When the genetic engineering approval Committee, headed by Additional Secretary in the Ministry of Environment and Forests, A.M. Gokhale, announced recently that permission had been granted for the sale of Bt cotton seeds, the gm (genetically modified) controversy, in a sense, was let out of the bottle. While it was a big victory for Mahyco Monsanto Biotech (an equally-owned joint venture between local seed company Mahyco and American seed giant Monsanto), the other nine hopefuls in the industry too sat up in anticipation.

	Will Rupee Breach The 50-Mark
	Promoters On Prowl
	Tax Me Not
	Jet's Rough Ride
	The Real Action Man
	Of Controversy Born

The Aurangabad-based Nath Seed, for instance, has a pipeline full of gm seeds that it is itching to launch. It has a tie up with Chinese research institute Biocentury Transgene and plans to launch its own version of the Bt cotton (Bt stands for bacillus thuringiensis, a common soil bacterium that as a gene allows the plant itself to make protein that fights against pests, thus obviating the need for insecticides). Then, there's Novartis, which has gm seeds for corn and maize. Between Nath's gm tomato seed and Novartis' maize seeds, industry reckons that the market for various gm seeds could be Rs 7,000 crore big by 2010.

But don't bring out the bubbly yet. The next gm seed to hit the market may do so only in 2004. For one, there are (for valid reasons) long-drawn testing and trial process. For example, Mahyco had been conducting field tests since 1996, before the approval came in the last week of March this year. Says a Monsanto spokesperson: ''Before any other Indian biotech crop from our portfolio can be commercialised in India, it is expected that it would take at least three years to go through the regulatory process.'' Agrees Nandkishor Kagliwal, Chairman of the Rs 65-crore Nath Seeds: ''We don't expect our variety of gm cotton seeds to reach the market before 2004.''

Regulatory issues are just one set of challenges. Farmer activists like M.D. Nanjundaswamy who want all the risks associated with biotech seeds to be analysed before being okayed, will only prompt further tightening of approval processes. Even today in the US (and India) there is a strong lobby against the use of such transgenic seeds because there is a danger of insect resistance. The impact of such pests on organic plants could be devastating. Also, the lack of a plant patent regime in India automatically ensures that companies don't expose their entire portfolio. Therefore, progress in the industry will be measured.

That said, the race to come up with India's second gm seed is pretty much on, simply because there's tonnes of money to be made. Take the case of cotton. India has the largest acreage under cultivation in the world. But the 9 million hectares yield just 15 million bales (each of 170 kg), translating into a per-hectare yield of 350 kg versus the global average of 650 kg. The promise of Bt cotton, then, is a dramatic increase in yield per hectare. Nath Seeds, for example, is promising a 20 per cent jump in yield, and Mahyco Monsanto, a 60 per cent.

Compared to Rs 350 for a 450-gm packet of ordinary cotton seeds, the new gm seeds will cost between Rs 1,500 and Rs 2,000. But the increase in yield apart, the farmer saves on expensive pesticide, which costs nearly Rs 4,000 per acre. Monsanto claims that for every Rs 100 of additional income to the farmer, the company gets only Rs 20.

To get the seeds out to farmers, the players are looking to tie up with hybrid seed companies for mass production as well as distribution. Monsanto, for example, has already tied up with Ankur and Rasi seeds. Says Raju Barwale, MD of Mahyco Monsanto Biotech: ''We are not averse to more such tie-ups.'' Bt cotton's success or failure will pretty much decide the fate of the other players.

-Venkatesha Babu

FOREIGN EXCHANGE
Will Rupee Breach The 50-Mark?
The answer to that lies in what happens not so much to exports as the nation's fractured polity.

RBI Governor Bimal Jalan: Keeping fingers crossed?

Bimal Jalan should be a nervous man these days. Not just because as many as 30 industries have reported negative growth in 2001-02 (CII-Ascon survey). Or even because exports is on a grease pole. Rather, the Mumbai-based governor of the central bank has his eye on the goings-on in Delhi, where a shaky government is sending wrong signals to the money market. Traders have already taken the rupee to 48.84 versus the dollar. The question now being asked is when-and not if-the rupee will breach the Rs 50 mark, important only for the psychology associated with it.

