India Perspectives: Business & Trends

chillibreeze writer — Usha Ganesh

News and Views about the Indian Business and Economy

Weekly news updates on sector specific trends in the Indian economy

Government Policy & Infrastructure
Fashion
Manpower & HR
Real Estate
Tier II Cities
Sector Specifics
Agriculture
Lifestyle Trends

Government Policy & Infrastructure

Forget size, dozens of IT SEZs go ahead with plans
Size does not seem to matter for the developers of IT SEZs. Unperturbed on the brouhaha over size of multi-product SEZs, many developers of IT SEZs are going ahead with their plans and at least two dozens of them are likely to hit the street over the next 12-18 months. And the early birds are looking at commanding a premium in the lease rentals.

One of the new ones to jump onto the bandwagon is Mumbai-based Royal Palms Estates, which is setting up an IT/ITeS SEZ spread over 25 acres, with projected development cost of around Rs 650 crore over the next three years. While many IT SEZs are targeting large users — with minimum leased space requirement of 50,000 square feet — Royal Palms plans to devote substantial chunk of space to small users whose demand may typically vary from 2,000 sq feet to 50,000 sq feet. “Not many are targeting smaller users, who would not mind paying a premium to be part of an SEZ, which is within city-limits,” said Dilawar Nensey, joint managing director, Royal Palms Estates.

Another IT SEZ coming up in Mumbai is the one being developed by Hiranandani Builders at Powai. Sources in real estate market said IT major TCS have already booked over 60% of the space in the Powai SEZ.

Analysts point out that larger users of office space generally prefer to position themselves on the outskirts of cities, where rentals are much lower, while smaller users tend to stay closer to city-centres. Typically, large users are able to bargain harder for lower rentals, while smaller ones end up paying premium for the space.

As per industry estimates of the 140-odd IT/ITeS SEZs approved by the central government, at least 25-odd such SEZs should be up and running by end-2008.

While the uncertainty over extension of the STPI scheme beyond 2009 may give some SEZs edge in marketing themselves to new players entering the space, existing players who currently operate under the scheme are keeping their expansion plans flexible. “Many corporates, who are used to plan their office space needs three years in advance, are now just looking at their requirements for the next 18 to 24 months,” points out Ankur Srivastava, MD, DTZ India, a real estate consultancy firm.

Monday, April 9, 2007
Source: TNN via economictimes.com

State’s SEZ plans go for a six
The new rules guiding the special economic zones (SEZ) may put a question mark on six sanctioned projects in Maharashtra, home to the largest number of SEZs.

The empowered group of ministers had on Thursday stopped state governments from acquiring land for SEZs promoted by private players. The rules are applicable to SEZs cleared after February 10, 2006.

This means states will not be able to fulfil the promise of ensuring cost-effective land acquisition for the SEZs cleared after the cut-off-date. The developers will now have to buy land directly at market price without any support from state governments.

Of the 72 SEZs proposed in Maharashtra, government agencies are involved in as many as 24. Of these, 18 may not face any hurdle since they were cleared before the cut-off-date. “We don’t know what will happen to the remaining six,” a top official from the industry ministry said. The SEZs in question are promoted by Bharat Forge, in Khed near Pune (5,000 acres); Mahindra Gesco, near Pune (2,700 acres); Videocon, one in Aurangabad (5,000 acres) and another in Pune (2,500 acres); Supreme Petro, in Raigad(250 acres); and the Reliance Group, the Maha Mumbai SEZ near Mumbai (35,000 acres).

The Maharashtra Industrial Development Corporation (MIDC) is a partner in five of these projects except that of Reliance. “We have joint venture agreements in place for these five SEZs. What will happen to them in the wake of the eGoM order, we don’t know. We will have to wait for some clarity on the issue,” an MIDC official said.

For Maha Mumbai SEZ, the state government had chipped in by invoking the Land Acquisition Act 1894. “Henceforth, the company will have to go out on its own to acquire land,” a state official associated with the exercise said.

Though the company has announced plans to buy land directly from farmers, the state government’s decision to impose Section 4 (1) of the Act virtually froze the land for any other purpose. The Section 4(1) arms state governments with the power to notify any land they want for ‘public purpose’. Once imposed, the section is valid for 12 months. After the Centre’s direction to state governments to stay clear of land acquisition, the validity of the section is uncertain.

When contacted, the spokesperson for Maha Mumbai SEZ refused to discuss the issue. State government officials said first they have to get the Centre’s order. “By Tuesday, we expect to receive a copy of the order,” said a government official.

Monday, April 9, 2007
Source: TNN via economictimes.com

Stricter obligations for SEZs on cards to boost exports
To ensure that the much-touted special economic zones (SEZ) actually become vehicles for boosting exports, the revenue department is pitching for a review of the net foreign exchange criterion to make it more stringent.

There are 15 instances where supplies from SEZs to the domestic tariff areas (DTA) are considered deemed foreign exchange earning under the existing SEZ rules. The revenue department wants the list to be shortened as it feels that SEZs should be undertaking actual exports to meet the export obligation.

The commerce department, however, holds a contrary view. It feels there is no problem with the existing classification and there was no need to change it. “These are widely-accepted norms and the classification for foreign exchange earning for SEZs is similar to that of EoUs,” an official said. The issue, however, is expected to be taken up at the next EGoM meeting.

SEZ units are required to be not only net foreign exchange earners but under the expected new guidelines, their exports would also have to be more than whatever they source from the DTAs.

The revenue department is of the view that since the zones have been given huge tax benefits, the emphasis should be on actual physical exports being more than imports, an official said. The zones should not rely on deemed exports to achieve their net forex earner status.

The official said the objective behind setting up the zones was to boost exports from the country and garner a larger share of the world market, and this could be done if the focus remains on physical exports. The department wants pruning of certain deeming provisions that have been spelled out in the rules.

Supplies from the SEZs to the DTA are considered as foreign exchange earnings for 15 specified cases including goods sold under various duty exemption schemes of the commerce department, viz, the export promotion capital goods scheme and the advance licence scheme, supplies are made for various government-recognised projects and supply of IT agreement items under notified zero duty telecom and electronic items.

Tuesday, April 10, 2007
Source: TNN via economictimes.com

RIL lands a good deal on back of SEZ uncertainty
Uncertainty over the fate of Reliance’s proposed giant SEZ at Jhajjar in Haryana is working to the company’s advantage when it comes to land acquisition. Landowners in the area notified for the project are in a knee-jerk mode, apprehending cancellation of the project.

In just about one-and-a-half working days following the announcement of the revised SEZ norms last Thursday, farmers sold around 125 acres to Reliance. Prior to the empowered group of ministers (eGoM) announcement, the company was buying just about 50 acres a day.

And that’s not all. Sources in the land records department of Jhajjar district say that, in the last couple of days, transactions have taken place at an average price of Rs 18-19 lakh per acre. Prior to the notification, average price commanded by land owners in the area was in excess of Rs 20 lakh per acre.

Industry sources anticipate that this trend would continue till there is more clarity on the fate of the project. “Farmers in the area have never been averse to the idea of selling their land for the project, given the fact that the price on offer has been 7-8 times the market rate. However, many of them were waiting in hope that as when Reliance needs to speed up the acquisition process, prices would go even higher. However, ever since the announcement was made, there has been a general apprehension that the company may call off the project, something which could have led to panic selling,” a spokesperson of Jhajjar’s land records department said.

There is apparently another section of farmers for whom the policy change has been for the better. “Farmers can be divided into two groups — one that would dispose of their land at whatever price they get from the company, in apprehension of a dark future, and the other group who would want to negotiate with the company to reach the best price possible to help the company fall in place with the contiguity norms,” a member of a farmers’ organisation said.

With the option of government compulsorily acquiring land on behalf of the project now being ruled out, Reliance is likely to face higher price demand from farmers holding on to chunks of land in the middle of the area already under Reliance ownership, some farmers feel.

Meanwhile, according to sources in the state government, Reliance has proposed it will go ahead with land acquisition in the area. However, further acquisition will only be aimed at generating contiguity in the 10,000-odd acres the company has acquired, which could be ensured by the acquisition of nearly 5,000 acres more.

To make use of the entire land acquired in the process, RIL is learnt to be considering breaking up the giant SEZ into five separate zones — one large multi-product SEZ and four smaller ones.

Wednesday, April 11, 2007
Source: TNN via economictimes.com

Rlys re-invites bids for station modernisation
The Indian Railways has cancelled its first station modernisation bidding process wherein it had qualified about seven companies based on technical evaluation. It has now issued a fresh tender — reinviting bids from consultants — for a relatively narrow scope of work.

Earlier, it had invited expressions of interest from consultants to advise Railways on the detailed design parameters, technical, financial and legal aspects of the process to be adopted for modernising the New Delhi Railway Station.

It had already technically qualified about seven firms for providing advisory services that include the Italy-based Grandi Stazioni SpA Via, Chinese firm East China Architecture and Design Institute and the UK headquartered Mott Mac Donald.

Modernisation Plan

However, the Planning Commission recently asked the Railways to define broad parameters only and let developers design the stations, as was followed in the airport modernisation plan.

Now, the Railways has invited bids from architects and technical consultants for 'redevelopment of the station into world-class station through public-private partnership.' The consultant would have to prepare the master plan for the station and surrounding areas involving station operating area, commercial developments, parking areas, inter-modal interchange, traffic dispersion, amongst others.

