Where are the worms? The government is working to ensure there aren't any

Dropsy deaths due to adulterated mustard oil... pesticides in soft drinks... worms in chocolates... Long after the dust has settled on these recent food-related controversies in the country, the joke is on the consumer: he still doesn't know the "truth" behind these reports. Who was responsible? Was anyone punished? Were these acts punishable under existing laws? Or were they, as the cola majors would have us believe, mere NGO propaganda?

The government proposes to table the Food Safety and Standards Bill, 2005 (The Integrated Food Bill) in Parliament in the second half of the Budget session to address these issues. But the big question is: Will it provide the legislative framework to develop the over-regulated and under-nurtured Indian food and beverages industry? Well, yes and no! That's because the Bill's fine print betrays its good intent. The positives-replacing the multiplicity of laws like the Prevention of Food Adulteration Act (PFA), The Milk and Milk Products Order, etc., with one comprehensive legislation, and bringing the hitherto confusing multi-level, multi-departmental controls under one roof-are outweighed by the fact that the Bill does not give enough teeth to the consumer.

For example, the proposed Food Safety and Standards Authority of India (FSSAI) under The Integrated Food Bill-which will regulate the manufacture, processing, import, export, distribution and sale of food in the country-has one consumer nominee, one representative from the food industry, one food technologist and as many as nine government nominees. The fear is that the FSSAI will become yet another arena for bureaucratic jousting, leaving it with little energy, technical capability or will to carry out its mandated responsibilities.

One way out could be to follow the industry suggestion and expand the FSSAI to include 15 members-two from consumer associations, three from the food industry, one from the judiciary, two from nationally-recognised research and development institutes, one eminent food technologist and six government nominees. This will allow the government to exercise regulatory control and, simultaneously, ensure healthy debate and accommodation of all shades of opinion and interests and, thereafter, lead to robust legislation.

The Integrated Food Bill does well to introduce various grades of offences and related penalties, which are lacking in the laws that now govern the sector. But it also strengthens the inspector raj: it gives the food inspector sweeping powers to pick up food samples, inspect facilities and levy fines for non-compliance with "improvement notices". Past experience shows that such a system leads to all kinds of arbitrary decisions and graft.

Then there is the issue of traceability from the farm to the table. Here, the onus has been placed solely with the food manufacturer. In a scenario where it is difficult to track the raw material back to the farm-because contract farming in India is still in its infancy-this will unnecessarily place an additional and unwarranted burden on the industry. There is a proposal to initially make manufacturers accountable only for the value they add. This means they will be responsible for any acts of omission and commission in their factories, storage facilities and distribution chain. Thereafter, there could be an agreed timetable to extend this chain of accountability back to the farm.

"There are obviously several building blocks that will have to be put in place," says Utpal Sengupta, President of Agro Tech Foods. That will take time. But having a single-window reference point for all standards, regulations and enforcement is not such a bad first step for the Rs 3,15,000-crore Indian food processing industry.

-Shailesh Dobhal

IT's No Different
As Bangalore's latest land-scam-in-the-making shows all business is the same.

See the tech campus? Nor can Reddy and he likes it

India's software majors never tire of reminding anyone who cares to listen that they are different from companies in other businesses, many of which (especially the larger ones) have been around for much longer. We are younger, goes the refrain, and operate in a knowledge industry; we do not carry any baggage of having operated in the licence-permit-quota era and know our responsibility to society.

They may be all of that, but as recent happenings in Bangalore show, they are also reluctant to pay market rates for land. It helps that states and their Chief Ministers woo it companies; they generate employment, add to the state's export numbers, and attract more of their ilk.

Karnataka has been no laggard and the state government has been busy acquiring several thousand acres of land (it does not have an exact idea of the quantum acquired) for various purposes including the construction of the international airport at Devanahalli (some 4,300 acres have been acquired for this) and allotment to it companies. Not too long ago, it (the state government) announced that it was in the process of allotting 300 acres in North Bangalore to the city's tech glimmer twins Wipro and Infosys, and all hell broke loose.

Farmers went up in arms accusing the government of forcibly acquiring land from them and handing it over to it companies at prices well below the prevailing market rates. "Why is the government using its right to acquire land, forcibly and at below-market prices from us, and giving it to the tech companies?" asks K. Jaganath Reddy, President, Belandur Village Panchayat (the village is near Sarjapur, an emerging destination for technology firms, and the state government's proposed it corridor runs through it). "Why is the government subsidising billion-dollar companies in their land grab act?"

