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P O L I C Y Come, trick me It's a small change in the abbreviation, but a huge leap in policy. After hanging fire for more than three years, the Foreign Exchange Management Act (FEMA) early this month replaced the paranoid, 17-year-old Foreign Exchange Regulation Act (FERA). That's good news for corporate India, as any accused now won't have to bear the burden of proving himself innocent; rather, the policing authority will have the onus of proving him guilty. But in its zeal to decontrol foreign exchange transactions, the government may have left gaping regulatory holes in FEMA. For one, in the absence of the Prevention of Money Laundering Bill (PMLB)-which has been sent to the Standing Committee of Parliament for reconsideration and won't be in play at least until July-FEMA is virtually toothless. The reason: All foreign exchange related offences have been brought under the purview of civil law, subject only to monetary penalties. Such offences will no longer be treated as criminal offences. Thus, the powers to arrest and imprison-which were an integral part of FERA-go flying out of the window. In fact, Sections 8, 9 and 18 of the FERA Act that provide details regarding offences relating to illegal acquisition of foreign exchange without the Reserve Bank of India's permission, offences dealing with hawala transactions and with non-remittance of export proceeds, find no mention in FEMA. Punishments too have been greatly diluted. Under FERA, the Enforcement Directorate could impose fines as high as five times the amount recovered and award imprisonment for two years. Under FEMA, the imprisonment clause has been done away with and the fine reduced to twice the amount of contraband goods. Moreover, the maximum penalty has been fixed at Rs 1 lakh, irrespective of the amount recovered, and a daily fine of Rs 5,000 set in case of continued contravention. Unlike FERA, FEMA has no provision for the ''search and seizure of economic offenders and their property''. And in case such a search becomes necessary, it will have to be done in accordance with Chapter 13 of the Income Tax Act. The government argues that the new legislation has been drafted keeping in mind the new regime of liberalisation, increase in foreign exchange reserves, rise in foreign trade, and the partial current account convertibility. A noble intention, which could be undone by unscrupulous operators. By Ashish Gupta R
E V E N U E S H A R I N G It's only fair: if company A were to do something that raises the demand for B's product or services, the former has the right to expect a share of the latter's gains. That's what the country's Internet Service Providers expect. For every hour an user spends on the Net, for rates as lows as Rs 500 for 100 hours, he or she uses up Rs 24 worth of telephone time, money that goes straight to the account of the friendly (ha!) neighbourhood basic telephony service provider. The Internet Service Providers Association of India (ISPAI) has asked the TRAI to help kick-start the revenue-sharing process. Avers the head of a private sector ISP: ''I expect revenue sharing to start by the beginning of the next financial year.'' That will mean ISPS get a share of the revenues that accrue to telephone companies from people accessing the Net the dial-up way. The fall-outs range from lower rates for Net-access to more profitable ISPS. Agrees S. Rajagopalan, 60, CMD, Mahanagar Telephone Nigam Ltd (MTNL): ''Revenue sharing is a natural progression in the ISP business and should boost growth.'' There's a flip side to it, though. If the TRAI gives the green signal to revenue sharing, it cannot, logically, object to ISPs and TELCOS bundling Net-access packages. And that could work to the benefit of companies that have a presence both in the ISP business and the basic telephony one. MTNL is testing the waters with the announcement that it will offer a reduced telephony tariff slab for its Net-users. MTNL, which has a nominee of the Department of Telecommunications on its board, cleared the proposal to have a four-minute pulse for Net access. This will be available for all services and is expected to be extended to the entire country shortly. The road from the information footpath to the information super-highway seems to be getting smoother by the day. By Ashutosh Kumar Sinha R
E T A I L A booming middle class, lack of organised competition, and a growing population. The world's retail industry couldn't ask for more. Which is why several of the industry supremos, including Walmart, Toys 'r' Us, Barnes and Noble and many others are making a beeline to India. Many of them are currently busy researching the market. While no reliable estimates are available, the retail industry could be as big as $5 billion by 2004. The world's retailers have several things going for them. One, recent consolidations in the industry have given them huge bargaining power with manufacturers. For instance, Walmart, the world's largest retailer, has 1,792 stores in the US alone, and about 1,000 in other parts of the world. Its turnover is more than $100 billion. Sure, the other retailers in the US are much smaller than Walmart. Nevertheless their size is big enough to increasingly move profit margins from manufacturing to retailing. Second, growing consumer awareness is pushing up the demand for state-of-the-art retail environment. Especially since the supermarkets tend to sell products which are not only cheaper, but also better. And, of course, the shopping ambience is better too. Says Pranay Sinha, 34, Senior Manager (Retail Practice), Jones Lang Lasalle: ''India is an extremely attractive market for most of the big retail brands in the world.'' In the recent past, consumer demand in many of the Asia-Pacific and South American