just about a few months ago, it appeared that the most pressing
security issue was that in the energy domain. Financial dailies
screamed about how public sector companies were aggressively scouring
the earth to secure our future energy needs. However, the exit
of Mani Shankar Aiyar from the petroleum ministry saw the demise
of this zeal, as it also meant the exit of ONGC chief Subir Raha
who led this thrust. And so, while global crude oil prices continued
to soar, the pursuit for it was tempered with moderation-ONGC
was reminded that its core business was not M&A activity,
but that of exploring oil and gas. One of the recommendations
that played a role in the exit of Raha came from M.K. Narayanan,
the head of the National Security Council (NSC).
While the NSC has helped tame one raging
fire, it has lit another one-that of national security concerns
and how several global corporates pose a threat to the sovereignty
of the country. The NSC has emphatically argued that companies
like Huawei (Chinese, managed by former members of the Chinese
Communist Party) and Orascom (a large telecom operator in Pakistan
and Bangladesh, allegedly funded by late Palestine Liberation
Organisation chief Yasser Arafat's camp) should not be doing business
in the country. Not surprisingly, help for the foreigner comes
from the country's Left parties. "Security considerations
are non-negotiable. However, restrictions should be area-specific
and not country-specific," says Sitaram Yechury, CPI(M) politburo
member and Rajya Sabha MP. The Left parties are lobbying for a
Chinese company with operations in Pakistan to be allowed to execute
a port contract in Kerala.
Ironically, there is another
issue on which help comes from the least expected quarters, the
Left parties. The issue: blue collar labour from overseas. Defending
Reliance's move to hire Chinese workers to lay gas pipelines,
Yechury says: "We would of course prefer our labour class
to be used by the private sector. However, the sanctity of commercial
contracts must be honoured. If Reliance has hired a Chinese company
to build its pipelines, then surely, it must be given a free hand
in hiring labour." Even as this controversy rages on comes
news that the Russian underworld is investing large sums of money
in Goa through a string of front companies.
Will the security issue be used by the private
sector as a handle to restrict competition? That's unlikely to
happen. However, fears about domestic industry's attempts to raise
the barrier are not unfounded. Liberalisation of the Indian economy
in the early '90s did not turn out to be a one-way ticket. In
1998, the government formulated a policy that made it mandatory
for foreign players having a presence in the country to take the
government's and its domestic partner's approval before embarking
upon a wholly-owned business. Press Note 18 cut both ways. While
it proved to be an insurance cover for those domestic corporates
sprucing up their skills to compete in the global environment,
it also made for rent seeking amongst the laggards. Indian corporates
did use this instrument-the K.K. Modi Group delayed Walt Disney's
plans to enter the country; and Baron International resisted Chinese
major TCL Electronics' move to enter the domestic market on its
own. These are but two illustrative examples from a much wider
and exhaustive list.
Last year, this norm was eased with a lighter
provision-Press Note 1. That still does not deter domestic companies
from taking refuge under it. The ongoing tussle between Modi Rubber
and the us-based Guardian International highlights it. While the
government's approval for Guardian's wholly-owned unit is a step
in the right direction, the decision faced considerable resistance
from entrenched sections of Indian industry.
Clearly, the ongoing globalisation process
reinforces Darwin's theory!
The fortnight's burning question.
Second Quarter results have been outstanding.
The BSE Sensex is flirting with the 13,000-mark once again. Does
it make sense to buy Sensex stocks?
No. U.R. Bhat,
Managing Director, Dalton Capital Advisors
Current valuations are stretched and it doesn't
make sense for retail investors to buy Sensex stocks. They should
follow a bottom-up approach and buy shares of companies with sound
fundamentals and fair valuations.
Shah, CIO, Prudential ICIC AMC
For long-term investors with a time horizon
of 5-10 years, buying stocks at current levels is not a bad idea.
With India and India Inc. on a growth trajectory, you will not
be disappointed even if you buy stocks at current levels.
Narayan, Senior Portfolio Manager, ABN Amro Asset Management
It completely depends on one's risk appetite, investment
horizon and expectations on returns from the investment. One can't
really recommend a one-size-fits-all kind of a strategy.
"India Is Very Important To Us"
R. Adams, Senior Vice President
of Engineering at the $9.3-billion (Rs 42,000-crore) aircraft
engine maker Pratt & Whitney was in India recently. He spoke
to BT's on
a wide variety of subjects. Excerpts:
Why is India important to Pratt &
We look at India as a key market for us and
we've done very well here. In the commercial market, 75 per cent
of all aircraft have our engines or one developed by one of our
JVS. And given India's high growth rates, we see it as a very
key long-term strategic market.
Do you have any plans of outsourcing work
We see India as a key location in our global
search for world class talent. But our biggest worry in India
is the attrition rate among engineers.
What work do you do here?
There is a broad span of work we do here,
we have a six-year relationship with (Hyderabad-based engineering
services provider) Infotech Enterprises. Then, we have over 550
engineers at our two sites in Bangalore and Hyderabad doing hi-tech,
high-value design and analysis work in the gas turbine space.
Will you step up your engagements with
L&T and HAL?
We will. We will do some design work and also
undertake some production activity. For example, we are getting
some tooling and some engine components from HAL. We are still
in the early stages of this relationship.
sector insurance companies are taking a closer look at their health
insurance portfolios. Oriental Insurance Company (OIC) has increased
premiums by 10-100 per cent for different age groups. Others like
The New India Assurance Company, National Insurance Company and
United India Insurance Company are expected to follow suit with
similar hikes. Private insurers like ICICI Lombard already charge
much higher premiums than public sector companies.
"OIC incurred a loss of Rs 160 crore
on medical insurance last year. For every Rs 100 premium, oic
pays Rs 120 by way of claims. That is obviously unsustainable,"
says a company official.
Apart from hiking the premiums, the public
sector companies, which have a combined market share of 70 per
cent, are also tightening the terms of their medical policies.
OIC has capped hospital room rents (which in some cases could
be as much as 50 per cent of the total claims) to discourage policyholders
from passing on unnecessary and unrealistic costs of rents to
the insurers. Customers above the age of 45 will also have to
compulsorily undergo check-ups at medical centres identified by
This is only the start of a rationalisation
process. "Premiums will rise further in future in line with
costs. Health insurance is a commercial business, after all,"
said the official.
will shortly become the first city in the world to be totally
WiMAX-enabled. WiMAX, or Worldwide Interoperability for Microwave
Access, technology allows wireless internet access across large
areas and even across entire cities, unlike Wi-Fi, which allows
wireless access only within a smaller zone.
Beta trials, carried out over the last 12
months, have been successful and the system is already functional
in 70 per cent of the city. "Over 200 SMEs in Chennai are
already using WiMAX," says Ram Shinde, Business Head, Aircel
Business Solutions, which is implementing the project. The remaining
30 per cent will become operational within 90 days. "Internet
access will be at market rates," says Shinde, adding that
Aircel's main competition will come from BSNL and MTNL, which
have the last mile copper wires in place and so, do not need to
use wireless connectivity.
Says B.K. Jena, a scientist at the National
Institute of Ocean Technology, who uses Aircel's new service.
"The Wimax service is quite satisfactory at our institute
and we get good support from Aircel." By 2008, the company
plans to deploy WiMAX across 44 cities including Delhi, Bangalore,
Pune, Ahmedabad, Coimbatore and Hyderabad.