Monday, July 30, 2012

The Chinese Answer to The West – “Made in China” to “Made by China”

There is this flippant yet popular joke that goes like this: if you clone yourself four times, one will be Chinese! That says it all about the manner in which the world perceives the ubiquitous Chinese – populated and copycats. There’s no doubt, China has become numinously overpowering and has integrated itself into the lives of people all across the globe by their sheer human power and the power to produce goods and services at a prodigiously unprecedented pace and volume. So much so that from Greenland to Antarctica, and from Middle East to Europe, if one were to try and search the origin of the products used in these countries on a daily basis, in all probability the ‘origin’ would turn out to be China. Be it your cell phone or the laptop, or even the engine of your car, everything turns out to be made in China. An original iPhone or even its look-a-like (with similar or more features), both are made in China. In fact, all this is known. But what is mostly unknown is the infrangible might that the Chinese have garnered today with their home-grown products and brands. Not only is China manufacturing almost all goods for Western companies, but it also has gained a huge impelling momentum with its own domestic production. Today, stellar Chinese companies are topping various global lists in terms of revenue, market share, size and scale; but more than that, their sterling products are also acting as alternatives – or even better replacements – for Western products within and outside China. Today, the Chinese have a “Made by China” option with similar features and quality for almost every known Western brand, which are also anyway made in China.

Against the populist perception of China being a nation of cheap-labour export and copycats, China has emerged as one of the most innovative nations as well! When one goes to a top designer store in America or to the Disney Stores in Disneyland, all products in these stores are made in China, totally dispelling the myth that Chinese products mean coarse or low quality fakes. Everything, everywhere seems to be made in China, especially in the West. So much so that post 9/11, when the Americans had their national flag flying up and about almost everywhere, it was found out that most of these flags had been made in China! Obviously, as an Indian, it hits one hard since there is absolutely no such concept like “Made in India”, though as a nation we have some of the best talented individuals, many of whom are even running the world’s topmost companies now. That is why when Hillary Clinton comes to India and gives a motivation pill to Indians that they should look at a parallel role in this region along with China, and when the Indian media goes ga-ga over that, I feel like rolling with laughter! One reason why I started writing on China – and plan to write often – is so that Indians know where we could have been and where we actually are, shamefully. This piece actually doesn’t merit an Indian mention at all – so much is the telling Chinese superiority when it comes to “Made in China” as well as “Made by China”!

In the latest World Intellectual Property Indicators 2010 (WIPO) report, China figures as the third largest nation in terms of patent applications. China has applied for 203,481 patents in 2009 and around 492,008 between 2003 and 2007. To further their supereminent entrepreneurial endeavours and strengthen domestic companies, the Chinese government launched an “indigenous innovation” scheme and further declared it a national priority in 2006. This whole program was aimed towards encouragement of technological innovation in Chinese domestic firms and motivating them to own their proprietary Intellectual Property rights. Moreover, all science and technology based production has been continuously aided with huge tax incentives, credit facilities and budgetary support. On top of that, the products thus developed under the “indigenous innovation” program also featured as a priority in the government procurement lists. A 2010 US Chamber report titled ‘China’s drive for indigenous innovation’ states how China has climbed the ladder swiftly and made itself prominent in the field of science and technology. The Thompson Reuters Science Citation Index (CSI) placed 122,998 Chinese scientific papers in 2009, thus making them the third largest contributor. China also features as the largest contributor in the areas of engineering, genomics and nanotechnology.

Let me start the China story with an interesting anecdote. All those who followed the Beijing Olympics closely would have surely been impressed by former Chinese gymnast Li Ning, who lit the cauldron during the opening ceremony. But then, knowledge about the fact that this 45-year old, triple gold medallist of the 1984 games is actually the founder and owner of China’s biggest sporting goods manufacturing company – Li Ning Company Limited – is quite limited. Li Ning Co. is not only the biggest in China, but also has stores across the globe. During the 2008 Olympics, the company sponsored many sporting teams, besides sponsoring the Chinese teams. Today, it is the biggest competitor to Adidas and Nike in China and clocked in staggering revenues of $1.354 billion in the last year. As per the China Market Research Group Survey 2009, Li Ning and Adidas both had a 14 percent market share in China, which was just 3 percent behind the market leader Nike.


