Get surfing: IT minister Maran (R) with HCL Info's Chowdhry

Technology's relentless march down the price curve is producing some interesting results. In March this year, the Kolkata-based Xenitis Group launched a low-cost "Aapna pc" for the north Indian market, following its launch earlier in some other parts of India. Now, the leader in pc business, HCL Infosystems, has launched one below Rs 10,000 (it's sticker price is Rs 9,990, to be exact). So sure is HCL about the success of its low-cost pc, which also runs on the Linux operating system like the Aapna pc, that it has committed to manufacturing one million of them every year, and expand its dealer network from 800 to 3,000. Says Ajai Chowdhry, Chairman and CEO, HCL Infosystems: "pc penetration can only come from pyring open the bottom of the pyramid."

Compelling as they are, lower pc prices in themselves won't be enough to make it a common household gadget. The manufacturers, especially if they have to tap small businesses and lower income classes in urban and rural India, will have to make a case for the Rs 9,990 investment. That means, the boxes must have applications that are relevant to such customers. Who will develop that software? Possibly not a Microsoft, but smaller Indian companies. The problem, however, is of software piracy. If the small software vendors aren't guaranteed copyright protections, they will have no incentive to invest time and energy in developing local language and locally-relevant software.

That apart, if the pc is to be used productively (think e-choupal), it must be connected to a network of computers-the internet. At the moment, the spread of the internet is limited by the low penetration of telephones (9 per cent). But pc manufacturers can probably take solace from the fact that improving it penetration is part of the government's common minimum programme. As the Union it and telecoms minister Dayanidhi Maran said at the launch of HCL's low-cost PC: "The government is looking forward to working closely with the industry in increasing pc penetration in the country." It's a partnership India needs.

-Amanpreet Singh

STICK
GDRs Boom, ADRs Go Bust

America's Sarbanes-Oxley (SOX) is taking its toll on American depository receipts (ADRs) from Indian corporates. So far this year, there have been just two ADR issues: One from Sify and the other from Infosys. Compare that to the seven global depository receipts (GDRs), which got listed on European stock exchanges such as London's or Luxembourg's, worth more than $600 million (Rs 2,640 crore). "The costs of adhering to SOX are quite high, and it isn't just one-time cost," says Sanjay Sharma, Head of Equity Origination and Capital Markets, DSP Merrill Lynch India. Still, given that a lot of prestige is attached to an American listing, Indian companies may not completely give up on ADRs.

-Kushan Mitra

SEASON
From Wheat To Tea

Field day: Reaping a new crop

The next time you are in the Kumaon hills, you may mistake it for Assam or Kerala. Uttaranchal, which produces just half a million kg of the 170 million kg produced nationally, is encouraging the plantation of tea, and many small and marginal farmers are taking it up. Already 560 acres of new plantations have been developed and the government plans to bring additional acreage under tea plantation over the next few years. "Often, farmers are not able to prepare proper terraces for the cultivation of wheat, rice or potato," says Joginder Lal Butail, Chairman, Palampur Tea Cooperative. And that's when they decide to grow tea on that land, instead of letting it lie fallow. In fact, the Uttaranchal government has created a database identifying suitable land for tea cultivation. It is also training farmers, and thinking of setting up tea processing and packaging units in the state. Uttaranchal and tea may seem like apples and oranges, but that doesn't bother the state's farmers.

-Swati Prasad

Tea's Price Warriors
'Bought leaf factories' give the big players a run for their money.

Price over quality: Poor compromise

Bought leaf factories (BLFs), which, unlike traditional tea companies, do not grow their own tea but buy-often, cheaper quality-tea from small growers, are all set to mushroom across north India as well. So far, essentially a southern and eastern phenomenon, bought leaf factories, which undercut prices of companies like Tata Tea, Hindustan Lever Ltd (HLL) or Duncans, are looking at the north because farmers in states like Himachal and Uttaranchal are beginning to shift to tea (see From Wheat To Tea). "With more farmers taking up tea cultivation, tea leaf production is bound to go up," says Joginder Lal Butail, Chairman of Palampur Tea Cooperative. As of now, there are four tea cooperative companies in Himachal and just one bought leaf factory in Uttaranchal.

Their proliferation will be something to worry about for the bigger players. Since the BLFs don't own tea gardens, they don't have to meet the costs and statutory requirements that the bigger, integrated players do. And since they buy from small gardens, tea price and not quality is the selling point. But it seems that the BLFs are winning. In the organised sector, tea production is down by 4.3 per cent. But in BLFs and cooperatives, between 1998 and 2002, production increased by 16.7 per cent. Even in the north, BLFs saw a growth of 28.2 per cent in that period, while the organised sector shrank by 3.7 per cent.

Inevitably, though, labour problems and increasing cost of production may force the bigger players to turn bought leaf factories. HLL is said to have sold seven tea gardens in Assam recently, and in the south, Tata Tea has exited from its tea plantations in Munnar, Kerala. At least for the plantations, the cup brings cheer no more.

-Swati Prasad

Plane Partnership
Six Delhi companies join hands to buy aircraft.

