Farmer rights: Marginalised?

Hamstrung by protests across the country over large industrial projects displacing thousands of families, the UPA government has come up with a new draft National Rehabilitation Policy (NRP 2006). This is a comprehensive revision of the National Policy for Resettlement and Rehabilitation of Project affected families (NPRR 2003). The new NRP 2006 is significant in light of the recent protests over industrial development in Orissa (Kalinganagar), West Bengal (Singur), Uttar Pradesh (Dadri) and Maharashtra (Navi Mumbai, Pune). Farmers and activists claim that state governments are acting in concert with industry to 'steal' land. The language in the NRP tries to address this fact: "These (land acquisitions) have traumatic, psychological and socio-cultural consequences for the displaced population which calls for affirmative state action for protecting their rights, in particular of the weaker sections of society like tribals, marginal farmers." Some observers feel industry too should play a proactive role in rehabilitation. "If corporates take more proactive steps to work with the displaced population they will not only speed up the land acquisition process, but also improve the standard of living of the local population, which might go on to become customers," says Sachin Nandgaonkar of Boston Consulting Group.

-Kushan Mitra

Pie in the Sky?
There's not enough land for Mumbai airport's revamp.

G. V. Sanjay Reddy has an inimitable way of putting things in perspective. "The fun in Mumbai is in the land," quips the Managing Director of Mumbai International Airport (MIAL), with a wry smile. What Reddy means is that the biggest hurdle to revamping the city's international airport-for which MIAL, the GVK group-led venture, has a licence-is land, or rather the lack of it. "Some of the constraints we are facing include rehabilitation of slums, relocation of Air India and other facilities, buying large tracts of private land outside the CSIA (Chhatrapati Shivaji International Airport) and removing a number of privately owned buildings that are in the proposed area," says Reddy.

That hasn't stopped him, however, from unveiling the master plan for the new look CSIA. MIAL received charge of the Mumbai airport in early May and is discovering that land acquisition is turning out to be a pain. Of the total land meant for the airport, MIAL has discovered that 262 acres are encroached as compared to the state government's estimate of 147 acres. Another 38 acres are under litigation, while 253 acres have been leased out to various other parties. That leaves an operational area of 936 acres. The upshot? Mumbai's international airport will not have a new parallel runway until more land is available. At present, Mumbai airport has two runways cutting across each other, of which only one is used regularly. "Tackling complex issues like clearing encroachments and relocating people cannot be time-bound. Even as we will continue to work on the parallel runway, we have decided to substantially upgrade existing cross runway operations to meet the growth in demand," adds Reddy.

Activists like Debi Goenka of the Bombay Environmental Action Group (BEAG) feel that MIAL has a tough task at hand because the problem of encroachment has to do with the lack of political will. "Even though the government may help in acquiring land outside the airport, the process of clearing the slums might be tougher. Despite all the lip service paid to developing infrastructure in Mumbai, ruling party MLAs have, in the past, obstructed any effort to clear illegal encroachments," says Goenka.

Despite these problems, MIAL has envisaged a state-of-the-art airport. The master plan has been designed to expand and upgrade the infrastructure at the airport to handle traffic of 40 million passengers and a million metric tonnes of cargo per year. (See Flying Dreams). MIAL plans to spend Rs 5,200 crore on the project by 2010. The expenditure would be financed through a debt-equity mix of 80:20. "The debt has already been tied up with institutions led by UTI Bank and IDBI Bank,'' says G.V. Krishna Reddy, Chairman, MIAL. A significant portion of the expenditure will be on a brand new terminal building, T2 at Sahar, which will cater to 30 million international and domestic passengers every year. Construction is slated to begin in a couple of months once the government gets back to MIAL with feedback about the master plan. Construction is the easier bit; it's the demolition part of the project that might give the Reddys a few sleepless nights.

-T.V. Mahalingam

Cooperative Action
Saraswat Bank is on an acquisition spree.

Cooperative banks plumbed the depths in 2001 when the securities scandal involving broker Ketan Parekh broke out. The Gujarat-based Madhavpura Mercantile Co-operative Bank was just one cooperative up to its neck in risky stock market lending. At least a dozen more urban co-operative banks, with an exposure to equity, bullion and other riskier assets, went bust one after the other in Gujarat and Maharashtra in the wake of the stock market meltdown five years ago. The scenario is brighter now, thanks to a wave of consolidation in the urban cooperative bank space. Taking the lead in that initiative is Saraswat Bank.

