Mr Sharma said the industry has been requesting the board to do away with the concept of connected load and base its dealings with the consumers on the basis of contract demand. With competition coming from all fronts, constant upgradation of machinery becomes inevitable.
Accordingly, the industries have to install balancing equipment to meet the requirement of the competition. In view of this, marginal additional equipment may need to be installed.
“For consumers, it may not be possible to run to the board every time for getting the additional load sanctioned,” he averred.
He said, “In reality, every industry has some excess load in addition to the sanctioned load and what is worrisome is that the flying squads of the PSEB levy heavy penalty for this.”
He further said with electronic meters installed at the premises of the industries, the board should not insist on connected load, which is a source of unnecessary harassment to the industries. The 66 KV scheme is turning out to be a major hurdle in the growth of the industry, and therefore, it should be withdrawn. Those who do not shift to the scheme have to pay a heavy surcharge, which ranges between 10% and 17.5% for 25 KV and above.
He also urged the state government to consider replacing the ordinary incandescent electric bulbs, wherever possible with compact florescent lamps (CFLs). Ordinary incandescent electric bulbs are banned under Kyoto Protocol. International clean development mechanism has been instituted to facilitate the replacement of these bulbs with CFLs.
As the Centre is providing funds for the replacement of bulbs, the state should take advantage of this scheme. Haryana has already started this scheme, he said.
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| UT plans expansion of Medi City to 50 acres Officials Say There Is Possibility Of Expanding It Furth |
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| MEDI City- the state-of-the-art healthcare township planned by the Chandigarh administration to be developed on a public-private partnership (PPP) model in Makhan Majra on the periphery of the UT - will now be extended up to 50 acres from 30 acres.
Senior UT administration officials told ET, “The plan of action is being chalked out presently, and a final scheme will be ready within a fortnight. The area has now been increased to 50 acres. There is a strong possibility that it may be increased to 60 acres as well.”
Other than having specialty hospitals dedicated to cardiology and cancer treatment, nursing schools, training schools and a dental college are also being added to the initial blue print. According to the officials, the number of campuses may also increase. The preliminary plan involves establishment of 4-5 campuses, which will be constructed and operated by established individual players of the healthcare industry.
The PPP model would allow the administration to introduce a clause, whereby the private player will have to provide medical services to people below poverty line (BPL) within the city and the region at subsidised rates. The administration will float expressions of interest (EoIs) for the project in August. Sources reveal that Fortis has evinced interest in the project.
The interest of a number of players, including Inscol, Dr Bedi’s and Health Kids International, is evident since the administration is floating another project of an individual hospital in the southern part of the city. The 4-acre plot would have a multi-specialty hospital, which will also include a trauma centre. The grapevine has it that Reliance has evinced interest in this project, which will also be implemented on the PPP model.
Both the projects will add up to the existing medical infrastructure of the city that comprises Government Multi-Specialty Hospital, Post Graduate Institute of Medical Emergency and Research (PGI-MER) and Government Medical College and Hospital.
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| Haryana okays projects worth Rs 2,250 cr • HSIIDC Allots Plots To 32 Units At Bawal, Rai, Kundli, Ba |
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| A HIGH-LEVEL allotment committee headed by P K Chaudhery, principal secretary & financial commissioner, industries & commerce department, cleared industrial projects worth Rs 2,257 crore in Haryana. Industrial plots developed by the Haryana State Industrial and Infrastructure Development Corporation (HSIIDC) in various industrial estates were allotted to 32 units.
The committee met here on Thursday to consider allotment of industrial plots to projects entailing an investment of Rs 30 crore and above. Land sites measuring 222 acres in total have been allotted to companies at Growth Centre-Bawal Phase II, and the industrial estates at Rai, Kundli, Barhi and Bahadurgarh.
Caparo Vehicle Products India is envisaging an investment of Rs 629 crore for setting up six projects at Bawal. These units will manufacture tubes and tubular products, stampings, braking systems and suspension for automobiles, and house a steel service centre and a die design and development centre.
The units will be set up in two phases with equity funding from the holding company, Caparo Engineering India.
Omax Autos has been allotted a site in Growth Centre-Bawal Phase-II for setting up a unit for the manufacture of advanced tools and a related design centre. The project cost has been estimated at Rs 128 crore and the company plans to invest more than Rs 100 crore in the first three years of starting the project.
Rico Auto Industries and its group company Rico Casting are setting up two projects to manufacture hi-tech ferrous and aluminium high pressure die-casting components for two-wheelers and four-wheelers at Bawal. While the first project is being set up in technical and financial collaboration with Continental AG of Germany, the second project will be set up in collaboration with Zhejiang Jinfel, a leading wheel company of China, for manufacturing alloy wheels. The capital cost of both the projects combined together has been estimated at Rs 140 crore.
Sona Koyo Steering Systems has been allotted land at Bawal for setting up two units that would manufacture automotive parts and components. The first project for the manufacture of mechanical steering columns will involve an investment of Rs 36.25 crore in technical and financial collaboration with FUJI KIKO of Japan. The second facility is being set up in collaboration with JTEKT Corporation of Japan with a capital of Rs 43.03 crore.
Wipro Group, through its whollyowned subsidiary Wipro Infrastructure Engineering, has been allotted a land site at the industrial estate in Kundli for setting up a unit to manufacture hydraulic cylinders with an investment of Rs 32.99 crore, which will be entirely financed by internal reserves and accruals.
Motherson Auto is setting up two projects for the manufacture of pressure die casting moulds and components for automobiles, ropes, overhead guards and built-cabins for construction and agricultural machinery at Bawal. The cost of both the projects would come to around Rs 137 crore.
Saraswati Dynamics has got a land for setting up a unit for the manufacture of environmental testing equipment at Growth Centre-Bawal with a capital investment of Rs 39.67 crore.
Two projects, involving IT-enabled services, are being started by APV Infotech and PNR Capital Services. While APV Infotech will set up a BPO with an investment of Rs 161.03 crore, PNR Capital Services shall be setting up an offshore call centre infrastructure at a cost of Rs 145.68 crore.
The committee also ratified the allotment of 160 acres of land to Asian Paints in Rohtak Industrial Model Township, which was earlier approved by the Haryana Investment Promotion Board under the chairmanship of Chief Minister Bhupinder Singh Hooda.
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| Income-tax profiling is norm in evasion cases: Finmin |
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| The finance ministry has clarified that when there is information about large financial deals that are unreported or huge tax evasion, an attempt is made to bring together all financial information about the person from sources such as AIR, BCTT, STT, income-tax and wealth-tax returns. The object is to construct a financial profile of the person. IT profiling is a standard device adopted as an anti-tax evasion measure, the ministry said.
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| Borrow if you need and not for luxuries |
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| Movement of interest rates is probably the most common issue which most people are deliberating. Direction of rates will determine host of their future decisions, be it to loan, investments or even day-to-day expenses. With the consumer boom in Indian economy, younger population participating in the consumerism coupled with increased entrepreneurial initiatives, credit off take has increased substantially contributing to the much talked about ‘liquidity’ problem.
This ‘liquidity’ concern in turn gave rise to another economic worry called ‘inflation’, which is a worrying sign from the consumer’s perspective. With overall economic growth getting hurt by the inflationary pressure, Reserve Bank of India in its monetary policy announced increase in reverse repo rates and CRR hikes to control liquidity and thereby inflation. However, this stance resulted into increase in interest rates, thereby again hitting common consumers, especially those who had already availed loans.
Sounding music to people’s ear, inflation numbers seem to come under control with variety of factors acting in its favour ranging from base effect to better monsoon. Since the beginning of this year, rupee has appreciated by about 9%. Though the appreciation helped in controlling inflation, but it is hurting the export competitiveness of the economy. In case rupee appreciates further at the rate experienced since early this year, RBI may have to take some drastic steps like market sterilisation or CRR hike. However, rupee is unlikely to demonstrate drastic strengthening from current levels, and hence we may not really see any material intervention by RBI.
Thus, coming back to the first question, from hereon what could be the direction that interest rates may take. I believe that in the short term, i.e., in the next three months, with wholesale price index (WPI) touching favourable limits, loan growth getting contained, improving asset liability mix of banks, we may not see aggressive policy stance by RBI and rates may remain stable at current levels. However, broad-based reductions in lending rates are unlikely in the short term.
In the medium term, contingent upon monsoon conditions, sustenance in controlling inflation and capital inflows, call on interest rates will be taken. Aggressive hike in interest rates does not seem to be a reality.
From global market perspective, though other major economies like UK, Euro area, Australia and New Zealand are hiking interest rates, in US we expect interest rates to be steady in 2007. This in turn will keep the capital inflows to India and comfortable levels, thereby not influencing the liquidity conditions. Thus, the upside of interest rate seems to be capped and downward movement of interest rate seems to be protected. So overall we expect a range bound scenario.
Under the given circumstances, my advice to borrowers would be to borrow only if it is a necessity. Time is not right for borrowing for luxuries. For instance, in case a common person wants to borrow for his or her first house, one should not wait. However, decision to purchase second or third flat from investment perspective can certainly be stalled or the surplus money can be routed to other investment avenues. Similarly, with uncertainty prevailing on the direction of interest rate floating or semi fixed interest arrangement should be preferred.
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| Godrej & Boyce to invest Rs 100 cr on expansion Manufacturing Facilities At Mohali & Baddi To Get Rs |
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| GODREJ & Boyce, a key player in the home appliances industry in India, will be investing Rs 100 crore to expand their refrigerator and air conditioners manufacturing facilities at Mohali and Baddi.
"We will invest Rs 50 crore each in both Mohali and Baddi facilities to augment the existing capacities of both the frost-free refrigerator and the air-conditioners,'' Godrej & Boyce chief operating officer George Menezes told reporters here on Wednesday.
The company has the capacity of 5 lakh direct cool refrigerators annually and the new facility, to be operational this year, will take its annual capacity to about 7.5 lakh units, he said, adding that the company hoped to double its domestic
market share from 20% to 25% by the year end.
The company has now two manufacturing facilities at Mohali and Pune, and has a combined direct-cool and frostfree refrigerator capacity of ten lakh units. Expansion in the Pune facility is also being undertaken, which will increase its capacity by 2.5 lakh units. While the frost free market grew by 26% in 2006-07, the direct cool grew by 5%, according to company data. With added focus to the Punjab market, the refrigerator summer sales of Chandigarh branch are up by 34% over last summer.
"Currently the direct-cool market accounts to 72%, whereas the frost-free market is 28%. We expect growth to come from both the refrigerator and Air conditioner market and hence are pumping the money,'' Mr Menezes said. This summer, Godrej air conditioners have grown by 90% in volume terms and 120% in value terms (Jan-Jun '07) in Punjab over the last summer (Jan-Jun '06).
The Baddi unit assembly line currently manufactures 3 lakh units of airconditioners annually.
Kamal Nandi, vice-president, sales & marketing said, "To support our expansion plan, we are further strengthening our sales and service network to reach out to customers all over the state and north markets."
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| ITC scripts Africa story for wood import PAPER SECTOR’S PLAN RESEMBLES THAT OF METALS INDUSTRY |
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| The chief executive of ITC’s paper division Pradeep Dobhale tried an experiment recently. He led paper companies to consider importing wood from Africa, a radical departure from the set norm of importing from countries such as Malaysia and Indonesia.
“For most paper companies, it was common to import bamboo wood from either Indonesia or Malaysia,” says Mr Dobhale, who is also the head of the Indian Paper Manufacturers Association. “But decreasing availability led us to explore options of importing from Africa. As an experiment, we will initially import about 1,00,000 tonnes of wood and if it becomes viable, we’ll go for more.”
India consumes about 10 million tonnes of wood annually for making paper. Although the government is currently working on a plan that will allow public-private partnership in growing dedicated forests for the paper industry, a final picture will take some time. “Till then we will import from either Tanzania or Ethiopia,” adds Dobhale.
ITC thus joins a growing list of Indian industries that are excited about Africa due to its vast raw material resource and a growing consumer market. While developed countries once scrambled for dominance of Africa, a surging demand for consumer goods such as cars and commodities is now leading large Indian business houses to script strategies around the continent.
The paper sector’s plan closely resembles that of the metals industry. However in this case, metal companies are setting up shop in Africa to tap its vast raw material base. The Anil Agarwal-promoted Vedanta Resources and Tata Steel, India’s largest private steel company, are building large projects in the continent. While Vedanta has a copper mining project in Zambia through subsidiary Konkola Copper Mines, Tata Steel is building a ferro-chrome project at Richard’s Bay in South Africa.
“The large raw material resource base, basically copper concentrate, is what brought us to Zambia,” says Vedanta CEO Kuldip Kaura. “Our total investment in Konkola will go up to $700 million which is the largest so far in Zambia,” he said, adding that Vedanta is ramping up Konkola’s capacity to about 5,00,000 tonnes. It currently makes about 2,50,000 tonnes of copper.
The story is the same for other Indian metal companies. Public sector SAIL is one among several local companies that had recently sent geologists to scout the continent for iron, coal and other mineral deposits. And not without reason. Africa has 35% of our planet’s mineral reserves, including iron reserves (15%), copper (17%) and bauxite (43%).
Among the various Indian business houses, the Tatas are known to be most active in Africa. Apart from Tata Steel, the group’s other companies such as Tata Tea, Tata Motors are also very keen on the continent. The group has floated Tata Africa Holdings, a Johannesburg-based company that acts for all Tata operations in Africa.
Coffee, cars and metals are the priorities for the group. “We’ll make Uganda our hub for coffee exports across the world,” says Tata Coffee managing director MH Ashraf.
The company currently exports to Russia and the CIS countries and is now planning to tap the lucrative markets of Europe and China. Uganda is Africa’s second largest coffee producer, after Ethiopia.
India’s largest commercial vehicle maker, Tata Motors has for long been in South Africa selling cars, trucks and light commercial vehicles. Now encouraged by its success in South Africa, the company is opening dealerships in neighbouring countries such as Botswana, Lesotho and Namibia.
But as more companies foray into Africa, there is a growing concern. Security threats, especially kidnapping and extortion in countries like Nigeria, where China and India are increasing their investments, has thrown a dark shadow.
In May, three Indian petrochemical workers were kidnapped in Nigeria’s oil capital port, while two employees of Global Steel, a company with Indian origin, were kidnapped and later freed, again in Nigeria.
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| India to dominate global KPO market |
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| INDIA, already known as the back office of the world, will account for two-third of the global Knowledge Process Offshoring (KPO) segment that could create up to 1.8 lakh new jobs here by 2011, a new study has said. The worldwide KPO market is expected to grow to $16.7 billion in revenues by 2010-2011 at an annual growth rate of 39%. Of this, India would account for $11.2 billion, according to the study by business research and analytics firm Evalueserve.
The industry would employ about 3.5 lakh professionals by March 2011 globally. This includes nearly 2.55 lakh in India, where only about 75,400 people are currently employed.
According to Evalueserve, the KPO industry in India had only 9,000 billable professionals in India, generating revenue of $260 million during 2000-01. This number has grown to 75,400 by 2006-07 with $3.05 billion in revenue at an annual growth rate of 51%.
The anticipated success in KPO comes after the success of Business Process Outsourcing (BPO) in the country, which accounts for revenues of $15.8 billion in 2006-07, a jump from just $7.7 billion in 2003-04. This huge growth in the global KPO space would be driven by the vast pool of educated and experienced professionals in countries like India, China, Russia, Poland, the Philippines, Hungary and many republics from the erstwhile Soviet Union, California-based Evalueserve’s Chairman Alok Aggarwal said.