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posted by Editorial at 4:41 PM

Saturday, July 28, 2012

Demand upswing of steel & cement in india

As long term demand upswing of steel & cement in india is assured, larger players in both Sectors probably look for distressed assets in the coming months 

Avinash Gupta, consultant with Deloitte India said, “Consolidation is typically driven when there is an overcrowding in the industry or a shortfall in terms of work for everybody.” In the case of cement, the situation is similar to steel, as the larger players are on the look out for capacity expansions as well. Take the recent example of Lafarge India – the Indian subsidiary of the world’s largest manufacturer of cement. To expand its reach and become a more national player, it is trying to purchase Chennai-based Ramco Group’s West Bengal cement grinding unit for around Rs.3.5 billion, which originally took an investment of Rs.1.20 billion to set up. Given the strong demand from building and construction, recent forecasts and upcoming development projects in India, most large cement producers are eying expansions of up to twice their capacities. For buyers in steel & cement, this is a better route to the greenfield option, which has become a red flag in India due to land acquisition controversies. On the other hand, the sector has a number of smaller players facing pricing pressures at the moment due to a dip in demand that is typical in the monsoons. Prices are down by around Rs.20 per bag since April. Moreover limestone costs could go up by around Rs.75-80 per tonne after the new mining laws. Furthermore delayed execution and the slowdown imminent in real estate with high interest rates would have an obvious negative effect. Larger players can survive more easily on volumes and also push surplus to off trade markets. But regional players face a high probability of losses and often look to milk their assets to a suitable bidder. This year, the only major acquirer so far has been Ambuja Cement, which has bought an 85% majority stake in Nepal’s Dang cements for Rs.191.3 million. But in both steel & cement, the coming months should see a number of incremental value generating deals and the competitive battle lines getting redrawn.


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posted by Editorial at 3:03 PM

Friday, July 27, 2012

The Factors Responsible for this De-Growth were Industry Specific

Although Grasim Posted its lowest Profit in Five Years, most of The Factors Responsible for this De-Growth were Industry Specific. 

Even the company’s cement business was grappling with issues like increase in input costs (a rise in raw materical prices, including coal and pet-coke) and higher employee cost due to wage settlement. This coupled with lower cement realisations affected overall profitability of the company in FY2011. Agrees Adesh Gupta, CFO & Whole-time Director, Grasim Industries as he tells B&E, “The cement business has been facing oversupply issues, due to which in the early part of the year, particularly in Q2 FY2011, the cement realisation and profits had fallen to unrealistic levels. In the same quarter, even the VSF business had gone through market related challenges. However, the better profits in the fourth quarter helped in nullifying the lower up to date profits of the year.” At the same time, he adds that volumes were maintained by the VSF business despite a shutdown at one of their plants. Further, it’s the consumer awareness that has led to a growth in VSF demand.

But then, there are critics like Jinal Joshi, Sr. Research Analyst at Jaypee Capital Services, who doesn’t sound very optimistic about Grasim’s performance in the last fiscal. “Grasim’s stock underperformed the indices in the last fiscal. Grasim’s stock generated negative return of 12.5% y-o-y in the last fiscal as compared to 11.5% positive return generated by Nifty during the same period. Stock price of Grasim underperformed the indices due to overall negative sentiments attached to its core business segment - ‘Cement’ (Grasim holds 60% in the listed cement subsidiary ‘UltraTech’).

Thus, looking at the market scenario and the current trends in both the cement as well as the VSF sector, Grasim Industries aims at working on a few key elements to bring in added efficiency to both its sectoral performance and its ability to deliver on the key result areas (KRAs). In fact, Grasim is now planning to start with improving logistics cost efficiency by creating a hub and spoke model.

When it comes to cement business, owing their own rakes has been the company’s focus. Innovations, both on the cost efficiency front and development of new products, especially on the RMC (ready mix concrete) and Wall Care Putty side, is a continuous process in the cement business, and the company intends to work on that front. This will certainly help the company in the long run as analysts expects all-India cement demand growth to be 8–10% for FY2012, as against 7%, 10.8% and 9% in FY2011, FY2010 and FY2009, respectively.

