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| People protests: One of the
reasons why it’s so tough to set up (industrial) units
in India |
India inc. has struck mega
deals worth about $40 billion (Rs 1,76,000 crore) in the first two
months of 2007. Outbound M&As (mergers & acquisitions) account
for about half of this. But if India is the big story in global
boardrooms, and the whole world is coming into India, then why are
Indian companies going abroad? There are many answers: for access
to new markets, larger manufacturing capacities to grow faster as
well as to de-risk business models. But there's also another reason.
It's ironic that it is now easier for Indian companies to make billion-dollar-plus
acquisitions overseas than invest similar amounts in India to create
greenfield capacities. This is because companies seeking to expand
or set up new projects within the country are facing various hurdles
(land acquisition is the biggest of them). Archaic labour laws,
an indifferent bureaucracy, long-drawn and multiple procedures,
red tape and the lack of infrastructure are merely some of the problems
that companies face. "We are running a Ferrari on bumpy roads.
We are growing, but not at the speed at which we should be growing,"
says R. Gopalakrishnan, Executive Director, Tata Sons, adding: "It's
better than in the past, but it's still tough to set up units in
this country. You can sign MoUs (memorandums of understanding),
but there is little progress after that. Land, water, infrastructure,
getting clearances... these are perennial problems that companies
face when setting up units." And to top it all, SEZs have now
been put on hold.
The Tatas are currently facing problems in Singur, the Salim
Group in Nandigram and Hero Honda in Uttaranchal, all over land
acquisition. posco, Arcelor-Mittal, Essar Steel and Jindal Steel
& Power still haven't been able to start the process of setting
up their units in Orissa even after signing MoUs with the state
government. Says Nikhil Johari, CFO, Bhushan Steel, which is setting
up a 2.2 million-tonne steel plant in the state: "Despite
signing an MoU in 2002, we still have to be allocated iron ore
mines. We are looking at alternatives like acquiring mines overseas."
Time is running out; Bhushan Steel's plant is due to be commissioned
in 2008.
Spentex Industries decided to head abroad in order to avoid
uncertainty over government policies and to save time and money.
Mukund Choudhary, Managing Director, Spentex Industries, says:
"We plan to expand through acquisitions rather than through
capacity expansions as the former is cheaper and easier."
Last year, Spentex acquired Tashkent-To'yetpa Tekstil LLC, an
Uzbek textile company. Raw materials, labour and power are cheaper
in that country compared to India; this results in a 10 per cent
saving. "Today, buying is cheaper than building," says
Akhil Jindal, President, Welspun, adding that there's another
reason why companies are heading abroad. Indian financiers and
banks are reluctant to finance projects that are bigger than the
company's balance sheet. "It takes ages to build capacity
in India; given the economy's growth trajectory, we can't afford
the time lag that comes with building capacity," says Jindal.
This is not to say that domestic capacities are not being added.
They are, and several of them are big ticket plans even by global
standards. But it's just that India Inc now has an alternative.
In 2006, India Inc. made acquisitions worth $9.9 billion (Rs 43,560
crore), compared to $5.4 billion (Rs 23,760 crore) worth of FDI
(foreign direct investment). That figure should serve as a wake-up
call to the government.
INSTAN
TIP
The fortnight's burning question.
WILL THE PROPOSED DECONTROL OF SUGAR
FUEL INFLATION FURTHER?
No. Gokul Patnaik, Chairman,
Global AgriSystem
There will be no inflationary impact due to a further deregulation
of the sugar industry. The demand-supply dynamics, which is a
function of market forces, will take care of any possible spike
in prices, even if some of the commodity is exported. Increased
supplies will keep prices in check
No. Ravi Gupta, President
(Sugar and Alcohol Business), Bajaj Hindusthan
The timing is just right for decontrolling the commodity. And
no, it will definitely not be inflationary as the country has
lots of surplus sugar stocks. The decision to decontrol sugar,
however, should be based on a long-term policy of freeing the
sugar sector from controls rather than on the basis of any short-term
agenda.
No. S.L.
Jain, Director General, Indian Sugar Mills Association
Prices are a function of demand and supply, which varies according
to a variety of seasonal and other factors, not controls. Freeing
the industry from levy sugar and free-sale quota will have no
effect whatsover on price at which sugar is sold at the retail
level.
-Compiled by Kapil Bajaj
Q&A
"We are here for the long term"
Bt's Deepti Khanna Bose conducted
an e-mail interview with Francesco Trapani, CEO of Bvlgari, soon
after it launched is first flagship store in Mumbai recently. Excerpts:
Why have you chosen to enter Mumbai with a store three
years after the one in Delhi? Also, what will the store sell?