It is quite likely that companies — both with their own captives and those using thirdparty vendors — may use a “hub and spoke” model in which a provider in India may constitute the “centre” whereas other units in the world may provide appropriate “spokes”, Aggarwal said. Evalueserve said in the near future, KPOs are likely to be driven by factors like breadth and depth of coverage, domain expertise, location advantage, sales and marketing capabilities, data compliance with respect to regulatory standards and management of business risks. However, the study took some assumptions particularly for controlled attrition, in which case the KPO industry may be able to generate no more than $9.9 billion in revenues by 2010-11.
Also, lack of highly-educated professionals such as MBAs, chartered accountants and architects in India and other low-wage countries may affect the growth of the KPO sector. The sub-sectors within the KPO industry that are expected to do well are banking, finance, securities and insurance research, data mining and analytics and contract research organizations and biotech services.
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| Power to dream sets them apart Easy, failure-free life will create its own challenges for India Inc |
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| MY 17-year-old does not want a bike – he wants a car. Alfa Romeo. The cheapest one comes for Rs 40-45 lakh. “Daddy, you wasted your money building this house,” he tells me.
My 12-year-old daughter, who paints very well, one day got up at the dinner table and announced – I am going to New York and Switzerland. Will draw landscapes. And will have exhibitions in New York.
Of course the savings mentality has given way to spending. But there's a bigger change. Liberalisation children's mental power to dream is what differentiates us from them. Think about it – a 17-year-old talking about a 40-45 lakh car, even before he has begun to earn. It's the certainty of the future income that helps them dream so big. Technically an average Indian executive would see his Rs 10,000 starting salary multiply 30 times during his career span. These consumerist kids see their future cash flow to weigh their current spends. Social contexts have changed. Pre 1990, we had three broad social classes – rich, middle class and under privileged. Today we have just two – haves and the have-nots. Liberalisation has slowed down the havenots growth and accelerated the creation of haves in the society. There are people who have managed to break away from have-nots and move to the “haves” – they are the children of opportunity and global aspirations. Today, potentially for a middle class family, education and job anywhere in the world is a realistic possibility.
As parents we have changed too. I told my daughter – “if this is what you want, start working on it now.” My parents would have said – “what are you fantasising about, first go and get a job.” We feared thinking beyond boundaries, but they do not. The constraints constantly played on our minds - even the haves behaved like have-nots. Cynical and skeptical, we were largely problem-focused in everything we did. As a result we were more socially aware. At 15-17, we were troubled by what was happening around us. There was a bit of idealism. For them, the world is about possibilities, not constraints.
Changing family structures will make things intense. Nuclear, double income families with one-two children will lack social skills. Today many parents are artificially creating this feeling of abundance, taking them on the road to escapism. These children are the touch-me-nots who have been treated as fairy princes all their lives. And suddenly when some comes and tells them they are not princes and they are actually ugly ducklings, they just can't take it. They will be in denial – you are wrong, not them. For companies showing these kids the mirror will be a tremendous task.
With indulgent parents and cushioned lives, most haven't seen reverses in lives. They haven't learnt how to handle shattered dreams. Three times I was waitlisted at XLRI – I was a 95 percenter and it was extremely disappointing. Failures help you learn to fight and rebuild. My worry is how will these kids, who have had pain-free, failure-free, constrain-free lives, handle reverses. And as family gets smaller, with no siblings to lean on, we have to think what is the support structure we can provide them. Second big challenge we will face is that these kids do not value what is currently available to him. Attrition isn't a salary issue. It's a generation issue – these kids are looking at the future and deciding their moves now. At the first instance of dissonance or disciplining at work, they want to quit and go. “I will work on my own terms,” I often hear. Lifestyle issues, work-life balance is getting very important to them. You can't talk about these from day 1.
Beauty of child of constraints was he fought all constraints and outdid his ability. I fear when faced with reverses will the Liberalisation Children drop out and come back or will they hang in there and move mountains. I worry that many of these kids will struggle to push themselves to their limits – and may not be able to realize their full potential. But if they manage to handle the reverses and disappointments well, they would create and achieve far more than any other generation that has preceded them.
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| Watch out: The vish may bite off your bank a/c |
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| THE virtual crooks are becoming smarter and less visible. This time they have devised a novel way of sending a routine text message much like the one that pops on your mobile phone screen everytime a major transaction happens in your bank account. But beware if you receive an automated 0800 call from your bank because the caller may ‘vish’ away your bank balance to zero. These new smart alecks are called vishers and are a different species from the phishers (who send fake e-mail to gather information). The fraudster ‘war dials’ hundreds of mobile numbers through VoIP telephony — simply put, internet-based telephony. Typically, a war dialling program — available on the web — refers to dialling hundreds of numbers from your computer. You as a customer, may receive an automated call from your ‘bank’. The call will tell you that a major transaction has taken place in your account and instruct you to call back if you want further details. On calling back, an automated voice asks you to input credit card number / bank account number for ‘account security reasons’. Once a visher has your bank account/credit card details, he may withdraw from your account as per his wish. The phone number is often 0800 number with a spoofed caller ID of the financial company it is pretending to represent. If you happen to ever receive such a call, it’s better to hang up, say experts.
“If anyone calls pretending to be a credit card provider and requests a card’s three-digit Card Verification Value (CVV) number, the card owner should immediately hang up and call the phone number on the back of the credit card to report the attempt,” says Srkiran Raghavan, regional head of RSA Security, world leader in network security. Vishing is very hard for legal authorities to monitor or trace as the IP of the call is fake. “Rather than provide any information, the consumer is advised to contact their bank or credit card company directly to verify the validity of the message,” he adds.
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| Punjab announces settlement of sales tax arrears |
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| CHANDIGARH: The Punjab government on Tuesday announced a scheme of one-time settlement on a token charge of Rs 300 per lakh for clearance of sales tax arrears under deemed assessment for trade and industry for the pre-VAT period. The government also decided to consider the adoption of the Haryana model for VAT regime in the state. It also contemplates to slash VAT from 12% to 4% after the recommendations of the newly-constituted committee on certain commodities (to be proposed by the industry associations) for three months on experimental basis with an assurance of increased revenue. The committee of officers, which has the Financial Commissioner (Taxation) and the Principal Secretary, Industries & Commerce, as members and the Chief Secretary as chairman, would look into various demands of the industry. A long-drawn demand of the industry to prevent PSEB officials from checking power load inside industries, which have electronic meters installed outside, was accepted by the state government. The PSEB has been directed to reduce high voltage surcharge by 50%. |
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| Google buys 30% stake in APIDC venture fund |
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| AS PART of its strategy to invest in technology startups in India, Google is acquiring close to 30 % stake in a venture capital fund floated by Ventureast and Andhra Pradesh Industrial Development Corporation (APIDC).
Ventureast and APIDC have formed a fund called Ventureast Tenet Fund II. The fund invests in startup companies engaged in providing technology solutions for addressing the needs of small and medium enterprises, IT and communications technology sectors and environment oriented technology sectors.
The corpus of the fund is initially pegged at $ 15 million, with contributions to be made by investors over a period of 5 years.
The investment is being routed through Google Holdings, Singapore. Google has earlier made investments in two early-stage venture capital funds, Seedfund and Erasmic. India is the first country where Google has made a limited partner investment in early-stage funds. Google operates the world’s largest intenet search engine.
Google had stated that seed stage companies in India with good ideas have very few avenues for financial support.
It believes a small amount of what the venture capitalists invest in India trickles down to the small firms or the startups. Google seeks to close this gap by investing in early-stage funds, which identify and finance startups and help them, grow.
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| Good time for business With companies across industries reaching out to the SMEs, this indeed could |
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| It's a good time to be an entrepreneur or an SME. Governments are supporting them, industry bodies are promoting them, financial institutes are helping them and educational organisations are training them. We present snapshots showing how players across verticals are reaching out to the SMEs.
"The SME initiative will be our biggest product rollouts in India. Indian SMEs are evolving and they are looking at technology to enable them to grow bigger. They are looking at something designed for them; a consolidated voice and data solution from a single source. We aim to be the one. We have even set up an independent contact centre for addressing the issues of our SME customers. Basically, we have established a long-term strategy to cater to specific needs and challenges of this segment." - Ravi Chauhan, MD, Nortel India
Manufacturers have started adopting Product Lifecycle Management (PLM) to eliminate waste and build on efficiency. SMEs face some unique challenges with PLM including the need to change business processes and lack of resources. Fortunately, software vendors are now addressing these needs by offering solutions that felicitate PLM adoption. These include predefined workflows, data configuration templates, and industryspecific functionality, which provide a starting point for creating and automating processes to improve product development performance. We,
for example, are playing a major role here." - Suman Bose, Country Director, Dassault Systemes, India.
"It requires robust & scalable infrastructure to protect critical data and manage operations efficiently. SMEs usually do not have the resources to manage network security equipment. Without any proper guidance, they face complex challenges in choosing and managing the right equipment. That’s where we can help them."
- Shailendra Sahasrabudhe, Country Manager, Aladdin Knowledge Systems
"SMEs are constantly looking at improving operational efficiency with various available solutions. We have formulated the Five 'C' concept of creating, collaborating, controlling, configuring and communicating product and design information across the teams. With our Product Development System (PDS) and PLM solutions, we wish to support India's SME growth spurt."
- Rohit Biddappa, Mktg Manager, PTC, India –Coordinated By Niranjan Mudholkar
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| Badal to approach Centre with plans for industry • CM Says Rs 7,000-Cr Infrastructure Projects Launc |
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| PUNJAB Chief Minister Parkash Singh Badal has said the government is laying special emphasis on strengthening infrastructure, and has launched big projects worth Rs 7,000 crore during the past four months. In a press statement issued today, he has also announced that the government will initiate special measures to reinvent the industrial economy of the state shortly.
The CM said he would be having talks with the Centre soon on the issues relating to the industry in the state and the problems caused to it by the Center’s concessions to several states, especially those bordering Punjab. He further said he would also take up the issue of freight equalisation with the Union government.
Mr Badal said the government is committed to sort out all the problems of industry to create a congenial environment for the growth of industry in the state, and he has decided to hold meetings with the representatives of industry associations of different parts of the state.
He said he is looking into many of the problems presented before him by various industry associations. The government will also bring in a new comprehensive industrial policy. It is also constituting two state-level boards - Industry Development Board and Trade Development Board - which would be headed by the prominent personalities of trade and industry. Mr Badal said as a result of the thrust laid by the government on developing industry, huge investments amounting to Rs 44,000 crore in the industrial sector have been either made or promised in the state. The investments include Rs 18,919 core for the revival of Bathinda Oil Refinery. Mr Badal said the government is committed to enhance power generation by 5,000 mw within the next five years, and after the execution of new power projects, the state would be in a position to sell power to other states, besides providing 24-hour power supply to the people in the state. He added that district-level advisory committees would be constituted to thrash out the issues pertaining to the industry with regard to an early clearance of non-objection certificate (NOC) from the Punjab Pollution Control Board (PPCB).
Manoranjan Kalia, minister for industries and local government, said the government is committed to develop industry, and informed that it has disbursed the second instalment of Rs 100 crore of longpending capital subsidy to the industries during this financial year.
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| Exporters in north need more than Rs 1,400-cr package |
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| THE Centre’s Rs 1,400-crore revival package for exporters is not cutting much ice in the northern export belt. A spot analysis from Ludhiana and Jalandhar shows that the nine main sectors have been severely hit due to the appreciating rupee, and they are: textiles (including handlooms), readymade garments, leather products, handicrafts, engineering products, processed agricultural products, marine products, sports goods and toys.
Though the Confederation of Indian Industry (CII) has welcomed the announcement of the government, especially the reduction in interest rates on pre and post-shipment to help exporters, the industry feels the package does not fulfil the demands of some quarters.
S P Oswal, chairman, Vardhman group of companies, says, “In case of garments, the relief package is all right, but for yarns, it’s not adequate. Since it requires lots of value additions, duty drawback is also short of our expectations.”
J R Singal of Eastman group, Ludhiana, says, “It was too late for the government to announce the relief package. Reducing export rate by 2% is not a big things. We are already losing 10% of our turnover due to the rising rupee.” However, the views of Tarun Chawla, vice-president, Malwa Industries, slightly differ from those of others. He says, “This has definitely provided a breathing space for the industry.”
In the wake of strengthening rupee and consequent pressure on profit margins, Indian exporters are exploring euro-denominated trade opportunities. This is revealed by a Ficci survey on exports. The survey shows that a combination of factors, namely rising cost of raw materials, hike in interest rates and appreciating rupee, has jolted the confidence level of Indian exporters.
While the Indian exporting community has welcomed the measures outlined in the Trade Policy Announcement for 2007-08, its enthusiasm with regard to export performance in the near term has been severely dampened by the sudden and sharp appreciation of the rupee in the last few months. The results of Ficci’s latest export survey show that the incremental improvement in the outlook for exports seen in the last survey has failed to sustain itself.
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| Swaraj to fight parent M&M’s brands |
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| SWARAJ tractors, the flagship brand of Punjab Tractor Limited (PTL), will have a completely independent existence in the market and will compete with the Mahindra range of tractors. Mahindra and Mahindra (M&M), which now owns both the brands—Mahindra and Swaraj— after its successful acquisition of PTL few months back, would maintain distinct identities of both the tractor brands in the domestic market. The company has drawn up aggressive marketing plans for Swaraj tractors and would continue with its existing 500 dealer base.
Mahindra and Mahindra’s president (farm equipment sector) Anjanikumar Choudhari, who took charge as PTL’s chairman over the weekend, told ET’ “Swaraj has tremendous brand value in many northern markets and we are going to exploit it fully. It was the second largest tractor company a few years back and we would be promoting Swaraj aggressively to regain its lost market share. Some price improvements in the product are also being planned which would be followed by a publicity campaign.”
While both tractor brands would enjoy independent existence, a complete synergy in the field of production and other backend operations has been planned by M&M. The company would utilise the lowcost vendors of PTL for its own tractors and eventually have a common vendor base for both products. The PTL foundry which is doing 8000-9000 tonne of casting and forging operating annually —but has a nominal peak capacity of 20,000 tonne—would be expanded and utilised for manufacturing critical parts for Mahindra tractors.
“We are planning major capital investment for the modernisation and expansion of the foundry operations. There is huge shortage of casting capacity in the market, so a major integration of the PTL’s foundry business with M&M operations is being planned,” said Mr Choudhari.
M&M would also be harnessing the two under-utilised facilities of PTL for organic needs. Swaraj Engines, which is currently working at a 50% capacity and forks out 30,000 units annually, would be utilised to meet the engine demand for Mahindra products. While Swaraj Automotive, which makes automotive seats and recliners and is already a major supplier to many original equipment manufacturers including Maruti Udyog, would feed M&M as well. The company is also targeting some expansion of PTL’s combined harvestor (mechanised harvesting vehicle) manufacturing facility. “Iran Tractor Manufacturing Company, our business partners in Iran, has shown keen interest in the combined harvesting facility. They have visited the PTL factory and are looking for exports of these machines,” Mr Choudhari added.
Swaraj tractors would have independent exports in Nigeria and Uganda, its traditional export markets, but for the rest it would tag the Mahindra brand. M&M, which had sold 113,000 units world-wide in last fiscal year and became the third largest global brand in term of sales.
