Saturday, October 28, 2006

Bio-fuels Fuel Imagination Of The Entrepreneurs Of Tomorrow

When I started blogging about 4 months back, I initially started writing on topics such as human behaviour, nature and the role destiny plays in life. As I entered the blogosphere and got a little familiar with the alien environment, my mind yearned to focus on news relating to India’s rapid progress in the economic field and industry. Topics in which I have lasting interest include the new technologies for cleaner environment reducing carbon emission. In addition, topics of growing importance like steel, infrastructure development, FDI flows and even floriculture have captivated my attention.
The report on the result of the first Economic Times’ Wharton Business Plan competition published in Economic Times had especially an encouraging effect on me. The report has mentioned how difficult it was to choose the best entries from 600 budding entrepreneurs for business ideas. Some of the winning entries show the maturity of the young minds who are going to be custodian of the country in the future. It is reassuring for me to note that I am not much out of steps with the modern thinking of the young minds.
The winning team made the following comments on their bio-diesel business plan – “In the age when ethanol is grabbing attention, bio-diesel is slowly picking up pace in foreign markets such as the US, along with India. Although bio-diesel production is at a very nascent stage in the country, the sheer potential of the area compelled us to look into such a business opportunity.” I had commented as follows in my earlier post titled “India’s short menu of alternative fuels”.
“The most promising alternative fuel is bio-diesel using jatropha, karanj and similar species. The hybrid fuels and flexi-fuels can be run with varying amount of blended ethanol. Locally, the plant cultivation can be promoted provided incentives are made attractive. The auto industry, the government and the political class as a whole have to put their heads together to make this happen.”
Hopefully the budding entrepreneurs will translate their plans into reality when they will be at the helm of affairs.

Monday, October 23, 2006

The Newly-rechristened Ministry Of New And Renewable Energy

'Rose smells sweet - call it by any name' is the famous quote. But some subscribe to the belief that whether the intrinsic worth of anything remained strong or not, a mere change of name does enhance it. The ministry of non-conventional energy sources of Government of India has been given a new name - Ministry of new and renewable energy. Though the ministry has the responsibility to facilitate the development of non-conventional energy sources in view of India's own oil supply being far less than the demand and the other sources like coal getting depleted fast, it is one of the ministries lowest in the ladder of political or financial power. The petroleum and natural gas ministry officials supported the name change and said "The new name gives a more positive outlook compared to the earlier name."
Let us all hope so. We are very fond of changing names without any rhyme or reason. The three metros earlier known by their names Bombay, Madras and Calcutta have become Mumbai, Chennai and Kolkata. I have not seen any perceptible change in the quality of life in these metros except that a lot of stationery, signboards, visiting cards and records had to be changed involving expenditures of several hundred crores.As far as the change of name of the ministry from the ministry of non-conventional energy sources to the new one, the industry has been crying hoarse that it gave out a negative message.
I think the name indeed is not striking. But it is a sad commentary of how we function if we could not make much headway in popularising or researching new and renewable energy sources merely because the name was uninspiring. It is a classic example of the saying "A bad workman quarrels with his tools". I hope the new name of the ministry will inspire and revitalise all so that our dependence on conventional source of energy gets reduced.
It should not turn out to be a case of 'an old wine in a new bottle'!