Jamal Mecklai, CEO, Mecklai Financial and Commercial Services, believes that the rupee might touch that mark in September this year. His argument: Since the RBI has been allowing the rupee to depreciate by 3 per cent to 3.5 per cent every year (around Rs 2) for the last two to three years, to lose another rupee or so against the dollar will only only take until September. Some others say it could be December before that happens.

But then on, the rupee is expected to hold, not because it reflects its real value, but because it is considered a significant number. However, most people believe that further depreciation is hardly a cause for concern not only because India has enough forex reserves ($53 billion and counting), but also because a little volatility is good for the market.

Arun Kaul, Chairman and Managing Director of PNB Gilts, believes that while a gently depreciating rupee is not a cause for concern, any sharp fall could spark off speculative attack on the rupee and force the market to turn bearish. It could also result in outflow of short-term non-resident deposits from the country. Meanwhile, all eyes are on Vajpayee & Co.

-Ashish Gupta

STOCK MARKETS
Promoters On Prowl
With their stocks touching rock-bottom, dozens of promoters are increasing their stakes inexpensively.

Poor small investor

Call it the promoters' ball. And everybody who's anybody is inviting himself to it. Over the last four months, at least 40 companies have made or are making preferential allotments to increase their promoters' holdings. Most of them are it and media companies, including Padmini Technologies, etc Networks and Moschip Semiconductor Technologies. What's the big rush?

With more than 3,000 small companies quoting below par and others quoting near their 52-week lows, promoters are using a loophole in SEBI guidelines to increase their holdings. According to the rules, preferential offers should be made at the average of the previous six months' stock price. Smart promoters are using this to pick up stocks at abysmally low prices.

But could this be the beginning of another scam? Especially since the stocks that announce preferential issues tend to attract speculative interest and are followed by a rally post announcement. Also, to jog your memory a bit, a litigation filed by Consumer Education and Research Centre against the preferential allotment scam of early 1990s is still languishing in courts. Suggests Prithvi Haldia, CEO of Prime Database: ''Maybe SEBI could put a three-year lock-in for the entire preferential allotment instead of the current lock-in for mere 20 per cent.'' Is SEBI listening?

-Roshni Jayakar

TAXATION
Tax Me Not
The FM didn't mean it, but the changes in dividend tax norms could spur consolidation in industry.

Last year, ITC, the tobacco giant, received Rs 220.87 crore in dividend from its subsidiary company, ITC Hotels. This fiscal, ITC may not be that happy receiving such a generous pay out. Reason: this year's budget, where Finance Minister Yashwant Sinha moved the dividend tax back to the hands of the receiver. Worse, instead of a flat 10 per cent tax on dividend, the tax henceforth will be calculated based on the recipient's income bracket. Which means if you are more profitable, you pay more.

Rahul Garg, Partner, PricewaterhouseCoopers, believes that could prompt promoter companies to merger their dividend-paying subsidiaries with themselves. Another fall out could be the setting up of subsidiaries in Mauritius and Cyprus, with whom India has double taxation avoidance treaties. The dividend tax in the two countries is only 5 per cent.

Investment arms that derive income from dividends and capital gains may also be merged, since dividend paid can be taken out of total income for tax purposes. But how much of the consolidation actually happens will depend on India Inc's zeal to avoid tax.

-Ashish Gupta

CONTROVERSY
Jet's Rough Ride
Angry travel agents force India's largest private carrier to restore the cuts in commissions. But this may just be a truce.

Jet's Naresh Goyal: Practical move

A little arm-twisting can sometimes be a good tactic. Just ask the country's 2,000-odd travel agents. In the first week of March, the Naresh Goyal-promoted Jet Airways decided to cut its commissions on domestic booking from 6.9 per cent to 5 per cent and on dollar bookings from 7 per cent to 5 per cent, and enraged travel agents announced they would boycott Jet. The move was strategic. Indian Airlines too had cut its commissions without drawing the agents' ire. IA and the other private airline, Sahara Airlines-which has just 6-8 per cent share of the market-would have gained at Jet's cost.