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| Bajaj sets eyes on Ducati, Triumph Indian Company Goes For European Acquisition |
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| TWO-WHEELER major Bajaj Auto is looking for a big-ticket acquisition in the European motorcycle market. According to sources in the auto industry, cult bike companies Ducati Motor Holding of Italy and Triumph Motorcycles of the UK are among the possible targets. When contacted, Bajaj Auto MD Rajiv Bajaj refused to comment.
Bajaj Auto—the market leader in the performance segment in India, thanks to Pulsar twins and Avenger—has been looking for an alliance or acquisition to possess enough engineering and product development expertise to crank out cruisers and higher displacement bikes in the 200 cc plus range. Bajaj Auto’s reported talks with Japanese major Yamaha were also centred around sharing technology and expertise for bigger bikes while offering engineering, manufacturing expertise and scale for smaller motorcycles.
A big-ticket European brand like Ducati or Triumph will not only give Bajaj products in the premium lifestyle range in India but also a vehicle to drive export growth in the developed markets of the west.
Ducati, the Bologna (Italy)-based motorcycle major, is a e95.4 million company that clocked about e10 million in operating profits in the first quarter of the calendar year. Its product roster includes such ever-green classics as the Monster (dubbed the ‘original naked bike’), the Multistrada and the 1098 super bike. Nearly all its products are in the 700 cc and above range and the brand has a formidable reputation in the MotoGP series as well.
As for Triumph, this cult bike company is all British with a plant in Hinckley. Its roster includes everything from the iconic Bonneville of the 60s to the latest range including the Rocket III and the Speed Triple. The £165-million company has cruisers, urban sports bikes and other lifestyle products in its range including apparel and accessories, as does Ducati.Bajaj Auto has been getting increasingly aggressive with its bike retail channel Probiking and Mr Bajaj has been on record to say that the company will crank out more products to stock its Probiking shelves. Bajaj Auto has taken the view that entrylevel four-stroke motorcycles will become defunct as the second largest bike market in the world moves towards performance.
The motorcycle market in India has been facing volume and margin pressure with all bike biggies rationalising production. In the first quarter, Bajaj Auto averaged about 165,000 a month and top officials say it will end the first half of this year with a million motorcycle sales. The company is all set to launch its new entry-level bike in the next couple of months and expects to clock around 200,000-250,000 motorcycles a month in the second half ending the year with around 2.5 million motorcycles.
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| Punjab to cast IT net to catch all records |
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| THE Punjab government is formulating a policy of placing all records of the government on a common IT network. The policy is the brainchild of Adesh Pratap Singh Kairon, minister of information technology. “We want to bring everything that needs to be done to computerise a department into the policy, which will encompass all the departments. This will include purchasing of computers, servers, servicing and maintenance of software and hardware. All the departments need to have access to the systems that will help bring in better governance,” says Mr Kairon.
The larger scheme of things seems to be trying to make the state government paper-free, though the government thinks there is a long way to go before achieving that. The government has plans to set up recovery sites and backup systems in non-seismic zones to ensure security of data and make the systems insulated from hackers.
After computerising land records, the government wants to create a common internal framework accessible to all departments. It is proposed to automate the back-end processes across the government hierarchy and digitise legacy data
to enable the departments to give online services to the citizens. The focus would initially be on the departments, which have intensive manpower applications, such as personnel and recruitment.
Now, the IT department is interacting with different departments and cabinet ministers to give a concrete shape to the policy. The policy would work in tandem with the government’s e-governance plans. “The Punjab government is in the process of finalising its e-governance plan, which would be based on an overall Government Enterprise Architectural Plan (GEAP). The GEAP would have a business portfolio framework, information portfolio framework, application portfolio framework and technology portfolio framework,” says RK Verma, director, IT department.
The government would make full use of the core infrastructure of the State Data Centre, State-wide Area Network and the Common Service Centres to implement e-governance projects. All applications and data would be hosted in the State Data Centre and would be accessed by various departments through the Statewide Area Network. The public would have access to the citizen services through a single point entry portal.
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| Industrial output in May up 11.1% |
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| THE country’s industrial output grew 11.1% in May 2007 compared to May 2006, a drop from 12.4% in April 2007 as growth in the manufacturing sector declined to 11.9% from 15.1% in the previous month. The slow down in the manufacturing sector was on account of the decline in growth rate in the consumer goods category, as high interest rates continue to impact consumer demand. Production of consumer goods grew by 9.8% in May compared to 17.7% in April.
Growth in the consumer durables sector, which includes white goods and automobiles, decreased from 5.3% in April to 2.6% in May. The corresponding figure for May last year was 17.5%. The various monetary tightening measures on account of exchange rates, interest rates and liquidity have had a bearing on the demand in this sector.
IIP figures for April 2007 were revised downwards, showing a final growth rate of 12.4% rather than
13.6% as released by the government last month.
Economists predict some moderation in the industrial production growth rates in the coming months.
“Growth in industrial output is expected to moderate in the second half of the fiscal and will hover at around 9.5% at the end of the fiscal year,” HDFC chief economist Abheek Barua said.
In spite of the slow down in the Index of Industrial Production (IIP), demand for investment goods continues to remain high. While growth in the capital goods sector was 17.7% in April, the sector grew by 22.9% in May. Growth rate in the machinery and equipment sector was 22.8%.
“Even though there has been a dramatic decrease in the interest-sensitive consumer goods category, shocks from the high interest rates have not slowed down corporate investment as they are relying on overseas borrowing and their foreign reserves,” Crisil principal economist DK Joshi said. Makers of two-wheelers have cut production in response to falling demand.
In terms of industries, 14 out of the 17 industry groups have shown positive growth during May.
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| Manufacturing slows industrial growth to 11.1% |
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| The country’s industrial output grew by 11.1% in May 2007 compared to the same month in the previous year, a drop from 12.4% in April ‘07 as growth in the manufacturing sector declined to 11.9% from 15.1% in the previous month. The slowdown in the manufacturing sector was on account of the decline in growth rate in the consumer goods category, as high interest rates continue to impact consumer demand. Production of consumer goods grew by 9.8% in May compared to 17.7% in April. Growth in the consumer durables sector, which includes white goods and automobiles, decreased from 5.3% in April to 2.6% in May. EFM: |
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| Companies can claim tax relief on provisional leave encashment: HC ACCORDING TO INCOME-TAX ACT, DEDU |
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| COMPANIES providing for leave encashment payments in their books can now claim tax deduction even if the actual cash payouts have not taken place. Providing for leave encashments is mandatory under ICAI accounting norms for companies. However, companies were unable to claim a deduction for the encashments if there was no actual cash outflow due to a provision in the Income-Tax Act.
The government had carried out an amendment in the section 43B(F) of the Income-Tax Act in 2001. As per the amendment, companies could only claim deduction for actual cash flow and not for the provisions made.
According to a recent ruling given by the Calcutta High Court, companies will be able to claim deduction based on provision for leave encashment. The decision came in response to an petition filed by Exide Industries. The court has termed the amendment carried out by government as arbitrary and struck it out.
“What the high court has held is, for other items covered under the section 43B like statutory duties, payments to excise department, contribution to provident funds, interest payments to banks, giving deduction only on account of actual cash outflow was appropriate as public money was involved in these payments and the government wanted to stop any misuse of public money. But, leave encashment is not a statutory liability and does not involve public money in any way. The decision will help companies as they would be able to claim deduction for these payouts and would reflect on their balance-sheet,” PricewaterhouseCoopers executive director Rahul Mitra said.
The amendment was brought in by the government to nullify a Supreme Court verdict given in the case of Bharat Earth Movers. The high court pointed that the original 43B did have the sub-section F covering leave encashments. Section 43B was brought in only to prevent evasion of statutory liability and sub-section F was inserted in 2001 only to nullify the apex court’s decision.
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| Punjab to issue licence to 5,600 wood factories |
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| IN ORDER to boost agro-forestry, the Punjab government has got the approval of the Central Empowered Committee (CEC) to issue licences to 5,651 existing wood-based industries (WBIs) in the state. These WBIs included 5,290 saw mills, 139 veneer mills, 203 plywood factories and 19 other units, and the licences would be issued to these units on the basis of one-time payment.
As many as 360 WBIs, that were established after October 30, 2002, were closed down in the state on the orders of the Supreme Court, according to which no state or Union Territory could permit any unlicensed saw mill, veneer, or plywood industry to operate, without the prior permission of the Central Empowered Committee. The chief secretary of the state or the administrative head of the UT will ensure strict compliance of this direction, it added. In Punjab, 32 lakh cubic metres of wood is available per year, and the total consumption of these WBIs was 28 lakh cubic metres per year.
According to Tikshan Sood, minister for forest & wildlife preservation, Punjab, for the consumption of the surplus 4 lakh cubic metres of wood, approximately 200 new industrial units may be set up, which would generate direct and indirect employment to thousands of youths.
“The state government is also studying the possibilities of setting up plywood factories at the behest of the Punjab Forest Corporation. The move can motivate more and more farmers to plant trees. This will enable the corporation to fix the MSP of agro-forestry products,” he said.
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| Exporters Rs 500-crore refund arrears released |
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| THE finance ministry has cleared arrears of excise and CST refund to exporters worth Rs 500 crore pending in some cases for over a year. Commerce department officials said that the amount would be disbursed to exporters soon. The move is being viewed as one of the measures taken by the government to ease the burden of the appreciating rupee faced by exporters.
The relief package for exporters being worked out by the government is also expected very soon, sources said. Finance minister P Chidambaram and RBI governor YV Reddy met on Tuesday to discuss the package. The package, which is to include a rise in the rate of reimbursement of input taxes to exporters among other measures, is being designed to partially bail out exporters whose profit realisation has been declining with the appreciation in the value of the rupee. The rupee has appreciated by an estimated 12% since March this year.
Speaking to ET, official sources said that while the government owed the refund money to exporters, the finance ministry has, in the past, taken longer to clear the dues. “By clearing the arrears, the government has not gone out of its way to help exporters. But the fact that the finance ministry has taken cognisance of the tight spot exporters are in and has released the amount has to be appreciated,” an official said.
Commerce ministry officials are, however, not sure whether interest will be paid on the due amount. Although, in the foreign trade policy announced earlier this year, it was said that the government will pay interest on pending payments to exporters, there is no clarity yet on whether the finmin is willing to oblige.
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| IL&FS to help government offer need-based training for youth |
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| THE Punjab government’s newly-created department of employment generation is preparing to take on the Herculian task of reducing unemployability in the state. The state government is planning to provide 3.57 lakh jobs every year till 2020.
The Education & Technology Services (ETS) of the Infrastructure Leasing & Financial Services (IL&FS) will provide consultancy services as a state programme management agency. IL&FS, an ORIX Group company, established ETS as an online education-related services company. ETS is a developer and provider of high quality educational services, primarily for elementary and junior high schools. Pardeep Singh, MD, IL&FS ETS, gave a detailed presentation to Chief Minister Parkash Singh Badal in this regard on Tuesday.
Mr Badal said the Punjabi youth have to be
absorbed in remunerative ventures provided they are equipped with the training necessary for the growing industry and service sector.
The aim of the new department is to provide needbased training programmes to impart skills necessary for construction industry, driving and private security. The government and the IL&FS will chalk out a detailed action plan to restructure the existing curriculum of the Industrial Training Institutes (ITIs). The IL&FS would coordinate with MNCs, industry and ITIs to develop market-focused curriculum, identify agencies for development of multimedia and web-enabled content and develop IT-infrastructure to efficiently deliver the content to ITIs.
The government hopes to generate jobs in construction, hospitality, entertainment, food processing, manufacturing, light industry, garment, textile and hosiery industries, besides new areas in retail, real estate, health services and business process outsourcing (BPO).
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| Auto part SMEs won’t poach |
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| It is not official yet, but scores of small and medium enterprises (SMEs) in the thriving auto component sector are informally trying to enter into nopoaching pacts to stem attrition. The unwritten protocol is in vogue, especially in the industry corridors of state agency SIPCOT, besides Ambattur and Guindy in Chennai, for sometime now. Some of the auto component units have tried to find a solution to the problem. About 25 member companies of Auto Component Manufacturers Association (ACMA) are said to be signatory to a pact that will “put the person on notice”, sources told ET. |
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| Staying connected in the global market SMEs can achieve seamless connectivity by implementing the re |
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| Globalisation has brought in various challenges as well as opportunities for SMEs. To tackle the challenges and to make the most of the opportunities, SMEs need seamless connectivity in multiple geographies. The connectivity should unite employees, streamline processes and improve collaboration. For this, SMEs require leading edge technologies, world class infrastructure, fool proof processes and high-end networking solutions to stay connected – to differentiate and compete.
As small companies turn into medium size organisations and when medium size companies transition into large organisations, the single most important need is that of employee, customer and partner collaboration and empowerment. This requires the SMEs to focus on customer delight which can only be supported by driving the customer responsiveness as a culture. This can be achieved by staying in touch with customers and by proactively responding to the evolving customer demands.
For reaching out to their customers, SMEs are embracing newer technologies, processes and concepts. Rising modes of communication mean increasing number of touch-points for a company to interact with their consumers. As these interactions become increasingly multimodal and collaborative, businesses must put together their resources to offer a highly satisfactory experience for their customers. Consistently meeting and exceeding customer expectations across all touch-points requires a thoughtful, intelligent and highly mobile communication platform.
Communication infrastructure
Let's put the networking and telecommunication needs of SMEs in three different buckets – Fixed Line Voice Services, Mobile Services and Data Services. As these technologies integrate and merge often, many times a clear distinction in the real world is not possible.
Under the Voice Services the popular offerings include from basic business telephone lines to more advanced managed services including the Centrex – Centrex services (from 'Central Exchange') delivering facilities similar to Corporate Switched Telecommunications Network (CSTN). SMEs opting for a Centrex, get telephone lines which can be used as both direct lines (for calls outside your office) as well as extension numbers (for calls within
your office). All calls made between terminals in this system are not charged and thus allow unlimited free calls within the system, bringing in huge savings. This virtual system offers cost savings without giving away the features of EPABX. We notice that last-mile broadband networks have a great potential to transport data, if voice is needed it is
provided by the public switched telephone network (PSTN). Instead of separate voice networks, these data networks can avoid costs to be used for both data and voice.
Under the Mobile Services, the offerings include mobile voice, mobile data and mobile application services. There are two chief technologies for mobile voice needs
(GSM & CDMA). These services also include messages (text & multi-media including audio & video), call conferences, long distance national and international calling.
Similarly, other solutions and services available can be very beneficial for the SMEs. It is not possible to discuss each one of them here due to space constraint.
Most of these services and technologies are being offered by large telecom companies (telcos) under what is called as 'bundling of services'. The bundling of services bring cost savings, seamless integration and single vendor for SME. This allows the SME to manage fewer vendors and thus increase efficiency. Hence the SME needs to shop around for these bundling – those which makes more sense.
Are telcos playing the ball?
While the telecom needs of SMEs are fast changing, it is heartening to note that this segment is becoming more important for telcos than ever before. Telcos realise that these SMEs offer significant opportunity in many ways – increasing market & revenues, higher gross margins and increasing sophistication of requirements.
As existing contracts get renewed at lower prices in the large accounts, the SME segment's pie is increasing. Moreover, SMEs have lesser scale to bargain similarly low prices and hence offer higher profits to telcos. With growing revenues offering higher margin, SMEs have become a darling segment for service providers.