We will sell the complete collection of Bvlgari watches, jewellery
and accessories. The Mumbai store is opening three years after
the one in Delhi because Bvlgari's retail strategy requires very
exclusive and distinctive locations. In India, this involves a
time-consuming search as there is an absence of a premium retail
environment outside five-star hotels.
Who is the Bvlgari woman?
The Bvlgari women have a taste for contemporary objects-with
a special love for bold, distinctive designs, fine craftsmanship
and the impeccable service that Bvlgari is well known for, regardless
of age.
How important is India as a market to you?
We are here for the long term. The Asian market is generally
experiencing a rising demand for luxury goods and India, in particular,
is a fast-growing market that has responded very well to the international
luxury brands that have recently entered. We do not disclose revenues
by countries, but we expect India to be one of Bvlgari's key markets
in the future.
Veni,
Vedi, Wiki
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| Wikimania Camp in progress in Chennai:
It’s all about increasing Wiki’s base |
It's one of the world's most
popular reference sites. Contributing to this popularity is the
fact that Wikipedia is interactive, i.e., it is managed by ordinary
netizens, who are at liberty to access material, or contribute write-ups
and updates and even take up administrative jobs, all on a pro bono
basis.
"I had started a previous net-cyclopedia venture called
Newpedia in 1995 that depended on academic contributions and had
a top-down approach; it failed," says Jimmy Wales, Founder
and Chairman Emeritus of Wikimedia Foundations, a non-profit organisation
that started Wikipedia. Wales was in Chennai to attend the Wikimania
Camp on February 25. Then, he heard the name "Wiki"-which
means quick and fast in Hawaiian-and liked it. In 2001, he launched
Wikipedia.
At the camp, there are viewing mattresses, placed in front of
the large screen, on which participants are invited to take a
nap if they so desire. But, there's an associated danger-there
are a good number of smiley balls (soft, yellow foam balls with
a smile cartoon drawn in black) available that others can fling
at the sleeper.
The camp is being organised to increase the participation base
for Wiki, explain to dummies how it works, and explain to code
writers the other uses of backend Wiki tools. This is the first
time a Wikimania Camp is being held in India.
"The English Wikipedia has 1,656,239 articles (as on February
24, 2007), and about 609 million words-roughly 15 times the number
in the next largest English language encyclopedia, Encyclopedia
Britannica," says Wikipedian Arun Ramarathnam, who classifies
his mission for Wikipedia as "food for his soul". "My
day job at Satyam Computer in Bangalore provides food for my stomach,"
he adds. Wikipedia has 151,934 contributors in English. It is
also available in 250 languages and has 5.3 million articles from
282,874 contributors. On a three-month average, 5.78 per cent
of internet users visit the site and the percentage is increasing
rapidly. The average number of page views per user for Wikipedia.org
is five. Indian contribution to text is rather low, at 1.9 per
cent, especially when compared to the traffic generated by way
of visits (it ranks # 13). Ramarathnam wants more contributors
from India, "as there is such a wealth of information available".
A rising user base makes it a better self-propagating engine both
for content generation, and for attracting donations.
Open it might be, but you can't make alterations to the text
once a copy has been uploaded. You have to post changes on the
notice board and these are effected by an "administrator"-who
gets to this rank by virtue of his contributions to Wikipedia
over a period of time. Nobody gets paid for his or her efforts.
"We are contributing to free dissemination of knowledge in
a structured manner," says S.N. Sudharsan, a former employee
of Infosys Technologies.
"It is a totally democratic set- up," says Ramarathnam.
Behind every article are self-governing rules that have been designed
to protect the "ethicality" of content and promote credibility.
E-vandalism is kept in check by thousands of Wikipedians worldwide
who monitor pages of interest to them. Not everyone wants to write;
some people want to join the welcoming committee, welcoming new
entrants through instant messaging on signing up. Some take up
policing (one can't write, for instance, that Chennai is the best
place on earth, though one may believe it is).
What's Wikipedia's business model? "It is a non-profit
organisation that works on donations, though we could leverage
its brand value better in the future," says Wales. Last year,
it spent $1 million (Rs 4.4 crore) on bandwidth, hardware and
seven employees. "This year, the expenses will rise to $2-3
million (Rs 8.8-13.2 crore) and we have four months cash in hand,"
he says, adding: "We have a good thing going." Veni,
Vedi, Wiki.
-Nitya Varadarajan
Is
a Crisis Brewing in Wheat?