Legal Process

The Railways also plans to appoint another consultant to advise it on the legal and financial process to identify the developer.

The Railways has identified 19 stations to convert them into world-class ones. The tentative list includes New Delhi, Chhatrapati Shivaji Station (Mumbai), Howrah, Chennai Central, Amritsar, Ahmedabad, Bangalore, Bhopal, Bhubaneswar, Chandigarh, Lucknow, Mathura, Pune, Patna, Secunderabad and Thiruvananthapuram.

Wednesday, April 11, 2007
Source: thehindubusinessline.in via moneycontrol.com

E-toll plazas soon
Even as the world moves towards a barrier-free road transport system, India is gearing up to increase the average distance covered by vehicles per day from 250 km to 400 km, bringing it nearer to the average in developed nations.

The average distance covered in developed countries is about 500 km per day. Taking a cue from these countries, the Indian government is working towards deploying state-of-the-art technology for cashless transactions for toll collection.

The government is in the process of finalising a uniform tolling technology for electronic toll collection (ETC). It may soon finalise either microwave technology or infrared technology as standardised tool for electronic toll collection (ETC) throughout the country. The National Highways Authority of India (NHAI) would be commissioning consultants for conducting studies, and the technology is likely to cover the whole network by 2010.

Microwave technology, commonly used throughout the world, is based on radio frequency waves to pass on information from the vehicle to the toll collection plaza. This kind of technology is used in mobile phones. Infrared technology, like the kind used in remote controls, is a relatively new technology for toll collection.

This technology is more versatile since it can also be used for road safety, traveller information systems, fleet management, advanced traffic management system etc. ETC systems use vehicle-to-roadside communication technologies to perform an electronic monetary transaction between a vehicle passing through a toll plaza and the toll collection agency.

In addition, it allows such transactions to be performed while vehicles travel at near highway cruising speed.

When a vehicle with On-Board Units (OBUs) approaches the toll plaza equipped with ETC, the OBUs communicate with the Road Side Unit (RSU). OBUs and RSUs exchange information like registration number, vehicle class, identification numbers etc.

Upon receiving the information from OBUs, RSU sends it to the central processing system. Central processing unit calculates the exact user fee to be deducted from the road user and sends this information back to RSU. RSU in turn will send information to deduct the calculated amount equal to the class of the vehicle from the balance amount in the OBU.

After the amount is deducted from the OBU, the information will be sent back to the central processing system through RSU. Central processing system gives instructions to open the barrier for letting the paid vehicle pass through. All the above activities take place in a fraction of second.

“The cost of the modern toll collection system at each toll plaza is Rs 3 crore. Once completed, the Golden Quadrilateral will have 95 toll plazas and the North-South corridor and East-West corridor will have 112 such toll plazas,” an NHAI official said.

Wednesday, April 11,2007
Source: TNN via economictimes.com

Mashelkar may still’ve some say
The government is favourably considering retaining sections of the controversial report of the technical expert group on patent laws headed by former CSIR director-general R A Mashelkar.

While portions giving ‘acceptable’ suggestions on Indian patent laws compatibility with the Trips might be retained, portions which have been allegedly plagiarised from another report and where suggestions have supposedly been made favouring multinationals are likely to be junked.

Speaking to ET, official sources said that while the department of industrial policy & promotion (DIPP) had not taken a final call on what to do with the report, it was favourably considering retaining parts of the report.

“There are a number of suggestions in the report which are logical and acceptable like the one which says that excluding micro-organisms from patenting is compliant with Trips. It might be a wastage of effort if even such suggestions are rejected,” an official said.

What would be definitely excluded are the controversy mired paragraphs where the report suggests that Trips provisions would be violated if India restricts patent protection to new chemical entities (NCEs) and doesn’t allow incremental innovations to be patented.

Thursday, April 12,2007
Source: TNN via economictimes.com

Race for Kandla port project hots up
Infrastructure companies can’t wait to drop anchor at Kandla. The race for the Rs 2,000-crore ship building yard project at Kandla is hotting up with as many as 14 leading infrastructure companies in the fray.

These include Indian biggies like ABG group, Essar Construction, Bharati Shipyard and L&T as well as foreign players such as South Korea’s Hanzin Heavy Industries and a leading port developer from the UK. Kandla Port Trust has invited expressions of interest (EoIs) and plans to float the request for qualification (RFQ) document in three months’ time.

Other companies in the race include: Nitesh Infrastructure (Bangalore), Afcons Infrastructure (Mumbai), SKIL (Mumbai), Jaypee Group, Bombay Marine Engineering Works, Regal Shipping (Gandhidham), Parekh Marine Services (Gandhidham), Jaisu Shipping (Kandla).

KPT intends to invite global tenders for the project ship repair/ship building complex on private participation basis. KPT plans a larger yard at Tuna and a smaller one at Kandla. The trust has already got a feasibility report for the project prepared. The project will be developed on a build, operate, transfer (BOT) basis by a private developer which will be selected through international competitive bidding.

“The port plans to set up a mega ship repairing as well as ship building yard of international standards at a suitable location at Tuna. Around 1,200 acres of land has been earmarked opposite to waterfront where natural deep draft is available,” a senior KPT official said.

Thursday, April 12,2007
Source: TNN via economictimes.com

Agri labourers to be included in compensation package
The labour ministry wants to include agricultural labourers who will lose their jobs as a result of land acquisition for special economic zones (SEZs) in the compensation package under preparation.

Talking to reporters on the sidelines of a meeting organised by Ficci, Union labour minsiter Oscar Fernandes said: “Till now, we were only talking of compensation for the land owner whose land would be acquired for an SEZ. But we strongly feel that workers who are engaged in farming activity should also be able to access the compensation package.”

Mr Fernandes also indicated that existing labour laws for SEZs would continue till new laws are enacted. “Let the SEZ issue be settled first. We can decide on the appropriate labour laws,” Mr Fernandes said.

At the meeting, Ficci proposed to introduce a new employment Act which would be employment friendly with extensive social security coverage. “The new Act will not touch on the privileges of the existing labour force and their employment can continue under the existing law,” said Mr C.K. Dhanuka, chairman, Ficci (eastern region).

The proposal was upheld by the Union labour minister. “In India, only 7% of the workforce is engaged in the organised sector and enjoy all social security. But the remaining 93% have no social security cover. We can work out a model to address this. We have no problems if the management and workers decide this on a bipartitite basis. The government will play the role of mediator. Our focus is to create an ambience for employment generation.”

He also informed that the Social Security Bill for the unorganised sector would be tabled before Parliament in the monsoon session.  Earlier, the West Bengal labour minister Mrinal Banerjee said existing labour laws do not come in the way of economic growth.

Thursday, April 12,2007
Source: India Times Newsnetwork via economictimes.com

Centre plans to improve connectivity to North East
The Centre will release Rs 1,25,000 crore to the eight north-eastern states by 2012, an increase of more than 50% over the Tenth Five Year Plan. The government is also planning 226 air links between the North-east and the rest of the country and 592 internal flights for the region to improve connectivity.

“For fiscal 2007-08, the government will extend Rs 15,000 crore, 90% of which will be in the form of grants to the eight state governments,” minister of development of north-eastern region Mani Shankar Aiyar said at the third North-east business summit organised jointly by the ministry and the Indian Chamber of Commerce. The Centre spent Rs 80,000 crore towards the region during the Tenth Five Year Plan.

Dispelling the notion that the entire north-eastern region was insurgency-prone, Mr Aiyar said law and order situation in many parts of the region was better than that in Mumbai and Noida. “It is extremely erroneous to say that the North-east is insurgency-prone. There is absolutely no law and order problem in Sikkim, in Arunachal Pradesh and Mizoram,” he said. Further, security personnel were available at short notice to the states.

In the roads sector, the government would be investing Rs 50,000 crore in the region by 2012. Manipur chief minister Okram Ibobi Singh favoured improvement of surface connectivity between the North-east and Asean countries for speedy economic development.

Sikkim chief minister Pawan Kumar Chamling said with the signing of free trade agreement with the Asean countries, the north-eastern region would play a vital role in the formation of East Asian community.

Thursday, April 12, 2007
Source: TNN via economictimes.com

Rs 2537 crore released for urban infrastructure projects in 2006-07
Rs.1353 crore have been released as the first installment of central assistance for the projects under the Jawaharlal Nehru National Urban Renewal Mission during 2006-07. Out of the approved projects, 64 are for water supply, 39 for sewerage, 39 for road and flyovers, 27 for drainage and 20 for solid waster management. 205 projects have been approved involving a total cost of Rs. 17,000 crore. These projects will get central assistance of about Rs. 8300 crore.

62 cities have prepared city development plans, 49 cities have signed Memorandum of Agreement with the Urban Development Ministry with regard to reform agenda and implementation schedule. 28 cities and Union Territories have submitted their detailed project reports with regard to submission Urban Infrastructure and Governance.

Rs. 1184 crore have been released as first installment of central assistance for projects under the Urban Infrastructure Development Scheme for Small and Medium Towns, UIDSSMT during 2006-07. 328 projects have been approved for 274 towns involving a total cost of Rs. 4204.62 crore. The Government will release 3382.36 crore as central grant for the projects during the implementation period.

