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TRENDS: TRENDS 2001

TARIFFS AND TAXES: The government went into a tax rationalisation overdrive in 2001. Excise duties were rationalised into three rates (8, 16 and 24 per cent), and the 10 per cent surcharge on Customs duty was scrapped. Even a two-tier VAT (value added tax) was promised for 2002.

-Swati Prasad

Pramod Mahajan: unravelling the tangle

TELECOM: It was in tangles. It started with the then telecom minister Ram Vilas Paswan announcing in January that the government would allow basic telecom operators to deploy Wireless in Local Loop (will), which would allow them to offer limited mobility services. Predictably, cellular service providers were up in arms. In the dogfight that has ensued, the sector is now a lawyer's paradise, with basic operators fighting cellular operators and both in turn ganging up against BSNL (the erstwhile operational arm of dot). All of them together are lobbying with the Telecom Regulatory Authority of India (TRAI) to protect their respective interests.

The industry squabble claimed Paswan's job, and Pramod Mahajan was brought in. Mahajan promptly merged the communication and it ministries. On the disinvestment front, VSNL sale continued to hang fire, even as the government milked it for dividends.

Finally, as the nation awaited for private players in domestic and international telephony, Internet Service Providers (ISP) seemed set to enter the business using the Voice over Internet Protocol (VOIP) technology, by paying the mandatory entry fee of Rs 25 crore. Not an easy business this.

-Ashutosh Sinha

Sandeep Goyal: a failed reprogramming attempt 

TELEVISION: The year saw Star Television emerging on top, primarily at the expense of rivals Sony Entertainment Television (SET) and Zee Television. Zee did try to re-launch its entire channel, but flopped miserably. Tongues wagged, the buck got passed and ultimately quite a few heads rolled both at Zee and SET. On the news front, Aaj Tak, the 24-hour Hindi news channel from the India Today Group stable (which also owns Business Today) became the number one news channel scoring over Zee News and Star News.

The imbroglio over TRPs, triggered by the leak of the sample-householdsforced the merger of tam and INTAM. Meanwhile, Zee pushed its five-language Alpha bouquet and Star picked up a majority stake in Tamil channel, Vijay. And the year ended with lots of buzz over Subhash Chandra apparently trying to offload a 26 per cent stake in Zee to AOL-Time Warner. Zee announced the formation of a distribution joint venture with Turner (India), Zee Turner Private, but the buzz refuses to die.

-Shailesh Dobhal


Such pictures could soon belong to the past

UNIONS: Lal Bahadur Singh has plenty of time on his hands. A general secretary with INTUC (Indian National Trade Union Congress), Singh is fast becoming a part of a dying breed-a trade unionist. And, if the affairs at Singh's home state, West Bengal, are any indication then the coming years could well see trade unions move from a confrontationist approach to a cooperative one. There have been no strikes in West Bengal and Kerala, both traditionally hot-houses of trade unionism, in the past six months. Even the disinvestment of state-owned enterprises hasn't prompted unions to see red.

''We realise the need for industry to do well,'' says Chittabrata Mazumdar, General Secretary, CITU, which has for long been the most obdurate of trade union organisations. Mazumdar has little option. The leader of the party he belongs to, and the chief minister of West Bengal, Buddhadeb Bhattacharya, has made it clear that strikes are just not on. Even the late Datta Samant's Marathi Kamgar Union and the INTUC echo Mazumdar's sentiments.

''We have seen the damage militant trade unionism had caused in the previous years,'' says INTUC president Subrata Mukherjee. Adds S.K. Benjamin, the President of the workers' union in Tata Iron and Steel Co: ''For the last 50 years we have been partnering the management. And that is the new mantra for all trade union activity across the country.''

-Debojyoti Chatterjee

K.V. Kamath: univ-bank blues

UNIVERSAL BANKING: The finance sectors buzzphrase-of-choice for 2001 was 'universal banking'. In April 2001, the RBI provided a framework for financial institutions to convert themselves into universal banks. Then, in October 2001, while presenting the mid-term review of the monetary and credit policy for 2001-2, RBI Governor Bimal Jalan promised to process applications promptly. It makes sense for FIs to repurpose themselves-the original developmental objective they were set up for isn't really relevant at a time when companies have easy access to capital. And the conversion, one school of thought goes, will impose more stringent provisioning norms on them, thereby, adopting a prophylactic route to solving the malaise of Non Performing Assets that has traditionally plagued FIs.

ICICI was the first to submit an application to RBI (on October 25, 2001) and got an in-principle clearance this month to become an universal bank through a reverse merger with ICICI Bank. The Industrial Development Bank of India (IDBI), which has sought a bail-out package from the government in the wake of a messy NPA problem has also submitted its proposal and will soon announce the bank with which it will merge.