This has resulted in all large integrated telcos in India bringing more focus on SMEs. SMEs are indeed happy to get this attention. Most telcos have formed SME business units within their organisation. Obviously, with the right set of engagement tools, right product offerings and enhanced operational efficiency, SME would certainly be the next big growth area for telcos.
And of course the SMEs are not complaining. They are indeed feeling lucky. With this fresh approach from telcos, they now have the same access to customer services, technology solutions and services, which hitherto were only accessible to large organisations. SMEs are only going to gain and its time for them to 'sit back and stay connected'. It's an imperative in the competitive global market.
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| Surviving in the global village The impact of changing global market trends on Indian SMEs |
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| Over the past few years, it has become increasingly difficult to discuss the development of SMEs without making a link to the globalisation of markets and thus of the economy. Ease in international trade barriers, economic liberalisation, globalisation, privatisation, disinvestments and deregulation have thrown several challenges (and opportunities) for SMEs in India. Thus, globalisation is an advantage as well as a challenge for SMEs. Talking about challenges, Pramodh Menon, Senior VP – Commercial, Cisco India & SAARC, says, "Indian SMEs have become part of a global supply chain. To stay competitive in this environment, SMEs must adopt collaborative technologies. They need to use their network as a platform for more effective and personalised global business collaboration. “
The impact of globalisation on SMEs is a result of direct and indirect interaction with foreign firms through forward and backward linkages. Through backward linkages, foreign firms work with host country firms to supply inputs, such as raw materials, products or services. These are part of the foreign firm's global value chain. On the other hand, with forward linkages, host country firms are contracted by foreign firms to channel products and services to final consumers as distributors or intermediaries for foreign firms. Indirect interaction takes place when foreign firms compete with host country firms for resources and markets.
Other forms of indirect interaction may come from the movement of labour between foreign firms and host country SMEs. The greater the interaction between the two, the higher the likelihood that foreign owned firms will influence the performance of local firms. Says Suman Bose, Country Director-India, Dassault Systems PLM Sales, "SMEs are being forced to adopt a global context, even if they are not involved directly. They are being forced to re-do their products and they will have to source profitably to offer consumer-surplus pricing, scout for new sales channel including internet, and explore cross border financing to lower cost of capital."
It is feared that globalisation will constrain small businesses which are at the source of most job creation in most industrialised countries. There are also those SMEs who fear the vanishing of trade barriers and are being forced to sell their products and services to customers at lower prices; because if they don't, some vendor in another part of the world will take away the customer. However, as Ajay Adiseshann, Founder and MD, PayMate lucidly puts it, "With globalisation SMEs are exposed to larger corporations entering their markets and attempting to eat their lunch. This element of risk is something we see unfolding almost on a day to day basis, for which we are constantly planning and reinventing ourselves both from a strategic and technology perspective to thwart such challenges."
In their efforts to compete with foreign firms, SMEs may learn from these firms new methods of production and management leading to product advancement. This can also take place as foreign firms instil additional capital and modern management practices into SMEs through acquisition or as joint venture partners. As the MD of a rapidly growing SME in the auto ancillary segment from Maharashtra says, "Globalisation has brought with it opportunities to grow bigger and faster. To make the most of it, every SME will have to focus on speed, quality and product innovation while maintaining cost competitiveness."
While talking about the possibility of considering export as a strategic option for growth oriented SMEs, Mr Bose says, "Export will facilitate sales growth, expand customer base, reduce dependence on few major customers, even out regional business cycle-related demand fluctuations, and establish network of partners."
The driving issue is the move toward increasing economic interdependence, open regionalism and the liberalisation of flows of goods, services, resources and capital. However, the impact of open regionalism is not equal for all SMEs. There are those SMEs which are able to become internationally competitive. They are likely to be advantaged by increased open regionalism. As R Subramaniam, MD, Subhiksha Trading Services, explains, "Globalisation will initially cause the SME sector a lot of pain and discomfort, however, in the medium and long term, they will benefit as they will be able to compete with their global peers. "
SMEs are aware of the advantages that globalisation has to offer, but some barriers have prevented them from adopting that route. Thus, it is imperative for SMEs to emphasise on technology, improving quality and creating globally competitive products.
What SMEs need to survive in the global village
• Improvement in infrastructure
• Modern management practices
• Quality processes confirming to global standards
• Highly skilled workforce
• World class technology
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| Exporters want Sidhu for Basmati campaign |
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PUNJAB-based rice millers and exporters would like former Indian cricketer and commentator Navjot Singh Sidhu to be the face for the global Basmati promotion campaign.
The exporters had earlier raised objections against featuring Bollywood star Sharukh Khan. The All India Rice Exporters' Association along with the Agricultural and Processed Food Products Export Development Authority (APEDA) had finalised the Rs 21 crore campaign to be financed by the Basmati Development Fund (BDF).
Speaking to ET, the Punjab Rice Millers and Exporters Association president Ashok Sethi said, "We are not against Sharukh Khan, but against so much money being spend on mere advertising. Unlike SRK who demands Rs 3-4 crore, our Navjot Sidhu would do the promotional activity for free. His charismatic personality and Punjabi raw appeal will make him an instant hit across the world."
The exporters and farmers opine that such a huge amount could be used for other important and essential activities to benefit the farmers. "In this season we spent Rs 14.32 lakh to encourage and increase sowing area for Basmati, super and Pusa varieties in Punjab which we got sanctioned form the BDF fund. Farmers are demanding assured prices, increase in bonus, loan availability etc for which we need to address. If the farmers are happy then only trade will progress," said a leading rice exporter from Punjab.
On the question of whether the batsman, cum comedian cum BJP MP from Amritsar would like to be the brand ambassador for the promotion he said that Mr Sidhuwould do anything to promote the farmers cause. "At the end of the day the farmer should be one of the beneficiaries apart from exporters and traders," he said.
However, The All India Rice Exporters' Association chairman Vijay Setia informed that in the current globalise scenario there was a need to market a product with an international personality. " Discussions on this topic with other members will be held soon," he said.
The Rs 21-crore campaign was divided into two segments of Rs 10.50 crore each for the Middle East (Quwait, Bahrain, Dubai, Doha and Iran) and Europe( UK, France and Germany). Out of the 9.5 lakh ton export of Basmati , 6.5 lakh ton is exported to the middle east, followed by 2.2 lakh ton to the UK markets.
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| IT dept lines up incentives for SMEs |
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| Small and medium enterprises (SMEs) may soon become investment hot spots in the IT segment. The department of information technology (DIT) has recommended a slew of measures, including fiscal incentives, to encourage growth and development of SMEs. To encourage SMEs to create their own products, the department of information technology has suggested tax depreciation and credits for investments made towards developing intellectual property (IP) by SMEs. The department has stated that IPs developed by SMEs in particular be encouraged in e-governance projects.
In a move to boost growth of SMEs, the department of information technology has recommended that companies with a turnover of over Rs 100 crore be offered tax benefits on costs incurred for goods and services procured from domestic SMEs through a subcontract model.
To further growth in the SME sector, it has been suggested that tax deductions of up to 20% of the taxable income be provided to all IT-ITeS professionals working with SME companies for a minimum period of two years.
With a view to popularise seed funding in SME start-ups, the department of information technology has recommended setting up of a fund that insures a certain percentage of the seedfunder’s investment.
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| Manufacturing growth slows in Dec: PMI |
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| India’s manufacturing sector expanded at its slowest pace in five months in December as a slew of monetary tightening measures started to bite, dampening blistering demand and easing price pressures. The seasonally-adjusted Purchasing Managers’ Index (PMI) fell to 56.6 in December from 58.9 in November as the strong momentum of previous months slackened due to slower domestic and external demand. The PMI, compiled by the British-based NTC research and sponsored by ABN Amro Bank, tracks changes in manufacturing business conditions by polling 500 companies each month on output, orders, employment and prices. PMI readings above 50.0 signal an improvement in business conditions while readings below 50.0 show deterioration.
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| ‘Developing nations to drive growth’ |
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| While projecting a moderation in growth rates in India and China during 2007 and 2008, the World Bank has said that the next 25 years belonged to the developing world, which would drive global growth resulting in higher income levels.
The World Bank’s Global Economic Prospects 2007 said the pace of economic expansion was slowing and developing countries are projected to grow 7% in 2007 — which is twice as fast as high income countries. For 2007 and 2008, the forecast for developing countries is 6%.
During 2006-2030, the report said, global economy is projected to rise faster than the last 25-year period. With demographics on their side, the developing countries are expected to power global growth.
While the global output (or GDP) is estimated to grow 3% annually for the next 25 years and more than double from $32 trillion in 2005 to $72 trillion in 2030, developing countries look set to capture a greater share of the global economy — from 23% in 2003 to 25% in 2010, 28% in 2020 and 31% in 2030.
As a result, the per capita income in developing countries is forecast to rise 3.1% a year, compared with the average 2.1% growth during the last 25 years. So, the per capita income in developing countries would be $11,000 (over Rs 5.1 lakh), compared with $4,800 (Rs 2.2 lakh) at present.
The World Bank has also warned against rising inequalities — between skilled and unskilled workers — but bulge in the middle is set to grow. The global middle class population is projected to rise three-fold from 400 million at present to 1.2 billion by 2030. The middle class has been described as families of four earning between $16,000 (Rs 7.5 lakh at today’s exchange rate) and $68,000 (over Rs 31 lakh) a year.
While Africa, the report said, may lag in the years to come, there seems to be no stopping India and China which are expected to force a shift in manufacturing and service to low cost suppliers and in the process eat up jobs in the high income countries of Europe and the US.
“Import of high income countries from all developing countries have risen from below 15% in 1970s to nearly 40% today — but more important, their share is expected to rise to more than 65% in 2030. This has exposed workers in rich countries to competition from low wage countries, a pressure that will intensify over 25 years,” it said. India and China have also generated fear among their developing peers who are scared that they may be squeezed out of the global market, foreclose diversification avenues and soak up available foreign investment.
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| India, Japan to go for greater flow of trade |
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| India does not want to restrict its strategic relationship with Japan to just a bilateral Comprehensive Economic Partnership Agreement (CEPA), which is round the corner, but use it as an engine of growth for an eventual Asian Economic Community (AEC).
The ambitious AEC may be unrealistic at this point of time, given the bitterness between China and Japan, as also the fears by the Asean community that it would lose its relevance, but the economist in PM Manmohan Singh is optimistic. Unveiling his vision while addressing a joint session of the Japanese Parliament, Diet, the PM said: ‘‘Prime Minister Shinzo Abe and I will launch negotiations that will lead to a CEPA to encourage greater flow of trade, investment and technology between our two countries.
‘‘Our partnership has the potential to create an arc of advantage and prosperity across Asia, laying the foundations for the creation of an AEC,’’ he added, to resounding applause from the Japanese MPs. Abe, speaking at the inauguration of the festival of India in Japan later, reciprocated the sentiments. The Indian PM’s speech, he said, reinforced his conviction that ‘‘we must nurture this relationship’’ as the ‘‘most important bilateral relationship in the world’’.
Addressing the Diet, Singh said economic ties must be the bedrock of the Indo-Japanese relationship but they need ‘‘a strong push’’ to take it to the next level since the bilateral trade and investment ties between the two are well below potential. ‘‘In contrast, India’s trade with both China and Korea is booming and grew last year at around 40% with both countries. China’s trade with India is nearly three times India’s trade with Japan and Korea’s trade with India is almost equal to Japan’s trade with India. This must change,’’ said Singh.
India’s economic engagement with Japan is certainly way below potential despite great mutual affinity and complementarities. India’s bilateral trade stood at a measly $6 billion in 2005-2006. The Japanese FDI inflow into India also stands at a modest $2 billion. In sharp contrast, China gets thrice as much FDI from Japan.
But with Japan now moving slightly away from China, growing as it is extremely wary of putting most of its eggs in the Chinese basket, India stands to gain in the process. Japan, of course, is already pitching for India ahead of China in various regional forums.
The PM said that he believed that the most important area in which India and Japan could build a partnership was in the ‘‘knowledge economy’’. ‘‘In the field of science and technology, we need to accelerate the pace of cooperation in the growth sectors of the future like nanotechnology, biotechnology, life sciences and information and communication technologies. We must exploit synergies in the development of Indian software and Japanese hardware,’’ he said.
Commerce minister Kamal Nath also asked Japan to take advantage of the opportunities being offered by a ‘‘rising’’ India. ‘‘India is emerging as a major manufacturing hub for Japanese industry. The Japanese are looking at India as a hub to service not only the Indian market but also the European market,’’ he said.
Nath admitted Japan was concerned at the lack of proper infrastructure in India.
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| India sees FTA with Gulf Arab nations by end ‘07 |
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| India expects to sign a free trade deal with Gulf Arab nations by the end of 2007, minister of commerce and industry Kamal Nath said on Friday. He said India, which is negotiating a free-trade agreement (FTA) with the six-member Gulf Cooperation Council (GCC), was keen on attracting Arab investment especially from the rich, oil-producing region flush with funds from high oil prices. He added that a meeting between India and the GCC would be held in March or April to discuss details of the planned agreement. |
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| Inflation falls 15 basis points to 5.3% |
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| THE capital markets seem to be adjusting to the inflation rate of 5% plus. The 10-year bond yield closed flat at 7.39 % from the previous close on Friday, as the market was expecting a higher rate for the week-ended November 25.Instead, the WPIbased inflation while continuing to exceed the 5% mark, dropped by 15 basis points from 5.45% the previous week to 5.30%. The inflation was 4.48% in the corresponding period of last year. Experts, however, feel that the impact of the lowering of the prices of petrol and diesel by centre, will be felt with effect from next week’s data. The data released by the government on Friday shows a perceptible fall in the index of food articles which fell by 0.6%.
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| SBI ups deposit rates by 0.75% Lending Rates May Also Go Up |
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| THE country's largest bank, State Bank of India, has raised deposit rates by as much as 75 basis points — a move that will increase its cost of funds. The rate hike, which is on all deposits over one year, may also cause lending rates to move up.
The bank is also targeting bulk deposits and has offered chief general managers the discretion to provide a quarter percentage point more on deposits of above 15 lakh to Rs 1 crore. The bank's treasury will decide on interest rates for deposits above Rs 1 crore. This is the second time in four months that the bank has revised deposit rates. The last time rates were changed was on August `06.
Interestingly, a day ahead of SBI's rate hike announcement OP Bhatt, chairman, SBI had indicated that interest rates would remain stable in the short term. Mr Bhatt had also indicated that deposit mobilisation peaks up in Q3. SBI's hike could be aimed at consolidating its marketshare of deposits in the banking system.
SBI appears to be preparing to build up a cash horde ahead of an ensuing liquidity crunch in the money markets. Over Rs 30,000 crore is expected to leave the banking system by mid-December on account of advance tax outflows. The next key policy announcement that bankers are awaiting is the quarter review of the monetary policy on January 30.
Interestingly, while the cost of funds is on the rise for banks, the government has seen a reduction in borrowing expenses. In August when SBI revised lending rates, the yield on the 10-year paper was 8.08% since then the government's cost of borrowing has gone down to 7.39%. One reason why the government has been able to borrow far more easily is because of the huge growth in savings mobilised by insurance companies, particularly the Life Insurance Corporation of India.