For their VSF business they are now focusing on specialty fibres. Having developed the technology and new capacity plant at Vilayat in Gujarat, the company is all geared up to produce specialty fibre. Claiming to have a strong R&D base in the VSF business, both at the product as well as product application level, the future is set to beckon the company even though the terrain might be rocky at various sojourns. But it looks like there’s nothing stopping them, at least for the moment.



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posted by Editorial at 2:46 PM

Thursday, July 26, 2012

UP’s Land Acquisition Policy - Any Surprises?

After rounds of Protests by Farmers and Opposition groups, The Ruling UP Govt. announced a New Land Acquisition Policy of The State. The Improvements as most did not expect, took many by Surprise. Is it a beginning-much-needed, or is it just another Political Gimmick?

Facing flak from the ruling coalition in the Centre over the stand-off between the Noida administration and residents of Bhatta-Parsaul village in Greater Noida, Mayawati, the Chief Minister (CM) of Uttar Pradesh, on June 2, 2011, announced a new policy for land acquisition in the state. Under the newly laid-out policy, all land transactions hereon, will now be struck using a consensual approach. This will happen through a direct dialogue between the private developers and the land owners.

“The role of the government now would be that of a facilitator only, limited to issuing a notification under Section 4 of the Land Acquisition Act, 1894,” said the Chief Minister while briefing the media in Lucknow at a press conference organised to announce the new Land Acquisition Policy of the state. This is the second such policy to be announced by the Mayawati regime in the past nine months. The previous one was declared on September 3, 2010. The new policy will be implemented with prospective effect and will not apply to land acquired during the time period when the previous policy was active. The announcement of the new policy followed a “kisan panchayat” addressed by the Chief Minister. The panchayat was attended by farmers’ representatives from Bharatiya Kisan Union, including its general secretary Rakesh Tikait, and those from Tappal and Bhatta-Parsaul.

According to Mayawati, the new policy had been devised after elaborate discussions with the farmers’ representatives. Describing the new policy, the CM claimed it would be better than the “proposed land acquisition policy of the UPA government”. The Congress, which a few days back had slammed the UP chief minister for alleged atrocities in the process of acquiring land for the Yamuna Expressway project and had spoken volumes against the state’s policy, did not respond to her claims. Mayawati claimed that the issue of land acquisition policy would be raised by the Bahujan Samaj Party (BSP) in the monsoon session of the Lok Sabha and if the Centre’s policy was not announced, the BSP would ‘gherao’ the Parliament.

Voices from the industry have been divided on this issue. The two major industry bodies, Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industries (CII), have expressed dissenting views on the matter. The major point of contention appears on the role of the government. While CII has found support with the National Advisory Council’s (NAC) suggestion that the government should play a prominent role in the process of all land acquisitions, FICCI believes otherwise. Speaking to B&E on the role of the government, Chetan Bijesure, FICCI’s Additional Director, says, “In the case of UP, the role of the government has changed from that of an acquirer to one of a facilitator. We are not saying that the government should be absolved of the entire process. We are advocating a model that ensures better results for farmers as they will have the option to negotiate better rates.” Further, he adds, “The past instances where the state government has acquired land, we have seen the [unsatisfactory] results (in West Bengal, UP, Orissa). Also, the option of the developer meeting the farmer directly reduces the possibility of vested interests influencing the process at any given stage.” B. Muthuraman, President of CII, however had a different explanation for recommending a greater government involvement. As per him, the government cannot absolve its responsibility in land acquisitions. “We are pleased to note that NAC is also of the similar view on this critical issue. The State must fulfil its responsibility for economic development and play a critical role in acquiring land for industrial projects, as planned industrialisation is essential for job creation and inclusive growth,” says Muthuraman.

The mass agitations which had become synonymous with land acquisitions in the state could only be dealt through innovative solutions, and the confidence with which the UP government has doled out the fresh land acquisition policy, is backed by the reforms that it proposes to bring out.