-Roshni Jayakar

Subramanyam: what a mess!

US-64: For the first time in its 37-year history, the flagship fund of the Unit Trust of India announced a freeze on trading in July 2001 when its reserves turned negative. The Trust's chairman at the time, P.S. Subramanyam, blamed the bear market and corporate investors who providentially exited the scheme before the freeze. It later turned out that under PSS, UTI had simply mirrored the actions of a bull-coterie. Its dubious investments had caused a precipitous fall in its NAV (now Rs 8.50). Current Chairman M. Damodaran has a year to clean things up at UTI, and he seems to be doing alright.

-Roshni Jayakar


VC: Downsize, right-size, economise. They rhyme, and they were the mantras of choice in the VC domain in 2001. As funds available to venture capitalists became scarcer-less than 30 per cent of the total funds flow in 2000-they began conserving cash and making sure that their portfolio companies had sound business models. And where there were duds in the portfolio-and every VC had them-they had no option but to let them die. One firm, Eventures India announced that it would only retain those staff required to keep its their $70 million-worth investments going. Another, Connect Capital, set up in May 2000, with a clutch of international backers, including Microsoft, failed to raise further capital from investors and was taken over by Singapore Technologies.

-Roshni Jayakar

Damaged Coke plant

VANDALISM: Andhra Pradesh-based Naxal outfit People's War Group took its war with the establishment to an economic battleground. In the last quarter of 2001, the PWG targeted a bottling outfit of Coca-Cola, two export oriented units (one of Tata Coffee, and another of Gopikrishna India Granites), and a milk processing plant that is part of Heritage Foods, a company managed by State Chief Minister N. Chandrababu Naidu's wife Bhuvaneswari.

Evidently, the PWG has realised that the easiest way to get its message across in a state whose cm calls himself CEO is to scare away potential investors. Increased security, feels Hindustan Coca-Cola's Regional Vice President Vineet Kumar Kapila, may not be the answer. The solution could lie in convincing local residents that increased investment is better for the community. That view is echoed by Tata Coffee Managing Director M.H. Ashraff. But that is easier said than done.

-E. Kumar Sharma

VISITORS:

Carleton S. 'Carly' Fiorina, Chairman and CEO, H-P
Fiorina's fate may have been decided as you read this piece but fact is, the merger with Compaq wasn't on her strategy-horizon when she visited India in April, 2001. Then, she spoke about her turnaround strategy for h-p and how she was string to stoke innovation in the company. One would assume neither worked, for she had to fall back on a merger with another flailing tech major.

John Bond, Groupp Chairman, HSBC Holdings, an Patrick Gillam, Chairman, Standard Chartered
Sir Bond, the head of the world's seventh largest banking company by assets, and Gillam, the chair of Standard Chartered, both visited India for global board meetings of their banks. Just for the record, all seemed well between Gillam and CEO Rana Talwar when they were in India. How things change!

John Chambers, CEO, Cisco
The 50-year-old Chambers came to India in early January, when things were already going very wrong in the tech economy. But Chambers was confident about continuing to grow Cisco at between 20 and 25 per cent. However, his claim might be difficult to sustain considering that the company has already said it expects its November-January quarter (its year closes in July) to be flat.

Ed Meyer, Chairman, Grey Global
Advertising's sole dissenting voice who's consistently eschewed the conglomerate route favoured by the likes of WPP and Interpublic in favour of a best-of-breed approach visited India in June.

Niall FitzGerald, Chairman, Unilever
We'd like to say more about his visit, but since this issue also features an interview with him, we'll let it pass. Turn to Page 58.

-Abir Pal


XD FOR AFTER DIVIDEND: The concept of dividend is straightforward: you buy a piece of the company, and you get a cut of the profits. The more money a company makes, the more it will return to you. And, yes, you do not pay any tax on dividend income. So there are companies that believe in returning all the profit they earn as dividend. In 2000-01, for instance, Nestlé paid a 140 per cent dividend. Of course, the anti-dividend league would argue that companies could build themselves more effectively by reinvesting this money. If we don't get into the pros and cons of it, a large number of companies did give out huge dividends in 2001. Remember, stocks that yield dividend are nothing short of lifesavers in turbulent times. The income helps offset any drop in the share price; ergo, the stocks of companies with a history of good dividends tend to be less volatile.