Jet-setting club: DCM Shriram's Ajay Shriram (L) and HM's C.K. Birla

It's fractional aircraft ownership, but with a twist. Six Delhi-based companies-Bharti Tele-Ventures, the Dabur Group, DCM Shriram Consolidated, Hindustan Motors, Jubilant Organosys and the Hero Group-have reportedly come together to buy a business jet such as the Gulfstream IV or Citation II, and a turboprop like the Raytheon Beechcraft. None of the companies was available for comment (and while one company's spokesperson seemed aware of the development, another that BT called wasn't). A jet such as the Gulfstream IV costs upwards of $20 million (Rs 88 crore), while a turboprop sells for half that price. A single aircraft can manage up to 800 to 1,000 hours of flying in a year, but maintenance costs of a Gulfstream can be as high as Rs 50 lakh a month. Says Manav Singh, Managing Director, Club One Air, India's first fractional ownership airline: "Two planes between six corporates, each with tens of divisions... sharing time for them will be very difficult." Singh has reason to hope that the trend doesn't catch on, but the challenge of sharing aircraft among busy CEOs does seem daunting. No doubt these companies run excellent shopfloors, but scheduling an aircraft for six heavy-weight CEOs is an altogether different thing.

-Kushan Mitra

RACE
Swift's Rivals

If you are a car-maker selling cars in India today, and your name is not Maruti Udyog, chances are that you are lining up a car to take on the Suzuki Swift. In the nine weeks since launch, the Swift has sold 14,000 units and another 10,000 are in delivery. Not surprisingly, then, Toyota Kirloskar and General Motors are among the carmakers rumoured to be readying a launch in the Swift segment. GM might bring in its two-box version of the Daewoo Nubira, but branded as the Chevrolet Aveo. Toyota Kirloskar, on the other hand, may roll out the new Aygo (pictured). The Swift had better watch out.

-Kushan Mitra

SWITCH
Hello, Moto

Come October this year, Allen Burnes, Motorola's chief for high growth markets (HGM), will embark on a novel experiment. Along with his Danish wife and two children, Burnes will relocate from Denmark to Delhi, thus setting up a new headquarters for the American telecom major's HGM business. With him are also relocating HGM's Directors of finance, strategy, operations and product marketing from countries such as the UK and Congo. What's behind the move? "Over 150 million handsets are expected to be sold in India over the next three years," says the 10-year veteran of emerging markets. "And the best way to understand a market is to be there." There's no other telecoms market quite like India's: a billion people, and a penetration level of just 9 per 100. For Motorola, a late-comer to India's telecoms party, this is an opportunity to catch up in a rapidly expanding market. Motorola seems serious about winning. A few weeks ago, it unveiled a line of ultra low-cost (Rs 1,500) handsets for the Indian market. There's more (of high-, mid- and low-end phones) coming, promises Burnes, whose wife, like those of the other directors, will shortly start learning Hindi.

-R. Sridharan

Now, Corporate Farming
Agriculture in India promises to get bigger and better.

Agriculture Minister Pawar: Sowing success

The lack of media attention that accompanied the passage of the Food Safety & Standards Bill 2005 on August 4, is in stark contrast to its import. In one stroke, the integrated food law has clubbed nine different regulators (thus, obviating the need for multiple clearances) and made a corporate entry into agriculture a real possibility. Says P.M. Sinha, Chairman of FICCI's agriculture and rural development committee, and former Chairman of Pepsi India: "This Bill will give a big boost to corporate farming-something the industry had been pleading for the last 15 years or so."

The Bill, whose passage is credited to Union Agriculture Minister Sharad Pawar's tenacity, will encourage the processing food industry to invest in modern facilities and create backward linkages to the farmers. With the quality of food and produce assuming critical importance under the new Bill, large processing firms will be prompted to build direct links with the farmers. Some corporates are already moving to tap the sector's potential. Bharti Group's agri-export venture, Field Fresh, which exports fruit and is raising the first shipment of winter vegetables, is targeting $1 billion (Rs 4,400 crore) in exports and domestic sales. "We are in the process of building a model farm over 300 acres in Ludhiana, Punjab," says Rakesh Bharti Mittal, Vice Chairman, Bharti Enterprises.

Pepsi India, a big contract farmer already, has ongoing projects for basmati rice, seaweed cultivation and peanuts. "Now we are broadening a whole selection of citrus rootstocks and plants," says Abhiram Seth, Head of Exports and Agriculture, Pepsi India. Next year, Pepsi's farm R&D will be shipping out 25,000 citrus saplings, with their numbers going up to 2.5 lakh in 2007 and 25 lakh the following year. Nothing like free market to raise Indian agriculture by its bootstraps.

-Kumarkaushalam

LEAP
Scaling The Great Wall

It's taken three years in happening, but Infosys Technologies has finally scaled the (Great) wall. With a $65-million (Rs 286-crore) investment and a plan laid out to hire some 6,000 engineers over five years, Infosys last fortnight received the Chinese government's nod to scale up in the country (it currently has just 250 engineers in China, while other Indian IT giants like TCS and Wipro have bigger facilities). "I am excited about China since all our concerns have been addressed quickly. Our foray is as per schedule," says Infosys' Chairman and Chief Mentor, N.R. Narayana Murthy. The 25,000 sq. MT. Shanghai centre will get an initial investment of $10 million (Rs 44 crore) in the next two years. In Hangzhou, Infosys plans to invest $15 million (Rs 66 crore) on a 100,000 sq. MT. facility over two years. According to Gartner, China's IT exports, estimated at $5 billion (Rs 22,000 crore), are set to touch $25 billion (Rs 1,10,000 crore) in three years. So, Infosys' global delivery scale-up in China comes at the right time.

-Rahul Sachitanand