Secretary, Urban Development Ministry Shri M.Ramachandran took a review meeting of the progress of the JNNURM projects with the senior officials of his Ministry. The Government is giving top priority to drinking water, sewerage, drainage and solid waste management schemes in mission cities. Shri Ramachandran convened a meeting of all States and UT secretaries of Urban Development in Kochi on 14th of April 2007. The meeting will discuss issues including capacity building at States and City levels, monitoring and implementation of JNNURM projects, urban infrastructure development schemes for small and medium towns, community participation, new technologies in sewerage and solid waste management, resource mobilization for urban local bodies, measures to improve urban governments, reduction in water wastage and initiatives to improve public transport in cities.

Thursday, April 12, 2007
Source: inrnews.com

Rs 8,900cr four-laning projects cleared
The government on Thursday has cleared implementation of various four-laning projects across the country at a total cost of Rs 8,900 crore.

The Cabinet Committee on Economic Affairs (CCEA) approved the four-lane connectivity to the International Container Transhipment Terminal (ICTT) project in Kerala using cess funds. The Rs 557 crore project, to be implemented by NHAI, would be completed by 2010 end.

The CCEA also gave its approval to add about 1,000 km to the existing 11,113 km under National Highways Development Programme (NHDP) Phase III for upgradation.

The inclusion of 996 km under NHDP-III encompasses eight new stretches, which would be developed on build-operate-transfer (BOT) basis. Per km cost of construction is expected to be Rs 5.85 crore, with the private sector contributing Rs 29,869 crore. The government will provide viability gap funding (VGF) of Rs 17,688 crore.

Upgradation of 780 km of national highways in Bihar would be either on BOT (toll) or BOT (annuity) model, depending on the response of bidders. While the implementation of four-laning of 780 km of national highways on build-operate-transfer basis in Bihar would cost Rs 6,782 crore, the four laning projects in Jharkhand, Maharashtra and Madhya Pradesh would cost Rs 1,616 crore.

Friday, April 13,2007
Source: TNN via economictimes.com

IT’s poring: Delhi designs nerd towns
The government is considering incentivising IT, ITeS and BPO industries for building integrated townships exclusively for the sector. While the infrastructure for such townships will be jointly funded by the state and the Centre, the private sector would be encouraged to invest in these projects.

The sops would be over and above those under the Software Technology Parks of India (STPI) scheme for the new townships, an official said. The townships would have all basic facilities such as water, drainage, electricity and easy access to transport.

The proposal was mooted at a discussion between the government and the National Association of Software and Services Companies (Nasscom) in September last year. The latter had demanded that such townships be build in tier II and tier III cities, where the IT and BPO sectors are yet to spread. The ministries of IT, urban development and the department of industrial promotion and policy(DIPP) are understood to have taken this forward.

“A committee has been set up to look into creating integrated townships congenial to IT related services and manufacturing industries” an official in the IT and communications ministry said. The details of the policy are yet to be chalked out, he added. The committee has been set up under the secretaries of the ministries of IT and urban development and DIPP.

“We have had talks with the IT ministry over earmarking land for developing exclusive townships for IT and BPO industries across India. The PMO would also take a view of the proposal,” urban development secretary M Ramachandran told ET. Presently DIPP is taking the final view of the proposal.

The Nasscom- McKinsey Report 2005 says the expansion of the IT and BPO industries beyond the five metros is taking place but its success will hinge on the timely creation and upgrade of infrastructure.

The report projects that IT/BPO employment in 2010 will be less skewed towards tier I cities and that tier II and tier III cities will account for 40% of additional employment creation in the next five years. Tier II and tier III cities will need to aggressively build capacity (around 2 million sq ft of commercial real estate in each city per annum), the report says.

Friday, April 13,2007
Source: TNN via economictimes.com

Salim Group to locate SEZs at ‘politically-correct’ site
After the March 14 violence in Nandigram and changes in the central government’s SEZ policy, Indonesia’s Salim Group has decided to revise business plans for its twin SEZ projects in the state. The group has also decided to set up the chemical industrial SEZ at a “politically-correct location” in a clear bid to make the process hassle-free.

Salim Group’s proposed projects will be executed by New Kolkata International Development (NKID) — a special purpose vehicle jointly formed by the Salim Group, Prasun Mukherjee’s Universal Success and Unitech. NKID proposes to implement Rs 30,000 crore of infrastructure projects in the state.

NKID official spokesperson Prasun Mukherjee told ET: “We will implement all projects... our call is final. We only have to revise the business plan. We are very used to changes in global regulations. This kind of situation is not new to us.”

But the Salim Group is undecided on where the 10,000 acre chemical industrial SEZ will be located, especially with Nandigram ruled out as a location. “Politics and economics go hand in hand. Economical activities cannot happen without the support of political parties. We have, therefore, taken the decision to set up the chemical SEZ at a ‘politically correct location’. The state government will decide the site of the project,” said Mr Mukherjee.

A change in the business plans will, however, not have any impact on the size of the proposed SEZs and other infrastructure projects. Mr Mukherjee added: “We will not downsize any of the projects. We will have to rework our return on investment and discuss it with financial institutions, who will be involved in our multiple projects. In the present scenario, we may have to wait longer for returns on investment.”

The state has indicated that the chemical SEZ may be relocated to Haldia, where the Salim Group proposes to set up a 12,500 acre multi-product SEZ.
Asked whether the group is open to the idea of direct purchase of land and providing jobs to each member of displaced families, the NKID spokesperson said: “We are studying all proposals. It is too early to comment on these issues. We are interacting with the state government on these issues. They will guide us.”

Friday, April 13,2007
Source: TNN via economictimes.com

Govt lines up big-bang reforms on international taxation front
The government is set to usher in major reforms in international taxation, including the transfer pricing regulation, to bring them in sync with best international practices. A working group on reforms in international taxation and transfer pricing, chaired by GC Srivastava, director general, international taxation, has taken the views of the Organisation for Economic Development (OECD) on legislative changes that India can consider in these areas.

On the cards are a review of penalties for violation of transfer pricing norms. The penalty now ranges between 100% and 300% on the tax sought to be evaded. The introduction of new methods to compute transfer price on transactions such as business restructuring in group companies of MNEs, brand royalty valuations and so on are also being examined.

Other reforms may include having an advance pricing arrangement. An APA is an agreement between the MNE and the revenue authority on the method to be used for pricing their future intra-group transactions.

The panel is one of the four groups set up by the government to recommend ways to strengthen capacity building in the revenue department. The programme is in collaboration with the Asian Development Bank (ADB). “We are looking at adopting best practices in international taxation and transfer pricing to bring about uniformity in audits and assessments. We have sought a feedback from experts in the field,” Mr Srivastava told ET.

Transfer pricing refers to the price charged by one group company to an associated enterprise for an international transaction relating to supply of goods, services and property. Since transfer prices can be used to shift profits out of the country and hence avoid taxes, revenue authorities in various jurisdictions have a regulation in place to check such violations.

India introduced the transfer pricing legislation in 2001 and there have not been any major changes since then.

“Every tax authority around the world, just like every taxpayer and advisor, changes its views on how best to manage transfer pricing as it gains more experience which, after a few years, tend to evolve towards globally accepted best practices. India is no exception to this rule,” said Samir Gandhi, tax partner, Deloittee Haskins and Sells.

The transfer pricing law in India says that income accruing from international transactions should be at arms’ length price. Currently, the Indian regulations outline five methods to compute the arms’ length price and the expert group is looking at the feasibility of adding more to this list.

“The idea is to cover transactions such as those in a business reorganisation that could result in intra-group transfer of business from one holding company to another. This could be through sale of shares, transfer of intangibles and so on. In intra-group transfers, for instance, it may be extremely complex to apply the existing methods to arrive at the arms length price,” reckons Rakesh Mishra, associate director, transfer pricing, PWC.

Valuation of intangibles, again, is a highly technical. More so for marketing intangibles such as brand name, trade mark, distribution network and customer lists. These transactions have to be evaluated differently. The recent case of Glaxo involving a $3.4 billion settlement with the Internal Revenue Service of the US establishes the importance of intangibles, reckons Samir Gandhi.

The Percy Mistry committee report on Mumbai — An International Financial Centre has also recommended the introduction of best practices in international taxation and transfer pricing.

Saturday, April 14, 2007
Source: TNN via economictimes.com

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Fashion

Style in pockets!
What gives you the most hip look these days? Of course a multiple pocketed garment.

The latest style statement in youth is multiple pockets in their garments, be it low-waist cargo pants, smart capris or jackets.

These have a unique utility angle as well. The pockets can be used to keep your mobile phones, iPods and even radio sets within reach.

College going gals can have trendy look in a low-waist and cotton capris with pair of cross-cut pockets or a pair of palm-size flap pocket on thighs and knees that are available in a variety of colours like blues, black, grey.

Guys, if you want to have a rugged look, a loose cargo full pant with eight to ten flaps, zip pockets in earthy colours of shades of brown, olive green, beige, greys can surely bring out adventurous appearance.

There are also 100 percent smart cotton zipped jackets in shades of grey and brown with four pockets in the front are available at various garment stores.

Monday, April 9, 2007
Source: fibre2fashion.com

Tanishq targets US jewelry market
Titan has revealed plans to open first Tanishq jewelry brand outlets in Chicago and New Jersey by January 2008.

Company aims to expand this into a 10-store chain with initial investment of US $6-7 million.

Tanishq will target the world’s biggest jewelry market, through either franchisee or self-owned outlets. Currently, US jewelry market is valued at around $16 billion.