countries has softened. While the economic recovery in these countries is firming demand, retailers have come to realise that an international presence is no more an option. Rather it is critical to their future growth. Some of them, like Dairy Farm International of Hong Kong, have tied up with Indian groups (in this case the RPG group) to tap the market. RPG's FoodWorld supermarket chains has grown rapidly in the few years it has been around, and is now scouting for acquisitions. The entry of organised players in the industry will more than just benefit consumers. It will improve efficiencies up the supply chain. All activities, right from sourcing of raw material to packaging to transport, will gain from international best practices. Says Pradipta Mahapatra, 50, CEO (Retail), RPG Group: ''The benefits will be pervasive, right from the manufacturer to the seller to the consumer.'' In fact, the entry of somebody like Toys 'r' Us could prove a big boon to local toy industry that currently has no organised outlet. Similarly, Walmart could help boost fortunes of a range of manufacturers. Outdated land legislations and high start up costs, however, are some hurdles any retail entrant will have to deal with in India. But anybody who breasts the tape has a whole new industry for prize. By R. Sridharan M
E D I A At the moment, it's safe. The fact that you are reading this article in print and not on your laptop or a hand-held gizmo means that the print media is not dying-not yet, at least. But even those in the business of purveying news and predicting the future aren't taking the enemy lightly. Last year, the Indian Newspapers Society (INS)-a newspaper-body with over 700 publishing houses as its members- unleashed an aggressive media campaign to woo readers and advertisers. The agency which orchestrated the battle was industry major Ogilvy & Mather. This year, the battle seems to have the rumblings of a war. In the fray for the prized account are the advertising world's seven bigwigs: Chaitra Leo Burnett, Contract, Euro RSCG, HTA, Lintas, Mudra, and TBWA Anthem. So, who's getting worried? ''I think print has held its own very well thus far. But there is no reason for us to get complacent,'' says Shobha Subrahmanyan, 50, President, INS. Indeed. A recent research by TNS Mode paints a not-so-rosy scenario for the print industry. Called NetValue 2000, the survey covered 9,000 individuals in Socio-Economy Class A&B households in Bangalore, Calcutta, Chennai, Delhi, Hyderabad, and Mumbai. It looks at aspects like the frequency of Internet usage on weekdays versus weekends and the share of various media in total media-related time. Significantly, newspaper reading comprised only 16 per cent of the time spent by the sample on media activities. Magazines had a lower claim of 9 per cent. Television ruled the roost at 41 per cent, but the Net was fast catching up at 28 per cent. But the good news: for 90 per cent of the sample-which had an average age of 27.7-newspapers still command as much of their pre-Net attention. Besides, 92 per cent of the people surveyed said that they had spent some time reading a newspaper on their most-recent working day. Interestingly, that number was higher than that of television watchers. In terms of newspaper reading, however, Calcutta takes the cake. A staggering 99 per cent of those surveyed in the city said they had read a newspaper on a recent weekday. Also, they spent more time on it than the others. But, then, 100 per cent of them had also used the Net. In terms of newspaper's share in media activities, Delhi, Hyderabad, and Mumbai were close on the heels of Calcutta at 95 per cent. Bangalore came in close behind Calcutta with 91 per cent, and Chennai followed with a distant 76 per cent. While the agencies involved with the pitching do not want to talk about it yet, the agenda will obviously be to use the pen as a sword to gain mindshare and underline the fact that real reach is still its bastion. After all, you would agree, holding a laptop can be rather uncomfortable if you are on the throne. By Shamni Pande A
D V E R T I S I N G It's the day of the New Economy-in advertising too. An ORG-MARG survey reveals that of the Rs 1,376 crore spent in print advertising between November, 1999, and March, 2000, services top the chart, accounting for almost a third of the total spend. The highest spenders in the services category were Internet services, which spent nearly Rs 76 crore, followed by computer-education providers, who splurged Rs 70 crore. The second-highest print customer was the automotive industry, including passenger cars, two-wheelers, and tractors, who bought advertising space worth nearly Rs 160 crore. For the advertisers, the average insertion cost worked out to Rs 31,282. Predictably, most of the advertisement revenue (Rs 320 crore) came in March. Total adspend went up from Rs 253.49 crore in November to Rs 280.99 crore in December, but slipped to Rs 269.53 crore in January and further to Rs 251.52 crore in February, before bouncing back under the year-closing budget-exhausting spree. Certain kinds of products lend themselves more for a print pitch, it seems. Take white goods, for instance. Makers of refrigerators, air-conditioners, cooking ranges, washing machines, and peer products sunk Rs 106 crore, whereas over-the-counter drug brands spent a mere Rs 14 crore. However, manufacturers of office-equipment fought for reader mind-share by shelling out Rs 91 crore. In clothings, the readymade garments sector spent around Rs 29 crore, with suitings and hosiery makers forking out Rs 21 crore and Rs 10 crore, respectively. But when it comes to advertising, there is nothing like better or worse. It's always, the more the merrier. By Aparna Ramalingam |
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