Friday, October 20, 2006

India And Pakistan - The New Tigers

It is not my simile but used by Asian Development Bank. Its South Asia Economic Report has said that removal of bottlenecks, improved infrastructure and better quality of regulation help South Asian economies, already growing at high rates led by India and Pakistan, emerge as the "new tigers". While developments in India are clearly the predominant factor in the improved economic performance in South Asia, most other countries in the region have been on a similar trend, although their improvements are more modest.
India, buoyed up by a consistent 8% GDP growth for the last 3 years, is gearing itself for further acceleration and achieve 10% GDP over the Eleventh Five Year Plan (2007-2012). The Prime Minister Dr Manmohan Singh has admired the role of the industry in the global arena."They are investing on an unprecedented scale and expanding their capabilities to boldly take on global competition. Many of them are actually taking over firms in other countries, setting up factories and becoming global companies," Singh said.
As I was about to publish this post came the news that the mega deal between Tata Steel and Corus (formerly British Steel) has been clinched. My last post coincidentally was relating to the same deal. It is the biggest acquisition ever made by any Indian company including Tatas in foreign soil. "It is a defining moment" was the reaction of Ratan Tata after the deal was announced. I think the history has taken a full circle. Like 'East India Company' casting its anchor near Kolkata three centuries back and spreading wings all over the country, Tata Steel is the new incarnation of ' East India Company' of yesteryear's. Of course, the mission is different this time.
How I wish India and the neighbours steeped in poverty emerge soon as economic powers globally by working harder. If only terrorism and eyeball to eyeball confrontation over border disputes could be reined in, these new tigers' roar could be heard all over the world. Unfortunately, they cannot even mew out of fear and retaliation by the opponents.

Wednesday, October 18, 2006

Tata Steel Steals The Show By Proposing To Corus

I told you in my last post titled 'Acquisition - The Stepping-Stone To The Path Of Success' how acquisitions are becoming commonplace in business. I also mentioned about this particular deal - Tata Steel taking over Corus likely to materialise shortly. Now it is very much official. The ball has been set rolling by Tata Steel - the first steel company and the biggest in the private sector in India; they have made an offer of 455 pence (Rs 385 approximately) for each share of Corus and if it goes through, it will be the third biggest acquisition in the steel industry. Of course, the mother of all acquisitions remains Mittal-Arcelor's at an investment of $43.63 billion followed by Kawasaki's takeover of KK Corp at $11.89 billion.
After the takeover, Tata Steel-Corus combine will have steel production capacity of 23 million tonnes. Presently, Corus is ranked 8th and Tata Steel 55th in global steel capacity. The deal is most likely to go through even as Corus has been courted by other suitors. Tata Steel has the advantage of producing the cheapest steel in the world by having captive mines and its cost is not subject to the vagaries of price fluctuations of raw materials. Corus has a steady market in Europe for its high-valued products having applications in construction, automobile and aerospace industry.
I think the acquisition will send out a message loudly to the world that Indian companies are having the right stuff to become multi-national companies (MNCs). But to call spade a spade, the steel in the raw form will be made in India with all the attendant problems of polluting the environment while the finishing operations will be done in Europe; it will put Indian MNCs at the bottom of the list.
In any case, you cannot have the cake and eat it too!

Tuesday, October 17, 2006

Chasing Carbon Credits - The New Passion Of India Inc.

For long, the industries have been grappling with the menace of air pollution caused by carbon dioxide emissions and the public outcry against the resulting global warming. The reward and punishment system to control the situation by introduction of trading in 'carbon credits' seems to be catching up. In the earlier post titled - 'India's Creditable Feat Of Earning Carbon Credits', I had touched upon its growing acceptance in corporate world and India's initial success in earning carbon credits. India is already the third largest to amass carbon credits reportedly equivalent to $1 billion - next only to China and Brazil.
The concept of modifying industry processes and waste control efficiently while earning carbon credits to be reflected in the company balance sheet has become the latest passion of Indian companies. Not surprisingly, one of the navratna public sector undertakings ONGC, according to a report in Economic Times, is about to launch 14 projects for carbon emission reduction and earn carbon credits as well. SAIL is also drawing up such novel projects. I think, the PSUs are best equipped to take the lead as these measures, on the face of it, do not appear to give any handsome return in the short run. Again, these companies have the financial strengths on the one hand, and suffer from the bureaucratic red tape as well as orthodoxy regarding investments on the other. If they can get over these hiccups, I think the companies will be killing two birds in one shot.
Changing times demand changing names. I remember, PSUs at the height of controlled economy had a nondescript post of a Public Relations Officer (PRO) whose main job was to issue passes for the visitors. Now ONGC has a senior position with an exotic designation in the corporate world - 'GM, alternate energy & carbon credits'. This alone speaks about the importance the company is attaching to carbon emission reduction (CER). I wish other PSUs follow suit and create departments for alternative energy & carbon credits or something similar with the sole responsibility of earning carbon credits.