Titan Industries, India’s largest name in watch and jewelry sector, looks forward to compete with US high-end brands like Tiffany’s and is optimistic about the opportunities.

Gitanjali Gems and Rajesh Exports also recently publicized plans to explore the US market.

Monday, April 9, 2007
Source: fibre2fashion.com

Slow demand dulls diamond exports
Exports of cut and polished diamonds recorded year-on-year drop of six percent by during April-February 2006-07, earning around Rs43,828.

It is believed that the rising energy prices, instable gold rates and slide in demand from the US, adversely affected the diamond exports.

Exports of gold jewelry mounted to Rs21,349 crore, 41 percent over corresponding period last year.

However, total exports, including diamond-studded gold jewellery and coloured gems climbed around five percent.

According to Gem & Jewellery Export Promotion Council (GJEPC) demand from the US, which absorbs almost 50 percent of the jewelry exports, is slowing down.

The situation is not optimistic as this trend is expected to continue for atleast 2-3 months.

India is exploring new markets and concentrating on potential countries like CIS countries and Japan.

Experts expect market to pick up and recover well by late this year or 2008.

Tuesday, April 10, 2007
Source: fibre2fashion.com

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Manpower & HR

MBA admission takes toll on aspirants' finances
With IIM admissions being deffered, many MBA aspirants have been left in the lurch, reports CNBC-TV18.
For Ashish, the journey to IIMs has just got a little longer and also more expensive. Ashish was waiting for a final call from IIM Bangalore and Calcutta and had already been selected for XLRI Jamshedpur. But with iim results being delayed to April 21 and the XLRI deadline to pay its first fee instalment on the April 20 -  this month and he is left in a catch 22 situation - either pay up close to Rs 2 lakhs for XLRI and secure an MBA degree or wait for IIM results. He has decided to pay up for XLRI.

Ashish, student, says, "I have taken loan from my relatvies and Rs 17,50,000 is a lot of money. Now if I get through IIMs, I will obviously go there and lose a lot of money; so I am very worried." He is not the only one facing this dilemma. More than 4000 students, who were shorlisted for group discussions and interviews in IIMs are in a similar situation.

The last date to pay Rs 1,76,000 as the first instalment in XLRI is April 20, while a non-refundable fee of Rs 35,000 to be paid in SP Jain Institute was April 11. The deadline to pay Rs 1,75,600 in Mumbai-based Narseemonjee Institute of Management is April 18, of which, Rs 26000 is non-refundable.

Gejo Shrinivasan, CAT expert, says, "We are getting a lot of calls from students as well as from the parents about what to do." IIMs are normally among the first management institutes to declare results. It is the first time that their admissions are delayed.

Friday, April 13, 2007
Source: moneycontrol.com

Infrastructure talent crunch a boon for civil engineers
Civil engineering students are in the seventh heaven, thanks to a talent crunch in the booming infrastructure sector.

It's time to move over for software engineers. Civil engineering is fast emerging as the ticket to a high-paying job. This year, all the 4th year civil engineering students in Hyderabad have been placed, with salaries that are higher than in any other branch of engineering. 

Ramachandra Reddy, Director of CBIT says, "This year is the highest and we predict that next year will be much more. Because the demand for civil is so high that many companies are coming to conduct civil engineering interviews as soon as the college reopens in August."

Over the last 10 years, India's civil engineering graduates were being absorbed by the software industry, to be trained on the job, leaving a gaping hole in the booming real estate and infrastructure sector. A gap that will, now, be filled by these young students.

Number of civil engineers to graduate in Andhra Pradesh this year will be 1800, compared to 1.5 lakh software engineers, previously. A trend that may change, as starting salaries for the civil engineering graduates have doubled in the last year.

N Muralidharan, a civil engineering student, says, "In 2004, civil engineering students were being offered Rs 200. Last year it went up to Rs 7000 and this year it has doubled, we have been offered Rs 15,000."

The highest offer received by these students is five lakhs a year for the training period, with a promise of double, when they take up their project.

Saturday, April 14, 2007
Source: moneycontrol.com

Kolkata's employment density higher than Delhi: NSSO
The latest National Sample Survey or NSSO study shows employment density in Kolkata is higher than in Delhi, but Mumbai and Bangalore lead.

An NSSO survey has indicated the opposite it shows employment density in Kolkata is higher than most other big cities, including Delhi.

Shereen Bhattacharya is an IT professional. Like most people in Kolkata, she believes the city offers limited employment opportunities."It's difficult to believe, but then you can't challenge statistics. All the new modes of employment that have come into play have had a hand in this," she says.

The one-year survey that concluded in June 2005 shows that a little over 75 per cent of employable males in Kolkata have jobs whereas in Delhi, it's 71.4 per cent. Employment density for women is 19 per cent in Kolkata, whereas in Delhi, it's 11.2 per cent.

But Mumbai and Bangalore are ahead of both, and more importantly, employment density in these two cities is increasing, whereas in Kolkata and Delhi, it's been falling.

Though Buddhadeb Bhattacharjee's government takes great pride in having beaten Delhi in employment density and pared unemployment in the state, academics take these figures with a pinch of salt.

Abhirup Sarkar, Economist & Professor, Indian Statistical Institute, Kolkata says, ""There is nothing to be particularly happy about if you have a lower level of unemployment or a high level of employment. It just shows that people are compelled to take almost any job."

How the  NSSO data is interpreted would be an individual choice, but the employment density in Kolkata and Delhi is still below the national average for class one cities or those with population of one million or more.

And worse still, the decline in employment density in these two cities is an indication that population is growing faster than new jobs are being created.

Saturday, April 14, 2007
Source: moneycontrol.com

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Real Estate

Commercial Property Sales surge as Demand Shoots Up
Although, the residential property segment may not performing well but the commercial property is certainly hitting the sky, says a report complied by real estate adviser DTZ India. Due to the corporate demand, the rentals have witnessed a rise of another 20% in the last three months, reports add further.

Getting a good commercial space has more become an illusion than dream in a city’s CBD.  Indeed, the report claims the rentals to see a jump of 10-20% in very near future. This is because of the ongoing demand that continues to outstrip supply. Last year, the India’s IT hub, Bangalore added over 14 million sq ft of grade A commercial space last year. Staying in step is the NCR witnessing office space supply of 10 million sq ft. Surprisingly, corporates are still searching for more space.

The rentals are likely to increase further in the CBDs of most cities. This is because of limited or no new supply being added, and the demand is going through the roof. There will be an increase in the demand for office space by 30-35% this year, but a multitude of corporate requires settling for space in the city’s suburbs, as space in the CBDs is exhausted.

Bangalore’s outskirts may witness a supply infusion of near about 13 million sq ft, whereas Chennai and NCR will add between 15 to 17 million sq ft of office space. Interestingly, 25% of this expected supply has already been booked.

Tuesday, April 10, 2007
Source: indianrealtynews.com

IT Companies Pushing Real Estate in Chennai
Chennai is witnessing a smart make over with the ongoing construction activities, a result of constant demand from the information technology (IT) sector, which has certainly given a push to real estate developments in this known city of South.

To stay in step with its geographical growth, the city needs to integrate developments offering good quality and neighborhood with decent work places and entertainment options in the same premises, says a report compiled by Trammell Crow Meghraj Property Consultants.

Residential properties in Chennai are also showing a mark appreciation. Around 20 major residential projects have line up to come up in Velachery and Perangudi.

Middle and high segment housing will witness more than 2000 accommodation units to come up over the next two years.

Another 3,000 units are expected to be added by the next year’s end if the Mahindra city and Singapore Township are to be taken into account. Talking about commercial properties in Chennai, more than 15 million sq ft of A grade is likely to come up in the next two years.

With an increase in number of IT and ITes companies in Chennai, there is strong demand in peripheral locations including Velachery, Perungudi, and Thiruvanmiyur for budget apartments to provide the employees with accommodation.

As per the data showcased by the report, IT sector growth in India has emerged as a key driver in giving further impetus to real estate activities in all segments whether commercial, residential or retail.

Tuesday, April 10, 2007
Source: indianrealtynews.com

Delhi to Witness High Growth by 2021
Delhities have high hopes with Delhi Master Plan 2021 which envisages turning the city of Mughals into maximum city. With a complete new and vibrating look, Delhi will be moving up its infrastructure elevator by taking up the development of multi level car parking, underground and metro railways, skyways, special bus corridors, and strict zoning for residential and commercial areas.

However, B. Lal Joshi, Lieutenant Governor of Delhi was perhaps unaware of the DDA’s (Delhi Development Authority) monopoly hold over the building permit and licensing system will be broken.
Fulfilling the need of 2.4 million residential units by 2021 does not seem to be an easy task for the DDA, says Lalit Maken, Union Minister of State for Urban Development.

Delhi is likely to grow from the present 1,483 sq km to 2,300 sq km by 2021 under the Delhi Master Plan.

Following are the other cities to witness expansion as per their respective master plans:

Cities	Present Area (in sq km)	Expected Area Expansion (in sq km)	Earmarked Year
Bangalore	226	696.17	By 2015
Gurgaon	98.81	370.69	By 2021
Greater Noida	50	120	By 2020
Kochi	264	731	By 2026
Hyderabad	1,864	2,000	By 2020
Visakhapatnam	1721	3,000	By 2021
Metropolitan Region

However, all the metros are undergoing the same situation – they all are eating in to neighboring States and Districts to cater to their surging residential requirements. This has disturbed the administrative, revenue, law & order, crime and traffic management. The population of the Capital has transgressed to several States including Haryana, Punjab, Rajasthan, and Uttar Pradesh, engulfing towns as far as 20-60 km away into the new city plans.