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| Keep off wheat mandis: Corporates
warned |
What exactly is the government
up to? After banning wheat exports, and then futures trading in
the commodity, it has reportedly "warned" corporates to
keep off the wheat market. Reason: it ostensibly wants to curb prices
and give itself sufficient leeway to meet its procurement target
of 15 million tonnes without having to import wheat. BT learns that
initially, some companies did resist the "unofficial diktat",
but media reports now suggest that some of the bigger players like
Adani, AWB, Noble Grain, Glencore and ITC (which buys wheat for
its foods division) have decided to remain off wheat mandis this
year.
Traders and analysts, alike, feel that the immediate provocation
behind the volte-face by corporate procurers is a veiled threat
by the government to bring wheat under the Essential Commodities
Act. "If this happens, the state will have the right to confiscate
wheat from these companies," says Rajni Panicker, Head (Research),
Man Financial. Last year, out of a total production of 69.48 million
tonnes, corporates had procured only around 2 million tonnes.
"Though the actual amount of wheat procured was insignificant,
these private players were offering Rs 12-15 more than the government-stipulated
minimum support price," says another Delhi-based analyst.
This means the only real losers will be the farmers. So much
for the government's concern for their plight.
-Aman Malik
Bangaloring
Bangalore
The cabin of Gaurav Gupta, the recently appointed Special Commissioner
for the newly created Bruhat Bangalore Municipal Palike (BBMP),
has a retrofitted feel to it-it's made of hardboard and the floor
tiles are mismatched-much like the city he has been mandated to
manage. Faced with mushrooming growth and an influx of global
and domestic corporate majors-and their employees-Bangalore has
struggled, vainly, to keep pace with its own growth.
But the administration has, at last, woken up to its sheer size
and the challenges of managing this emerging megapolis. The creation
of Greater Bangalore may help bring about uniformity in governance
across the city and its newly added boroughs, but it is unlikely
to improve its infrastructure.
Making available water and power are only two of Gupta's biggest
organisational challenges. The Bangalore Water Supply and Sewerage
Board will spend Rs 350 crore to expand its network to the new
extensions, but according to officials, will be hard-pressed to
find enough supply to meet burgeoning demand. The city is also
saddled with a power shortage of around 1,500-2,000 mw and the
expansion will only further burden the strained grid of the Bangalore
Electric Supply Company, the local electricity distribution utility.
"Bangalore has grown much beyond its original limits; this
has resulted in several gaps in its civic administration,"
says Gupta. He points to specific areas such as the collection
of property tax in outlying city municipal councils, which was
a paltry Rs 40 crore during the last financial year. "This
will rise 'three-to-four fold' under the new set-up," he
says, adding: "Bangalore's infrastructure is in terrible
shape, but we have mapped out a Rs 22,000-crore upgrade plan to
fix these problems over the next six years."
The city's road infrastructure, too, needs an urgent fix. Its
vehicle population has grown three-fold from nine lakh vehicles
in 1996 to over 28 lakh vehicles now, but its road length has
increased only 20 per cent during this period, he informs. Now
you know why the roads are always clogged.
Some of the finances needed to patch up Bangalore will come
from the Jawaharlal Nehru Urban Renewal Mission; the rest will
be raised via loans and from other external sources. "We
will go to the market to raise money; and will get ourselves credit-rated
for this purpose," says Gupta.
Others, however, aren't so bullish, arguing that Bangalore has
many other leaks to plug before it can even consider such a move.
"The city has grown enormously over the last few years and
the municipality has to be able to manage this larger scale of
operations," says Kiran Mazumdar-Shaw, Chairperson of Biocon,
one of the many iconic knowledge economy majors that call the
city their home.
Gupta points out that the management of BBMP will eventually
be split into four layers; this decentralisation, he feels, will
hasten decision-making. But not everyone is convinced. "The
municipal body should be made autonomous so that it can chart,
fund and execute its own development programmes," says T.V.
Mohandas Pai, Director (HR) at Infosys Technologies, and a bitter
critic of Bangalore's administration.
The city, meanwhile, continues, by turn, to hope and despair.
THE NEW BANGALORE PLAN
111 villages, one town municipal council and seven city municipal
councils integrated into the city.
The size of the city increases from 225 sq. km to 800 sq. km.
The new Bangalore now has 6.8 million inhabitants compared to
about 5 million earlier.
The new municipality will have 140 wards compared to 100 wards
earlier.
Four-tier governance structure to manage the larger city.
Greater devolution of powers to sub-zones.
-Rahul Sachitanand
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