Maruti Udyog: Passing the buck

ndia's passenger car industry may have thought it was in Easy Street after Finance Minister Jaswant Singh slashed the excise duty on cars from 32 per cent to 24 per cent. ''That should kick start growth,'' chorused analysts. But commodities have written the industry a parking ticket.

Steel prices are up 25 per cent since 2002, plastic, 31 per cent, and aluminum 8 per cent. Even rubber is up 23 per cent. And with the timing of the hike coinciding with the beginning of the financial year when companies renew contracts with suppliers, says an executive at Maruti Udyog, India's largest car manufacturer, ''car makers have no option but to pass on the increase to customers.'' And so, the company that slashed prices on its 29 models by between Rs 10,884 and Rs 37,664 in early March has announced that it will increase them soon-just how soon, or by how much wasn't known at the time this magazine went to press. It's status quo for customers, but car makers can take heart from a what-if scenario that has the fm ignoring their pleas for a reduction in excise duty.

-Shailesh Dobhal

ON THE ROAD DEPARTMENT
Manna in The Gulf of Mannar
Once, fish were plentiful here but catches like the one below are increasingly rare. Still, the beginnings of pearl culture, shown above, could bring prosperity to the Gulf

It isn't easy getting to this corner of India. Our destination, Mandapam lies at the end of a 30-hour train journey from Chennai. Sri Lanka is a mere 18 kilometres away. Mandapam is also one extremity of the 10,500 sq km arc that is the Gulf of Mannar, once a bio-reserve rich in fish, corals, and pearls. Today the pearls are hard to find, the fish are disappearing, and the reefs are denuded. The 1,750 households of Mandapam earn less than Rs 1,000 a month from fishing, seaweed collection, toddy tapping, or seashell gathering. And they find themselves in the clutches of moneylenders and middlemen. The Chennai-based M.S. Swaminathan Research Foundation hopes to change that.

The mechanics of the change involves pearl-culture, the processing of agar, the making of prawn pickle, even efforts to create an artificial reef. The Gulf, claims S Velvizhi, a scientist from the Foundation, has everything it takes for pearl culture. "There is potential for some 50-60 pearl farms around Mandapam." By June 2003, 10 families in Munthalmunai village engaged in pearl culture, hope to net their first profit of Rs 300,000. "We believe we can make some money from this," says a wizened-for-her-40-years V Nagakanni. That would help: steeped in debt to usurers who double up as fish traders, most people in the village, an important landing point for fish, have little bargaining power. Even as Nagakanni speaks of a better future, a fish trader on a shiny new cruiser rides off with the day's catch. Barely two kilometers away, he sells the fish to a processing plant-at a 100 per cent margin.

At another village-this one is called Kunjaravalasai-the Foundation has helped six women set up an agar processing plant. A critical processed foods and pharmaceutical ingredient, agar is extracted from marine seaweed of the kind that are common in the Gulf and India makes just 80 of the 450 tonnes of the product it consumes a year. Not too far away, just beyond the Gulf of Mannar biosphere PepsiCo is growing its own weed. Introduced from its natural habitat in the Philippines, this weed, the source of food-additive Carageenan, is flourishing in Palk Bay.

Five hours down the arc takes us to the predominantly Christian fishing community of Therespuram near Tuticorin. Illegal trawling and coral mining are rife in the region but Therespuram's fisherfolk have banded with the Foundation to create a 1 square kilometre artificial reef where they won't fish for the next two years. By then, the reef is expected to have bolstered the population of groupers and lobsters. And not too far away, in the village of Vellapatti, people are still marvelling at a factory that has emerged in their midst. The factory produces 20 kgs of prawn pickle a day and while a substantial part is sold to Chennai-based seafood and meat products company Farm Suzanne, the women running the factory are now considering branding it Queen and selling it themselves. "Our ultimate aim is to set up many National Dairy Development Board type projects and network the various entities to take on multinational competition," says K. Balasubramanian, Director, JRD Tata Ecotechnology Centre at the Foundation. It's a start.