Friday, April 13, 2007
Source: indianrealtynews.com

IIHM Plans to Invest $400Million in RE
Infinite India Investment Management (IIIM), a leading real estate private equity investment firm, is drawing plans to invest $400 million in the real estate sector in 2-3 years. The company has decided to focus on residential, commercial, retail and hospitality sectors.

IIHM has already pumped in $60 million in five real estate projects. More investments will be done at different phases in these projects. And the new developments are taking place at a fast pace.

The details of the five projects have not yet been revealed by the company. However, all the selected projects will have multi sector focus. Of all, there is a project to come up near Powai Lake in suburban Mumbai. The project will spread over a large area of 1.12 million sq ft.

Another project identified is a Mumbai-based real estate and infrastructure construction company MAN Infraconstruction.

IIHM holds a minority stake in a Bangalore based Construction Company and a 1.8 million sq ft IT park, RR Infopark, in Chennai. The IT project is likely to be over by 2007 itself.

The company has an operational asset in the country’s garden city, Bangalore and the second asset is on its course to launch soon in the Capital. There are another seven real estate projects aiming at the development of hi-tech apartments. All projects are likely to be put on the development track in the next 2 years.

Friday, April 13, 2007
Source: indianrealtynews.com

For Sale: Phillips' property in Mumbai
Rising property rates stand to benefit one more corporate.
 
Philips India is likely to strike a deal for its South Mumbai apartment at over Rs 50,000 a square foot. It's classy, snazzy and pricey. The 3,700 square foot duplex on the 3rd and 4th floors in Shanudeep Building, in Mumbai's uptown Altamount Road, was once the home of a British High Commisioner.

Then Philips bought it to house its senior executives. Now the company is looking for a buyer for the apartment to cash-in on the property boom. The duplex is being auctioned for nothing less than Rs 13.5 cr or Rs 36,500 a square foot. Property consultant Knight Frank has the mandate to sell the property. Consultants say with the current demand for such apartments, it is likely to be picked up for around Rs 20 crores. That's a little over Rs 54,000 a square foot.

This could be a record for the locality.

Altamount Road properties command between Rs 25000 and 30000 a square foot. But now with property prices booming and only a few apartments for sale on Altamount Road, prices are climbing. It is learnt many stock brokers and diamond merchants are eyeing this prestigious address.

The apartment is expected to sport a new nameplate next month.

Saturday, April 14, 2007
Source: moneycontrol.com

Home loan buyers feel pinch of successive rate hikes
Home loan buyers are feeling the pinch of the successive rate hikes. While existing customers will see a hike in their EMIs and tenures, new customers will see home loan eligibility going down by almost 35 per cent. 

Home loan interest rates have gone up by 5% in the past 3 years. Until now consumers were fighting rate hikes by simply increasing their tenures; so the EMIs would remain constant. 

But that too has now got stretched to the maximum with average home loan tenures rising from 13  to 20 years. Now it's EMIs.

"Customers who would actually see an EMI hike will be close to about 40% and our belief is that we would try to reduce this burden by first increasing tenures and then only if we don't have an option the passing on of the increase in EMI," opines Rajiv Sabharwal, Sr GM - Retails Assets, ICICI Bank.

Until 3 years ago, for a 10 year loan of 10 lakh rupees, at an interest rate of 7.5%, the EMI stood at about 12000 rupees. With interest rates at 12.5%, the EMI for the same loan has risen by more than 2500 rupees.

New customers are not much better off. Two years ago if you could get a one lakh rupee loan for your home, now it is down to 65,000 rupees.

Every 1% hike in the interest rate, reduces loan eligibility by 7% for every lakh of rupees. Consecutive rate hikes have reduced this further.

Little wonder that banks expect growth in the home loan business to go up by no more than 20 per cent this year, the lowest in five years.

Saturday, April 14, 2007
Source: moneycontrol.com

Residential Boom Reaches NOIDA
Noida, the largest industrial town of Asia, has undergone a paradigm shift in the last few years. The real estate in Noida is hitting the sky, which is also due to a large migration of people from Delhi who are being bullish to make it their home.

As a part of Uttar Pradesh, Noida cannot remain untouched by the problems prevailing in the state. Despite all, the individuals who have shifted their base to Noida witness to live a splendid life.

Noida certainly benefits from the relative proximity to Delhi. Excellent network of roads, 100 per cent power back up make up for a good idea to stay here. Also, Noida is attracting large interests from young well to do professionals who are making the highest income tax paying district in UP.

Income tax collections have surpassed expectations and seen a hike of a prohibitive 600 per cent in the last year.

However, the city is just seeing the phenomenal growth with the least improvements in its infrastructure facilities. Noida lacks in providing proper security to its citizens, says Saroj Raja, a resident of Noida.

The real condition of civic sanitation came before when the Nithari incident revealed that the drain had not been cleaned in 20 years.

Also, the Nithari case and Adobe India CEO’s son’s kidnapping in the past months has also dented the Noida feel good story

Saturday, April 14, 2007
Source: indianrealtynews.com

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Tier II Cities

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Sector Specifics

Textile Sector

Re hurts: Textile exports to US dip after long time
There is now the initial evidence that appreciation of the rupee against the greenback has started hitting exports in the form of diminished unit value realisation, with the exports of textile products to the US declining by over 3% in dollar terms during January 2007, as compared to the corresponding month a year ago.

This follows a very strong growth for about two years after the abolition of quotas, and according to industry sources, this is the first time in several decades that the US’ imports of textile products from India has shown a negative growth.

As per the US’ customs data, import of textile and apparel items from India dipped 35% from $486 million in January ‘06 to $472 million in January ‘07. The US market accounts for 35% of India’s textile and clothing exports at present, and with a huge growth expected in textiles based on manmade-fibres, industry watchers have predicted the share to increase in good measure in the coming years.

It may be noted that during the calendar 2006, India’s exports of textile and clothing items to the US stood at $5,031 million compared to $4,617 million in ‘05. Pertinently, the decline in exports is hitting where it hurts the most.

Clothing, which is the most value added and labour-intensive segment in the textile chain, has registered a negative growth of over 9% in the US market in January this year, more than offsetting the positive growth in other textile products. Similarly, manmade fibre products in which India has an insignificant presence in the US market and therefore hold tremendous growth potential, the exports have declined by over 23%.

Says DK Nair, secretary-general, Confederation of Indian Textile Industry, “Supply side problems like unworkable labour laws that restrict the garment industry to SMEs, high transaction cost that renders exports uncompetitive and infrastructure weaknesses have been infusing production inefficiencies in the textile and clothing industry. But all these were there even during 2005 and 2006 when the exports registered impressive growth. What is new is perhaps the steep appreciation of the rupee during the last few months, and particularly during the last couple of weeks.”

The situation has become more unwholesome for India, as the currencies of some of the major competitors in the US market depreciated against US$ over the year April 10, ‘06 to April 10, ‘07, while the rupee appreciated 4.45%. Pakistan rupee, Turkish lira, Indonesian rupiah and Hong Kong dollar depreciated against US$ by about 1.3%, 0.72%, 2.3% and 0.72% respectively.

Thursday, April 12,2007
Source: TNN via economictimes.com

NTPC mulls tying up with low-cost Chinese vendors
NTPC Ltd. is open to sourcing equipment from Chinese vendors in an effort to keep project costs down for its new power stations. The Rs 30,000-crore utility is also looking at the possibility of tying-up with Chinese suppliers for the 4,000-MW Ultra Mega projects in the pipeline.

NTPC, which has largely been relying on Bharat Heavy Electricals Ltd (BHEL) for equipment supply, was priced out in the bidding for the initial Ultra Mega power project, mainly with competing bidders having tied-up with low-cost Chinese vendors.

"We are open to talking with Chinese suppliers. It is just a question of getting equipment at the cheapest cost, so whoever bids for our project and is ready to supply at the lowest cost would be selected," a senior NTPC official said.

Price-competitive bids

He said that the Chinese equipment suppliers were welcome to bid for NTPC's new projects. The company is also open to talking with low-cost suppliers for ensuring its bids for the Ultra Mega projects are competitive, he added.

The company is already sourcing equipment from Korea's Doosan Heavy Engineering and Power Machines of Russia for its power projects based on the new super-critical parameters. In the first couple of Ultra Mega power projects, several bidders went in for tie-ups with overseas vendors for critical components to keep bids price-competitive.

For the Sasan project, the winning bidder Lanco Infratech had a tie-up with China's Dong Fang Electric Corporation for power equipment supply and had quoted a benchmark tariff of Rs 1.19 per unit, way below NTPC's quote of Rs 2.12 per unit.

According to industry sources, Chinese equipment makers may have an edge over the local players in terms of pricing and delivery lead-time in the light of overcapacity in the Chinese domestic market. Chinais said to have huge idle capacity of as much as 50,000 MW with power equipment manufacturers, though its equipment quality is largely untested in the Indian market. Shanghai Electric and Dong Fang Electric Corporation are among Chinese firms said to be adopting aggressive entry strategies into the Indian market, which has been dominated by players such as Siemens and Alstom, besides market leader BHEL.