Reddy's ire is understandable: the government pays farmers a compensation of Rs 25 lakh an acre compared to the prevalent price of Rs 13.2 crore. And for those readers wondering why farmers should sell if there is such a huge difference, the government enjoys what is called a right of eminent domain (this essentially means it can acquire any land it wants to).

The it companies involved (Wipro and Infosys wouldn't speak to Business Today because the first is in the quiet period in the run up to its results, which will be announced around the time this issue hits the stands, and the second is in the quiet period in the run up to its ads issue in the us) insist that they have to take the government's help because of lack of clear titles. That explanation doesn't cut ice with anyone. "There is absolutely no merit in the government forcibly acquiring land and giving it to profitable companies at below-market prices," says Ramesh Ramanathan, Campaign Co-ordinator, Janaagraha, a Bangalore-based citizen's movement. "Let the government auction land parcels and pay farmers from the proceeds."

The state's view is that if it companies are not offered the land, they will leave for alternate destinations. "A number of states like West Bengal and Kerala are ready to go to any extent to lure our companies," says a senior bureaucrat. He is also dismissive of Reddy's claims regarding the actual price of the land. "Owners always want more," he says. Allowing free-market dynamics to set prices may be the ideal way out but it's far quicker and cheaper to just grab the land.

Last word: On April 15, the Karnataka High Court struck down the notification issued by the state government acquiring 2,750 acres of land from farmers for development of the Arkavathy residential layout by the Bangalore Development Authority in February 2004. The court said: "There is no public interest involved in the project as it only helps the affluent people at the cost of poor agriculturists." Some farmers whose land has been acquired by the government for other projects like the international airport and the IT corridor are jubilant and say that they will now go to court.

-Venkatesha Babu

RESULTS
So Far, So Good

Going by the stock market's swooning act of mid-April, it may seem that investors don't expect companies to make profits-ever again. ok, we are exaggerating. But so is the stock market. One conservative guidance (by Infosys, which, among other things like a global knock-on effect, triggered the stock market fall) is hardly reason enough for investors to panic. And certainly not at a time when topline and bottom-line growth is looking robust. Consider the first flush of results for 2004-05. A Business Today analysis of the results of 64 companies shows a 33 per cent jump in total income and a 61 per cent rise in net profits over the previous year (see Looking Good). Some of the more savvy readers may want to point out that stock prices reflect not past but future earnings. Indeed, and precisely our point. Infosys' muted guidance was only for the first quarter of this financial year. The US market is expected to rebound in the second and third. Want a million-dollar tip? Buy stocks now.

-Priyanka Sangani

ON THE ROAD DEPARTMENT
Seventh In Queue And Waiting
All those planes, and nowhere to land. The airline boom has an adventitious fallout.

Thirty flights an hour, eight luggage lines: Spot the problem?

A little after 8.40 P.M., the flight from Chennai to Delhi has taken off on time, and this correspondent is wondering whether to play a guessing game (What's for dinner?) with himself or dip into Malcolm Gladwell's The Tipping Point when the captain comes online with the mandatory post-take off announcement. Blah, blah, blah, he goes. Then, "We will reach Delhi at 10.50 p.m. as scheduled, but depending on our position in the queue, we could take anything from 15 to 20 minutes more to land." The flight eventually lands at 11.15 p.m. And not even The Tipping Point is gripping enough for an individual to condone that sort of delay.

This was the Chennai-Delhi flight; colleagues who fly frequently between Delhi and Mumbai have horror stories to narrate of 20 minutes in the queue prior to take off in Delhi and an identical time in the queue, waiting to land in Mumbai. That's because the two airports in question, Delhi's Indira Gandhi International Airport and Mumbai's Chhatrapati Shivaji International Airport, account for 60 per cent of all domestic traffic.

The problem is this: India's air-traffic infrastructure was built at a time when domestic air travel was the privilege of a few. You were either senior enough for your company to fly you across the country on work, or you were rich enough to do so yourself on a whim. These days, thanks to apex fares, the booming economy and the growing prosperity of the general populace, everyone flies. And apart from old faithfuls Indian Airlines, Air Sahara and Jet Airways that have either increased the number of flights they operate or are considering expanding fleets (or both), and new entrant Air Deccan (the pioneer of the discount airlines movement in India), a clutch of airlines such as Kingfisher and SpiceJet (and several others such as Go!) are rushing to grab a slice of the business. Some estimates suggest that by 2007, there could be as many as 300 aircraft (there are currently around 150) criss-crossing the Indian skies and ferrying 30 million passengers (15 million last year).