Monday, October 16, 2006

Are SEZs Special Exploitation Zones?

How can any economic development work be termed as anti-people? There is a big conflict of interests which has drawn battle lines between the opposing groups. It is axiomatic that more economic development will result in higher standard of living and one may readily agree that every nation ought to pursue such a goal. But such developments impose a social cost. If the benefits are going to be shared only by a minority and the majority is left high and dry, then they may be paradoxically called anti-people.
The government and policymakers are euphoric about Special Economic Zones (SEZs) which are being viewed as panacea for accelerated development. Simultaneously, there has been a growing opposition to setting up SEZs as it is feared that it would cause large human migration and environmental damage. Ms Medha Patkar - the noted social activist, who brought the mighty authorities to their knees by her fast unto death campaign over her strong opposition to the building of Narmada dam, has aired her scathing criticism against SEZ policy.Ms Patkar, while addressing the inaugural session of a two day national convention on “Globalization and Fast Industrialization versus Alternative Development Model” said that the current process of industrialization amounted to massacre of a minority by a majority that thrived with the use of force to suppress poor. She termed these SEZs as Special Exploitation Zones and warned that the three most backward states of Orissa, Jharkhand and Chattishgarh are going be exploited to the hilt by the MNCs.
It is generally accepted that with growing population, more jobs need to be created to feed more mouths. But in trying to do so, the interest of the masses should be weighed against the profits of individual companies and the limited benefit by way of employment generation. Then who should have the final say? In a democratic setup, the people's voices should always prevail. But when there are many interest groups - some illiterate and unable to comprehend the full implications, the vested interests can tilt the balance between development benefits and social costs.
Then should industrialisation be stopped?

Friday, October 13, 2006

Acquisition - The Stepping-Stone To The Path Of Success

Today, acquisition has become a buzz-word of business. Reports on acquisitions are appearing in print, TV media and Internet endlessly. Big sharks are on the prowl for big fishes; big fishes are chasing small fishes and small fishes are gobbling up smaller fishes. So acquisitions have become as common as wild animals hunting their preys.Because of acquisitions, companies generate synergies especially in pooling resources to face competition. The individual identities and images get blurred after acquisitions.
For manufacturing companies, the raw material suppliers tend to deal with the new entities differently as their combined demands go up. Their combined market share, too, becomes higher and consequently their say in price control assumes more importance. In most cases, the real beneficiaries are the owners and shareholders of the companies after acquisitions.This was exactly the bait used by the steel tycoon L.N.Mittal for the biggest mega-acquisition in the history in taking over Arcelor which raised lot of storm in the corporate world as well as several governments before the new company Mittal-Arcelor emerged as the biggest steel company in the world.
Taking the cue from the saying 'Join them if you cannot beat them', Nippon Steel and Posco are examining various modalities for flexing their combined strength. Tatas have already guarded themselves against any hostile takeover by the giants by enhancing their own shareholdings. Interestingly, Tatas are reportedly working for a $10 billion takeover of Corus - one of the largest steel manufacturers in Europe. Though the company's employees and a section of the public are against such a takeover, it is the will of the shareholders that will ultimately decide the fate as in the case of Mittal-Arcelor.When so many acquisitions and mergers are taking place all over the world, who really benefit - the consumers and general public or only the shareholders of the companies?