NTPC, which has an installed capacity of 27,404 MW at present, has announced a multi-pronged growth strategy to achieve 75,000 MW plus installed capacity by 2017.

Wednesday, April 11,2007
Source: thehindubusinessline.in via moneycontrol.com

Rieter investing $50 m in India in next 5 years
Swiss multinational textile machinery major Rieter plans to invest about $50 million over the next five years to set up textile machinery manufacturing capacities in the country.

"India is one of the key emerging markets for us. We are looking at investments of around $50 million in the textile machinery business over the next five years," Chief Executive Officer of Rieter, Mr Hartmut Reuter, told Business Line. Rieter has appointed SICPA Vice Chairman Mr Sudhir Jalan as its Indian partner and Chairman of its Indian advisory board.

Rieter plans to start off by expanding an existing facility in Pune that is being operated by its subsidiary Suessen Asia Pvt Ltd, with plans for a ring spinning machinery facility in the first stage. The unit would eventually be expanded to include its entire line of textile machinery.

"We have some free land there and will be kicking off our plans at our Pune wing," he said, adding that Rieter would also be looking at greenfield options in other locations across the country subsequently.

Regional hub

Mr Reuter said the company, which has about 1,100 employees across six locations in India, hopes to double its headcount in the country in the medium term, with focus on not just blue-collar recruitments but engineering jobs as well in the areas of development, design and layouting. The company would eventually look at India as a technology development and export hub for markets in the region, he said.

Mr Reuter said that while China will continue to expand its dominant role in the textile industry, India and Turkey were the other important textile hubs and therefore key markets for Rieter. 'The removal of quotas from 2005 has made the textile manufacturing base move to Asia occur in a much shorter time than expected and we are looking at expanding our activities in the key markets of China and India to service the entire region,' he said.

He said the Government's Technology Upgradation Fund Scheme (TUFS) had given an impetus to overall machinery sales, with demand going up three-fold on this count.

On competition from cheaper Chinese models and second-hand imports, he said Rieter is a premium segment player, with quality and after-sales service being key pluses, unlike in the case of Chinese imports and second-hand machinery where quality and service remained concerns.

Rieter Textile Systems, part of the Rieter Group, is the leading supplier of integrated systems for manufacturing yarns from natural and manmade fibres for all applications. The Rieter Group comprises two divisions — Rieter Textile Systems and Rieter Automotive Systems.

Thursday, April 12, 2007
Source: thehindubusinessline.in via moneycontrol.com

Textile exporters' concern over hardening rupee
Export of textiles and clothing from India to major markets is sliding on account of strong rupee. The worried textile exporters have urged the Central Government to intervene so that the country does not lose its share in the world textile markets due to the low realisation in rupee terms.

The sharp appreciation in the rupee vis-à-vis dollar witnessed in the past nine months has resulted in slowdown in textile/clothing exports from India, said Mr Prem Malik, Chairman of the Cotton Textile Export Promotion Council (Texprocil). The value of rupee, according to him, rose to Rs 42.65 to a dollar as on April 9, 2007 compared to Rs 46.51 in August 2006, an increase of 9 per cent. This rise had a direct bearing on export realisation leading to a slowdown in exports.

He said in the case of the US, while textile imports from India for the year ending January 2007 had grown by only 5 per cent, imports from China, Indonesia, Bangladesh and Cambodia for the same period rose by 27 per cent, 26 per cent 20 per cent and 23 per cent respectively. The consistently undervalued yuan had led to China's strong presence in textiles and clothing products in major markets. China could achieve 27 per cent growth in exports to the US despite restrictions on its products imposed by the latter.

Even as the appreciating rupee was making the country's exports uncompetitive, textile exporters were being further burdened by high production costs caused by high interests costs, pressure on prices and growing costs of inputs, Mr Malik pointed out.

Saturday, April 12, 2007
Source: thehindubusinessline.in via moneycontrol.com

Aviation Sector

Jet to buy Air Sahara at lower valuation
Private airliner Jet Airways has restruck its deal with Air Sahara at a lower valuation, according to sources. The deal, which was originally valued at Rs 2200 crore, has been struck in the region of Rs 1,850 crore, reports CNBC-TV18.

The new deal is likely to include creditors' balance of Rs 350 crore. The new deal includes creditors' deduction of Rs 350 crore. According to hearsay, the airline is expected pay the remaining amount of Rs 1365-1375 crore for Air Sahara. Jet has already paid Rs 500 crore as bank guarantee.

The deal may take shape over a period of two to three months. The Indian air carrier was in talks with various new players, including a private equity player.

Sources also inform that both the airliners have reached a commercial agreement and have informed the arbitration panel about the same, added sources. Meanwhile, the panel has set the Jet-Sahara hearing for 5:30 pm on Wednesday. Jet has only two options - either to buy out Air Sahara or compensate it.

Tuesday, April 10,2007
Source: moneycontrol.com

Wedding bells ringing for Jet-Sahara
The Jet-Sahara saga, is set to unfold its final chapter today. After 10 months of haggling and finally with a discount of Rs 750 crore discount, Jet may finally get Sahara cheaper, reports CNBC-TV18.

"We cannot comment anything. The matter is before the arbitration panel," says Naresh Goyal, Chairman, Jet Airways. But Naresh Goyal's smile gave everything away. The Jet Airways chief heaving a sigh of relief, finally sealing a compromise with Sahara after a bitter, 10 month legal battle.

According to sources, Jet will pay a total of Rs 1,450 crores for Sahara; of that Rs 500 was paid last year. Rs 400 crores will be paid when the agreement is signed and the balance Rs 550 crores will be payable in 4 equal, annual, interest free installments starting March 08.

Meanwhile sources say the over Rs 500 crore losses made by Sahara since the deal broke, will be borne by Sahara's promoters themselves. So net-net, Jet will get Sahara for Rs 750 crore - less than it had originally promised to pay.

It has taken 8 months of negotiations for Jet and Sahara to reach this solution. But experts say this is probably the best way out because if Jet had lost the case, it would have either been forced to buy the airline at the original Rs 2200 crore or it would have had to pay a huge compensation to Sahara. If Sahara were to lose the race, it would have found it difficult to get a buyer especially at the valuation that Jet had given it.

The sudden end to hostilities came after the arbitration panel gave both Jet and Sahara upto 2pm on Tuesday to hammer out a settlement. A battery of lawyers worked round the clock to negotiate a solution.

"All issues have been resolved amicably. But details will be announnced tomorrow," says Rustam Gagrat, Counsel, Jet Airways.

The revived Jet-Sahara deal may find support from the regulator. According to the m&a guidelines, Jet will get all the airport infrastructure, which is now with Sahara including landing rights and parking slots. The aviation ministry had passed a notification last year giving effect to the M&A guidelines when the Jet-Sahara deal had almost fallen through.

Life has come full circle for Jet Sahara. In January of 2006, Naresh Goyal's Jet Airways struck a deal to acquire Subroto Roy's Sahara airlines. But 5 months later in June, Jet walked out of the deal citing the lack of  important government permissions. The matter went to court and was then referred to an arbitration panel. The panel assembled in Mumbai in April and was to finish hearing the case in 3 weeks. But hopefully, none of that will matter any more.

Wednesday, April 11,2007
Source: moneycontrol.com

Jet takes over Sahara for Rs 1450 cr
Ending months of acrimony and legal disputes, Jet Airways today struck a deal to buy out Air Sahara for Rs 1,450 crore after clearance by a three-member arbitration panel.

“They (Jet and Sahara) have signed an agreement by which Jet takes over all the shares of Sahara for a price of Rs 1450 crores. Rs 500 crore was already paid, Rs 400 crore on or before April 20; the balance in equal annual instalments, payable from March 31, 2008, 2009, 2010, 2011, which will be interest-free. These are the important parts of the transaction, and we have informed the stock exchange,” Jet’s counsel, Harish Salve announced before the eager media today.

When probed for more, he declared, “The big news is that the two airliners have ended their dispute amicably and it’s back in the skies again, as far as Jet is concerned.”

On its part, Air Sahara seems to be content too. Air Sahara President, Alok Sharma  told the CNBC TV-18 group today that both the parties were happy with the deal and that the adjustments on assets will go back to the promoters.

Jet Airways Chairman Naresh Goyal said this price represents a 40% discount to the originally agreed price. He expressed his conviction in the deal saying, “There is no change in what was said in January, again in March; and I still say that there is no change in the thinking in the commercial sense.

Commercially, it was good for the shareholders at that time. Keeping in mind the present condition aviation, it is again going to be very good, as far as the deal is concerned.  What we are doing is going to help the shareholders,” he said.

Both, Salve and Goyal refused to divulge anything more, but promised to be more elaborate on the 16th of this month.

The deal was signed after the panel comprising British judge Lord Stein and Supreme Court Justices S P Bharucha and Jeevan Reddy, vetted the draft proposal prepared by Jet and Sahara.

This is the second merger in the country's aviation industry after the two state-owned air-carriers, Air India and Indian Airlines announced their merger last month.

Thursday, April 12, 2007
Source: moneycontrol.com

Automobile Sector

Hyundai Motor may bring auto finance arm to India
Hyundai Motor is expected to bring its instalment auto-financing unit Hyundai Capital Services Inc to India to service its expanding customer base.

Hyundai Motor India's Executive Director for marketing and sales, Mr W.S. Min, said there was a possibility of Hyundai Capital Services being set up in India even as the carmaker is doubling its capacity to 6 lakh units. "With our customer base going up, there is a possibility that that we could look at bringing Hyundai Capital to India," Mr Min said.