"There are definite issues with both air traffic control and landings, but it isn't as if there is no solution," says Alex Wilcox, CEO of the soon-to-take-wing Kingfisher Airlines. "In Mumbai, for instance, there is a second runway that can be used by narrow-body aircraft, and in Delhi there is one that is hardly used." Air Deccan's CEO Captain G.R. Gopinath suggests that Delhi's Safdarjung Airport be used by small private aircraft "that really clog up landing slots", but given that this airport lies in the heart of Lutyens Delhi (where all the political bigwigs live) security considerations have led to it becoming a rarely-used facility.

India's Minister of Civil Aviation Praful Patel admits that congestion is a major issue, especially in Delhi and Mumbai, but claims work is afoot (high-speed taxiways, upgraded software and the like) to "increase runway use from 25 movements per hour to 35". That would increase runway capacity by 40 per cent and that should do if things go according to Patel's design and "we see more point to point traffic; flights from cities like Raipur, Nagpur, Dehradun to the it hubs". The minister also believes the problem can be solved by expanding the Delhi airport and building a second airport on the outskirts of Mumbai. "London, Paris, New York, Chicago have multiple airports," he says. "Why not Mumbai?"

Much of these proposals will take time to be implemented. The next time I have to fly I propose to take something a whole lot more gripping than Gladwell.

-Kushan Mitra

ISB vs IIM-A
Competition hots up in the one-year MBA market.

ISB students: Will their queue thin next year?

So far, it has been the USP of the Hyderabad-based Indian School of Business (ISB): An intensive one-year MBA programme for students with work experience. But come April of 2006, India's best-known B-school, the Indian Institute of Management in Ahmedabad (IIM-A), will launch a similar programme of its own. Will that dent ISB's appeal? The threat can't be ruled out. The Vastrapur-based management school scores over ISB on a couple of important fronts. One, the school has a brand equity far more valuable than ISB's. Two, its one-year MBA (called post graduate programme in management for executives or PGPX) at Rs 8 lakh will cost almost half of ISB's (Rs 14 lakh). Says G. Raghuram, IIM-A's professor in charge of the programme: "Apart from providing international exposure to the participants, we will scout around and get international faculty and course material."

Is ISB worried? "As pioneers, we know we will be imitated," says Ajit Rangnekar, the school's Deputy Dean, himself an IIM-A alumnus. And far from being a threat, the move, he says, will vindicate the school's belief in the one-year MBA model. That apart, says Rangnekar, there's room for several more good B-schools and programmes. "We need at least 50 top B-schools with such programmes over the next five years," he says. On its part, ISB has been expanding its batch size every year. In 2004-05, it had 273 students. This year, the number is 320. In contrast, IIM-A will only take 40 students in the first year for its first executive MBA. Therefore, ISB may still gain on the rebound.

-E. Kumar Sharma

Rated R
HLL goes adult with its ice creams.

This summer looks hot. That isn't the weatherman talking, but the ice cream marketer, who seems to have abandoned an age-old positioning of the product (as a fun, family treat) in favour of a new one: as an adult indulgence. Leading the new strategy is Hindustan Lever Ltd. (HLL), which has reworked the marketing communication of its Kwality brand to something more risqué. Its television and billboard ads show adults "pleasuring it up" quite suggestively (see right). What's up? According to an HLL spokesperson, the repositioning is "a bid to reflect the sensorial awakening in society". Evidence of which, the spokesperson continues, is to be found in the spending one sees at malls and multiplexes. At any rate, says the spokesperson, given that half of the country's population is between 18 and 34, its new communication better reflects its image as a youthful and indulgent brand. Rivals haven't yet followed suit. On the contrary, ones like the Anand-based milk marketing cooperative Amul, whose officials were not available for comment, are sticking to their family-centric campaigns. Will HLL's new positioning put its Rs 89-crore (2004 revenue) ice cream business on the boil? Hard to say. For, this is one category where availability plays a bigger role than just branding.

-Priyanka Sangani

The World's Best BPO
It is IBM Global/Daksh, but there is a sting in this tale.

Outsourcers can now refer to their own black book (The Black Book of Outsourcing; Doug Brown & Scot Wilson; Wiley Publishers) and, as was to be expected, India has reason to be happy. There are three Indian firms in the top 10 (four if you include IBM Global/Daksh) and another 12 firms in the top 50. In percentage terms that would mean Indian firms account for 30-32 per cent of the world's top business process outsourcing (BPO) firms, and every Indian firm that figures in the list (and every one that doesn't) must be praying that this will someday translate into a similar proportion of the global business process market, estimates of which vary from $300 billion (Rs 13,20,000 crore) to $544 billion (Rs 23,93,600 crore).