YELLOW PERIL: Early 2001, and India Inc. was queued up outside the finance minister's office demanding tariff protection against cheap imports from China. By the middle of the year, though, some savvy Indian businessmen had identified various opportunities in our neighbour to the North. Some companies, like Bajaj Electricals, Bharti Enterprises, J.K. Industries, and Usha International began outsourcing products from China, for the domestic market in some cases, and for the export one in others; others, like Indal and Samcor Glass, started exporting to China. And still others moved to set up base in the country. Videocon International acquired a Shanghai-based internet TV plant in August 2001, and is now eyeing a Chinese appliance company. Still, in the long run, Indian businesses have reason to fear the Chinese. Subsidies or not, Chinese companies are far more competitive than Indian ones, courtesy, the country's superior infrastructure and the average Chinese worker's higher productivity.

-Swati Prasad

X-MEN... or the big ones who retired in 2001

J.J. IRANI,
TATA STEEL
The CEO of Tata Steel retired after handing over the baton to B. Muthuraman who had been selected, in keeping with the company's record at corporate governance, through a fairly effective succession planning process.

MICHAEL MASCARENHAS,
AIR INDIA
The Air India CEO's retirement was almost ruined by allegations of corporate misdemeanours prompted, some say, by his support of the airline's divestment. But Mascarenhas was cleared of all charges two days before he was to retire, and he did retire as CEO.

PRIYA MOHAN SINHA,
PRESIDENT, PEPSI FOODS, & CHAIRMAN, PEPSICO INDIA
Fine, the man hasn't retired yet, but 2001, was the year when his retirement (scheduled for March 31, 2002) was announced. A successor, Rajeev Bakshi, the former CEO of Cadbury India has been identified.

P.V NARASIMHAM,
CMD, IFCI
After coaxing the government to sign a much-needed bail-out package for IFCI, Narasimham rode off into the sunset and is now the Director General, Somaya Institute of Management in Mumbai.

-Ashutosh Sinha


Yoga: A great export-op

YOGA: If Time magazine puts Yoga (actually Christie Turlington in a svelte Yoga costume) on the cover, then surely, it wouldn't be out of place to look at the great export opportunity that is Yoga. Close to 15 million Americans include yogasanas in their fitness routine. Three out of four American health clubs and gyms employ yoga instructors. It isn't as if Yoga isn't popular in India. Only the numbers seem to be so much more promising abroad. Kalyani Chaitanya, a Londoner who has made India her home teaches Yoga at the Sivananda Yoga Centre in Delhi. The centre boasts a class strength of 300, less than half that at its branches in London and New York. Now, if only we can get out act together, apply for a 'geographical indication' or whatever thinagmajig will ensure that only Indians can teach Yoga, what an export opportunity it would make.

-T.R. Vivek

Prized customers boogeying away at a disco

YOUTH: The great marketing rush for the young continued. Close to 15 per cent of India's 1 billion-plus population is in the 15-24 years age group. The typical 'Indian Young Person' (IYP) is impressionable, and, when affluent, an early adopter of any new product, service, or technology. That's music to the ears of marketers. In a year when other consumers were downtrading (moving to less expensive products in the same category) marketers clutched at the young: Bharti's Airtel launched a youth club with a string of benefits, HLL forayed into iced tea (the young hate hot beverages, and aren't too fond of calorie-rich colas), and coffee bars mushroomed across the country.

-Shailesh Dobhal


ZEALOTS: The year had its share of politicos who opposed reforms in any form

SHARAD YADAV
As civil aviation minister, he did his best to scuttle the privatisation of AI, signing away bilaterals and suspending MD Michael Mascarehnas who was widely seen as favouring disinvestment. The government rehuffled his portfolio to labour but the damage, however, had been done. AI remains unsold. Meanwhile, Yadav says there can be no labour law amendments without consensus, blocking crucial labour reforms.

RAM VILAS PASWAN
As telecommunications minister, he tried to stymie the disinvestment of Videsh Sanchar Nigam Ltd (VSNL). A cabinet committee on disinvestment (CCD) meeting had to be called off at the last minute because his ministry didn't send the cabinet note. Paswan got his comeuppance when he was dumped in the coal and mines ministry in September. He seems to have learnt his lesson, though, and is not blocking privatisation of mining public sector undertakings.

MAMATA BANERJEE
After forcing Prime Minister Atal Behari Vajpayee to reverse increases in the prices of petroleum products in October 2000, the Bengal tigress presented an unabashedly populist railway budget in February. Passenger fares were spared any increases, while freight rates were hiked 3 per cent across the board. Dividend payment was deferred for the second year running and the railway budget was to be financed through external borrowing of Rs 4,000 crore.

AJIT JOGI
As chief minister of Chhattisgarh, he wooed private investors. But as Congress politician, he decided to oppose the sale of Balco to Sterlite. Alleging that the state government was not taken into confidence (since disproved by the Centre) he threatened to cancel Balco's mining leases and offered to buy Balco for Rs 50 lakh more than Sterlite's bid. He was forced to back down, and the Supreme Court judgement upholding the privatisation must be a bitter pill.

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