The large support of insurance companies in government borrowing is seen in the preference for very long-term paper in bond auctions. In Friday's twin bond auction, the Rs 5,000 crore seven-year bonds received bids worth Rs 10,712 crore while the Rs 4,000 crore 30-year paper saw bids worth Rs 10,439 crore.
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| Trade war: China trounces India 4-1 |
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| China has trounced India 4-1 in trade in the first 10 months of this year. It has notched up a trade surplus of $3 billion against India as compared to a trade deficit of $946 million that it suffered in the same period in 2005.
Chinese exports to India shot up 61% to reach $11.58 billion in that period. Indian exports notched a minor rise of 4.49% totalling $ 8.5 billion, according to the latest statistics released by the Chinese Customs for the January-October period. Chinese exports have grown by close to $4 billion in October as compared to $71.97 billion till October, 2005.
Beijing’s impressive performance gives a lie to the repeated Chinese complaints about India blocking the entry of Chinese goods. The latest stats show that the Chinese industry has managed to penetrate new and non-traditional areas and make a massive dent in terms of sales.
It turns out that Indian trade and industry has been far more receptive to Chinese goods rather than energetically taking up the task of selling Indian goods to China. This despite the number of visits by Indian trade bodies to China, ostensibly to promote Indian goods. Sources here say the Indian delegates are more interested in sourcing cheap Chinese products.
A highlight of the bilateral trade is that the two countries have managed to meet the $20 billion target set for 2008 by October this year. Bilateral trade reached $20.09 billion in October, indicating a 31% rise from $15.34 billion achieved in January-October last year. But this “success” has been possible because of a dramatic growth on the Chinese side and a slide by India, which lost the trade advantage it enjoyed in 2005.
Said a Beijing-based businessman: “Indian companies have been most aggressive in sourcing low-cost goods from China. Most of the businessmen visiting China are only looking for sourcing opportunities.’’ India’s dip in exports is largely because two of its most important item export items have a hit — ores, including slag and ash, and iron and steel. Both ores and steel were in great demand as the humunguous Olympics facilities in Beijing were being built. Now that most of them are nearing completion, their demand has tapered off.
Exports of ores, slag and ash have gone down by $348 million while iron and steel exports have down by $582 million. Ores, mostly iron ore, which accounted for 57% of India’s export basket last year now stands at 50.56%.
China has more than doubled its sales in three products — electrical energy, iron and steel products and paper and paper boards. It also achieved
a 91% rise in sales in another category called “iron and steel” and a 81% increase in “machinery”, which is different from electrical machinery.
India managed a negative performance in four different product groups while China slipped in one. China did better even in areas that are regarded to be strong points for India like plastics.
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| Inflation at 5.45% |
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| Rising prices of essential food items pushed up inflation measured by wholesale price index to 5.45% for the week ended November 18 — the highest in 18 months — and putting further pressure on government.
While government and RBI appeared confident that inflation would stay within the 5-5.5% bank forecast for the current fiscal, the movement brings it close to the upper end of the circuit for the first time this year.
“It is a supply side problem. We have to manage it,” FM P Chidambaram said. But the situation may ease in the coming weeks, not so much due to a dip in prices of essential food items like wheat and pulses, but on account of a reduction in price of petrol and diesel, economists said.
During the week ended November 18, prices of wheat, gram, masur, iron ore, cement, edible oils, ayurvedic medicines and basic metals increased. Rising prices of wheat, sugar, urad and moong dal and fruits have resulted in inflation continuing to remain at over 5% since September 30.
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| Economy clocks 9.2% growth in Q2 First Half Records Highest GDP Growth Rate Of 9.1% |
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| THE economy grew by 9.2% in the July-September quarter (Q2) and 9.1% during the first half of the current fiscal. This is the highest growth rate registered by the economy since the first quarter of 1996-97, when the CSO started compiling quarterly GDP data.
Commenting on the GDP figures released on Thursday, finance minister P Chidambaram said he felt the economy could close this fiscal at over 9%. He said, “I hope that the current year turns out to be one of the best years of economic growth.”
The stock markets also felt the surge. The benchmark BSE Sensex closed 79 points higher at 13,696 on Thursday.
The half-year report card of the economy, released by the Central Statistical Organisation, shows a 9.1% growth rate of GDP at constant prices, for April-September 2006-07. For the second quarter, it is 9.2%. The GDP growth rate was 8.5% in the first six month of last year and 8.4% in the second quarter.
Mr Chidambaram said inflation was the only worrying factor in the overall macro-economic story. He said the current rates of growth were the highest since reforms. “This growth is not accidental, and only twice in the past, the quarterly figure has been better,” he added.
Manufacturing registered a growth of 11.9% in the quarter against 8.1% in the corresponding period of 2005-06. The overall growth rate for the sector is in line with the booming corporate results. In the April to September period it has grown by 11.6%. The sector contributes to 17% of GDP.
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| For ’06-’07, growth seen at 8.5% |
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| For ’06-’07, growth seen at 8.5%
As Indian economy shines, most economists are betting on 8-8.5% growth during 2006-07, while RBI has forecast around 8% growth.
A beaming FM P Chidambaram refused to enter into the prediction game. ‘‘There are no limits to my expectations. Just savour the moment,’’ he said. He acknowledged that there were some concerns on inflation and described the situation as ‘‘worrisome’’. According to latest data, WPI-based inflation grew 5.29% during the week ended November 11. RBI expects inflation to range between 5% and 5.5%, but Chidambaram said the desire was to move below 5%. ‘‘A growing economy must learn to tolerate some inflation. The tolerance level is around 4%,’’ he added.
In recent months, rise in price of essential commodities like wheat, pulses, fruits, vegetables, eggs and milk have been a cause of concern for the government and it is under pressure to take more steps to keep inflation under check. The continued growth momentum is expected to raise inflationary expectations in the economy, as was evident from the drop in bond prices soon after GDP data was released.
There have also been growing concerns from the central bank which only last month said it was necessary to watch the economy for signs of overheating. But the FM said it was premature to say the economy was overheating. Since January, RBI has raised shortterm lending rate by 100 basis points and the short-term borrowing rate by 75 basis points, in a bid to curb inflation.
Prices apart, a slowdown of sorts in agriculture could prove to be another sticky point for the government, especially when it has already been accused of ignoring farmers and doing little to boost productivity.
The sector, which accounts for nearly 20% of GDP, grew 1.7% in Q2 as against 4% in last year. While FM said government would analyse the reasons for slowdown, economists blamed the rains. ‘‘Average rainfall was normal, but distribution was skewed geographically and in timeliness, which seems to,’’ said Crisil’s DK Joshi.
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| Govt fails to oil wheels of auto spares juggernaut |
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| THE Indian auto components industry is the toast of the world today thanks to the audacious global forays of some ambitious entrepreneurs. Outsourcing deals from both international and national automobile majors coupled with incentives from the government has boosted the industry. But the same can’t be said about Punjab, which too boasts of a solid auto component cluster.
One of the largest manufacturers of auto components in Punjab is GNA Axles Group with manufacturing units in Hoshiarpur and Jalandhar districts. According to GNA Axles director Ranbir Singh, the industry in the state is in need of basics like uninterrupted power supply and better logistics up to the ports. He also wants the government to provide gas to the medium and large industries as an alternative to furnace oil to make it more environmental-friendly. If gas is made available through pipelines it will help to generate captive power that will lessen the burden on the state government.
According to Mr Singh, the industry deserves to be given full VAT benefits, duty drawback on direct inputs like electricity, LDO (light diesel oil) and HSD (high speed diesel). Freight subsidy for the movement of goods to the ports has to come at par with exports of Chennai and Pune region. Uninterrupted power supply from the state electricity board without any peak load restrictions to meet the export commitments is of paramount importance, he said.
Kamal Jain of Jalandharbased Lasko Engineering, which manufactures and exports auto components, says that despite there being a boom in the auto component industry in the country, for the past few years, it has not made any impact on Punjab. “Our state is a minor player in the auto component industry. One cannot compare it with Tamil Nadu, Maharashtra and Haryana where all the major automobile players have their units. We are not getting benefits like Himachal and the other hill states. We should also be eligible for the tax and excise benefits,” adds Mr Jain. Federation of Small Industries Association president VP Chopra feels that the government’s disheartened attitude towards the automobile industry has seen big players like Tata Motors and Volkswagen not pursuing its interest in setting up their units in the region. “The policies of the government towards the industry are unethical and there is a justified demand of the whole section to extend the last date for the submission of CHNF forms,” he says.
Mohali Industries Association president Balbir Singh said 100 units in Mohali with investment of crores were engaged in auto components manufacturing and many were ancillary units with CNC machines for MUL, Tata and PTL. “We need uninterrupted and quality power,” he said. The industry, he said, was in need of government attention filing which it may not be able to compete with units in and around Pune in Maharashtra, government apathy may result in the industry vanishing from this belt, he says. Even the 1% subsidy on total turnover as freight subsidy announced and implemented by the state government had left the units in the lurch as the government had no money to disburse. There is no provision that by not paying the units could get the money in the next year. Thus government’s interest towards the existing units was of paramount importance and delay might cost the industry dear. Under the scheme he said a maximum of Rs 50 lakh is admissible but government had no funds in its kitty.
He said freight was a big disadvantage as units near the shores and closer to auto manufacturers could supply cheaper components leaving the units in Punjab on wafer thin margins.
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| India, China target $40bn trade by 2010 |
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| For all the friendly vibes between India and China, there was little movement on the boundary dispute on Tuesday. During their talks, PM Manmohan Singh informed Hu Jintao that India was unwilling to concede territory in the eastern sector. The two sides are now looking for suitable dates for the next meeting of the special representatives, which is possible before the end of the year. On business, the two countries voted with their feet. With $23 billion worth of trade under their belts, the two leaders targeted $40 billion for 2010.
Two new consulates have been added to the list — China will open one in Kolkata and India will start an office in Guangzhou in the heart of China’s highgrowth district. After opening the karela and grapes market in China last year, India is now entering the rice market, selling basmati rice to the Chinese.
The deliberations once again underlined that the border dispute continues to be a sticking point in bilateral ties. Although there were positive noises from both leaders — it is clear that both sides will have to find a sweetener for China to accept the loss of Arunachal. Singh said the boundary settlement should ‘‘advance the basic interests of the two countries and shall, therefore, be pursued as a strategic objective’’. Hu said the two sides should explore a ‘‘fair, reasonable and mutually acceptable’’ settlement.
If the special representatives can make progress, the next step will be to have an agreed framework for exchange of territory. Sources said one of the problems both sides were facing was conflicting interpretations of the articles in the guiding principles worked out in 2005. There will be a hotline in the foreign minister’s office with his counterpart in Beijing. China has also agreed to provide a plot of free land to India for its Shanghai consulate, ending a 40-year-old issue. The Chinese side has assured it will not be an ‘‘obstacle’’ in India’s bid to become a permanent member of the UN Security Council.
Security forces in the Capital had a tough time keeping the Tibetan protesters at bay. The incidents invited sharp reactions from Beijing’s foreign ministry. ‘‘We believe they are carried out by the Dalai Lama’s faction to sensationalise issues and to ruin China-India relations,’’ Chinese foreign ministry spokeswoman Jiang Yu said.
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| CASES WITH EVASION OF OVER Rs 10-LAKH TO FEEL THE HEAT Excise evaders may lose cenvat credit, monthl |
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| EXCISE evaders beware! The government is planning to withdraw facilities like availability of cenvat credit and monthly payment of duty from manufacturers who deliberately evade excise duty. However, the measures would be taken only in the cases where the duty evasion is Rs 10 lakh or more.
The penal provisions would be put in place from January 1, 2007, for which all necessary legislative changes will also be carried out.
The deterrents are expected to tackle the problem of planned and deliberate non-compliance by tax payers found guilty of evasion.
Excise duty collections grew only 5.8% in April-October 2006 at Rs 60,401 crore against the growth rate of over 60% in service tax collections. However, during the same time, there has been a 26% jump in cenvat credit availment.
As a part of its trade facilitation initiative, the CBEC had introduced measures such as monthly payment of duties compared to consignmentwise duty payment system, taking cenvat credit for inputs, capital goods and input services used by manufacturers, payment of 80% refund or rebate on provisional basis within 15 days of claim filing. Excise duty evaders will not be able to avail these facilities, sources said.
The officials said it has been noticed that the measures had not resulted in the expected rise in the level of compliance and, even now, many cases were being booked, indicating that certain classes of assessees continued to evade excise duty in a planned manner.
According to a draft circular put up by the board to elicit public response, the offences which would attract this action include, removal of goods without documents and without payment of duty, undervaluation of goods where portion of sale proceeds, in excess of the invoice price, is received separately and remains unaccounted, taking of cenvat credit without receipt of goods specified in the document or on invoices which are not genuine. Besides, issue of excise invoice without delivery of goods by a manufacturer or a dealer and claiming of refund or rebate based on invoices which are not genuine would also invite such an action. For different catgeories of assessees- manufacturers, dealers and exporters, separate provisions would be invoked.
For manufacturers found violating the specified coditions, the facilities which would be withdrawn include monthly payment of duties for a specified period, besides non-utilisation of cenvat credit for a specified period. However, the manufacturer would be able to take credit and utilize the same after the period of withdrawal is over. Facility of disbursement of 80% refundor rebate on provisional basis within 15 days of filing of claim would also be withdrawn.
After detection of second case, the manufacturing unit would be placed under physical control.
For dealers, action could come in form of suspension of registration of the dealer for a specified period, For merchant exporters, facilities of disbursement of 80% refund/rebate on provisional basis within 15 days of filing of claim and self sealing of export consignments would be withdrawn.
The decision to impose these restrictions will be taken by the member (excise), in the board after due consideration of the facts and circumstances of the case. The proposal for withdrawal of the facilities will also have to be forwarded by the jurisdictional commissioner or additional director general (central excise intelligence). After due consideration of the evidence on record, and the submissions made by the assessee, the chief commissioner or director general will forward his recommendations to the member.
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| Industrial output up 11.4% in Sept |
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| THE country’s industrial production has kept up its brisk momentum, rising by 11.4% in September 2006 over last year. The Index of Industrial Production (IIP) released on Friday, indicates that the growth was powered by the double-digit growth of 12% and 11.3% in the manufacturing and electricity sectors respectively. In the first half of this year, IIP has grown by 10.9% over the corresponding period of 2005-06. During the April-September months, manufacturing grew by 12.1%, electricity by 6.6% and mining by 3.1%. Mining has grown only by 3.9% during the period |
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| SEZs now face hurdles from home ministry |
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| The all-encompassing law to scrutinise foreign investment on security grounds is still being debated, but the home ministry has already spread its wings to cover special economic zones.
The ministry is reluctant to allow any SEZ near the border, fearing threat to national security. All zones with a port or near an existing dock are already on its radar. Even government-owned Kandla Port Trust, which is setting up a Rs 7,300-crore port-based zone, did not clear the hurdle initially.
Besides, gems and jewellery SEZs have not caught the home ministry’s fancy as it fears that the operating units could smuggle precious metals and stones . The finance ministry, which has the customs department under it, is, however, not so worried about the prospects of smuggling and is deputing its personnel to make sure that the rules are adhered to. One of India’s sunrise industries — pharmaceuticals — is also on the watch list. The home ministry wants a special dispensation for companies undertaking DNA-related work in the duty-free enclaves.
But unlike the other sectors, where the home ministry has agreed on a set of guidelines, the norms are clearer for pharma SEZs: only units undertaking DNA-related work face scrutiny.