Mphasis, a company that this magazine has praised and damned in turn (see Good, Better, Oops! in this section) must be the happiest of the lot. The company, which merged its BPO Msource with itself in September 2004, is ranked #4, although this still isn't vindication of its claim that its BPO and it services offerings are far more integrated than that of other firms and that this translates into a winning selling proposition in the marketplace.

The happiness of Indian BPOs, however, is likely to be shortlived. "The rates of growth of India and China will, in five years, lead to a situation where western outsourcing to these nations is no longer a profitable option," say authors Brown and Wilson. "The costs of labour in China and India will approach that of western nations and limit the benefits of offshoring." That could well mean that companies seeking to outsource work to BPOs may find culturally better-matched vendors in Baltimore than in Bangalore. Outsourcing may be becoming a widespread phenomenon-the authors point out that mid-sized corporations accounted for more outsourcing deals in 2004 than large ones-but Indian firms may not really benefit from it in the future.

-Rahul Sachitanand

51,000 CR
The I-bug

What, we worry? Infy's top management before announcing the 2005 results

The fact that global stock markets were cold that day contributed, but if analysts are to be believed, Infosys Technologies' below-par results for 2004-05 (it grew revenues by 46.91 per cent and earnings by 48.48 per cent) and conservative guidance for 2005-06 (it hopes to grow revenues by between 24.7 per cent and 26.6 per cent for the year, and between 32 per cent and 33.2 per cent for the quarter ending June 30, and earnings by between 23 per cent and 24.9 per cent for the year, and by 32.7 per cent for the quarter) are to blame. One would have thought these numbers were impressive; a growth of around 25 per cent-analysts expect it to actually be around 35 per cent given the company's record of keeping expectations low-on a base of Rs 7,129.65 crore (that is what the company closed 2004-05 with) is nothing to be sneezed at. However, the market sneezed; some Rs 51,000 crore in market capitalisation vaporised (on April 15); and the term irrational expectations grew richer by one more example.

Made In India
Made for the world. It's clichéd, but the manufacturing boom is on.

Elcoteq's Antiii Piipo: He is pro-manufacturing

Early this month, a manufacturing facility of Finland's Elcoteq Network Corporation, one of the world's largest Electronics Manufacturing Services (EMS) firms-the breed manufactures entire products for original equipment manufacturers, sort of like contract manufacturing, just much more advanced and complex-started operations in Bangalore. Elcoteq makes products for firms such as Nokia, Siemens and Sony-Ericsson; its Chairman Antii Piipo, in India for the commissioning of the plant, the company's 31st and first in India, says: "India is very important to us and to our clients... The big domestic market, (availability) of skilled labour and cost advantage were reason enough for coming here."

Piipo is right on the demand thing; his company largely makes products for telecom firms and India's telecommunications market has been on overdrive for the past two years. The country already boasts 51.4 million mobile telephony connections with 1.7 million new ones being added every month (that's 40 added every minute). Not surprisingly, Nokia recently announced an investment of Rs 625 crore in a handset-manufacturing facility in Tamil Nadu and Hyundai proposes to invest $50 million (Rs 220 crore) in a facility that will make both GSM and CDMA phones.

The entry of EMS firms such as Elcoteq signals the emergence of India as an attractive destination for hardware manufacturing. EMS majors Flextronics, Solectron (through a subsidiary Solectron Centum), and Jabil Circuits are already here. It also indicates life beyond mobile phones. This year, says data from Skoch Consultancy, an IT research firm, some five million PCs will be sold in India (last year, 3.4 million were sold). This, says Sameer Kochhar, the firm's CEO, is "a market large enough for manufacturers to begin looking at setting up larger manufacturing facilities in the country". As this magazine pointed out in early 2004 (see Hardware's Rs 75,000-crore Opportunity, BT, February 29, 2004) the Indian hardware-manufacturing story is well and truly on.

-Supriya Shrinate

EDC's Nesbitt: Heave-ho

After 30 years of doing business with India, Canada finally named a permanent India representative for its trade-facilitating agency, Export Development Canada (EDC), early April. The announcement, made by Canada's Minister of International Trade James Scott Peterson on his recent visit to the country, is significant. Although India is Canada's largest trading partner in South Asia, the annual trade adds up to less than us $2 billion (Rs 8,800 crore). Tasked with changing that is Peter Nesbitt, a 10-year South-Asia veteran and who was Scotiabank's pointman in Bangalore. "Canadian exporters are realising that opportunities in India are for real, while for India, Canada can be a beachhead to the us," says Nesbitt, EDC's India representative.