Hyundai's other financial arm is Hyundai Card, a credit card unit. In South Korea, Hyundai Capital Services owns over 60 per cent of the market share of the domestic auto finance business.

But sources also point out that one of the main reasons for Hyundai to look towards Hyundai Capital Services is because of the fluctuating interest rates in India. The recent increase in interest rates, according to an official with the company, is expected to considerably slow down car sales during the current fiscal. To derisk its sales from such market conditions, Hyundai wants to have its own auto finance company in place, sources said. During the last few years, car sales have more than doubled because of extremely attractive interest rates in the country.

Additional Burden

As an immediate measure to lower the impact of recent interest rate hike on its sales, Hyundai rolled out a special finance scheme offering reduced rates for buyers of Santro. The interest rate has been reduced to 8.99 per cent from the market rate of about 16 per cent for a three-year loan term with a loan ceiling of Rs 3 lakh. The burden will be shared among the dealers, Hyundai Motor and the domestic finance companies.

However, the scheme is for a shorter duration of 10 days because longer tenures could mean additional burden on dealers who operate on thin margins.

Customised Schemes

If Hyundai wants to remain competitive in the market despite issues like fluctuating interest costs or even changes in pricing, it can use its auto financing arm to launch customised schemes for its customers at various stages of the year, sources said. The financing arm could also come in handy whenever it wants to lift its sales, particularly during the lean season, according to sources.

Wednesday, April 11,2007
Source: thehindubusinessline.in via moneycontrol.com

Telecom Sector

No sharing telecom spectrum for now: TRAI
The Telecom Regulatory Authority of India, or Trai says it moots sharing active passive telecom infrastructure. It is also not in favour of sharing telecom spectrum for now.

Active infra sharing will stay limited to antenna and feeder cable. Active infra sharing will also stay limited to radio access network and transmission systems. TRAI favours amending licence norms to share backhaul network.

Wednesday, April 11,2007
Source: via moneycontrol.com

RComm, Sun TV ink pact for mobile content
Reliance Communications, has entered into an "exclusive long-term agreement" with Sun Network Ltd to broadcast the company's television content on mobile handsets with GPRS and video viewing capability.

Initially, content from the Sun TV channel will be available to Reliance subscribers.
The company is planning to broadcast other Sun Network channels later.

On a timeframe for accomplishing this, V.G. Somasekhar, Hub Head, Tamil Nadu and Kerala, Reliance Communications, told Business Line that Reliance could launch all 20 Sun Network channels immediately, but was waiting for viewer feedback to determine future broadcasts.

Both companies did not disclose details of investment or revenue sharing involved.
Currently, Sun TV content can be viewed in two formats - video streaming (for ongoing programmes) and clip cast (for viewing 1-2 minute-long pre-recorded video content).
Available throughout India, video streaming is priced at Rs 15 per session (about five minutes duration).

Clip cast is available at an introductory price of Rs 7 per clip (1-2 minute duration).
Additionally, subscribers will have to pay network access charges of 10 paise per 10 KB viewed.

A colour video clip of 1-2 minutes duration is about 300 KB in size, while a black and white clip is about 70 KB, said Mr Mahesh Prasad, President, Applications, Solutions and Content Group, Reliance Communications.

The company is working on making the audio of Sun TV programmes available to those without a video viewing handset.

He also refused to share the company's revenues from distributing video based content saying data services (including video) contributed about 15 per cent to total revenues.

Thursday, April 12,2007
Source: thehindubusinessline via moneycontrol.com

RCom, BSNL bag bulk of rural cellular project
Reliance Communications and Bharat Sanchar Nigam Ltd (BSNL) have bagged majority of the Universal Services Obligation (USO) fund-sponsored rural cellular project.

At the end of the third and final round of bidding, Reliance got access to 72 clusters of villages while the State-owned company got the contract to roll out cellular services in 58 clusters of villages.

Bids were invited by the Department of Telecom for offering mobile services across 2.5 lakh villages, which were divided into 81 clusters. While seven telecom companies had entered the fray, DoT has selected three operators per cluster.

The bids quoted are so aggressive that instead of paying the operators for rolling out services in rural areas, the Government stands to receive money. As per the bids quoted by the operators, the Government will get about Rs 10 lakh a year with most cellular companies quoting negative amounts. While this amount may be insignificant, what is interesting is that the Government was willing to give away Rs 800 crore annually to the winning operators at the beginning of the bidding process.

Passive infrastructure

Idea Cellular, Hutchison Essar and Aircel have also bagged about 15-20 clusters. The operators who have won the bids will get the benefit of using the passive infrastructure, set up with support from the USO fund, without paying any rental or fee to offer mobile services in the rural market. Passive infrastructure comprises land, tower, power connection, and associated civil and electrical works that enable operators to offer cellular service.

A majority of this infrastructure will be set up by BSNL, which bagged 80 per cent of the rural project, winning contract for setting up 6,125 mobile towers out of the total 7,871 passive cell sites envisaged by the Government.

While currently cellular networks cover about 60 per cent of the over one billion population, the USO project will cover another 270 million people who have not had any telecommunication facilities till now.

Friday, April 13, 2007
Source: thehindubusinessline via moneycontrol.com

AT&T launches ILD services in India
AT&T Global Network Services on Friday announced the launch of its international long distance services in India. The company was the first foreign telecom operator to get an ILD licence after the Government allowed 74 per cent foreign direct investment in the telecom sector. The US-based company has formed a joint venture with Mahindra Telecommunications Investment Private Ltd to offer international voice and data services to multinational enterprises in India. AT&T's entry will further intensify the competition in the ILD segment dominated by Indian majors VSNL, Bharti and Reliance. AT&T will, however, not offer services to the retail consumers.

"India is a high-priority market for just about every global MNC, and the increasingly competitive telecom landscape will be a major factor in helping to attract further MNC investment and expansion into India. AT&T is strongly positioned in India to directly meet their telecommunication needs. AT&T is investing $750 million in 2007 to support our global customers. This will help AT&T to provide our global customers with consistent services worldwide and help drive their business growth. Today's announcement is a major milestone for the new India business," said Mr V.S. Gopi Gopinath, the recently appointed Vice-President of AT&T Asia Pacific. The company is expected to spell out its India specific strategy next week.

Mr Dayanidhi Maran, Minister of Communications and IT, said, "We are pleased that AT&T — the world's largest communications company — is increasing its commitment and capabilities in India through its own licences. Their offerings will definitely increase the competitiveness of IT enterprises and IT users who need world class, state-of-the art global connectivity. For its part, the Government through its policies will ensure that India continues to be an investor friendly destination for global telecommunications companies."

Saturday, April 14, 2007
Source: thehindubusinessline via moneycontrol.com

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Agriculture

Desi mangoes can dominate 2.5 lakh tonne US mkt
Amid indications that the US would allow import of Indian mangoes this season, a leading American trade body said that the Indian varieties of the delicious fruit was likely to dominate the 2.50 lakh tonne US market if import was allowed.

"Since the news about the possibility of import of Indian mangoes to the US appeared, we have been getting frequent queries from speciality grocery stores as well as transporters," spokesperson of the United States Indian Business Council (USIBC) told the media in an e-mailed statement.

The spokesperson said although US consumers were relatively unfamiliar to mangoes, in recent years the fruit was getting popular, following import from mainly Mexico.

As a result, the Mexican variety of mango dominated the US market which has a size of 2.5 lakh tonne per annum.

"Mexican mangoes do not compare in terms of sweetness and varieties offered by the Indian mangoes," the spokesperson however said.

USIBC has been steadily building up a case for allowing import of Indian mangoes to the US in recent years.

As part of the same exercise the Council planned to organise the first-ever 'Indian Mango Tasting Festival' at its Global India Summit to be held during the 32nd Anniversary at Washington from June 27.

Union Commerce minister Kamal Nath along with a number of important names of Indian business including Reliance chairman Mukesh Ambani, FICCI president Hari Khorakivala and Tarun Das of CIL, are scheduled to attend the summit.

A business delegation from West Bengal led by Industry minister Nirupam Sen would also attend the summit.

When an American business delegation led by USIBC President Ron Somers had last month called on West Bengal Chief Minister Buddhadeb Bhattacharjee, he had made a special request to them to work on allowing import of Indian mangoes to the United States.

Indian mangoes have never been allowed to be exported to the US because they have not undergone pests risk analysis.

Tuesday, April 10,2007
Source: PTI via economictimes.com

Govt to import 1.5 million tonne pulses
In a bid to get over supply side constraints and rein-in rising inflation, Union Government has decided to import 1.5 million tonne pulses during the current financial year.

This was stated by Union Information and Broadcasting Minister Pranab Mukherjee after a meeting of the Union Cabinet that cleared the proposal made by Agriculture Ministry headed by Sharad Pawar.

Sources divulged that at least two cabinet ministers argued against the move as the BJP has already mounted pressure in the parliament and outside with charges that top ruling party politicians were involved in export of 3.19 lakh tonnes pulses during 2006-07. The export of pulses took place despite the ban imposed by the government way back in June last year.

In the midst of the BJP campaign, the Director General of Foreign Trade (DGFT) Bhawani Singh Meena proceeded on long leave reportedly owing to differences with Commerce Minister Kamal Nath on allowing export of pulses. The UPA Government has ordered a CBI probe into export of pulses despite the ban.