In case of telecom, the board of approvals, which clears SEZs, has mandated that foreign companies have to adhere to the remote access norms. For others, security fears are delaying clearances. “There are one or two proposals which are deferred at every meeting due to the ministry’s objections. But we hope to sort out the matter soon and will put in place clear-cut norms,” an official said.
What is also posing a problem to private developers is the delays they encounter once their proposal enters the home ministry’s domain. The ministry outsources the work to its intelligence agencies, and only after all three agencies submit their report does it get back to the board of approvals.
While commerce department officials said the country’s security was paramount and any company in an SEZ, a zone could be shut down the moment they were found to be indulging in something that was detrimental to national interest, they are against taking the fears too far.
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| SSI ministry to announce new sops in Dec |
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| THE new package containing fiscal and promotional incentives for micro, small and medium-sized units is to be announced by the small scale industries ministry (SSI) in December this year.
The final draft that envisages upgrading technology for small and medium enterprises (SME) is being worked out by the National Manufacturing Competitiveness Council (NMCC) under the national manufacturing competitiveness programme. It is likely to be submitted to the Centre in March 2007.
The fund size is likely to be Rs 950 crore instead of the proposed Rs 1,000 crore, said Jawhar Sircar, additional secretary and development commissioner of the SSI ministry, on Friday. He was speaking at a workshop on the Micro, Small & Medium Enterprises Development Act, 2006, which comes into force from October 2. The workshop was organised jointly by the Federation of Small and Medium Industries (Fosmi) and the Centre for Social Markets, an NGO. Mr Sircar didn’t divulge the ministry’s final recommendations for the incentive package. However, he added that this time around the thrust of the package is on improving the lot of specific segments within the SSI sector which are lagging behind absorbing modern technology. “In short, what I could say at this juncture is that under the new policy package, incentives would be given to SSIs to enhance their competitiveness, and not to protect them from competition,” he said.
However, sources said while formulating the incentive package the ministry was, at one point of time, deliberating on offering more incentives to cluster-based units and for infrastructure development in industrial estates and clusters. Speaking on the national manufacturing competitiveness programme, Mr Sircar said considering fund constraint NMCC has now being asked by the government to downsize the programme outlay by Rs 50 crore from the original proposal of Rs 1,000 crore. The programme, which is being jointly worked out by NMCC and the SSI ministry, aims to benefit over 10,000 firms in more than 500 SME clusters. It has been planned that one-third of the project fund would be allotted to technology infusion by SSIs. Fosmi while participating in the workshop has reiterated its demand to extend excise exemption benefit to SSIs up to turnover Rs 2 crore from the existing limit of Rs 1 crore.
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| Steel prices may soften next year: SAIL chairman |
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| Steel Authority of India (SAIL) on Sunday warned that prevailing high steel prices may not be sustainable next year and the industry would need to adjust according to market
conditions. The caution by public sector steel behemoth coincides with the rush among steel producers to expand through either fresh capacity addition or acquisition. “In 2007, steel prices could be lower to what are today,” SAIL chairman S K Roongta told PTI in an interview. Asked whether he was fearing a situation on glut in the domestic market, Mr Roongta said, “there may not be a glut but producers need to price the product according to the market. We are on a higher band and a correction cannot be ruled out.” His fears stem from continuous fall in imports of steel by China. If China turns net exporter and starts exporting to Europe the Chinese export may face anti-dumping measure forcing China to turn towards South-east Asia and India particularly. This could affect the steel prices downward.
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| India, China to ink 12 promotion pact |
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| In an effort to boost bilateral ties, India and China are expected to sign 12 pacts,including a investment protection agreement, during President Hu Jintao’s visit here next month. An accord for arranging regional trade is also likely to be inked during the four-day visit from November 20, sources said on Sunday. Other agreements include one on student exchanges and another on holding festivals on a reciprocal basis.
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| Service tax rate may be increased |
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| In what could point to an increase in service tax rates next year, the government is considering narrowing the gap between excise duty and service tax as part of a strategy to implement goods and services tax (GST).
A change in the rates has also been mandated by the fact that companies are claiming Cenvat credit of 16% on intermediate services, which attracts 12% tax.
This means that while companies pay 12% service tax, they claim a 16% refund.
“There is a need to have a convergence between excise and service tax. But this is not possible in the immediate future,” a senior finance ministry official said on Thursday.
The government has already announced its intention to implement GST over the next few years but is still contemplating whether a single rate system should be put in place or there should be dual rates — one for goods and another for services. A common rate would entail significant revenue loss to the exchequer.
The other element of the jigsaw — Central Sales Tax — is also not in place though most states have introduced Vat.
While the Centre wanted to start a gradual phaseout of CST from this year, it has missed the deadline due to differences with states over compensation for cutting tax rates from the present level of 4%.
Officials said details of the compensation package — which includes giving states the power to tax certain services, besides increasing their share in service tax proceeds — would be finalised shortly. CST reduction is now expected to start from April 2007.
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| Farm machines rake up riches Sonalika, DCM Engineering, GNA Register 30-35% Growth In Six Months |
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| PUNJAB is emerging as an auto hub. Auto majors like GNA group, Sonalika group, Standard Combine (Barnala-based) have registered a growth of 35%, 29% and 75%, respectively.
Hoshiarpur-based Sonalika group has registered 29% increase in profit after tax (PAT). There has been an increase of Rs 13.1 crore in PAT.
Sonalika group vice-chairman AS Mittal, says: “The figures tell the story. Tractor sale volumes have risen to 16,877 in the last six months. Figures of for the corresponding period last year were close to 13,844.” GNA group plans to close at Rs 340 crore by the year end. GNA group director Gurdeep Singh, says: “The growth rate from the last three years has been 35%. In the last six months, it has been 35%. In the next two years we will be maintaining the same growth rate.” As reported by ET a few days back, GNA Enterprises, also plans to invest almost Rs 100 crore in the next five years. The company claims to be making expansions worth Rs 20 crore in three years.
Barnala-based, Standard Combine, claims to have sold 525 harvester combines in the last two quarters as against 300 combines in the corresponding period last financial year. “This shows an increase of 75% in the sales of harvester combines. Group turnover is expected to be around Rs 200 crore during March 2007,” says Nachhater Singh, MD, Standard Combine.
Ropar-based, DCM Engineering’s net sales have touched Rs 111.14 crore. Figures for the corresponding six months in the last fiscal are close to Rs 94.72 crore. It indicates growth of almost 17.3%.
Sonalika group few days back announced Rs 800 crore expansion plans. Company plans to raise Rs 500 crore through IPO and the rest via private equity participation. Its in negotiations with overseas private equity players to raise Rs 300 crore by diluting 10% equity.
Money raised through IPO and private equity will be spent in making the acquisitions in Europe and putting up assembly units in African countries.
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| Exports up 41% in September |
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| MERCHANDISE exports rose 37% in the first half of this fiscal to $59.3 billion as compared to $43.2 billion in the same period of the previous year. Imports in April-September 2006-07 recorded a 32% growth to $83.9 billion against imports worth $63.5 billion in the first half of fiscal 2005-06. The trade deficit for the first half of fiscal 2006-07 (April-September 2006) was estimated at $24.6 billion — higher than the deficit of $20.32 billion recorded in April-September 2005 |
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| Exports rise 23% in first half, oil spike pushes imports up |
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| India seems to be on course to achieve the stepped-up export target of $125 billion for the current financial year, with merchandise exports rising 22.84% during the first half of the fiscal to $59.32 billion.
With imports continuing to surge, mainly due to higher international crude prices, trade deficit widened to $24.6 billion during the first half, but the government said it was not a cause of concern with forex reserves at a comfortable $165 billion.
The provisional trade data released by the commerce department on Tuesday showed a 36.83% rise in India’s oil import bill to $28.66 billion during April-September 2006, compared with $20.95 billion during the corresponding period last year. On the other hand, non-oil imports during the six months were estimated to have increased 11% to $55.26 billion, compared with $49.79 billion during April-September 2005.
Cumulatively, India’s imports were estimated to have increased nearly 19% during the first half to $83.93 billion.
But there were little signs of exports losing momentum with shipments from India ahead of the festival season in western markets rising 21.89% in September to $10.3 billion. Imports during the month were up 24.74%, but the rise was spread evenly between oil and non-oil. Non-oil imports rising 24.28% to $848 billion in September 2006 pointed buoyancy in the economy as manufacturers sourced raw materials to meet domestic and international demand, commerce department officials said.
The government appeared upbeat over India’s improved trade performance. “The sustained double-digit growth shows India’s exports were on a high growth trajectory and the enhanced export target of $125 billion for 2006-07 will definitely be met,” commerce minister Kamal Nath said.
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| Punjab pockets Rs 86,000-cr of mega projects |
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| • PATIALA: Chief Minister Amarinder Singh on Sunday said Punjab had garnered investments to the tune of Rs 86,000 crore in mega projects in industrial, agriculture, housing and township sector. Punjab has now emerged as future investment destination where entrepreneurs not only from India but abroad, specially from UAE, Malaysia and Singapore, had evinced keen interest to set up ventures in housing and township projects, he said at a function organised on the occasion Vishwakarma Jayanti.
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| 2nd SEZ draws closer to Punjab • More Than 300 Acre In Mohali Set Aside For IT Development |
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| PUNJAB would be playing host to small scale companies from across the country for setting up IT parks. The Punjab government has set aside 300-350 acre of land in Mohali for the development of IT in the region. The project will become Punjab’s second SEZ for IT.
An envisaged project of collaborating SEZ and STPI for making IT parks is on the cards. To be set up in Mohali, the land for the project has been outlined in sectors 83 and 101.
Of the available land, which forms part of the Industrial Park that the state has envisioned to develop, a combination of SEZ and Software Technology Parks of India (STPI) has been sought.
“Those who want to go for an SEZ and those who want to go for STPI will have the option of choosing the right way to go forward for all companies who want to set up here. This leaves doors open for small, medium as well as large players,” says N S Kalsi, director, Punjab Infotech, the nodal body for IT in Punjab. However, the combination of STPI will make it accessible for smaller players. Of the 300 acre, the government would ensure the status of SEZ for a project of more than 10 acre in land area complying with Government of India norms. Players having a land size lower than 10 acre would be accordingly shifted to the STPI.
The entire stretch of land will be taken from Punjab Small Industry and Export Corporation (PSIEC) which is developing the Industrial Park in 850 acre in Mohali. In accordance with the conversion for land use (CLU) policy, the players will have to purchase land directly from the farmer while the project would be given a go-ahead for developing by the PPP model. For the same, Punjab Infotech would act as a facilitator.
Taking into consideration the small and medium business units of the region, the combination will help the SSI and SME business hubs as well. The move comes close on the heels of Intel signing a MoU with SME Business Services, a joint venture of Punjab Infotech, last month.
“The 300 acre will be developed for IT as a business hub. Further, since it will be developed by the government, the project will serve as a focal business point for the state and the region,” says VN Mathur, joint-director, department of industries and commerce, Punjab.
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| Hooda woos UK industry, offers sops |
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| Haryana Chief Minister Bhupinder Singh Hooda has invited British entrepreneurs as well as UKbased NRIs, especially those from Haryana, to set up their units in the state. Speaking at a 'Haryana Diwas' function organised by the Haryana NRIs Association in London, the CM assured them of extending all necessary assistance towards this end from the Haryana government. Hooda also detailed the incentives being offered to entrepreneurs under the state government's new industrial policy to facilitate them in setting up their business.
He said an industrialfriendly climate has been created in the state and the law and order situation was well under control. He said India, especially Haryana, was attracting substantial foreign investment flows. He added the state was a major producer of automobiles, cycles and refrigerators. Indian High Commissioner to UK Kamalesh Sharma described Haryana as a symbol of dynamism for its ability to adjust to the changing world.
Among the prominent people present at the occasion were Navnit Dholakia, deputy leader of the Liberal Democrats in the House of Lords, Daljit Rana, a leading NRI investor in Northern Ireland, Atma Singh, adviser to London mayor Ken Livingstone and Pyara Singh Khabra, NRI Labour MP.
During a visit to the Swami Narayan Mandir in London earlier in the day, Hooda urged the temple's management to set up an Akshardham temple in Kurukshetra. He also assured all help from the state government towards this end.
He added his government has decided to project the state as a major pilgrimage and tourist centre.government would release a white paper explaining all the all aspects of the project
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| India has its way on trade pact with EU |
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| Helsinki: A deal which could deliver the mother of all FTAs between EU and India was sealed a few minutes before PM Manmohan Singh’s summit with European leaders began. Singh told a reluctant EU team that there could be no commas and semi-colons on labour laws and no vague “to be discussed” caveats on the proposed investment and trade deal expected to add up to euros 70 billion in the next two-three years.
The unequivocal exercise of political and economic muscle saw the EU brass, in particular European Commission president Jose Manuel Barroso, accept that a no deal would not only be terribly embarrassing, it would mean that a massive investment pie would move away from Europe’s businesses. So when the summit began at 9 am, the big deal was already in the bag.
Negotiations between commerce minister Kamal Nath and EU trade commissioner Peter Mandelson stretched to the midnight of Thursday and though the EU team did not back down, the Indian resolve came through clearly.
Labour and other non-tariff issues were a no-fly zone even though India was ready to look at EU concern on issues like access to financial services sectors.
The path ahead, for negotiations to deliver an agreement and then an FTA, would take time, admitted Nath. But the implications were not inconsiderable because one of the issues that the agreenment will look at is to make sure that there are no repeats of flashpoints like the take over of Arcelor by Mittal Steel. “Negotiations will focus on our business being accorded ‘national treatment’ in EU nations,” said Nath.
The talks will also need to look at travel of Indian professionals and acceptance of Indian qualifications like law and accountancy degrees. A review of visa rules is also expected to be looked at.
What this means is that a jingoistic pitch cannot be used to ward off takeover bids by Indian firms. EU has often made this point with regard to treatment of foreign companies in India and now that Indian businesses were looking for overseas acquisitions with an appetite that did not exist earlier, the ball was in EU’s court.
The agreement will also look at permitting access to Indian garments, textiles, leather, jems and jewellery to European markets, a highly contentious issue.
Later at a joint press conference with EU leaders, Singh said the high level trade group had “worked diligently and there had been no delay in the negotiations beginning”. The Indian PM was quite emphatic that the roadmap to long-term trade between India and EU was now in the offing, even if it took a while in happening.
Three top EU leaders, Finnish PM Matti Vanhanen, foreign policy and security head Javier Solana and Barroso, said there was now a strong case for the trade and investment pact. They did hint at some differences of opinion by referring to the need to build consensus within EU and Vanhanen somewhat euphemistically described the delay in getting the pact in place as being due to “some technical detail”.
The negotiations, which the EU-India business community gathered here wanted concluded in one year, will allow lowering of duties on hi-tech European goods. The talks will cover about 90% of goods and services and ought to increase what both sides described as complementarities between the two sides. Both also claimed this would not impact on WTO, but a bilateral clinch is significant as it recognises the business opportunities for either side.
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| Industrial output surges 9.7% in Aug |
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| SHOWING that the 8.9% growth registered by the Indian economy in the first quarter was no flash in the pan, manufacturing output has turned in a vigorous growth of 11.1% for August, bringing industrial growth for the first five months of the current fiscal to 10.6%. The 37% rise in direct tax collections up to mid-September reinforces this prognosis of sustained growth momentum. Strong manufacturing data augur well for the Q2 (July-September) results currently being announced by listed companies.