According to a Reserve Bank of India estimate, there are over 2,000 urban cooperative banks spread across Maharashtra, Gujarat, Andhra Pradesh, Karnataka and Tamil Nadu. And with the blessings of the apex bank, Saraswat has been on an acquisition spree. As Eknath Thakur, Director, Saraswat Bank, and also a Rajya Sabha member, says: "The RBI wants a small number of large cooperative banks rather than a large number of small ones."

In mid-80s, the 88-year-old Maharashtra based co-operative bank snapped up Vengurla Co-operative Bank followed by the Nagpur Co-operative Bank in 1992-93. In March, Maratha Mandir Co-operative Bank got added to the Saraswat fold. And the latest catch was the 33-year old Mandvi Co-operative Bank, which has a deposit base of Rs 575 crore and advances of Rs 307 crore. Post-merger, Saraswat will have a deposit base of Rs 12,567 crore, and 105 branches. "We want to strengthen the co-operative movement," reasons Bhawanji Haria, Chairman, Mandvi Co-operative Bank. With Mandvi too in the bag, Saraswat has attained a size that's at par with many of the old private sector banks. More importantly, on parameters like profitability and non-performing assets (NPAs)-Saraswat doesn't have any NPAs, although that will change post-merger with Mandvi-it stacks up head and shoulders above the old private cluster (see Giving Cooperatives a Good Name).

With a strong balance sheet, Saraswat's eyes are now set on Rupee Co-operative Bank, Suvarna Co-operative Bank and also the South India Co-operative Bank. "We are looking out for some more such marriages," says Thakur.

The smaller banks may have little option but to be acquired as competition and pressure on capital intensify. Saraswat itself can't become too big a force in the banking space. That's because market-savvy banks like ICICI, HDFC Bank and the foreign brigade are moving down the pyramid, into cooperative bank territory. Co-operative banks, which are traditionally community and region focussed, lack product innovation, a distribution network, cross-selling abilities, global linkages, and a management pool. The business model too is low cost in nature. Saraswat may be a giant amongst cooperatives but it's still just a dot on the larger landscape that is Indian banking.

-Anand Adhikari

More Turbulence
Deep-in-red Air Deccan isn't #2 any longer.

THE AIR POCKETS

Air Deccan's Gopinath: Rough weather » John Kuruvilla, Air Deccan's Chief Revenue Officer and a part of the founding team quits » The Rs 340 crore loss is larger than expected and pushes back breakeven by 12 months » An over-zealous expansion programme means Deccan is now forced to take a re-look at its schedules and reduce unprofitable routes » Launches an image overhaul exercise to try and soothe passengers by offering them free fflights if their departure is delayed by over 2 1/2 hours » Loses second place to state-owned Indian, just two months after wresting the position

These aren't the best of times for Gorur Ramaswamy Gopinath, the 55-year-old founder and Chief Executive of the Bangalore-based low-cost carrier Air Deccan. After the parent company, Deccan Aviation, announced a larger-than-expected loss of Rs 341 crore-on a top line of Rs 1,352 crore-the airline had to check out of the #2 slot, a position it had briefly grabbed from state-owned competitor Indian (till recently Indian Airlines). And just when it appeared that things couldn't get worse, news filtered in that the low-fare pioneer would be rationalising its routes. Analysts expect these setbacks to delay the company's breakeven by a year. Meantime, the company's Chief Revenue Officer and a founding team member, John Kuruvilla, put in his papers. Over the last 15 months, Air Deccan has burnt cash rapidly, adding 20 new planes, 56 routes to its charter, while carrying some 4.4 million people. "We are rationalising some routes as a part of changing market requirements," says Gopinath, adding that the carrier will not make any wholesale changes to its schedules. "We focussed initially on gaining market share and entering previously unconnected locations, but now we are focussing on improving our profitability and reducing our cash burn," adds coo Warwick Brady. As part of this process, Air Deccan will cut out flights to Nashik and Kanpur and reduce "rotations" during the lean season. Gopinath has brought on board a revenue team from Aer Lingus (the national airline of Ireland, a low-fare one) to ensure that 75 per cent of the airline's routes are mature ones, and the remaining new ones. "Air Deccan's losses are larger than expected since it is expanding its network and fleet," says Kalpesh Parekh, Head of Institutional Sales at broking firm ask Raymond James. "The sector is going through a phase of consolidation that could last for 11/2-2 years, but Air Deccan is close to sewing up its $100 million (Rs 460 crore) funding, which should help," he adds. When this magazine went to press, the carrier had just recieved the first $30 million tranche.

-Rahul Sachitanand