Cornered, Jet yielded. Says a triumphant Sharukh Kapadia, Western region chairman of Travel Agents Association of India (TAAI): ''Jet has agreed not to implement the rate cuts immediately and we have called off the boycott.''

This, however, may be temporary peace. Airlines world over are under tremendous price pressure ever since since 9-11 hiked their insurance costs and discouraged air travel. In India, exorbitant prices of aviation turbine fuel add to the problems. For instance, even the tightly-managed Jet reported profits of only Rs 12.5 crore in 2000-01.

To stay profitable, Jet, like other airlines, has no choice but to prune costs-all costs. Says Saroj Dutta, Executive Director, Jet Airways: ''It is a natural corollary to the recessionary pressures being felt by all airlines and India is no exception. Costs are constantly under review and will continue to be so.''

Part of the reason why Jet's arm could be twisted was its lack of an online booking system. Unlike the airlines in the US, Jet does not have the capability to sell directly to customers. But Jet will eventually build these capabilities. That means travel agents who don't toe Jet's line the next time round may get offloaded.

-Abir Pal

TOYS
The Real Action Man
Funskool beats a Chinese competitor to create a toy from scratch for JV partner Hasbro.

Funskool's R. Kuriyan: Kid-happy

It's an event that Raphael Kuriyan waited all his life for. Beginning February, the CEO of Funskool India started shipping out home-made Action Man toys (a boys' collectible) to Australia, New Zealand, Mexico, UK, Germany, Italy, France, Portugal, Spain, Belgium, and Scandinavian countries. But this is no ordinary consignment. The mould for the toy has been made in India-a first for the local industry. What Kuriyan is feeling even more kicked about is the fact that his Rs 45-crore company (a JV between MRF and Hasbro) beat a Chinese toymaker-incidentally,] also an Hasbro-owned facility-to bag the order. ''Our partners were worried that we may not meet delivery commitments, but we promised that we would,'' says Kuriyan. The deal could involve Funskool exporting as many as 5 lakh units of Action Man.

Making toy moulds, like Funskool did for Action Man, is difficult, especially if the toy is not geometric in shape, has less than three years of shelf life and doesn't fetch volumes. Action Man's success, however, has prompted Funskool-which sells Hasbro's popular GI Joe toys in India-to look at making moulds for other toys. It already has received enquiries from Australia for its in-house developed cricket toys.

But there are several problems facing Funskool. For testing, toys have to be sent to Hong Kong. Besides, bureaucratic hassles are monumental. Still, Kuriyan seems determined to play and win the game.

-Nitya Varadarajan

AVIATION
Of Controversy Born
Eight years after Bangalore was first promised an international airport, things are finally moving.

S.M. Krishna: Landing space, finally

If Bangalore is India's silicon valley, it is so despite-and not because of-its airport. For, the one-time military airport still looks like a relic. Since 1994, successive state governments have been promising the Garden City an international airport. But a series of controversies-ranging from the location of the airport to its naming to the choice of developer-has kept it from taking off.

But in January, the state led by its Chief Minister S.M. Krishna, signed a shareholders' agreement with a Siemens-led consortium-including Unique, which operates the Zurich airport, and Larsen & Toubro-for the Rs 1,150 crore project. Says Abrehart Borch, Director (Projects) Airports-Development, Siemens Projects Ventures GMBH: ''We expect work to commence from October and the airport is scheduled to be completed in a record 33 months.''

After its completion in 2005, the airport will handle 40 lakh passengers in the very first year (compared to the current airport's 22 lakh passengers), and throughput 1.4 lakh tonnes of cargo a year versus 65,000 at present. Currently, only Lufthansa offers direct flights out of Bangalore, but the new airport will enable flights to other American and European cities. High time, did you say?

-Venkatesha Babu