Government sources told B&E that the new policy on land acquisition has broadly been categorised into three parts. The first part deals with direct transfer of land from farmers to private developers, with the state (district administration) merely playing the role of a facilitator. The policy underlines that the compensation package against the acquisition of land will be prepared only after the terms and conditions have been approved by 80% of the farmers or land owners whose land is to be acquired for a particular project. Failure of the private parties to woo 80% of the farmers would result in reconsideration of the project proposal. Additionally, the farmers have been given the option of taking 16% of the land developed for the project along with annuity at the rate of Rs.23,000 per acre for a period of 33 years. The farmers will also have the option for cash component in lieu of a portion of the 16% developed land. Furthermore, farmers who wish to forgo annuity will be entitled to a rehabilitation grant at the rate of Rs.276,000 per acre. [The rehabilitation grant in the September 2010 policy was fixed at Rs.240,000 per acre.]

The second part of the policy states that farmers whose agricultural land has been acquired for building state highways and canals will be entitled to all the benefits accruing under the state’s Relief and Rehabilitation (R&R) Policy, 2010. Apart from the rehabilitation grant, 25% shares of the developer company will be allotted to the farmer and one member of each farmer’s family will also be given employment in the company. In the third part of the policy, where land has been acquired by the development authorities under the master plan, the deal will be executed only abiding by the terms of agreement through a consensual approach, sources told B&E. Mayawati’s new land acquisition policy has definitely set a benchmark for the Centre to better (when it brings its bill to the monsoon session of Parliament). The events could also, actually translate into the UPA coming out with a more farmer-friendly Land Acquisition Bill.


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posted by Editorial at 4:47 PM

Tuesday, July 24, 2012

Anna Hazare : My Prime Minister

A seventy-three year old unassuming man by the name of Kisan Bapat Baburao Hazare is again set out to give sleepless nights to the Government of India. More popularly known as Anna Hazare, this isn’t his first endeavour to take the establishment head on. He earned his due recognition when he tirelessly fought to develop a model village in the district of Ahmednagar in Maharashtra. As it happens to most in our country, for all the good work, Dr. Hazare was also arrested in 1998 and was released on account of a huge public uproar. Incidentally, the Government of India also recognised his efforts by bestowing him with the Padma Bhushan. But amongst all his mini revolutions which have advantaged the smaller sections of society, this time, Hazare is taking up such an issue which is probably the biggest malaise of our democracy and is a cause which affects every living Indian in some way or the other.

Hazare is one amongst those few who have dared to raise their voices against corruption in our system, by voicing his concerns over the Jan Lokpal Bill. The Bill currently, is nothing but a politically jaundiced version of the anti-corruption bill. In order to assert his arguments, which manifests into a more meaningful and logical conclusion to the Bill, he declared a fast unto death at Jantar Mantar, New Delhi; a fast that started on April 5, 2011 amidst massive support. His arguments stem from the manner in which the current bill has shaped up; the current bill is not just illogical, but also nothing more than a mere tokenism with respect to the fight against corruption! On the one hand, while Hazare is asking the government to give powers to Lokpal to receive complaints of corruption directly from the victims (and declare their decision suo moto), on the other, our government wishes to confine such powers to those that can be politically influenced. In simple words, in its current form, Lokpal can only probe complaints forwarded by heads of either the lower house or the upper house. The fact is that in its current form, the Bill is purely a tool for political gaming and one-upmanship. Unfortunately, the government – quoting hilariously that it cannot be blackmailed by Anna Hazare – has conveniently turned down Hazare’s logical argument of involving representatives from civil society. Owing to the fact that the biggest victim of corruption is the common man, Hazare also rightfully is demanding extending the ambit of the Bill to a level where the Lokpal can register FIRs and act as an independent body (along with the CBI) to punish corrupt officials, with sentences ranging from a minimum of 5 years to a maximum of life imprisonment. Expectably, and shamelessly, the government doesn’t want any such powers to be given to the Lokpal and instead wants corrupt officials, if convicted, to serve a punishment ranging from only six months to a maximum of 7 years. In a nation where every second official is corrupt, the quickest and strictest of punishment should have been the recourse! The government apparently thinks otherwise.

As the affairs stand today, when a civilian has to bribe any and every police official for raising an FIR, a Lokpal would be of great social benefit. Furthermore, making this body independent of political intervention would ensure its smooth functioning. It is so very unfortunate that first, our government is not willing to adopt a tool which can uproot corruption from our system; on top of it, like a habitual offender, the government is trying to find a scapegoat in Dr. Hazare and is even conspiring to punish him! I am amazed by the audacity of the government to not only turn down such logical and meaningful arguments but also criticise him! These are the heights of double standards when the same government, which awards a person with the highest state honour, after sometime, tries to find avenues for charging the very same person with criminal offences. We have seen such a situation happen with Dr. Binayak Sen as well!

