Petroleum Minister Aiyar: No reason to smile

When Adnan Shehab-eldin, acting Secretary of the Organisation of Petroleum Exporting Countries (OPEC), recently told a Kuwaiti newspaper that he could not rule out oil prices touching $80 (Rs 3,520) a barrel within the next two years, the news sent shock waves across the globe. Such a huge spike in oil prices, say analysts, will devastate the global economy, struggling as it is after years to come out from near-recessionary conditions. The situation could prove even worse for two of the world's fastest growing economies, China and India, whose dependence on crude has surged over the years, thereby contributing in no small measure to the high oil prices. India, for instance, which imports around 70 per cent of its crude needs, could find its crude import bill touching Rs 2,00,000 crore in 2007-08, from the Rs 85,000-crore bill that it forked out in 2003-04 (by March 31, it would have gone up by an additional Rs 20,000 crore, say petroleum ministry officials).

The rising import bill isn't the biggest worry. Nor is the consequent adverse impact on forex reserves. The #1 bugbear for the country is the resulting spiral in inflation-after all, petroleum products constitute nearly 14.22 per cent of the Wholesale Price Index-which, in turn, will mean lower consumption and an increase in the cost of industrial goods. Net result: lower economic growth. "(If oil prices shoot up) We can easily say goodbye to the 7 to 8 per cent growth story," says a Mumbai-based analyst.

If you prefer to see the brighter side of high oil prices, as a senior official at the petroleum ministry prefers to, "it could give a huge fillip to the research in alternative fuels, especially in hydrogen, biodiesel and ethanol", he says. Other alternatives too will get a leg up. For instance, recent experiments at converting gas to liquid fuel, considering that India seems to be literally floating on gas, will also come to the forefront.

Another implication of the $80 breach would be for the fertiliser and power industries, both of which will have to move away from using naphtha to natural gas as feedstock. Gas prices, though linked to crude prices, do not capture the total hike in crude, and will hence be lower. So companies like Petronet, Shell, British Gas, Reliance and GAIL India-involved in production and marketing of gas-could be in for boom times.

But the companies that will be laughing all the way to the bank are Oil and Natural Gas Corporation and Oil India Limited since they are assured of the import parity price for every drop of crude produced. The success story of the refinery companies isn't so easily guaranteed since their profits would be determined to a large extent by the demand for petroleum products. After all, refining margins are determined by the difference between the product prices minus the crude price.

The silver lining of oil at $80 could well be widespread reforms in the oil sector, which otherwise might never see the light of day. Restructuring of the public sector oil companies to make them more competitive, more efficient use of feedstocks in power and fertliser companies, further rationalisation of the petroleum subsidy structure and a far greater effort by Indian companies to acquire oil equity abroad could well be the welcome fallout.

-Ashish Gupta

The BT 50 Index
The budget foundation coupled with strong foreign fund flows is sustaining the BT 50 uptrend.

In early 2003, BT launched its own stock-market index because of issues it had with the construct of the BSE Sensex and NSE Nifty. Both were based on market capitalisation; that is, the weightage allotted to a certain stock in the index is based on its market capitalisation. The problem: the inclusion of closely-held companies with large market capitalisation distorts the index.

BT decided to adopt the far more responsive free-float method, wherein the market capitalisation of a company is based on the quantum of shares available in the market for trading. Ergo, this method excludes the holding of promoters and strategic investors. Free float didn't just help us choose the companies that should constitute the index; it helped us allot them weightages. To complete the methodology: the free float is according to data as on December 31, 2002; the index begins in January 2002, and its base value, like other indices is 100. All weights are updated every quarter, based on shareholding patterns. The Sensex went free float after BT launched its bt-50 index.

-Narendra Nathan

Sykes' BPO Blues
A US call centre cuts back. Should we worry?

Is this the beginning of the end for the fast-growing BPO sector? Sceptics have for some time been pointing to the double whammy of skyrocketing attrition and absenteeism as a potential stumbling block. Add to this the increasing number of disillusioned MNCs gravitating towards the exit sign, and the dismal picture is complete. Consider: Not too long ago, Wipro's BPO (formerly Spectramind) lost a part of the outbound voice work it would do for CapitalOne; then AXA Business Services lost a portion of the captive work it used to do from Bangalore. Now it's the turn of Sykes, a Tampa (Florida)-based call centre firm to cut its workforce, according to a filing it has made with the us Securities And Exchange Commission. Sykes says it will move "some" Indian work, with some reports pointing to half the $4 million (Rs 17.6 crore) in revenues generated from this centre being repatriated to other centres in the Asia-Pacific (in the Philippines and China) and workforce in Bangalore being slashed by 50 per cent.

Sykes' rejig comes only a few months after it had ambitiously announced it would hike its India employee numbers to 1,500 from 600 currently. Sykes, of course, isn't an exception. Recently, AT&T, which has been acquired by us telecom giant SBC, also cut work to its Indian vendors. And before that, computer maker Dell had repatriated some work for top-end corporate customers from its Bangalore operations.

So what's igniting this mini-exodus? For starters, many vendors, especially those in the small and medium category, often fail to deliver on service level agreements and have limited domain skills. Attrition remains the main issue, one coo says, adding that by the time an operator has spent six months training a new agent, he or she has jumped ship, necessitating further hiring. Even a large centre like Wipro BPO has 90 per cent attrition rates. "Customers now want to see Indian operators take a more proactive approach... take interest in process re-engineering," one executive says, adding that the days of simple "garbage in-garbage out" mentality are history. Infosys' Chief Mentor N.R. Narayana Murthy's recent prediction that call centres may get obsolete once VOIP and voice recognition technology matures will hopefully act as a wake up call for pure-play contact centres to focus harder on data processing work.

-Rahul Sachitanand

BANTER
Getting Fiscal

Films or fisc? Mallika Sherawat (L) with Adi Godrej

You heard the economists-wannabe and armchair-and the captains of industry thin-slice, dissect, tear apart and read between the zillion lines of the fm's budget speech. But it's not often that you have an industrialist (Adi Godrej), a politican (Milind Deora), and two... hmm, actors (Zayed Khan and Mallika Sherawat) attempting to make sense of Chidambaram's various proposals. A co-initiative of MTV and CNBC to ostensibly get the youth involved, the picture accompanying this piece might not be the most accurate summation of the goings-on at the "Budget Fundas" shindig, but it did give the alleged bimbo brigade a platform to make a point or two when it came to infrastructure and tax policies. Sherawat's agenda was clear-cut: "Education, education, education," she went. Great insight gal, but didn't the question have something to do with the positive gender bias in the Budget? Still, we won't hold anything against Sherawat. After all, if she managed to keep Adi Godrej interested-even for a split second-she wasn't discussing her next film. Or was she?

-Priyanka Sangani

MOONSHINE
Whistle-Wetters

Jean Berchon: A history of, um, wine

The term "alcohol in your veins" takes a whole new meaning in the case of Bill Berguis and Jean Berchon. Both these gentlemen come from families steeped in booze history.

Berguis is a fifth generation descendant of William Teachers, and he came to India to take in a taste of the country. He himself is the in-charge of the brand for Allied Domecq, the owners of the Teachers brand today. India incidentally is one of the largest markets for Teachers Scotch Whisky, with over 100,000 cases being sold annually.

Berchon, like Berguis, still works for the brand founded by his ancestor handling the pr functions for Moet & Chandon. "Once people are more aware about wines, they are ready to upgrade (to champagne)," says Berchon, who has a 'small' collection of about 5,000 wines.

Cheers to them both!

-Kushan Mitra, with Priyanka Sangani