-Nitya Varadarajan

The BT 50
Introducing an all-new stock index.

Why bother launching another stockmarket index? Because the ones that India has, including the BSE Sensex and the NSE Nifty, aren't the best measure of stockmarket performance. For one, these indices are based on market capitalisation and, therefore, inclusion of closely-held companies with large market cap (like Wipro) tends to distort the index. So, what BT has done is to develop an index based on the free float method. This not only improves the representative nature of the index, but also allows inclusion of closely-held companies albeit, with lesser weight. In fact, free float indices are becoming the norm world wide. The London FTSE or the Morgan Stanley MSCI are already based on the free float method. But in India, except the BSE teck, there are no such indices. That makes the BT 50 the only one of its kind. Watch for it in every following issue of Business Today.

-Narendra Nathan

BORDERLINE
VAT's Vexed Questions

Are states in a position to implement VAT from April 1?

No. Only Madhya Pradesh and Maharashtra have passed the bill. The others will take time to do so.

Will VAT simplify the tax system?

Yes. When implemented as a single levy, it will eliminate cascading effect of state sales tax. It will also widen the tax base by taxing the entire distribution chain.

Are all states happy with VAT?

No. States with a tax rate higher than the 12.5 per cent of VAT fear loss of revenues.

Will VAT hurt some sectors?

Yes. Petrochem, FMCG, and pharmaceuticals. The first two because of their long supply chain and the third because input tax credit won't be available.

Will VAT help some sectors?

Yes, again. Autos, capital goods, engineering, metals and oil and gas are some.

-Debojyoti Chatterjee

STEALTH
Dell's Day Out

Michael Dell: A low-profile visit

That billionaire Michael Dell was in Bangalore on March 19 is no secret. But his reasons for making it a hush-hush affair or why he chose to visit the Infosys campus and not Wipro, continue to be a mystery. BT did some sleuthing and this what we found out: The 38-year-old CEO of Dell Computers addressed the 3,000 employees at the company's year-old global technology support centre (Dell International Services), and reviewed its performance. Then Dell met with Infosys Chairman N.R. Narayana Murthy and CEO Nandan Nilekani. The agenda? Dell is believed to have explored the possibility of a deeper relationship with Infosys, including outsourcing some more software development work to the Indian company. The meeting is being seen as a coup for Infosys, since Dell had also met with top Wipro officials including its Chairman Azim Premji on his visit last year. Some observers point out that Dell's low-key visit could also be due to the flak American companies are facing for outsourcing jobs to India.

-Venkatesha Babu

THE QUESTION CORNER
"Reputation Is Like A Halo"

Charles Fombrun, a Professor of management at the Stern School of Business (New York University), has spent most part of his professional life championing the cause of corporate reputation. Also the founder of the Reputation Institute, Fombrun-on his first visit to India-spoke to BT's Venkatesha Babu on why reputation matters. Excerpts:

Charles Fombrun: Reputation matters

How do you define reputation?

Reputation is like a halo. It is like a cloud, which sits on top of somebody's head. It could be favourable or unfavourable, attractive or unattractive. There are six dimensions to it: Emotional Appeal; Products & Services; Financial Performance; Vision & Leadership; Workplace Environment and Social Responsibility. Therefore, reputation management is much more that branding or public relations.

Is there a correlation between reputation and market capitalisation?

This is the holy grail of the entire thing. We all look for links between financial value and intangibles. I have something I call reputational capital. This is: Physical Capital+ Intellectual Capital+Reputational Capital= Market Cap. Efforts to correlate how people perceive and put a financial number to it is the entire issue of reputation measurement and management.

How does your Reputation Quotient Gold index work?

RQ system is a rating, which we publish based on perceptions of the general public. For instance, in the Fortune list of ''Most Admired Companies'' they go to executives and analysts. However, the universe from which we get answers is much broader, wider, and more unbiased. With the six metrics mentioned earlier, we measure and rank companies. RQ Gold has been constructed such that it is generic enough and we could be asked of anybody and not just the analysts and executives.