At a point in time when the entire world is witnessing the fury of civil societies which are toppling governments left, right and middle, at a point in time where we are seeing global governments increasingly allowing public intervention in political decision making, our own government is going back in time and is trying to adapt a dictatorial model – and that too in its worst form! There is no doubt that just like the Right to Information Bill, the Lokpal Bill will not only give Indians the voice that had got suppressed over the years under the huge debris of corruption, but it would also increase public participation at large, which is an imperative in any functional democracy. Perhaps that is the very reason why Dr. Hazare has been getting every support from media, celebrities and common people, who understand the significance of his argument. Such is his support that while writing this article some time past midnight, when I uploaded his picture on my Facebook profile as a gesture of my support towards him, in 15 minutes flat, his photograph had received as many as 200 comments and 750 likes!

All in all, it is visibly clear that through this Bill, the government is trying to do nothing else but save its own skin and the skins of its own corrupt officials. In its current form, the Bill is similar to CVC initiatives, which are good for nothing and have no tooth to bite. The current situation is a matter of utter disgrace for the Indian government – especially when it has failed to bring back the Swiss black money, punish CWG officials and arrest 2G scamsters. In a country where the same government has failed to provide its citizens with even two meals a day and instead has allowed corruption to flourish, what more could one expect?

Anna Hazare is increasingly becoming a phenomenon in himself, if not already one, and rightly so. It is the duty of every non-corrupt, patriotic and sensible Indian to provide every form of support to this one man who is selflessly fighting for everyone’s cause. India needs one more victory and this time against corruption! Along with stalwarts like Kiran Bedi – a great icon of honesty – and the great RTI activist Arvind Kejrival, Anna Hazare is showing the way to Indians. We all need to unite to get him right to the top, because finally, Indians have seen an honest man who is also leading from the front. Irrespective of who is holding the position officially, Anna Hazare is my Prime Minister!



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posted by Editorial at 4:51 PM

Friday, July 20, 2012

Improve The Scenario in The Insurance Sector

Amidst Challenges of Standardisation, Will Health Insurance portability, which is Scheduled to be Implemented from July 1 This Year, Improve The Scenario in The Insurance Sector.

It needs to be seen now as to why a customer would change the company – for better services or for lower premiums. Given the rise in claims (the incurred claim ratio of health was 111.13% in 2009-10 as against 105.95% in 2008-09), demand for higher level of health cover and medical inflation (proposed 5% service tax will further impact health insurance premiums), health insurance is definitely a bleeding portfolio. In such a scenario, a war based on lower premiums could be an altogether unlikely case. Nonetheless, overcharging and variations in rates of premium would be reduced.

So when you consider the transformative impact of this judgement, it could really make the industry more competitive and transparent. Players will be encouraged to ensure constant innovation & improvement in efficiency standards and services. When TRAI introduced it in the telecom sector on January 20 this year, a lot of migration of customers has been observed from one telecom service provider to the other (statistics from the Department of Telecommunication reveal that by the end of February 2011, Reliance Communication’s net loss of subscribers was pegged at 0.3 million while Vodafone’s net gain of subscribers was pegged at 0.19 million).

Whether or not the portability scheme in the health insurance domain will lead to a similar mass migration is even yet to be seen. Moreover, customer disatisfaction is strongly linked to those few (thankfully!) moments when the cover is actually needed. But portability will surely encourage more people to opt for health insurance for themselves and their families, as it reduces the potential consequences of choosing a wrong insurer. If statistics are to be believed, only 2% of Indians currently have health insurance, which constitutes about 20% of the overall insurance business in the country. However, a major concern for the insurance companies is the lack of an effective data-sharing mechanism with respect to policy holders.

Also, for effective portability, a standardised system and platform integration needs to be introduced. The guideline also does not clearly specify the extent of past transactional information to be shared by the policy holder, and this could prove to be an impediment. The rule may be a blessing where migration affects serviceability. But until proper policies, procedures and implementation mechanisms are in place, it may not move far beyond being a psychological bargaining chip.



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posted by Editorial at 5:56 PM