State owned companies including STC, MMTC, NAFED and PEC have been asked to import 1.5 million tonne of pulses including urad, tuur and moong dal.

Meanwhile, the Union Cabinet has also cleared a new petro-chemicals policy. This policy is a precursor to setting up six mega Petrochemicals Investment Regions across the country. A high powered group headed by Prime Minister’s Principal Secretary T.K.A.Nair is overseeing the move to set up petro-chemicals regions.

The cabinet has cleared another proposal to increase the retirement age of personnel working with profitable public sector undertakings to 60 from the existing limit of 58 years.

Thursday, April 12,2007
Source: Indiatimes News Network via economictimes.com

Vanilla growers can hope to relish better days again
The natural vanilla prices are expected to go up in the current year with a 30% shortfall in crop predicted. The farmers have shown a lack of interest in manual pollination of vanilla flowers as the prices are down. Apart from this, the prolonged dry spell has also contributed to the crop damage. Last year the crop was close to 200 tonnes.

The series of cyclones that recently hit Madagascar, the largest global vanilla producer, has not yet affected the vanilla crop seriously, as per the market reports, Mr Jose said. When vanilla production in Madagascar was hit a few years ago, the global vanilla prices went through the roof touching staggering Rs 3,500 per kg.

Meanwhile, Vanilla India Producer Company (Vanilco), the company formed by the vanilla farmers, is launching more products to strengthen its presence in the local market. With international buyers hard to come by, Vanilco has directed its efforts on the domestic market. The latest attempt by the company is soap with vanilla fragrance.

It already has around 20 products including perfumes, virgin oil, agarbatis, flavoured tea and coffee, apart from vanilla extracts and powder. Vanilco MD Paul Jose claimed that it is the first time a company is launching soap with natural vanilla aroma.

“We don’t claim any health benefits. But it will have a lingering natural vanilla aroma,” he says. It is categorised in the premium category as natural vanilla price is higher. A 150 gm bar is priced at Rs 30. Vanilco is negotiating with Campco for launching chocolates with natural vanilla extracts. Campco will produce the chocolates which will be marketed under the Vanilco brand. The company is already selling its extracts to several ice cream companies.

Yet another product from Vanilco stable is vanilla booster, which can be added to synthetic vanilla to get a natural vanilla flavour. Mr Paul Jose admitted the wide price difference between the natural and synthetic vanilla stood in the way of wider acceptance of the former.

While 750 ml of synthetic vanilla extract sells under Rs 200, the corresponding price of natural vanilla comes to Rs 1,000. “There needs to be more awareness on the beneficial effects of natural vanilla for improved sales,” Mr Jose said.

Wednesday, April 11,2007
Source: TNN via economictimes.com

Canada eyeing wheat sales to India
Canada is eyeing wheat sales to India but imports by the South Asian nation are likely to be lower than last year, a senior official of the Canadian Wheat Board said on Friday.

"We are looking at a small increase in Indian wheat production which should translate into fewer imports by the country," Bruce Burnett, a director of CWB, told Reuters on the sidelines of a global commodities forum.

"We would anticipate that we would be able to supply to India if needed. It is certainly a market we are looking at," he added.

Friday, April 13,2007
Source:PTI via economictimes.com

India will export mangoes, import motorbikes from US
In an admittedly odd exchange of sorts, India would be exporting its exotic mangoes to the US this season in return for allowing motorcycles from the Milwaukee-based Harley-Davidson Inc's (HOG) of the US to India.

At a meeting on Indo-US Trade Policy Forum here, the Union Commerce and Industry Minister, Mr Kamal Nath, said, "The good news is that our mangoes are going to America and Harley Davidson is coming here."

For Indian fruit growers, the good news has come after 18 years since the US banned mango imports from here on concerns about Indian farmers were using too many pesticides. Instead, the farmers now irradiate the fruit to kill any pests, rendering the mangoes fit for consumption and in keeping up with sanitary standards of US agriculture administration.

Meeting norms

On the motorbike, the Minister's remarks were followed up by the Directorate General of Foreign Trade (DGFT) who issued a notification promptly, permitting import of motorcycles of engine capacity 800 cc or above. The DGFT said the imported motorcycles must meet Euro III emission norms.

At the time of import, the importer has to submit Type Approval Certificate, copy of an international accredited agency from the country of origin. Individuals, companies and firms, and original equipment manufacturers who have manufacturing and service network in India could import these machines.
Addressing the gathering, the US Trade Representative Ms Susan Schwab said, 'In a few short weeks, Indian mangoes will enter the US market. In return,' she said, 'we have received indications that the Indian government will accept Euro 3 (emission) standards for heavy motorcycles, creating an opportunity for a niche in the market.'

No agreements yet

Though no agreement was reached on tariffs, Ms Schwab said, 'If tariffs were to come down, trade in this sector would steadily begin to flow.' She said total bilateral trade in goods and services could hit $50 billion this year.

Both sides deliberated infringement of intellectual property rights, with India pleading with Washington to crack the whip on those plying in pirated versions of popular Indian films in the US market. 'We raised the issue of widespread availability of pirated Indian films and music in the US. They could be found in any grocery store. The US has assured us it will look into it,' Mr Nath said.

Ms Schwab said more Indian organic produce would now be going to the US as Indian agents could certify them. She asked Mr Nath to further bring down tariffs to boost trade and 'generate a win-win' situation.

Saturday, April 14, 2007
Source: thehindubusinessline via economictimes.com

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Lifestyle Trends

Bubbly takes on beer, soft drinks
Thirst busters this summer are poised for some added sparkle, with the country's leading wine maker preparing the pitch for an aggressive national launch of its latest low-end sparkling wine Vino.

The newest `Indian champagne' from Chateau Indage, which was launched in Maharashtra a little over a month ago, and is now ready for a national rollout, will aspire to make a dent in the carbonated soft drinks and beer market by virtue of its package size and price tag.

In a departure from tradition, the "dry-sweet" bubbly has been launched in a 375-ml bottle (against 750 ml) that will be available to the consumer between Rs 40 and Rs 75 depending upon the tax structure of the State where it is purchased. And if the figures of its first month sales are anything to go by, the aspiration to take on the beer and carbonated soft drinks isn't all just gas and fizz.

Robust sales

Mr Santosh Verma, Executive Vice-President, Marketing and Sales, Chateau Indage, reveals that since its launch, Vino has already notched sales of 1,30,000 bottles. In terms of litres, that translates into 48,000 litres, which is around 25 per cent (in litres) of the annual sales of its present range of three premium end (Ivy Brut, Marquise de Pompadour, Joie) sparkling wines.

The strategy is to keep the price 'affordable' enough to lure the beer drinker into moving up the value chain, as well as attract those who might opt for cold carbonated drinks.

Mr Verma is emphatic that the offered price band has been enabled without compromising the basic quality of the bubbly. 'We have used crown caps in place of corks which add to the expense,' he says. The raw material too is an Indian variety of grape, instead of the blend of fruit from imported vines that goes into their other sparkling offerings.

With the national launch of Vino imminent, the company expects not only to sell 45 lakh litres of the champagne this fiscal, but is adding another sparkling wine to this segment in a couple of months' time.

Growing market

Though the current market size of `Indian-made champagne' is miniscule - the still wine to sparkling wine ratio stands at 90:10 - it is growing at a heady rate of 80-100 per cent.

Wednesday, April 11, 2007
Source: thehindubusinessline.in via moneycontrol.com

Online gaming tries to climb a level!
Online gaming companies are attracting millions from investors, reports CNBC-TV18. But what about earning millions from consumers?

Exams or no exams - 18-year old Omkar and his friends spend nearly five hours everyday fighting evil. It is an expensive war. Access to a cybercafe costs them Rs 25 an hour and the adrenalin rush is limited by budget constraints.

Omkar Gharat, a gamer says, "I can pay a max for Rs 250, not more than that." Meanwhile, another gamer Omkar Mhatre says, "It is my own pocket money; my parents pay it for me."

Gaming is a price elastic luxury. So most gaming sites like Zapak.com and games2win come free. They make their money off advertising. But that is not much. Online gaming attracts less than 1% of the over Rs 100 crore online advertisement market in India. So some gaming sites have turned to subscriptions. Indiagames for instance charges Rs 200 a month for unlimited gaming. But that is not enough - what with free sites mushrooming!

Time then for gaming companies to jump a level - trap players by offering free access and then make them want to pay. Take for example a Korean game adapted for India called a3india. You can play up to a certain level for free but if you want to move ahead, you have to pay hard cash. And that is where the moolah is.

Alok Kejriwal, CEO, games2win.com, says, "We are going to charge consumers for 'avatar' revenue - we don't want to charge them subscription revenues, but when they are playing a game, if they want to upgrade a car, buy tyres, buy petrol, we will charge them for that."

That is the only way gaming companies will take on a profitable avatar. After all there is big money riding on this - from Anil Ambani who has invested Rs 450 crore in Zapak to UTV that has spent Rs 47 crore for a 50% stake in indiagames. Yet most of these companies are at least two to three years away from breaking even. Gaming, it seems, is no child's play!

Friday, April 13, 2007
Source: moneycontrol.com

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—About our writers: Usha Ganesh is a business writer with Chillibreeze   Vilasini Kumar is Chief Operations Officer and Business Development for Chillibreeze

 

 

 

 

 

 

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