Thursday, October 12, 2006

Colas Leave Women High And Dry

The cola companies seem to be getting out of the frying pan into the fire. Already alarm bells have been sounded that the colas are responsible for the high incidence of obesity among children. Now it is for women to sit up and take notice. According to an article in American Journal of Clinical Nutrition, a research study claims that women who drink colas daily develop low bone mass density (BMD) than those taking one serving a month. Those with a lower BMD run higher risk of bone fracture. So if one does not want to make any bones about bone fracture, she should keep a safe distance from colas.
Interestingly, the colas seem to have a gender bias; men do not have low BMD problems out of regular cola consumption. In case of women, the hips get affected more and with higher consumption, the thinning gets worse. The research, the findings of which have been reported by Reuters, has not established conclusively that the same can be said about young girls. Though they also suffer from low BMD, it is not known yet whether it is caused by less intake of milk or excessive consumption of colas.
The cola phobia concerns children and women so far. Until further findings are made, men do not have anything to bother. In India, the urban middle class women and young school and college-going girls generally are cola lovers. Hopefully, the news will enhance awareness among them about such risks in colas consumed by them.

Wednesday, October 11, 2006

Clinical Research Outsourcing Spreading Wings (CRO)

India has already set several milestones in the fields for outsourcing e.g. Business Process Outsourcing (BPO), Knowledge Process Outsourcing (KPO) and Engineering Process Outsourcing (EPO). The pharmaceutical companies have started outsourcing development, manufacturing and marketing processes so as to concentrate on their core competence and reduce cost of operation. Contrary to popular perception, cost reduction is not the only reason for their outsourcing. According to Wikipedia, some of the less known reasons for outsourcing are:
1. Less knowledge of regulatory affairs in a particular country of interest
2. Large requirements of patient populations
3. Regionalised diseases The pharmaceutical and biotechnology companies reportedly spent $57 billion on R&D in 2005 out of which an estimated $14 billion was used for outsourcing clinical research. India may be able to bag contracts worth $20 billion by 2010.
The CRO business must grow and evolve taking into consideration all ethical issues. As India has a high-level of poverty, its public health care leaves much to be desired. If adequate safeguards are not built in, there is a risk of patients being made unwitting guinea-pigs in clinical research that may finally end up as conspiratorial research.

Monday, October 09, 2006

$320 Billions Need To Be Infused For India's Infrastructure

India has been hogging headlines sustaining second biggest growth among world economies and aiming to become a super economic power soon. The architect of the liberalisation and reforms in India is no other than Dr Manmohan Singh - the Prime Minister himself. Of course, when he set the ball rolling 15 years back, he was neither the PM nor was then the victim of arm-twisting by Left policies. If anyone has been watching his faltering moves ever since he became the PM about two and half years back, he would not believe that it was he had taken such bold steps in his earlier avatar. He has become a prisoner of his own political expediency and promised reforms in labour, insurance, pension fund and privatisation of public sector units appear to be distant dreams.
While addressing a Conference on Infrastructure, he was pleasantly at his best as a reformist leaving his garb as a politician. He was critical of power reforms and advised private competition in generation and distribution. He rightly sounded the alarm bell that the much-cherished growth rate of 10% will remain elusive unless investments of $320 billions are pumped in next five years for improved roads, ports, airports, railways, power supply and other critical infrastructure. He said "We will need to run hard just to stay where we are. Maintaining a growth rate of 8% would need continual improvement in our policy regime."
The count-down for the general election to be held in 2009 perhaps prompted him to change tack. He knows his government has to work hard to deliver tangible results. The nation can heave a sigh of relief now that the economist and reformist in Dr Singh will prevail and control the economic policies of the nation. Sloth and ambivalence will hopefully be replaced by action plans and frenetic activities of the government at least till 2009.