Triggered by a whopping growth of over 20% during August in the consumer durable sector (13% last year) and an 11.1% growth in the manufacturing space (8.5% last year), India's industrial output shot up by 9.7% in August. The growth recorded in the same month last fiscal stood at 7.6%. All these growth rates are in relation to the corresponding period a year ago.
The index of industrial production (IIP) is a weighted average of mining, manufacturing and electricity output. Virtual stagnation in mining (-0.1%) and disappointing growth in power generation (3.7%) held back the growth of the index in August at 9.7%.
The consumer goods industry grew 14.6% in August (9.3% last year) and the consumer non-durables sector jumped 12.6% in August ( 8% last year).
Also in the five month period of April-August, the consumer durable industry recorded growth of 16.6% and consumer non-durables, of 9.5%, bringing the consumer goods sector’s growth to 11.3% for this period.
Growth in the mining sector was better at 3.1% in the April-August 2006 as against 1.6% in the first five months of 2005. Electricity sector posted a growth of 5.7% so far this fiscal, slightly lower than 6.0% in April-August 2005.
Suggesting that growth continues to be driven by investment, the capital goods sector turned in a growth of 14.7% in August. The growth rate of this vital segment over the five month period April-August ‘06 has been 18.6%, higher than the 13.8% witnessed in the like period in ‘05. However, basic goods have registered a slowdown in August, at 4.9%.
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| Big opportunity in Indian manufacturing sector: PM There are new synergies, a new architecture emerg |
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| THERE are numbers and there are numbers; Tony Blair, commerce minister Kamal Nath and British trade and industry secretary Alistair Darling, and everyone else have been quoting numbers to illustrate the rise and rise of India’s engagement with the UK economy. But it took Manmohan Singh to sound out the key numbers; foreign direct investment flows from India to the UK is higher than FDI from UK into India from ‘04, never mind that UK is India’s fourth largest trading partner and fifth largest source of foreign investments or that India is the third largest investor in UK. “We are particularly glad that the UK views the rapid economic growth of India as an opportunity that can be used for mutual benefit. In fact, UK business and industry should look more closely at opportunities unfolding in the quiet but substantive manufacturing revolution taking place in India,” Mr Singh said in a joint meeting with Tony Blair at 10, Downing Street.
Just across from Buckingham Palace, at Lancaster House, where over 100 “Codd Indian and British businessmen” are holed up in a daylong meeting, to be topped up with a meeting with the two premiers later in the day, the mood echoes that of Mr Blair; business is good, but could be better. Commerce minister Kamal Nath told the gathered luminaries, “not only has the global perception of India changed, India’s perception of itself has changed. Some years ago, a summit like this would have implied investment into India. Today, not only are Indian businessmen partners in investment, many of you are already investors here. This is just one of the many paradigm shifts taking place,” said Mr Nath.
His counterpart, Mr Alistair Darling, while extolling the opportunities of joint trade, tackled a sensitive issue head on — that a policy of embracing globalisation and change can be seen as a problem in both countries from time to time; but that insecure, sceptical people need to be shown that embracing change will ultimately bring new jobs, and increase Britain’s competitiveness.
UK and Indian businesses will meet the two PMs and raise issues affecting the UKIndia investment relationship.
The summit for the first time brings together top tiers of government, business and partner organisations to develop further the countries’ two-way investment relationship. “We can do more, and we are. Just one example, our network of trade and investment teams in India will grow by 20% in the next couple of years,” said Mr Darling.
Speaking to ET, Mr Nath said that there are new synergies, a new architecture emerging out of India in the global context. One of the key themes of this new architecture is that UK views India as a key partner in a knowledge economy; besides a series of increasing collaborations on science and technology, education and research. “The future is in the knowledge economy. Our human capital is the strongest we have,” said Mr Blair. And for this, clearly, India’s human capital is at a premium.
The investment summit hopes to provide UK and Indian business to have CEO dialogues on opportunities and challenges on areas such as financial services, manufacturing and information communications technology.
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| SEZ bank loans may get partial infrastructure tag Things Not Yet Black & White But RBI Circular Rais |
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| ALL bank loans to special economic zones (SEZs) will not be treated as exposure to real estate, a sector to which lending is costlier and therefore, discouraged by Reserve Bank of India. The central bank has raised hopes that parts of the loan to SEZs can be classified as infrastructure loan, which are encouraged by the government as well as the regulator.
In a master circular on bank exposure norms dated October 10, RBI has said that exposure of banks to entities for setting up SEZs or for acquisition of units in SEZs “which includes real estate” would be treated as exposure to commercial real estate sector and banks would have to make provisions as also assign appropriate risk weights for such exposures as per the existing guidelines. In the same circular while listing out loans which can reckoned as core sector advances, RBI has said that any credit facility in whatever form extended by lenders to a borrower “setting up a special economic zone” would be construed as loan to infrastructure.
Although this circular does not completely clear the air with regard to loans to SEZs, their inclusion in infrastructure has raised hopes among lenders as well as borrowers. Some bankers feel that this could possibly mean that loans for infrastructure facilities in SEZs will be treated as infrastructure loans, while loans for activities like land acquisition and construction of residential and commercial buildings will be considered as real estate exposure. The reiteration that SEZs are infrastructure comes close on the heels of RBI’s September 20 note asking banks to classify SEZ loans as real estate loans. Bankers therefore see this as RBI softening its stance.
Capital market exposure: While RBI is seen to be easing its stand on SEZs, it has not gone ahead with the expected relaxation on loans to another sensitive sector — capital market. The circular reiterates that the cap on exposure limits to shares convertible debentures and units of equity-oriented MFs has been retained at 20% of their net worth.
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| Omaxe to set up 30 townships in India |
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| REAL ESTATE major Omaxe Group is looking at a pan-India presence by setting up 25 to 30 townships across India in the next three to five years. Besides, the group is planning six to eight upmarket five-star hotels. The company has Rs 20,000 crore of projects in hand and Rs 10,000 crore projects are in the pipeline.The townships are planned in Lucknow, Patalia, Noida, Greater Noida, Sonepat, Jaipur, Indore, Rohtak Bahadurgarh and Baddi.
The real growth in economy, especially in urban areas is probably between 8-10%, as the Indian middle class per capita income is growing as a faster rate than anywhere in the world. The habit of high savings is also fast changing and the younger generation is fast embracing lifestyle products. We are looking at expanding in more cities across the country,” Omaxe Group CMD Rohtas Goel said.
The group has acquired 340 acres in Patalia, 50 acres in Noida and 30 acres in Greater Noida. The average area for the townships would be between 50 and 80 acres. In the next three to five years, the group plans to establish presence in southern India, Kolkata, Pune, Mumbai, Goa and Bangalore. It anticipates a great demand for township projects in smaller cities. The new projects would fall in the premium category. The townships would include apartments, villas, plots, clubs and malls among other facilities.
The group is getting into speciality malls by constructing five wedding malls in Gurgaon, Agra, Patiala and Lucknow.
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| India to lower tariff barriers for 50 LDCs |
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| INDIA is set to roll out dutyfree, quota-free market access for 50 least developed countries (LDCs) from Africa and Asia. The economic-diplomacy is expected to win not just hearts but also the support of these nations at multilateral fora like the UN and WTO.
On the domestic front, the move could face resistance from certain sections of the industry –– especially small players –– as competition would increase once these countries start tapping the Indian market.
A proposal to open up the Indian market to LDCs would be taken up soon by the Cabinet Committee on Economic Affairs (CCEA), government sources said. The Customs duty concessions would be rolled out from 2007, and the tariffs completely eliminated in five years.
The commerce & industry ministry has submitted a detailed note to CCEA on the basis of inputs provided by the trade and economic relations committee (TERC) headed by Prime Minister Manmohan Singh. To mute criticism from the local industry and farmers, the commerce & industry ministry has proposed a negative list of 776 items which would not be covered by the tariff concessions. In effect, agri products and goods produced by small units would be protected.
The move is being accorded great significance within the government as it gels with the prime minister’s south-south cooperation plank. Also, India would be in a position to muster substantial support for its bid for a permanent berth in the UN’s security council.
While enhanced market access for LDCs was agreed upon at the Hong Kong ministerial meeting of WTO, India had the option of not offering the concessions since it is a developing country. The sops are being offered voluntarily since India believes in supporting LDCs, sources said. Officials said a large number of LDCs have witnessed erosion in their exports after textiles quotas were scrapped. India’s gesture will provide them with an alternative market and also reduce their dependence on western nations.
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| Industry upbeat on trade proposal |
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| The Indian industry is gung-ho about the proposed trade and investment promotion agreement between India and the EU, the negotiations on which is likely to begin soon. However, the industry expects the government to be cautious while framing the agreement in a bid to ensure that sensitive sectors like agriculture do not get hurt.
Speaking to ET, Ficci president Saroj K Poddar, who is leading a highpowered business delegation to the India-EU business summit in Helsinki later this week, said that the industry was looking forward to a comprehensive co-operation agreement with the EU. “We are strongly in favour of such an agreement,” he said. Prime minister Manmohan Singh and his Finnish counterpart are expected to announce the beginning of negotiations on a India-EU bilateral agreement during the India-EU political summit.
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| India, EU need to tackle NTBs, says CII study |
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| INDIA and the 25-nation European Union need to tackle non-tariff barriers (NTBs) that exist in each other’s markets to fully benefit from a bilateral trade and investment agreement, to be finalised at the India-EU Summit at Helsinki on October 11-12, according to CII. A study done by the chamber shows that nearly 23.38% of total exports of India to EU are covered by NTBs — especially in the area of carpets (86.2%), textiles and clothing (65.85%) and leather (31.35%). In fact, India is one of EU’s most targeted countries affecting 3.5% of the Indian exports as against the global average of 1.5%, according to a recent study done by CII principal advisor Dr Jayanta Roy.
Further, the study shows that out of 84 anti-dumping cases initiated against exports from India, the highest amount — 33% — are from the EU. It also accounts for 44% of anti-subsidy cases. Standards are another area of concern and sometimes differing standards between EU countries can be a cause for concern for exporters from India.
CII is of the view that there is a need for the two countries to discuss ways and means of overcoming this serious hindrance to bilateral trade flows.
The chamber has suggested that negotiations for mutual recognition agreements (MRAs) in areas of interest to both sides should be negotiated alongside the trade and investment agreement. ne area of focus for India to boost trade would be trade facilitation, according to CII. There is an urgent need for India to focus on this area and to work with the European Union to ensure that the time period for goods at ports should be reduced to the minimum.
CII is of the view that implementation of electronic data interchange (EDI) should be extended beyond customs to all other agencies.
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| China, India emerge as technology giants |
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| The Dow Jones Industrial Average may have reached levels unseen since 2000 this week, but the technology industry has changed dramatically since the bursting of the Internet bubble. The nature of the transformation is apparent in a new report on the state of the industry, released this week by the Organisation for Economic Co-operation and Development (OECD), the club of rich countries.
Its league table of the world’s 250 largest technology firms, measured by revenue, shows two big shifts. The first is that it includes far fewer hardware and manufacturing firms than it did five years ago, and far more software and service companies. The second is that Asian firms are pushing aside American ones.
Companies from China, Hong Kong and India appear in this year’s ranking for the first time and the number from Taiwan more than trebled. China is actually under-represented in the figures: many of the Hong Kong and Taiwanese firms do the bulk of their business on the mainland and many of the big Western technology firms have substantial operations in China.
Indeed, China is now the world’s largest exporter of technology goods (although much of the work is on behalf of foreign firms). Domestically, China is now the sixth-biggest buyer of high-tech goods and services in the world; by 2010 it will be in third place, behind America and Japan.
Meanwhile, revenue from software and services has increased by around 50% between 2000 and 2005. So it is no surprise to see India’s software stalwarts Tata Consulting Services, Wipro and Infosys on the list.
Yet although China and India are often lumped together as tomorrow’s technology titans, there are marked contrasts in their technological development. They have roughly the same population, but China spends 2.5 times as much on technology as India does. It is the world’s largest mobile-phone market, and the second-largest market for PCs.
By 2005-end, China had around 110 million Internet users, compared with 51 million in India; and today China has 430 million mobile-phone users, versus 120 million in India. The two countries are adopting technology at different paces and in different ways.
China’s lead is partly the result of co-ordinated government action. Centralised economies can pour resources into projects and direct the development of entire industries, something that is much harder in India’s sprawling, bureaucratic democracy. For mobile phones, China established a second stateowned operator to challenge the incumbent, while India’s operators remained tangled up for years in legal fights over a botched regulatory framework. China has also tried to develop its own technical standards so that it can avoid paying royalties to foreign firms for using intellectual property.
“A difference is that China’s manufacturing strength means high-tech gear is available locally at low cost, whereas India must import it,” explains Sacha Wunsch-Vincent of the OECD. India has focused more on software and services, which can be delivered via networks without bureaucratic interference, unlike physical goods. But both Chinese and Indian firms are now setting up shop in central and eastern Europe, as a lowcost stepping-stone towards European Union countries, notes Wunsch-Vincent.
Instead of implying that the human-capital intensity of the industry has declined, the opposite is more likely: companies are outsourcing operations to smaller firms. many of them in China, India and Taiwan, and in the West that do not appear in the top 250. As a result, the rise of Asia is best characterised as the welding of the region into the global technology supply chain.
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| India-EU trade pact on fast track |
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| IT IS taking off like a bullet: India and the European Union (EU) are all set to sign a bilateral trade & investment promotion agreement to liberalise trade in goods, services and investment far quicker than expected.
The high-level trade group constituted to look into the possibility of such an agreement, has given its green signal. Commencement of the negotiations is likely to be announced at the India-EU summit in Helsinki next week. The time period for completion of the negotiations and implementation of the agreement will be two years, a timeframe much shorter than any other trade pact that India has entered into so far.
The seriousness with which both the EU and India are treating the proposed agreement spells a bonanza for the Indian service industry, which is expected to be a major beneficiary of the agreement. The mutual recognition agreements recognising each others qualification certificates will simplify the movement of professionals from India to EU countries.
The proposed agreement, which would include goods, services, investment and a double taxation avoidance treaty, is not being called a comprehensive economic cooperation agreement (CECA) to keep issues such as labour, environment and nuclear possessions out of its ambit. Since the EU has included all these issues in the CECAs it has signed so far with other countries, it was mutually agreed to change the name of the India-EU agreement, an official source said.
Prime Minister Manmohan Singh and Finnish PM Matti Vanhanen are expected to sign the declaration for starting negotiations on the India-EU bilateral agreement during the India-EU political summit on October 13. Finland holds the EU’s rotating presidency for 2006.
Speaking to ET, official sources said that since both the parties were extremely keen on the bilateral agreement, it was decided to conclude the negotiations in two years following which implementation of the agreement would begin.
Officials added that India’s CECA with Singapore had given it the confidence to go ahead with such an ambitious agreement with a major bloc like EU which includes 25 countries. “Enriched by our experience with Singapore, we are now confident of entering into bilaterals with the West,” an official said.
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| 35 mega projects cleared |
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| The Punjab government’s empowered committee Thursday approved 35 new mega projects with a total proposed investment of Rs 6,255.15 crore. They include 22 industrial, 9 agro and 4 housing and township projects with an employment potential for about 55,000 people.
Among the projects cleared is SEZ Textile Park in Ludhiana district on which Rs 250 crore would be invested and which would have an employment potential for 12,000. The other projects approved included 11 multiplex-cum-hotels and three hotels in Amritsar, Jalandhar, Ludhiana, Hoshiarpur and Mohali districts, entailing an investment of Rs 1 ,600 crore and generating employment for 9,680 people.
The committee also discussed two mega projects - Film City and Industrial Park - of Emaar MGF Land Pvt Ltd in Mohali and observed these would be taken up before the council of ministers for consideration.
The panel also approved four manufacturing projects to be set up in Ludhiana, Bathinda and Jalandhar districts with a proposed investment of Rs 551.7 crore and an employment potential for 3,550 people. It also cleared six projects of Industrial Park in Nawanshahr and Mohali districts with an investment of Rs 2,756.15 crore, which would generate employment for 7,000 people, and nine projects in the agriculture sector at a total investment of Rs 697 crore with direct employment potential for 2,000 people.
Apart from this, the empowered committee also approved five housing projects at a total investment of Rs 2,600.25 crore with an employment potential for 4,300 persons. These include Palm City Platinum in Ludhiana (Rs 169.25 crore), SAB Industries on the Zirakpur-Patiala highway (Rs 2,170 crore), AJB Developers, Amritsar (Rs 150 crore) and Inter City Promoters, Mohali (Rs 111 crore).
The committee also approved a special package of concessions to industrial park projects of Sport King India Ltd; Vardhman Polytex Ltd, Ludhiana; GNA Enterprises, Goraya; Orient Craft Fashion Technologies Ltd, Mohali; SEZ projects of Rockman Projects Ltd; IT Park of Asian City Developers & Builders and industrial park of Hansa Tubes Pvt Ltd.
The empowered committee has so far approved 282 mega projects, including industrial, housing and agro projects worth Rs 86,161.48 crore, at its various meetings.
A government spokesman said these projects, located in the districts of Ludhiana, Amritsar, Jalandhar, Bathinda, Ropar, Patiala, Hoshiarpur, Ferozepur, Fatehgarh Sahib, Gurdaspur, Moga, Kapurthala and Sangrur, were sanctioned earlier and are at various stages of implementation.
The empowered committee meeting was chaired by Chief Minister Amarinder Singh. Those present included Local Government Minister Jagjit Singh, Excise & Taxation Minister Sardul Singh, Industry & Commerce Minister Avtar Henry, Revenue Minister Jasjit Singh Randhawa, Punjab Pollution Control Board chairman Rajinder Singh Bajwa, chief secretary KR Lakhanpal, financial commissioner (revenue) KK Bhatnagar, financial commissioner (development) GS Cheema, principal secretary to CM Suresh Kumar, principal secretary, industries SC Aggarwal, principal secretary, excise & taxation Mukal Joshi, housing & urban development secretary AR Talwar and Punjab Agro-Industries Corp managing director Himmat Singh.
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| PAIC signs agreement with BACL |
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| Punjab Agro Industries Corporation Limited (PAIC) has signed an agreement with british agrifood consortium limited (BACL) that will help boost exports from Punjab, strengthen the food chain and help establish international quality norms for the agriproduce of Punjab. Under the agreement a six phase programme will be implemented. The first five phases will consist of information gathering and planning and the implementation of these plans will start in the sixth phase. As part of the agreement experts from BACL will visit Punjab, interact with farmers and entrepreneurs and guide them on the latest processes and technologies that help increase yields and productivity, while enhancing quality to international standards. Through this, BACL will help open the world markets to the farmers and entrepreneurs of Punjab. |
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| Core sector growth rises to 6.7% |
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| THE infrastructure sector growth rate has jumped to 6.7% for the April-August quarter of 2006-07, compared with a growth rate of 6.1% in the corresponding period of previous fiscal. The six core infrastructure industries, namely crude petroleum, petroleum refinery products, coal, electricity, cement and steel have, however, registered a growth rate of 5.5% in August, less than the 5.8% rate for August last year.
The performance of the infrastructure sector often has a strong impact on the industrial sector, as this sector has a weightage of 26.7 % in the overall index of industrial production.
The figures released by the Centre on Wednesday show that the petroleum refinery products sector has recorded the best growth performance, of 12.1% in the five month period. It had recorded a negative growth rate of 1.8% last year. Cement production too has grown by 9%. This is however way below the 12.7% recorded last year. But a worry is that of electricity production, which has grown by only 5.7%, less than the 5.8% in the same five months of ‘05-06.
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| Rico to set up 3 new plants |
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| AUTO component maker Rico Auto is planning to set up three new greenfield facilities by next year. This is over and above the Rs 100 crore investment the company earlier announced for capacity expansion and new product development. “We are looking at setting up three new greenfield plants, which will be operational next year,” said Rico Auto Industries managing director Arvind Kapur. The company is still finalising the location and investment for the plants. “The first one would be in Uttaranchal, while the other two would be in the eastern and western states,” he added.
The company is already investing Rs 100 crore in this fiscal year for capacity expansion and expansion of its product portfolio. “While Rs 100 crore has been earmarked for this fiscal, we will also invest more than that for the greenfield facilities,” said Mr Kapur. The company is also looking at overseas acquisitions. “We are looking for a good deal,” he added.
Earlier this year, Rico Auto signed two technical and licensing agreements for value-added components. The company signed an agreement with Teksid Aluminium of Italy to develop aluminium engine blocks and heads to be produced with high and low pressure diecast. It also signed an agreement with Pierburg, Germany to develop water pumps and oil pumps particularly for Maruti for their new Diesel Engine Project with GM-Fiat.
As of now, the company makes metal components including wheel hub assembly, brake panel assembly and clutch friction disk among others.
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| To Balance Gap Between Small, Large Players & Replicating Models From Technoparks Where SEZ, STPI co |
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| CHANDIGARH Technology Park could set aside more than 160 acre for small players that may come under the blanket of the STPI. “There is a huge demand from the smaller players and therefore to give some area under the STPI is still a tentative plan,” says M S Brar, director, IT, Chandigarh.
This may address the imbalance between the small and large players in the region at the same time replicating models from techno parks in the south where STPI and SEZ co-exist. Meanwhile, Phase II of the Chandigarh Technology Park has been accorded the SEZ status. The Board of Approval for SEZ’s constituted by the ministry of commerce, Government of India met under the chairmanship of G K Pillai, special secretary commerce, Government of India on Thursday at Udyog Bhawan, New Delhi and approved the proposal of the department of information technology, Chandigarh Administration for according the status of SEZ to Phase II of Rajiv Gandhi Chandigarh Technology Park. The approval has been accorded to the complete 100 acre of land which fall under Phase II of RGCTP. Of the total 250 acre, 123 has been awarded to Parsvnath by the Chandigarh Housing Board for a housing project. hence, the rest has been covered under the SEZ. Wipro, the anchor company possessing 30 acre of land and Tech Mahindra with 10 acre under its belt would begin construction soon.
While eSys and Bharti Airtel with 6 and 5 acre respectively will stand to benefit from the tax exemptions, phase II still has two plots of 10 and 5 acre free for possession.
According to M S Brar, director, IT, another 104 acre in Phase III land contigous to Phase II could be accorded the SEZ status soon.
For the convenience of the IT companies and for enlightening them more on the procedures of getting letters of approval for their respective units from SEZ NOIDA, the request of Director Information Technology was accepted by development commissioner SEZ NOIDA for deputing an officer to visit Chandigarh next week and give a presentation.
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| FieldFresh to enter food processing |
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| THE $50 billion Bharti Rothschild JV FieldFresh is planning to venture into food processing. “We will be in food processing by the end of 2007,” said Field-Fresh Foods’ Rakesh Bharti Mittal, speaking on the sidelines of the FieldFresh Centre of Excellence at Ladhowal in Punjab.
According to senior officials, Field-Fresh will be looking at the entire gamut of processed foods starting from plain vanilla packaged groceries to high-end processed foods. The move will bring Bharti group right next to Reliance Agri’s planned product spread. Though both the players, who compete head on in telecom sector, maintain that there is room for both in the agriculture sector, the mad scramble for land, human resources and facilities has already started. And Punjab is the first battleground.
“It’s not just about farming, farmers and crop cycles. Eventually, it will be all about processed products. The player who gets to processing first and keeps a lead there is the one who will be ahead,” says an industry analyst. Sources in Bharti agree, saying that the long-term interest of the company will lie in processing from juices, sauces, jams to packaged fruit, vegetable and wheat, once the project kickstarted. The competition might not be as fierce or as open as it is in the telephony but it’s getting hotter by the day. Even though both groups are targeting the same consumer, they do not acknowledge direct competition openly. “We have different business models,” says a senior Reliance Agri-Retail official.
Speaking to ET Rakesh Bharti Mittal, said agriculture required more corporate players to be here which will further fuel growth in all sectors.
The Bharti group company, FieldFresh, has a showcase 300-acre farm through Punjab government and Punjab Agriculture University’s goodwill to bank on for the 4,000-acre land it plans to cultivate in Punjab on contract. The agri arm of RIL, which plans to farm on about 3,000 acre of land in Punjab has already acquired about 1,400 acre through the state government and has also leased substantial undisclosed chunks of land on contract. Reliance has also been active in the horticulture, dairy and farm extension sectors in Punjab during the last few months. Land may not be the challenge but getting the right kind of farmer will be one of the major challenges in the near future, said a company official.
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| PM gifts agri research centre to Ladhowal |
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| PRIME Minister Manmohan Singh inaugurated the Rs 50-crore ‘FieldFresh Agri Centre of Excellence’ at Ladhowal, jointly planned by the Rs 12,000-crore telecom major Bharti and banker family Rothschild The opening of the centre marks the beginning of a $50-billion agriculture joint venture between them.
Apart from the showcase centre, their short-term plans include cultivation of exotic fruits, vegetables and legumes on 20,000-acre of contract-farm land sites spread across the country. Terming the project a “saga of adventure and entrepreneurial skill,” the PM said it would usher in the second green revolution in Punjab. He asked the farmers to adopt crop diversification, and underlined the need to make agriculture a much more “bankable” sector.
Planning Commission deputy chairman Montek Singh Ahluwalia, minister of state for industries Ashwini Kumar, Punjab governor Gen (retd) SF Rodrigues, chief minister Amarinder Singh, state finance minister Surinder Singla, company promoters Sunil Bharti Mittal, Rakesh Bharti Mittal and Lady Lynn Forester de Rothschild were present on the occasion.
Elaborating on the project, chairman of FieldFresh Food Sunil Bharti Mittal said the integrated agriculture research and development facility was one of the largest in India. With protected cultivation spread over 42 acre, the facility would showcase advanced technologies and best agricultural practices to farmers and serve as a hub of knowledge and training to the grower partners of the company. FieldFresh Foods earmarks an outlay of $50 million in the first phase through collaborative farming. “We have over 4,000 acre under cultivation in Punjab, which we plan to increase to 20,000 acre in the near future. We are in talks with the Bizarre and West Bengal to start similar projects there,” he said.
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| Raising money just got easier |
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| SMALL and medium enterprises (SMEs) tapping the overseas markets for external commercial borrowings (ECBs) are pleasantly surprised to find many foreign parties interested in partnering with them for equities as well. This interest is more than welcome given that external commercial borrowings (ECBs) are often a boon to small and medium enterprises making export earnings. But SMEs that do not earn significant revenues from overseas markets need to be more cautious and weigh the cost and benefits carefully before setting out to raise ECBs.
Of late, small and medium enterprises have been increasingly raising resources from overseas markets through external commercial borrowings (ECBs), a far cry from the days when banks were sceptical about lending to small enterprises. Things are slowly looking bright for SMEs as they have managed to win over lenders not only at home, but also abroad. They are also managing to get much better rates than what they used to get earlier.
The US Fed fund rate, a benchmark against which all major international loans are negotiated, is not expected to rise further, as indicated last Wednesday. This means that borrowing costs in international markets are not likely to rise in the near future, if the borrower has a sound financial position.
According to a recent study on finances of 2,210 firms, published by the Reserve Bank of India, 960 companies with a paid up capital of Rs 515 crore recorded a growth of over 50% in their net profits in ’05-06, compared with the around 20% growth posted by larger corporates. And though interest costs have gone up for SMEs, as compared to larger corporates, the costs as a percentage of their sales were curtailed by at least 30 basis points during FY06 from the previous year’s levels.
The strong performance by SMEs has helped to improve their credit worthiness both at home and abroad. According to D Thyagarajan, director, SME ratings, Crisil, “We have assigned ratings to nearly 400 entities and 100 more are in process. The feedback that we have received from the rated companies indicate that several of them have benefited not only on interest savings but also in attracting equity partners.” They have also receiving enhanced customer confidence.
The focus on exports is proving to be an added advantage to firms who earn bulk of their revenue through exports as they have a natural hedge against foreign exchange risks. SMEs currently contribute to around 40% of the domestic exports. Borrowers end up having a net gain of up to 2% by resorting to ECBs. At times, even those SMEs focused on the domestic market end up making gains from overseas borrowings.
According to Vijay Chandok, GM and head of Small Enterprises Group, ICICI Bank, companies with export earnings are now willing to borrow forex denominated loans. Cost of raising ECBs works out to around 10% for a 3-5 year loan. The post hedge cost works out to 0.5-0.75%. Some companies are willing to keep their positions open so that they get a cost benefit of 2% at the time of contracting, he said.
However, bankers warn that SMEs who do not earn significant revenue from the overseas markets should be more cautious on tapping ECBs and weigh the cost and benefits carefully. Loans to SMEs have grown 15- 20% annually, while SMEs account for around 10% of the $10bn odd of ECBs raised by Indian companies. And with the increasing thrust on exports in general and by SMEs in particular, their appetite for ECBs, given its cost advantage, is expected to grow even further. This will help SMEs bring down their costs and further improve their balance sheets.
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| Govt likely to levy 4% CVD on capital goods |
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| IN a bid to give domestic capital goods firms a level-playing field with foreign construction companies, the government is mulling a 4% countervailing duty on imports, which currently enjoy 0 to 5% duty. This would make all project imports costlier.
The proposal, which has been mooted by the department of heavy industries, could lead to an increase in costs of infrastructure projects, like ultra-mega power projects, transmission & distribution equipment, water supply and others, as these projects are heavily project import dominated. The move is aimed at providing competitive conditions for Indian project equipment manufacturing industry, which in certain cases pay duty as high as 24%. This is being done to even out the impact of central sales tax and value-added tax, which is levied on domestic project equipments.
A study commissioned by the department to look into problems faced by domestic suppliers, points out that Indian equipment manufacturers pay duty between 15-24% on their equipment due to host of taxes like terminal tax, octroi tax, sales tax, import duty on differential inputs and other factors like financing costs.
The proposal covers four major subsectors including electrical equip-ment, construction & mining equipment, machine tools and process plant equipment. The finance ministry has already set up a committee to look into the inverted duty structure arising out of various free trade agreements.
But PricewaterhouseCoopers executive director S Madhavan differs on the solution. According to him, it will be unfair to impose a blanket 4% duty. He explained that while it was true that the domestic procurement for these projects would be charged to sales tax/VAT, there are exceptions to this general statement also, like in the case of supplies to the Delhi MRTS project. For this project, the suppliers are eligible for a refund of the VAT paid. “Similar exceptions could exist with regard to other projects as well, based on the specific State provisions relating to sales tax/VAT. It is therefore incorrect to simply assume that domestic procurement for all these projects will be charged to sales tax/VAT”, he noted.
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