Friday, October 06, 2006

India's Foray Into Engineering Business Outsourcing

For going up a ladder, always one has to take the first step. India's success story in IT industry began 25 years back almost in this way. At that time, India lacked skill and brand name for which she had to start with low-value business. Slowly getting a foothold, the It sector established its credibility and carved out a niche in international outsourcing of software jobs. Then came Business Process Outsourcing (BPO). From call centres to managing clients' data bases, it was a struggle for getting shares of high-value business. Soon engineering and management graduates were drawn to Knowledge Process Outsourcing (KPO).
As IT industry conquered more sophisticated outsourcing jobs, a new opportunity has opened up for jobs demanding even higher skills in the field of manufacturing lines of telecom, aerospace, automotive and construction sectors. This specialised new business has been given a separate identity - Engineering Process Outsourcing (EPO) which entails a high-value, high-margin and system engineering market. The international market size is believed to be $10-$15 billion and is expected to grow to $150-$200 billion by 2020. There are already several competitors - Israel, Canada, China and Mexico to name a few.India has a strong technical base. But it needs to be strengthened on the lines of ESO requirements which demand a good knowledge of engineering fundamentals in manufacturing. To achieve this, the software watchdog NASSOCHAM, the IT companies and the premier IT educational institutes must interact closely and freely instead of working individually behind closed doors.
We are confident that IT industry can meet such a challenge. What about you?

Wednesday, October 04, 2006

Forecasting Steel Price Movements

It is becoming increasingly difficult to anticipate which way the steel prices are going to swing. Like weathermen forecasting a sunny day and heavy rains lashing soon after as if with a vengeance, the steel price movements are defying all basic economic rules. When demand goes up, the prices are normally northbound and vice versa. There are already indications of a decline in steel demand in USA - one of the biggest steel consuming nations in the world. The Wall Street Journal has reported (and its reports are generally regarded as reliable) that steel inventory in USA is going up apparently arising out of production cut by the biggest steel consumer segment - auto industry. It is apprehended that there could be similar slowdown in other manufacturing industries as well. Another report by Metal Service Centre Institute corroborates the above trend and states that steel service centres in USA which sell 30% of US steel consumption to the consumers are having the highest stocks of 15.9 million tonnes since January, 2005. So in a situation like this, one would not rule out prices falling. Right?
But if you refer to the statements of some stalwarts of Indian steel industries, the confusion gets further compounded. Dr J.J.Irani of Tata Sons has said "India's steel prices cannot be different. Steel prices are now an international phenomenon.... I do not see them coming down below the present levels in the next 3 to 6 months." Essar Steel maintains similar public stand on the issue. To top it all, there are reports that Mittal Steel SA will be increasing the steel prices by 5% on both flat and long products from November onwards.
We could not make out whether steel prices will go up in the near future. Can you?

Monday, October 02, 2006

India To Become World's No 1 Next-Generation Fuel Producer

Necessity is the mother of invention. The looming oil crisis with fast depleting reserves and uncontrollable rising prices, the human ingenuity has been searching for alternative fuels. In the last 3 to 4 decades, a lot of serious research has already identified some and commercialized a few sources.
Bio-ethanol has reached the realm of commercial viability. Diesel or petroleum is blended with varying amounts of ethanol - a product out of corn for use in automobiles. Similarly, another alternative fuel bio-diesel is the mixture of diesel with Jatropha plants. India is showing, though somewhat belatedly, interest in getting away from conventional fossil fuels to next-generation fuels. The government has identified 400,000 square kilometres (98 million acres) of land where Jatropha can be grown, hoping it will replace 20% of diesel consumption by 2011.
At Haldia, West Bengal which is emerging as a petro-chemical hub, a plant to produce bio-diesel out of Jatropha is being set up at a cost of Rs150 crores ($35 million). The company Emami will need 3,00,000 tonnes of Jatropha to be cultivated over 1,00,000 acres of land. A US company is planning to invest $0.5 billion dollars for a project to manufacture bio-ethanol and bio-diesel using rice, wheat, corn and potato etc.
Mother Earth is indeed bountiful and life can be very beautiful.
Is it not?